Ending Subsidies Slows the Growth of Wind and Solar Power

Falling prices for renewables such as wind and solar are prompting policymakers at the national and European levels to consider phasing out support mechanisms. In a new scientific study, we show that discontinuing these instruments could have negative effects on the growth of these renewables. We arrived at this conclusion with the aid of a model in which we have integrated empirical investor preferences for the first time.

The EEG as the core instrument in German climate policy

Some German political parties and economists suggest ending the Renewable Energy Sources Act (EEG) surcharge in the power bill and instead financing renewables through the carbon tax. While the recent carbon pricing debate has focused on equity and political feasibility, it has neglected the elephant in the room: how would this change affect Germany’s ability to meet the 2030 climate goals? Here, we show that this refinancing would put climate goals at risk. Purely market-based renewables are not yet viable, the change could therefore slow down their already sluggish deployment. We thus argue that the EEG remains the quintessential instrument for German climate policy in the coming decade.