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Economic impacts from the promotion of renewable energy technologies: The German experience

  • Frondel, Manuel
  • Ritter, Nolan
  • Schmidt, Christoph M.
  • Vance, Colin

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany's experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country's energy portfolio. To the contrary, the government's support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 8 (August)
Pages: 4048-4056

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Handle: RePEc:eee:enepol:v:38:y:2010:i:8:p:4048-4056
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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  1. Hillebrand, Bernhard & Buttermann, Hans Georg & Behringer, Jean Marc & Bleuel, Michaela, 2006. "The expansion of renewable energies and employment effects in Germany," Energy Policy, Elsevier, vol. 34(18), pages 3484-3494, December.
  2. Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M., 2008. "Germany's solar cell promotion: Dark clouds on the horizon," Energy Policy, Elsevier, vol. 36(11), pages 4198-4204, November.
  3. Neij, Lena, 1997. "Use of experience curves to analyse the prospects for diffusion and adoption of renewable energy technology," Energy Policy, Elsevier, vol. 25(13), pages 1099-1107, November.
  4. Manuel Frondel & Christoph M. Schmidt, 2008. "Measuring Energy Security – A Conceptual Note," Ruhr Economic Papers 0052, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
  6. Thure Traber & Claudia Kemfert, 2009. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions, and Firms," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 155-178.
  7. Morthorst, P. E., 2003. "National environmental targets and international emission reduction instruments," Energy Policy, Elsevier, vol. 31(1), pages 73-83, January.
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