In this blog post, Vivek Chandar, pursuing M.A. in business law from NUJS, Kolkata, talks about various laws from around the world to encourage use of alternative energy.
Any change is resisted, may it be person, company or even a nation. This is very true in regard to changing from conventional energy sources to alternate energy.
Some of the barriers to shifting to alternate energy are:
- Commercialization barriers: Undeveloped infrastructure and lack of economies of scale faced by new technologies competing with mature technologies.
- Price distortions from existing subsidies and unequal tax burdens between renewables and other energy sources.
- Failure of the market to value the public benefits of renewables such as lower CO2 emissions
- Market barriers including inadequate information, lack of access to capital, “split incentives” between building owners and tenants, and high transaction costs for making small purchases.
Thus, to encourage the use of alternate energy by nations for general good United Nations and consequently nations especially major polluters are through laws and regulations looking for ways to encourage alternate energy by nations which trickles down to companies and individuals.
Most of the alternative sources of energy are renewable sources. It maybe noted that hydro-electricity is a renewable source of energy but is not considered an alternative source. Similarly, nuclear power is in some countries considered alternative source, but is not a renewable source of energy.
Some of the laws being made around the world to encourage use of alternate and/or renewable energy region-wise are covered below:
United States of America
- At Federal level: Energy Policy Act ’05- It regulates both renewable and non-renewable energy. It is enacted at federal level.
- Laws enacted at State level: More than a thousand legislation have been enacted at state level to cover-
- Financing of renewable energy projects through loans, bonds or creation of financing authorites.
- Tax incentives for using renewable/alternative energy sources.
- Grants to fund renewable energy projects.
- Location and land use specifying where the renewable energy sources can be set-up.
- Ownership rights includes providing compensation for owners on whose land structures are set-up.
- Self-generation of electricity to allow the owners to generate energy on their premises.
- Mandatory renewable energy standards or renewable portfolio standards stated below.
Renewable portfolio standards: Most of the states in US have policies designed to increase generation of electricity from renewable resources. These policies require or encourage electricity producers within a given jurisdiction to supply a certain share of their electricity from renewable resources, which include generally wind, solar, geothermal, biomass, and some types of hydroelectricity, and may include other resources such as landfill gas, municipal solid waste, and tidal energy. These are not at national level. In some cases they also allow sale of credits, in utility company uses renewal energy more than the minimum required by the relevant state.
Electricity Industry Law: Mexico targets to provide 35% of the nation’s electricity generation mix by 2024, 40% by 2035, and 50% by 2050 from clean energy which includes renewable, nuclear energy and carbon capture. For achieving the same electricity reforms are in process and has provision for selling credits to further encourage the use of alternate energy.
- Green Energy Act, Ontario: It regulates the renewable energy in Ontario.
- Clean Energy Act (SBC 2010) CHAPTER 22 of British Columbia: It has provisions to cover similar areas as covered in the Item I.A.2 above.
Regime Especial de Tributação para o IncentivoaoDesenvolvimento e à Produção de FontesAlternativas de Energia (REINFA): It is a taxation policy of Incentives to Encourage Development and Production of Alternative Energy Sources in Brazil.
- Law No. 25,019: To promote solar and wind energy
- Law No. 26,093: To promote bio-fuels and their sustainable use
- Law No. 26,190: For the national development scheme for the use of renewable energy sources for electricity production
- Law No. 26,123: For hydrogen as a fuel and energy sector
- Investment and other subsidies (Law 7447): It lists a number of energy-related products which are exempt from various taxes including customs duties.
- Temporary import: Law 7557 (General Customs Law), Article 165, the equipment, etc. that were exempt from import taxes and if they were imported with a temporary purpose related to a renewable energy project. After the renewable energy project is finished and the imported products are no longer needed, they can be exported without incurring any customs tax.
- Feed-in tariff : Currently no feed-in tariff policy.
Renewable Energy Directive 2009/28/EC (applies to the complete EU): This specifies the levels of renewable energy use within the European Union, country-wise to achieve the overall EU target for renewable energy use of 20% by the year 2020.
Germany (Country specific)
Renewable Energy Sources Act: It has helped in boosting the alternate/renewable energy sector in Germany. The targets set by Germany are higher than provided in the EU Directive.
United Kingdom (Country specific)
Renewables Obligation: It is designed to encourage electricity generation as it obligates the electricity providers to source an increasing proportion of electricity from renewable sources. It is similar to the renewable portfolio standards detailed in Item I.A.2 above.
Denmark (Country specific)
Tax exemption in place to promote wind energy and other renewables.
Russian Federation (Country specific)
Decree No. 449 of 2013 and ordinance no. 47 on 2015 support scheme applies to projects of more than 5 MW in regions connected with grid.
Directive 2009/28/EC on the promotion of the use of energy from renewable sources (Renewable Energy Directive) sets a national target of a 34% share of renewables in Austria. Austrian energy strategy, published in March 2010 provides the basic principles of the energy policy until the year 2020. It calls for a rapid but sustainable expansion of energy generation from renewable resources.
- Belgium ratified the Kyoto Protocol in 2002.
