Are green hopes too rosy? Employment and welfare impacts of renewable energy promotion

► In economic theory labor market distortions can justify the adoption of RES-E subsidies. ► Our CGE analysis for Germany finds little scope for employment and welfare gains. ► Impacts depend on the level of the RES-E subsidy rate and the financing mechanism. ► Welfare and employment effects are strictly negative for labor tax financing. ► Financing through an electricity tax yields significant losses towards higher subsidy rates.