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

Christoph Böhringer, Andreas Keller and Edwin van der Werf ()

Energy Economics, 2013, vol. 36, issue C, 277-285

Abstract: 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.

Keywords: Renewable energy promotion; Wage rigidities; Computable general equilibrium; Double dividend (search for similar items in EconPapers)
JEL-codes: E24 H23 Q42 Q43 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:36:y:2013:i:c:p:277-285

DOI: 10.1016/j.eneco.2012.08.029

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