Power generation and structural change: Quantifying economic effects of the coal phase-out in Germany

Katja Heinisch, Oliver Holtemöller and Christoph Schult

No 16/2019, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: In the fight against global warming, the reduction of greenhouse gas emissions is a major objective. In particular, a decrease in electricity generation by coal could contribute to reducing CO2 emissions. We study potential economic consequences of a coal phase-out in Germany, using a multi-region dynamic general equilibrium model. Four regional phase-out scenarios before the end of 2040 are simulated. We find that the worst case phase-out scenario would lead to an increase in the aggregate unemployment rate by about 0.13 [0.09 minimum; 0.18 maximum] percentage points from 2020 to 2040. The effect on regional unemployment rates varies between 0.18 [0.13; 0.22] and 1.07 [1.00; 1.13] percentage points in the lignite regions. A faster coal phase-out can lead to a faster recovery. The coal phase-out leads to migration from German lignite regions to German non-lignite regions and reduces the labour force in the lignite regions by 10,100 [6,300; 12,300] people by 2040. A coal phase-out until 2035 is not worse in terms of welfare, consumption and employment compared to a coal-exit until 2040.

Keywords: dynamic general equilibrium model; labour market friction; energy; structural change (search for similar items in EconPapers)
JEL-codes: E17 O11 O21 O44 Q28 (search for similar items in EconPapers)
Date: 2020, Revised 2020
New Economics Papers: this item is included in nep-dge, nep-ene and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Power generation and structural change: Quantifying economic effects of the coal phase-out in Germany (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:162019

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