Completed research project: Tax incentives to reduce energy consumption

By studying the effects of Basel’s electricity levy, researchers at the University of Lucerne investigated how tax incentives work in practice and how their impact on energy consumption could be increased.

The Energy Strategy 2050 originally involved a second phase with an emphasis on incentive based policy measures to reduce energy consumption. The main idea of the concluded NRP 71 research project was to draw lessons from cantonal experiences with such measures for the national level.

Under the leadership of Prof. Simon Lüchinger, the researchers wanted to find out how tax incentives influenced consumer behaviour and what shape a national scheme should take. With this in mind, they analysed the electricity levy that was introduced in the canton of Basel-Stadt as early as 1999.

An average price increase by 8% per kilowatt hour was expected to promote electricity conservation in households and industry. Large-scale consumers were exempted.

In order to assess the levy's impact, the researchers compared the actual overall electricity consumption of Basel-Stadt with the hypothetical electricity consumption without the levy. The hypothetical consumption was calculated based on the weighted average of the electricity consumption of comparable cities.

The results revealed that the levy had a limited impact as the actual electricity consumption is only 2-3% below the hypothetical consumption. Moreover, this difference is statistically insignificant.

The limited impact is probably linked to the fact that a fixed fee which had been in place was abolished at the same time. As a result, many consumers did not see a significant increase in their electricity bills despite the higher price per kilowatt hour. Saving electricity would have been worth their while but these consumers were probably not sufficiently aware of this and official communication was insufficient. In addition, the number of users who were exempted from the levy was relatively high.