Germans pay extra for clean energy—is it worth it?

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Germany has become a world leader in renewable power thanks in part to its Renewable Energy Act (EEG), which came into force in 2000. It established a feed-in tariff program that guarantees producers of carbon-free power an above-market rate of return for 20 years. EEG pays tariffs to solar PV, concentrated solar, wind, geothermal, biomass, hydropower, and landfill or sewage gas. The tariffs vary according to capacity and level of technological development; they drop every few years based on the latest costs and level of penetration. German electrical ratepayers fund the program through a small fee that amounts to about 15 percent of their electrical bills. When EEG was passed, the Greens responsible for writing it proclaimed that they intended to double the percentage of Germany's power coming from renewables within 10 years. They were roundly mocked as unrealistic. And they were indeed wrong: between 1999 and 2009, German renewables tripled, from 5.4 to 16.4 percent.

The EEG is so well-designed and successful that policies roughly based on it (though adapted to local circumstances) have since spread to 50 countries -- no laborious international treaty required.

Naturally, though, it has its detractors. Count among that group pretty much all U.S. conservatives and quite a few economists, who in various ways say that the program is too costly. I want to hone in on one specific economic critique and an interesting response to it, found in this paper by scholars at the Wuppertal Institute (and supported by my generous hosts in Germany last week, Heinrich Böll Stiftung). This will be slightly wonky. You've been warned.

Generally speaking, environmental economists believe that the most cost-effective way to reduce greenhouse gas emissions is to put a price on carbon. Economists like that a carbon price is tech agnostic. It doesn't mandate this or that form of energy, this or that business practice. Instead it leaves the market, via the famous Invisible Hand, to find the cheapest reductions first, gradually moving on to the more expensive ones as the price on carbon rises.

The result, they say, is the lowest total marginal abatement costs (MAC) for a given level of emission reductions.

more....

http://www.grist.org...-is-it-worth-it