Municipal tax incentives and solar PV adoption: Causal evidence from Catalonia

This paper estimates the causal impact of municipal property tax exemptions on the adoption of solar photovoltaic (PV) systems in Catalonia. Using a balanced monthly panel of municipalities from 2015 to 2022, we employ a difference-in-differences (DiD) framework with staggered policy implementation. The exemption increased installed PV capacity by 34%–50% and led to roughly one additional installation per treated municipality per month. We find that 68% of the tax exempt installations would have occurred even without the policy, implying an implicit abatement cost of €102 per tonne of CO 2 . Heterogeneity analysis shows limited variation across structural and socioeconomic contexts. Overall, the policy was moderately effective but only partially efficient, suggesting that more targeted design could enhance its cost-effectiveness.