Subsidizing renewables as part of taking leadership in international climate policy: The German case

Abstract

Leadership in Climate Policy is usually associated with leading by example in mitigation efforts whereas little attention has been paid to leadership in climate-friendly technological progress. We point out that pioneering activities that create reliable demand such as Germany's feed-in tariff for solar energy constitute such technological leadership. Based on global learning curves, we argue that the enormous reduction of prices for photovoltaic modules is due to demand side interventions like Germany's EEG and related international technology diffusion and policy transfer, especially to China. For the German case, we calculate that the costs of incentivizing this technological progress through the EEG add up to a range between 112.34 and 122.18 Bn Euro (based on a thought experiment of a hypothetical new entrant in 2014).