Vermonters for Economic Health

Final report – October 2009
Project team: Dr. Manuel Frondel,
Nolan Ritter, Prof. Colin Vance, Ph.D. (Project management)

Abstract
"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.
In the case of photovoltaics, Germany’s subsidization regime has reached a level
that by far exceeds average wages, with per-worker subsidies as high as 175,000 €
(US $ 240,000)"