With increasingly extreme weather, high energy prices, the shift towards renewable energy, and the ongoing debates over a new heating law, climate, energy, and the environment have gained significant relevance among the public. These issues are not only pertinent due to the current heatwave but also because they directly impact our lives. The challenge lies in devising climate and energy policies that are ecologically effective, economically efficient, socially balanced, and viable. ZEW Mannheim has been working to address such questions since its inception. Our researchers delve into the importance of human behaviour, market dynamics, and institutional frameworks for both the causes and solutions of environmental problems.   This edition of ZEW Monthly, with its focus on “Environmental and Climate Economics”, provides insight into current research questions, such as how to tackle climate change in a manner that is fair to future generations, the impacts of a medium-term industrial electricity price cap, and the extent to which subsidies can foster eco-friendly behaviour. RESEARCH ON ENVIRONMENTAL AND CLIMATE ECONOMICS   ↗ SUBSIDISATION OF THE ELECTRICITY PRICE: RELIEFS JEOPARDISE TRANSFORMATION    A broad subsidisation of industrial electricity prices, as with the German “Brückenstrompreis”, reduces the incentive to save energy, makes innovations less attractive, and jeopardises the transformation of the German economy towards carbon-neutral production. Recent research conducted by ZEW Mannheim and the University of Mannheim reveals that the industrial sector responds to increasing electricity prices by reducing its power consumption. At the same time, the study results do not provide empirical evidence that higher electricity prices have harmed competitiveness, as measured by revenues and employment.   More about the ZEW study     ↗ SUBSIDIES BOOST MOTIVATION FOR ECO-FRIENDLY BEHAVIOUR    In a field experiment carried out by ZEW Mannheim, around 600 residents of Mannheim were given the choice between purchasing a regular or low-flow showerhead at different prices. As expected, when the price of the low-flow showerhead is lowered, demand for it increases. However, the authors find differences in demand responses depending on how the price decrease is communicated. Demand rises significantly more when the price reduction is attributed to a subsidy, compared to a price decrease of the same amount that remains unexplained.   More about the ZEW study     ↗ MAKING CLIMATE PROTECTION FAIR ACROSS THE GENERATIONS    Economists often argue in support of CO2 emissions pricing to tackle climate change. In the political reality, however, it is common to resort to “green” technology policies (such as subsidisation of renewable energy, energy efficiency standards, regulations on emission limits for cars, etc.). Researchers at ZEW Mannheim and Statistics Norway have come to the conclusion that current generations are less negatively affected by technology policies than they are by direct CO2 pricing. They may therefore tend to support green technology policy through elections and referendums.   More about the ZEW study AT A GLANCE ↗ HOW LONG DOES IT TAKE TO COMPLETELY REDUCE PSPP HOLDINGS?    In June 2022, the European Central Bank began to deplete the PSPP stock at an average pace of 15 billion euros per month. Professor Friedrich Heinemann and Carlo Birkholz from the ZEW Research Unit “Corporate Taxation and Public Finance” assessed the estimated timeframe for achieving a full depletion of the stock at the current rate, and also explored the potential outcomes of doubling or tripling the pace. More about the ZEW study CURRENT ZEW RESEARCH ↗ AUGUSTO OSPITAL RECEIVES HEINZ KÖNIG AWARD 2023    ZEW Mannheim has been presenting the Heinz König Award for exceptional scientific research to young scholars for 23 years. This year, Augusto Ospital from the University of California, Los Angeles (UCLA) was awarded the prize for his work on “Urban policy and spatial exposure to environmental risk”. In his research, the doctoral student shows the correlation between plans of urban land use and construction projects in areas that are at a higher risk of forest fires and extreme weather events.   