Description

There are many concerns on how to enhance environmental policies through participating in the international market with opened borders. For many years already a strong cooperation with countries with lower environmental regulations developed between the United States of America and some Western European countries. This development has brought forward a raise of standards in environmental policies across the world but a big gap still prevails in the regulations between developed and developing countries. Some environmental economists claim that trade flows across countries with different environmental regulations may create the “pollution haven” effect and a “race to the bottom” in environmental standards. The term “pollution havens” is used when pollution intensive manufacturing is relocated from developed to developing countries where environmental regulations are assumed to be less stringent (Nahman & Antrobus, 2005). Globalization and international cross-border cooperation also play a vital role for international tax regimes.

Different fiscal policies in one country influence the economic situation in others, even countries located far away. Companies and individual persons use the possibility of increased capital mobility and choose locations where the tax burden is lower. These locations are called “tax havens”. Similar to “pollution havens”, “tax havens” can create a “race to the bottom” in the collective tax base. The similarity of this terminology raises the question what makes a country a haven. Since the globalised market is being challenged by an increasing demand for energy and the energy supply is becoming one of the main cost factors in the production process for many industries, the research analysed a new definition of the term “energy havens”.

The term “energy havens” describes countries which have a big potential of renewable energy creation that can be provided to “power-hungry” consumers/energy-intensive enterprises. This is the aspect which differentiates them from the previously mentioned “pollution havens” because the use of traditional energy sources to offer industries a cheap energy supply would result in the “pollution haven” effect. The exploitation of renewable energy sources has to be feasible and ecologically desirable in order not to cause harm to nature and “pollute” the environment.

The leading example of an “energy haven” generating electricity from renewable energy is Iceland. The country can provide more electricity than required by all of its residents, businesses and industries. There are already many foreign companies investing in Iceland and relocating their facilities there.

Objectives and beneficiaries

The main target groups of this master thesis are energy intensive industries and the academic audience whose interest is the future energy market condition. The research conducted focuses on electricity from renewable energy, with production cost as the main factor.

Strong points of the practice

Electricity produced from fossil fuels is not favorable due to the unsecure conditions for future energy markets (import from politically unstable regions) as well as certain risks and impacts on the environment (e.g. oil spills, health risks from fossil fuel burning). Mainly, the origin of resources is from undesirable regions (such as the desert in Saudi Arabia) where the energy infrastructure can provide many challenges. Also, exploitation areas are changing over time. This kind of energy source does not attract many investments because it cannot promise a secure and infinite energy supply for the future. Conversely, renewable energy can help to decouple the correlation between the increasing energy demand and the negative impact on climate and nature.

Expected results and benefits for climate change adaptation and mitigation

The previously discussed “tax havens” will continue to exist as long as there are justifiable reasons for hiding your money at a safe location (it does not matter if this is done for security reasons or to avoid taxes). Another question comes to mind: will the possibility of polluting the environment still be a decisive factor when relocating your industrial production activities? Since technological progress allows us to better control pollution, cheap and widely available energy will possible be the crucial factor which places a manufacturing industry somewhere else. Concerning the everyday question of how to limit emissions, the search for “energy havens” could offer a solution. A common question these days is whether we should take advantage of the opportunity of low salaries in certain countries. The same question however should not be an issue when talking about taking advantage of “clean” energy which, in the example of the well developed country of Iceland, can also be cheap. Even though it is arguable whether the extraction of RE is expensive and unaffordable for many countries, the fact that investments could foster sustainable economic development must be stressed. The progression and spreading of innovations and technologies will eventually create possibilities for more and more countries to take full advantage of the potential of RE. The management of resources plays a vital role in the future energy development. For example, low prices of oil or coal from Saudi Arabia or Australia cannot guarantee a stable and secure energy supply because the extraction of these resources is becoming more expensive every day. It can be observed how RE is becoming more commonly used in these countries. The energy world is steadily changing and different areas than the ones identified in this thesis can develop at any given time.

Replicability potential of the practice

Based on experiences from Iceland to look for potential "energy havens" around the globe.