Distributional Challenges of Sustainability Policies - The Case of the German Energy Transition

Abstract

Sustainability policies based on the economic rationale of providing incentives to get prices right inevitably place a significant burden on society and often raise distributional concerns. The social acceptability of Germany’s energy transition towards more sustainable generation and usage of energy is frequently the subject of such critical appraisals. The discourse centres upon the burden imposed on electricity users as a result of the promotion of renewable energy sources in the electricity sector in accordance with the German Renewable Energy Sources Act (EEG). A regressive EEG surcharge is suspected of driving up energy prices unreasonably and of being socially unjust. It is also argued that high-income utility owners profit from the EEG system at the expense of low-income electricity consumers (redistribution from bottom to top). The aim of this paper is to examine the validity of these two hypotheses and to show that both exhibit substantial theoretical and empirical weaknesses, with climate and environmental policy being played off against social policy in a questionable manner. At the same time, the article points out remaining conflicts between energy policy and social policy and makes corresponding policy recommendations for their resolution, thus contributing to reconciling distributional concerns arising in the context of incentive- oriented sustainability governance.