- National Renewable Energy Action Plan proposed measures to achieve a 13% share of renewable energy in gross final energy consumption by 2020
- Key climate policy tools to promote renewable and high-efficiency electricity generation are the ETS mechanism and green certification schemes. They are supplemented by financial support schemes (subsidies, grants and tax reliefs).
- Bio-fuels benefit from a partial exemption of the internal tax.
- Companies may be granted a research tax credit on their environmental investments if the expenses they incur while carrying on such projects.
- Feed-in tariff: Feed-in tarrif applicable for electricity produced from the specific renewable/alternative sources which are revised on indexation formula.
- Investment Incentives Law 3908/2011: Incentives available for companies that qualify as synergy and networking JVs and engage in the production of energy from some of the renewable resources.
- Tax relief: Income tax exemption on profits before taxes available in the above law.
- Feed-in tarrifs: These are available per Laws 3468/2006, 3734/2009 and 3851/2010.
- Tax deductions: Additional deduction of a certain percent of the amount invested in qualifying assets is available under the Energy Investment Allowance.
- Free depreciation/depreciation at will is granted on qualifying environmentally friendly assets.
- Capital invested by an individual on Green Funds (funds investing on renewables) is exempted from personal tax.
- CO2 tax, Nox tax: On fossil fuels and such industries these taxes are applied, thus may dissuade people to use these.
- Fund: Especially kept for the renewable source projects.
- The Green Certificates Act : Electricity certificates are issued as an economic subsidy scheme to encourage investment in power production based on renewable energy
- Depreciation of windmills: Allows for high rate of depreciation for windmills.
- Energy Certificate: For each MWh produced by renewable sources (solar, geothermal, wind, wave, bio-fuels or hydro) the producer receives one certificate, whch can be traded with the distributor.
- Law 16.906, Decree 354/009: Particular benefits provided for the generation of electricity from alternative renewable sources (such as wind, solar thermal, photo-voltaic (PV), geothermal, tidal and wave energy, as well as the energy produced from the use of different types of biomass).
- Law 18.585: It declared the investigation, fabrication, implementation and development of solar thermal energy as of national interest importance. The law, along with Decree 451/011, established the exemption of VAT, Internal Excise Tax, duties and custom taxes applicable to certain items/equipment.
- Law 18.585: Introduced obligation of incorporating solar thermal technology in sport clubs, hospitals, hotels and heated swimming-pool, under certain circumstances.
Currently most of the ME countries other than some listed below, do not have regulations in regard to renewal/alternative energy, maybe due to abundance of oil/gas in the region.
- Renewable Energy Law: Sets out the regulatory framework for renewables in Egypt.
- Prime-Ministerial Decree No. 1947 of the year 2014: Establishes feed-in tariffs for electricity generated
Planned laws: The Executive Regulations of the Renewable Energy Law and new electricity law.
Renewable Energy and Efficiency Law (REEL) in April 2012: Exempts all equipment and systems from customs tariff and duties. It ensures that the energy produced will be purchased by the power company and connected to grid.
Limited policies and regulations: Renewable energy policy is not yet well established. The government’s focus is on reducing the environmental impact of fossil fuel used to generate electricity. An integrated policy will attract renewable energy investments in Kuwait.
Reforms to the Renewable Energy Target in 2015: The RET covers both large scale and small scale renewal energy projects. The scheme has provision to receive “certificates” which can be sold. It encourages additional generation of renewable energy through financial incentives, and hopes to ensure that at least 20 per cent of Australia’s electricity supply will come from renewable sources by 2020.
- The Energy Efficiency and Conservation Act 2000: To promote renewable energy in New Zealand. The Energy Efficiency and Conservation Act 2000 was legislative effort to promote renewable energy in New Zealand. It established the Energy Efficiency and Conservation Authority (EECA) which produces reports on New Zealand’s energy use and energy targets. The Act largely sets out the ambit of the EECA’s reporting requirements.
- The National Policy Statement for Renewable Electricity Generation: Policy on coordinating the renewable energy drive throughout New Zealand. Its objective is to provide for the development, operation, maintenance and upgrading of new and existing renewable electricity generation activities.
- Other Government incentive programs: Encouragement programs for renewable energy generation at a residential level- incentives for the installation of solar power systems on individual properties.
- The Renewable Energy Law 2006 and amendments includes provisions regarding price regulation, differentiated pricing, special funds and tax relief. It ensures that the grid operators buy the electricity.
- Other laws/incentives: China subsidizes 50% of grid-connected solar investments and 70% of off-grid solar PV power investments. It provides rebate on VAT for wind energy, and has also introduced a feed-in tariff for biomass, wind, solar and hydro-power, with the generous tariffs for solar energy generators.
- Renewable Energy Special Measures Act, Amendment in 2016: For regulating the renewal sources. Available Feed-in tariff and tax benefits. One of the best packages in the region.
- 2003 Renewable Portfolio Standard: These where introduced to ensure power companies use renewable energies.
- National Electricity Policy 2005: Overarching policy for the development of India’s energy sector. There is no separate national, unified framework for renewable energy. The above law includes promotion of renewable energy sources.
