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

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 on adopters and by electricity surcharges for 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 the potential reward by adopters who received generous subsidies. Further analysis indicates that punishment mainly comes from non-adopters, who change their vote towards anti-establishment parties.

Replaces

Olivier De Groote, Axel Gautier, and Frank Verboven, “The political economy of financing climate policy – Evidence from the solar PV subsidy programs”, TSE Working Paper, n. 22-1329, April 2022, revised February 2024.

Reference

Olivier De Groote, Axel Gautier, and Frank Verboven, “The political economy of financing climate policy – Evidence from the solar PV subsidy programs”, Resource and Energy Economics, vol. 77, n. 101436, April 2024.