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Stable Policies, Turbulent Markets-Germany's Green Industrial Policy: The costs and benefits of promoting solar PV and wind energy

Green industrial policy (GIP) is the pursuit by governments of national economic excellence in key green economy sectors, with a view to creating globally competitive domestic firms.

It differs in only a few respects from traditional industrial policy, most significantly with respect to the potential global environmental benefit that comes from private sector innovation and competition in these sectors.

GIP is increasingly used by governments in the developed and developing countries, a trend that is likely to be reinforced in coming years by the desire to capture the environmental and economic benefits of green economy sectors. However, as with traditional industrial policy, it is easy to implement policies that undermine rather than support the intended goals.

This report is one in a series that considers the lessons for GIP that can be learnt from policies in the renewable energy sector. The aim of the series is to provide policy makers with research to support the development of cost effective, well targeted policies for the development of green industries. The reports highlight how policies have worked, the outcomes of the policies and the lessons that have been learnt.

This report focuses on the wind and solar sectors in Germany. It reviews the German policy in support of raising the share of renewables in the energy mix within the context of multiple social, economic and technological objectives. Based on this analysis, the report concludes that the extent to which policies have achieved their green industrial goals at reasonable cost is mixed. Wind energy seems to perform better against all policy objectives, while the solar PV sector has come under intense pressure from international competition.

View the other paper in this series, Assessing Green Industrial Policy: The India experience.