Understanding local adoption of tax credits to promote solar-thermal energy: Spanish municipalities' case

• We analyze the reasons to implement tax credit to promote solar thermal.
• A cross-section logit model is formulated to describe the behavior of municipalities.
• Municipalities likely to implement tax credit are large in size with low fiscal stress.
• With high solar potential and predominantly collective-housing buildings.
• Environmental-stress, neighboring effect and citizens ideology positively influence.

Spanish local governments may offer, in accordance with Royal Decree 2/2004, tax credits up to 50% in Real Estate Tax for those with installed solar powered thermal or electrical energy systems. This paper analyzes by logistic regression estimation which factors influence the decision of governments to implement this tax credit. Factors included as explanatory variables are related to the characteristics of municipalities, fiscal stress, environmental stress, the environmentally friendly nature of municipalities, the neighboring effect, and economic motivations. Results show that municipalities applying these measures are mostly large in size, with high solar potential, with predominantly collective-housing buildings, with low fiscal stress, mainly rural, environmentally friendly, surrounded by municipalities implementing similar measures and with higher unemployment rates.