More about the Heinz König Award   ↗ ECB INFLATION TARGET REMAINS A LONG WAY OFF    According to financial market experts who were surveyed by ZEW Mannheim, the rate of inflation in the eurozone is expected to stabilize at a high level in May 2023. Inflation is expected to decline in the coming years, meaning the inflation target of the European Central Bank (ECB) will probably not be reached until after 2025. While a large majority of respondents were concerned about wage developments in the eurozone, developments in energy prices and in ECB monetary policy have led some survey participants to expect inflation to decline. The experts anticipate the ECB to implement at least one more interest rate hike in 2023. In 2024 and 2025, ECB interest rates are expected to continue to fall gradually. These are the results of the special question included in the ZEW Financial Market Survey in February 2023, in which the respondents provided their predictions of how inflation and key interest rates will develop in the eurozone from 2023 to 2025.   More about the ZEW study   ↗ CHANGE IN OWNERSHIP DOES NOT LEAD TO INCREASED ADOPTION OF GREEN TECHNOLOGY    Companies that have been transferred to new owners reduce their pollutant emissions, on average. However, they do not achieve this by adopting new, eco-friendly technologies, but rather by scaling down production or shutting down plants altogether. This finding stems from a study conducted by researchers from ZEW Mannheim, which examines the effects of ownership changes on emissions and economic strength of industrial companies in Europe. The study relies on data from the Mannheim European Panel on Financial Indicators and Emissions (ME-FINE).   More about the ZEW study ↗ INDUSTRIAL ELECTRICITY PRICE: BRIDGE TO NOWHERE   The German Federal Ministry for Economic Affairs and Climate Action is planning the introduction of an industrial electricity price – a medium-term electricity price cap for energy-intensive industries – to bridge the time until the energy transition is sufficiently advanced. It is feared that without this measure, deindustrialisation may occur. The underlying assumption is that a future renewable electricity system will be more cost-effective. Based on this belief, the Ministry for Economic Affairs and Climate Action expects that this industrial electricity price will no longer be necessary by 2030 at the latest.   Read the full opinion piece EVENTS ↗ ALUMNI REUNION AND RETIREMENT CELEBRATION HIGH TURNOUT AT COMBINED ZEW ALUMNI DAY AND RETIREMENT PARTY FOR DR. GEORG LICHT    On 16 June 2023, alumni turned up in record numbers for the yearly reunion at ZEW Mannheim, enjoying the radiant sunshine while simultaneously celebrating the retirement of Dr. Georg Licht, head of ZEW’s “Economics of Innovation and Industrial Dynamics” Research Unit. Around 70 alumni enjoyed seeing and catching up with each other again. The day’s agenda, rich with variety, also contributed to the guests’ high spirits.   Read the full event report ↗ INTERNATIONAL GUESTS DISCUSS ENERGY TRANSITION AT ZEW ELEVENTH MANNHEIM CONFERENCE ON ENERGY AND THE ENVIRONMENT    On 8 and 9 May 2023, around 90 energy and environmental economists from Germany and abroad participated in the eleventh Mannheim Conference on Energy and the Environment at ZEW Mannheim. For two days, international researchers discussed various topics of energy, climate and environmental economics. This year, the conference focused on air pollution, emissions trading, energy conservation, and climate policy.   Read the full event report UPCOMING ↗ CONFERENCE 21ST ZEW CONFERENCE ON THE ECONOMICS OF INFORMATION AND COMMUNICATION TECHNOLOGIES    The objective of the conference on 6 and 7 July 2023 is to discuss recent scientific contributions to the economics of information and communication technologies (ICT) and the economics of ICT industries. Theoretical, empirical, and policy-oriented contributions are welcome. One keynote speech will be held by Özlem Bedre-Defolie (ESMT Berlin), a second keynote speech will be held by Joel Waldfogel (University of Minnesota, USA).   More about the event → CONTACT FOR QUESTIONS OR SUGGESTIONS ON THE CONTENT Dr. Frank Herkenhoff | frank.herkenhoff@zew.de EDITORIAL TEAM   Yvonne Bräutigam // CvD   Simone Mann // Design   Bastian Thüne // Press Officer   Pascal Ausäderer // Press Officer ZEW – Leibniz Centre for European Economic Research L7, 1 · 68161 Mannheim Phone: +49 (0)621/1235-01 E-mail: zewmonthly@zew.de Website: www.zew.de   Executive Directors: Professor Achim Wambach, PhD; Thomas Kohl Chair of the ZEW Supervisory Board: Ministerial Director Dr. Hans Reiter Registered Office: Mannheim Local Court Mannheim HRB 6554 USt-IdNr.: DE188318292   Commitment to Data Protection   Detailed Legal Note   Notification on the General Data Protection Regulation (GDPR)   Unsubscribe from ZEW Monthly