The Burden of Germany's Energy Transition – An Empirical Analysis of Distributional Effects

25 Pages Posted: 25 Mar 2015

See all articles by Manuel Frondel

Manuel Frondel

RWI Leibniz Institute for Economic Research ; Ruhr University Bochum (RUB)

Stephan Sommer

RWI - Leibniz-Institute for Economic Research

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

Date Written: January 14, 2015

Abstract

Germany’s energy transition has been accompanied by a near doubling of power prices for private households since the outset of the new millennium. Millions of poor households and those that are close to the poverty threshold are likely to suffer from these increases in electricity cost. Focusing on low-income households, this paper illustrates the distributional implications of Germany’s energy transition by investigating their electricity cost burden between 2006 and 2012, using data from the German Residential Energy Consumption Survey (GRECS). Our estimates suggest that in 2012, on average, households at poverty risk allocated 5.5% of their income to power and, hence, paid nearly as much for covering their electricity consumption as for heating purposes. Given Germany’s ambitious targets to expand the share of costly renewable technologies in electricity consumption, which has broad support among the electorate, it is to be expected that households’ expenditure for power will increase in the upcoming years. This raises the urgent question of how to mitigate the regressive impact of further increasing electricity prices on poor households. Direct cash transfers are suggested here as a non-distortionary instrument for easing the burden of high prices, one that is directly targeted at those endangered by energy poverty.

Keywords: Energy transition; feed-in tariff ; German Residential Energy Consumption Survey

JEL Classification: Q21, Q28, Q47

Suggested Citation

Frondel, Manuel and Sommer, Stephan and Vance, Colin, The Burden of Germany's Energy Transition – An Empirical Analysis of Distributional Effects (January 14, 2015). Ruhr Economic Paper No. 542. Available at SSRN: https://ssrn.com/abstract=2583765 or http://dx.doi.org/10.2139/ssrn.2583765

Manuel Frondel (Contact Author)

RWI Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany

Ruhr University Bochum (RUB) ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Stephan Sommer

RWI - Leibniz-Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
0049-201-8149-237 (Phone)

HOME PAGE: http://www.rwi-essen.de

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