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Are green hopes too rosy? Employment and welfare impacts of renewable energy promotion

  • Böhringer, Christoph
  • Keller, Andreas
  • van der Werf, Edwin

In view of pressing unemployment problems, policy makers across all parties jump on the prospects of renewable energy promotion as a job creation engine which can boost economic well-being. Our analytical model shows that initial labor market rigidities in theory provide some scope for such a double dividend. However, the practical outcome of renewable energy promotion might be sobering. Our computable general equilibrium analysis of subsidized electricity production from renewable energy sources (RES-E) in Germany suggests that the prospects for employment and welfare gains are quite limited and hinge crucially on the level of the subsidy rate and the financing mechanism. If RES-E subsidies are financed by labor taxes, welfare and employment effects are strictly negative for a broad range of subsidy rates. The use of an electricity tax to fund RES-E subsidies generates minor benefits for small subsidy rates but these benefits quickly turn into significant losses as the subsidy rate exceeds some threshold value.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 36 (2013)
Issue (Month): C ()
Pages: 277-285

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Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:277-285
DOI: 10.1016/j.eneco.2012.08.029
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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