Volume 59, Issue 2

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in-tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy and protecting the environment.

In the past few years the idea of a potential cartel in the natural gas market has emerged and was hyped in the media. Recently, the main producing countries under the leadership of Russia have built a formalized organisation to strengthen cooperation. Since then, regular meetings of the Gas Exporting Countries Forum (GECF) have taken place. Especially in Europe, where import dependency will rise within the next decades, the stronger coordination has amplified the already existing fears of collusive behaviour. A closer look, however, reveals numerous obstacles that make a full-fledged cartel controlling prices by setting production quotas rather improbable at this time. Nevertheless, producers’ attempt for more coordination should not be ignored.

The paper offers an innovative structure for a future transnational climate policy beyond the Kyoto Protocol (and criticizes the overall methodology of climate economics), but mainly assesses the possibilities for a strongly extended pioneering role of the European Union - secured by complementary border adjustments for imports and exports. Border adjustments do not discriminate against anybody in global free markets and therefore do not violate WTO rules, as they make sure that whoever refuses to protect the climate will not be granted an unfair advantage by eco-dumping. Border adjustments do not spare us to rethink our way of life. But border adjustments allow the EU to act as a role model for countries like China, India and or the USA in advancing an effective and social (and economically prospering) climate policy. This may be the only way to stimulate action for a global, effective and social climate policy.

Border measures to support unilateral climate policy efforts are being discussed in particular in the EU and the US. The EU has stipulated in its 2008 Directive on the European Emissions Trading Scheme (EU ETS) that in order to address the potential for carbon leakage, an inclusion of importers in the ETS could be a policy option amongst others. A climate policy adjustment at the border could take various forms and it could be motivated in three ways. First, trade measures could be announced as a “stick”, sanctioning those countries who are not willing to cooperate on climate protection. Second, the border adjustment for importers (making them pay at the border according to the carbon they emitted for producing the traded good) or a rebate for exporters for the CO 2 -price they paid at home, would take away the competitive disadvantage vis-à-vis producers from third countries. Third, and as the flip side of the competitiveness effects, the border adjustment could be motivated from a climate policy point of view: in order to secure the environmental integrity of a domestic carbon pricing scheme, such measures could prevent leakage of emissions (caused by relocation of production, in parts or as a whole). While a strong economic case could be made for preventing leakage and also competitiveness effects from CO 2 pricing through a cost adjustment at the border for a few sectors, there is little evidence that trade measures as such help to create international leverage for climate policy cooperation. From a legal point of view the justification of such measures very much depends on their designs and motivations. From a political point of view, the risk of disruptions amongst trade partners is fairly high and this is a major argument for limiting the use of border adjustments altogether.

This article looks at the impacts of climate policy on international competitiveness and Carbon Leakage and the role of environmental tariffs. More specifically, it analyzes the current climate debate and illustrates potential future challenges in implementing environmental tariffs. It argues that environmental tariffs are not the least evil among the different trade measures as a means of protecting domestic industry.

The name of Adam Smith is always associated with the development of the invisible hand, the differentiation of labour and with the foundation of the economic liberalism, so that his book the Wealth of Nation is still in fashion. Based on the criticism of mercantilism system Smith develops his own economic system. Furthermore this economic system is more than pure discretion, it is also instruction which role the market and the state have to fulfil. Smith attributes to the market his famous role, the free function of the price system. Whereas the function of the state is limited to three tasks and no intervention into the market or price process are allowed.

This article analyses the question whether FDIs have a positive or negative impact on employment and turnover. The analysis is done with the IAB establishment panel and covers the years 2005 to 2007. While the descriptive analysis shows no clear pattern, the econometric analysis leads to the conclusion that FDIs have a positive impact on employment. Since the time period is rather short, it is worthwhile to analysis the development of firms with FDI and without FDI over a longer time period.