Do Electricity Prices Matter? Plant-Level Evidence from German Manufacturing

25 Pages Posted: 8 May 2015 Last revised: 3 Feb 2017

Date Written: January 20, 2017

Abstract

In many countries, the transition process towards a low-carbon economy has been associated with increasing electricity prices. Microeconometric evaluations of the causal impact of electricity price changes on plant-level outcomes are rare, though. By exploiting local randomization induced by thresholds in exemption rules, we estimate the local average treatment effects of electricity levy exemptions using a fuzzy regression discontinuity (RD) design. The results indicate that exempted German manufacturing plants increase electricity use substantially and substitute it for fossil fuels, while we do not find evidence for short-run effects on gross output, exports and employment.

Keywords: Electricity prices, electricity use, manufacturing, regression discontinuity design

JEL Classification: D22, H23, L60, Q41, Q48

Suggested Citation

Gerster, Andreas, Do Electricity Prices Matter? Plant-Level Evidence from German Manufacturing (January 20, 2017). Available at SSRN: https://ssrn.com/abstract=2603211 or http://dx.doi.org/10.2139/ssrn.2603211

Andreas Gerster (Contact Author)

University of Mannheim ( email )

L7, 3-5
Mannheim, 68131
Germany

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