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Evaluating Policy Instruments for the Transformation to a Low Carbon Economy: Causal Evidence from Administrative Microdata

Mitigating the effects of climate change represents one of the major global societal challenges. In the framework of the COP21 held in Paris in 2015, the international community agreed to limit global temperature increases to less than 2 degrees Celsius by the end of this century. This requires drastic mitigation of greenhouse gas emissions. In addition, Germany has unilaterally adopted very ambitious goals in the context of the energy transition. To accomplish these national and international objectives, various political instruments have been implemented. Among them are the European Union Emissions Trading System (EU ETS) and the German Renewable Energy Sources Act (EEG). These instruments generally lead to rising energy costs for firms and thus provide incentives to reduce energy consumption and greenhouse gas emissions. However, concern has been raised that a unilateral increase in energy costs will weaken Germany’s competitiveness and result in decreasing market shares and exports as well as job losses in the affected sectors.

The TRACE project is funded by the German Federal Ministry of Education and Research (BMBF) through its funding priority “Economics of Climate Change”. The Project aims to provide a differentiated analysis of regional and sectoral challenges associated with the policy goal of decarbonization. The project, jointly carried out by the University of Mannheim, the ZEW – Leibniz Centre for European Economic Research and the Institute for Employment Research (IAB), explicitly deals with a societal dimension of that transition by studying both quantitative and qualitative effects of climate policies on the labor market.