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The political economy of financing climate policy – Evidence from the solar PV subsidy programs

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  • De Groote, Olivier
  • Gautier, Axel
  • Verboven, Frank

Abstract

We analyze the political impact of a generous solar panel subsidization program. Subsidies far exceeded their social benefit and were partly financed by new taxes to adopters and by electricity surcharges to all consumers. We use local panel data from Belgium and find a decrease in votes for government parties in municipalities with high adoption rates. This shows that the voters’ punishment for a costly policy exceeded a potential reward by adopters who received the generous subsidies. Further analysis indicates that punishment mainly comes from non-adopters, who change their vote towards anti-establishment parties.

Suggested Citation

  • De Groote, Olivier & Gautier, Axel & Verboven, Frank, 2022. "The political economy of financing climate policy – Evidence from the solar PV subsidy programs," TSE Working Papers 22-1329, Toulouse School of Economics (TSE), revised Feb 2024.
    • Handle: RePEc:tse:wpaper:126863
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    Cited by:

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    2. Fabra, Natalia & Reguant, Mar, 2024. "The energy transition: A balancing act," Resource and Energy Economics, Elsevier, vol. 76(C).
    3. Gert Bijnens & Jozef Konings & Stijn Vanormelingen, 2022. "The impact of electricity prices on European manufacturing jobs," Applied Economics, Taylor & Francis Journals, vol. 54(1), pages 38-56, January.

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    More about this item

    Keywords

    financing climate policy; photovoltaic systems; retrospective voting; buying votes;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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