Ruhr Economic Papers

Ruhr Economic Papers #672

Do Electricity Prices Matter? Plant-Level Evidence from German Manufacturing

by Andreas Gerster

RGS, RWI, 01/2017, 27 S./p., 8 Euro, ISBN 978-3-86788-779-3 DOI: 10.4419/86788779

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Abstract

In many countries, the transition process towards a low-carbon economy has been associated with increasing electricity prices. Microeconometric evaluations of the causal impact of electricity price changes on plant-level outcomes are rare, though. By exploiting local randomization induced by thresholds in exemption rules, we estimate the local average treatment effects of electricity levy exemptions using a fuzzy regression discontinuity (RD) design. The results indicate that exempted German manufacturing plants increase electricity use substantially and substitute it for fossil fuels, while we do not find evidence for short-run effects on gross output, exports and employment.

JEL-Classification: D22, H23, L60, Q41

Keywords: Environmental taxation; electricity prices; manufacturing; regression discontinuity design

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