The Green New Deal Should Focus on Economic Opportunities: Lessons from the German Energy Transition

Sebastian Sewerin, Nicolas Schmid, Bjarne Steffen, Martin Beuse, Florian Egli, Anna Geddes, Léonore Haelg, Lynn Kaack, Abhishek Malhotra, and Tobias S. Schmidt

Policymakers supporting the Green New Deal (GND) should carefully review the lessons from the German energy transition. Germany was early in adopting effective low-carbon energy policies, and crucially, Germany’s flagship policy was ‘sticky’: the feed-in-tariff introduced in 2000 survived government changes and succeeded in overcoming partisanship. This stickiness resulted from positive feedback of a new support coalition emerging as a direct outcome of the feed-in-tariff: It triggered a massive increase of renewable electricity generation (from 5% of German electricity consumption in 2000 up to 38% in 2018), the creation of approximately 350,000 local jobs, and a multi-billion euro renewable energy industry.

The German case provides a key lesson for the US: An active industrial policy within the GND should focus on nurturing promising low-carbon technologies. Such a strategy creates positive feedback and, through an increasingly strong coalition of voters, interest groups, and policymakers, results in policy stickiness. We believe that considering future support coalitions is especially relevant for the US: While the adoption of ambitious federal low-carbon energy policies is arguably a major political challenge, ensuring that they persist through future Congresses might be even harder. Thus, creating stickiness through positive feedback (e.g., through job creation) is a crucial design challenge for policymakers. Here, we make the case that especially job creating technology-smart design of low-carbon energy policies increases positive feedback and thus stickiness.

Creating policy stickiness through economic opportunities

How to generate political support for low carbon policies? First, policies should create  direct benefits for citizens. Second, GND policies need to generate support of important interest groups along the value chain of such technologies: from technology manufacturers, project developers, investors, installers, to maintenance. In Germany, the creation of millions of small-scale rooftop solar PV installations and thousands of energy production cooperatives resulted in strong public support for the feed-in-tariff. In addition, new technology manufacturers emerged over time and established interest groups. Political parties are susceptible to such positive feedback of voters and interest groups. As a result, German center-right parties initially opposing the policy increasingly supported it over time. For instance, the Bavarian Conservative party embraced solar PV because it strongly benefitted farmers, a key constituent.

For industry-related elements of a GND, this feedback logic may be applied to at least two technologies: energy efficient buildings and energy storage. Deployment of these technologies may also trigger positive feedback: First, voters could directly profit from programs facilitating energy-efficient retrofits of buildings. Second, nurturing an energy storage technology industry could lead to the appearance of strong interest groups. The crucial challenge for US policymakers is how to design policies that can achieve such positive feedback. Bipartisan support for wind technology in Texas and Midwestern states might provide an inroad to such a strategy.

Job Creation and Technology Innovation

Technology-smart policies enhance policy stickiness by creating economic opportunities. From innovation studies, we know that creating markets through deployment policies and facilitating interaction between industry players to support the transfer of tacit knowledge fosters innovation and helps build an industry. Obviously, policies also need to be generally well-designed, e.g. include clear targets, implementation rules and monitoring procedures.

In Germany, the feed-in tariff differentiated the level of remuneration between low-carbon energy technologies, thereby creating a level-playing field, avoiding premature lock-out of PV. It was complemented with policies enabling low-cost financing, e.g. through the state investment bank KfW. In the case of solar PV, this led to a boom of manufacturing capacities in the late 2000s – until the new industry largely relocated to China. For a time, this threat to what seemed to be a promising local industry, combined with raising electricity costs for households, endangered the continuation of the feed-in tariff. Importantly though, positive feedback from small-scale solar PV installers and support coalitions – including the finance industry – around other technologies, particularly wind, sustained the support policy.

Conclusion

Drawing on the German experience, we advocate thinking about policies that create economic opportunities (such as jobs, investment, new income sources), and therefore broad local support coalitions. While, understandably, a GND’s potential for social policy reform catches most of progressive US policymakers’ attention, the danger is that the difficulty to design sticky and effective low-carbon energy policies is underestimated. From a climate mitigation perspective, it would be tragic if, to secure the adoption of social policies, Progressives would agree to settle on low-carbon energy policies with no or limited potential for creating positive feedback loops.

Sebastian Sewerin is a Senior Researcher and Lecturer with the Energy Politics Group, ETH Zurich.

Nicolas Schmid is a PhD student with the Energy Politics Group, ETH Zurich.

Bjarne Steffen is a Senior Researcher and Lecturer with the Energy Politics Group, ETH Zurich.

Martin Beuse is a PhD student with the Energy Politics Group, ETH Zurich.

Florian Egli is a PhD student with the Energy Politics Group, ETH Zurich.

Anna Geddes is a PhD student with the Energy Politics Group, ETH Zurich.

Léonore Hälg is a PhD student with the Energy Politics Group, ETH Zurich.

Lynn Kaack is a Postdoctoral Researcher with the Energy Politics Group, ETH Zurich.

Abhishek Malhotra is a Postdoctoral Researcher with the Energy Politics Group, ETH Zurich.

Tobias S. Schmidt is an Assistant Professor of Energy Politics and the head of the Energy Politics Group, ETH Zurich.