January 2, 2010
Manuel Frondel, Nolan Ritter, Christoph M. Schmidt, Colin Vance have recently published a paper on the economic impacts of promoting renewable energy technologies in Germany.
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 current 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.
November 4, 2009
According to the most recent analysis from the Congressional Budget Office (CBO), a cap-and-trade bill will shrink the GDP’s growth 0.2 percent to 0.7 percent by 2020:
Here is how the pay breaks down at a household level per state:
So what accounts for the differences? Jonathan Rothwell and Mark Muro explain:
The household costs of cap-and-trade compliance vary quite a lot, and depend quite a bit on what metro you live in. Ranging above and below the average $160 cost to a household nationally in 2020, the average metro figures range from a high of $277 per household in Lexington, KY to a low of just $96 in Los Angeles. Low costs are registered all across the West’s metros and in Northeastern metros like New York, Boston, and Rochester. Much higher costs will be borne by households in metros all across the upper South and Ohio Valley—places like Cincinnati, and Indianapolis, and Nashville. So once again, as we keep saying: Place matters.
In terms of what’s driving these variations and what we’re to make of these differentials, the bottom line is this: Differences in the compliance costs across metros result mostly from variation in carbon emissions. Residents of high emission metros emit roughly 2.4 times as much carbon per capita as residents in low emission metros and this translates into about $178 extra in costs per household. In that sense, the cap-and-trade system really will penalize high-energy-consumption households. But beyond that, it will also penalize sprawling, low-density metros that contend with extremes in temperatures and lack transit options. That’s because, as the earlier report confirmed, the per capita “carbon footprints” of metro areas are influenced by their development patterns, the existence of rail transit, the carbon content of electricity sources, as well as the weather.