- India has signed Paris Convention.
- Incentive programs: Government has set up incentive programs to promote alternate energy sources.
Renewable Energy Act 2011: It prioritizes renewables over fossil-based fuels. It is mainly regulatory in nature. It also provides for feed-in tariff subsidizes.
- The Green Energy Policy 2004 resulted from MEMR Decision No. 2/2004 aims to reduce the country’s reliance on fossil fuels.
- Geothermal Law No. 27/2003: Regional governments empowered to develop geothermal energy and establishes a separate regime for geothermal licensing.
- Governmental Regulation No. 70/2009: To promote energy efficiency and offers incentives for the importation of energy-saving devices.
- Presidential Regulation No. 5/2006 sets out the definition of renewable energy and the target for renewable energy production.
- It has various incentive programs to encourage renewable/ alternative energy sources.
- The Renewable Energy Act: It regulates the renewable energy in Philippines. It has provisions for renewable energy certificates to facilitate compliance with the Renewable Portfolio Standard (RPS).
- RPS: It requires electricity suppliers to source a minimum amount of energy from renewable sources viz. biomass, solar, wind, hydro-power, geothermal and ocean energy sources.
- Feed-in tariff regime: Rates for wind, solar, hydro-power and geothermal energy are relatively high by regional standards.
Republic of Korea:
- Basic Law on Low Carbon Green Energy: It establishes national policy/strategy for low carbon, green energy, which includes, realisation of green economic system, viz. green technology and green industry and policies on energy.
- Promotion Act on Development, Use, Deployment of New and Renewable Energy 2010: It requires 3,000m2 buildings (or larger) are constructed, expanded or remodeled by the government or a public organisation, a minimum of 5% of the total construction costs are required to be invested in renewable energy facilities and renewable energy sources. This percentage was 10% in 2012 and it will increase by 1% every year until it reaches 20%.
- Government incentive programs:
- Renewable energy technologies receive a 5% tax credit
- Reduced Import duties for equipment
- Feed-in tariffs have recently been replaced by the RPS. The scheme requires that the 13 largest public and private utilities to purchase or generate renewable energy at a rate equal to 10% of their share of total energy generation by 2022
The Energy Conservation Act 2012: Minimum energy management standards specified for large energy users in the industry sector. The standards only affect companies that consume more than 15 GWh of energy annually. The Act is part of Singapore’s plan to achieve its target of 35% improvement in energy intensity by 2030 from 2005 levels.
Key objectives include the:
- Appointment of energy managers
- Reporting of energy use
- Submission of energy efficiency improvement plans for large energy users
However, there are no renewable energy subsidies, targets or feed-in tariffs to incentivize renewable energy generation.
- Alternative Energy Development Plan (2012-2021) establishes aggressive objectives, with renewable energy consumption targeted at 25% of total energy consumption by 2021.
- The Energy Development and Promotion Act 1992 gives powers to regulate production, transformation, utilisation and conservation of energy sources.
- The Energy Conservation Promotion Act 2007 promotes the efficient use of electricity.
- Corporate Income Tax Exemption for Sale of Carbon Credit (2009): Corporate income tax exemption for three consecutive years on the profit derived from the sale of carbon credits of a Certified Emission Reduction.
- Feed-in tariff scheme: Additional tariff for solar and wind tariffs provided last for 10 years.
- Power Development Fund: It is created t promote the renewable energy.
- Corporate tax exemption: Allows an eight year corporate income tax exemption for manufacturing solar cells, generation of alternative source energy, manufacturing of energy saving/renewable energy machinery or equipment and to energy service consulting firms who provide consulting services for the same.
- Renewable Energy Technology Development and Application Project (2004)
- Maldives Energy Action Plan (2009-2013)
- Maldives National Energy Policy & Strategy (2010)
- Maldives Renewable Energy Framework (2011)
- Maldives Energy Policy (2011)
- Government Incentive Programs:
- Renewable energy equipment is exempt from Maldivian duties.
- General investment incentives offered through the Ministry.
- Energy Law of Mongolia 2001 regulates energy generation, transmission, distribution and dispatching, opens the industry to private sector investment and coordinates supply activities, as well as infrastructure matters.
- The Program on Integrated Power Energy System ofMongolia 2002 sets the long-term strategic plan to form the integrated power system.
- The Renewable Energy Law 2007 establishes a feed-in tariff range for renewable energy, which varies among different types of renewables.
There is no renewable energy law in Myanmar at present. Regulations are found in energy policies and electricity laws.
- Section 12K of the Income Tax Act: Provides tax exemption on amount accrued in respect of the disposal of any certified emission reduction (CER) credit derived to further a qualifying clean development mechanism.
- Section 12B of the Income Tax Act: Provides for an accelerated capital allowance for machinery, plant implements, utensil or articles, where the assets are used for purposes such as the generation of electricity from wind, sunlight, gravitational water forces of not more than 30 megawatts or biomass.
From the above, it is observed that all over the world, importance of alternative sources of energy are being encouraged.
What are your views on this? Feel free to comment below & share the article.