Economy-wide benefits and costs of local-level energy transition in Austrian Climate and Energy Model Regions

To achieve a low-carbon transition in the electricity sector, countries combine national-scale policies with regional renewable electricity (RES-E) initiatives. Taking Austria as an example, we investigate the economy-wide effects of implementing national-level feed-in tariffs alongside local-level ‘climate and energy model (CEM) regions’, taking account of policy externalities across the two governance levels. We distinguish three types of CEM regions by means of a cluster analysis and apply a sub-national Computable General Equilibrium (CGE) model to investigate two RES-E scenarios. We find that whether the net economic effects are positive or negative depends on three factors: (i) RES-E potentials, differentiated by technology and cluster region; (ii) economic competitiveness of RES-E technologies relative to each other and to the current generation mix; and (iii) support schemes in place which translate into policy costs. We conclude that the focus should mainly be on economically competitive technologies, such as PV and wind, to avoid unintended macroeconomic side-effects. To achieve that, national support policies for RES-E have to be aligned with regional energy initiatives.