Modelling the social funding and spill-over tax for addressing the green energy financing gap

The major challenge for filling the financing gaps of green energy is lower rate of return of green projects comparing to fossil fuels. Electricity tariffs are often regulated by governments; It has to be kept in low price to serve for every households as a necessary goods. Sources of revenue from green energy comes only from user charges. Hence it is not so much attractive for private investors. The paper is proposing a model for utilization of the tax revenue spillover of green energy supply by returning the portion of it to green energy projects in order to increase their rate of return. In addition, the paper is proposing a social community based funding scheme for smaller scale green projects (e.g. solar and wind). The paper theoretically and empirically shows that utilizing spillover effect in form of tax return for funding green energy projects will increase the rate of return and make them feasible and interesting for the private investors.