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Renewable Energies Act and International Competition: Is the Special Compensation Scheme Sustainable?

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  • Rahel Aichele
  • Gabriel Felbermayr
  • Inga Heiland

Abstract

The Renewable Energies Act (EEG) levy shares the costs of financing the feed-in of green energy amongst electricity consumers. To counteract any negative impact on the international competitiveness of German companies, the EEG special compensation scheme exempts electricity-intensive companies from the EEG levy. In December 2013 the EU initiated a state aid investigation into this German policy. The investigation should verify whether the special compensation scheme can be classified as appropriate. This would be the case if the scheme prevents carbon leakage, or the transfer of emissions to other countries. In an expert report for the German Federal Ministry of Economics and Energy the Ifo Institute proposes measures to assess the leakage risk faced by individual branches. Ifo’s analysis shows that sectors producing goods whose prices heavily influence demand for them would be deeply affected by the migration of emissions and value creation abroad, especially in the metals, paper and steel industries. Even if competition-intensity measures are used, it remains questionable whether the resulting distortions are justifiable and whether a far-reaching reform of the EEG is not required.

Suggested Citation

  • Rahel Aichele & Gabriel Felbermayr & Inga Heiland, 2014. "Renewable Energies Act and International Competition: Is the Special Compensation Scheme Sustainable?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(02), pages 23-29, January.
    • Handle: RePEc:ces:ifosdt:v:67:y:2014:i:02:p:23-29
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    References listed on IDEAS

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    1. Aichele, Rahel & Felbermayr, Gabriel, 2012. "Kyoto and the carbon footprint of nations," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 336-354.
    2. Rahel Aichele & Gabriel Felbermayr, 2013. "Estimating the Effects of Kyoto on Bilateral Trade Flows Using Matching Econometrics," The World Economy, Wiley Blackwell, vol. 36(3), pages 303-330, March.
    3. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
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    Cited by:

    1. Markus Zimmer & Rahel Aichele & Anna Sophia Ciesielski & Julian Dieler & Ana Maria Montoya Gómez & Tilmann Rave, 2017. "Integrated Assessment of the Instruments and the Fiscal and Market-Based Incentives of International Climate Change Policies and their Impacts (IACCP)," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 81.
    2. Feld, Lars P. & Fuest, Clemens & Haucap, Justus & Schweitzer, Heike & Wieland, Volker & Wigger, Berthold U., 2014. "Neustart in der Energiepolitik jetzt!," Kronberger Kreis-Studien 58, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.
    3. Michael Ebnet, 2014. "Branch Spotlight: The Textile and Clothing Industry in Europe and Germany – There's Life in the Old Dog Yet," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(05), pages 35-40, March.

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    More about this item

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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