The European Union has committed to climate neutrality by 2050. To achieve this, the share of renewable energy sources in total electricity generation must rise, and greater environmental regulation is necessary. A new ECB working paper examines how a significant investment in clean electricity generation and a carbon tax will impact EU manufacturing firms. The results are as follows:
A 20% electricity price increase could reduce employment by 2-4% for the industries most impacted.
The greatest impact would be on electricity-intensive industries (e.g., chemicals, metals and paper), on which Belgium, Southern Germany and Northern Italy rely heavily.
Alongside the labour market effects of automation, higher electricity prices could have long-lasting negative effects for the affected regions and workers.
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