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

C. Bohringer, A. Keller, E. van der Werf

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52 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)277-285
JournalEnergy Economics
Volume36
DOIs
Publication statusPublished - 2013

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Keywords

  • nominal wage rigidity
  • climate policy
  • market
  • curve
  • labor
  • unemployment
  • germany
  • world
  • costs

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