The expansion of renewable energies and employment effects in Germany

The promotion of electricity produced from renewable energy is a high priority of the European Union, as well of its member states. The German government wants to increase the share of renewable energies from about 5% to 12% by 2010. To attain this goal, the German government has introduced compulsory compensation schemes for electricity produced from renewable energy fed into the public grid. This paper examines the economic impact of this policy employing an econometric model. Particular emphasis was given to employment effects. In general, we distinguish two effects: (1) an expansive effect resulting from additional investments and (2) a contractive effect resulting from an increase in the production cost of power. The first effect will dominate during the first years and lead to an increase in employment of approximately 33,000 new jobs. However, the contractive effect will offset these gains and lead to a slightly negative employment balance by 2010.