Research Press Release

Consumers see red if green energy costs are unfair

Nature Energy

September 11, 2018

German households would more readily accept extra costs for renewable energy if existing subsidies for energy-intensive industries were removed, suggests a paper published online this week in Nature Energy.

To finance the expansion and promotion of green energy, Germany places a fixed surcharge on the net price of electricity, dubbed the Renewable Energy Act levy. Today, this accounts for a quarter of the end-use electricity price. However, around 4% of energy-intensive facilities - constituting about 40% of industrial usage - qualify for an exception to this surcharge, a policy intended to protect these industries’ international competitiveness. It was unknown whether the price inequity between consumers and industry could impact the public’s willingness to support renewables.

To investigate, Manuel Frondel and colleagues conducted a randomized, stated-choice experiment involving 11,000 German households. They asked participants about their readiness to accept an increase in the levy intended to achieve a greater share of green electricity by 2020. The authors found that survey respondents who were informed about the prevalence of levy exemptions for industry were less likely to accept a surcharge increase. However, 35-40% more respondents indicated that they would accept the extra charge when they were told that the industry exemption was being abolished.

Although the authors only tested one renewable energy policy in this study, they conclude that the findings highlight the importance of also considering the distribution of cost burdens resulting from other policy instruments, such as carbon tax schemes.


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