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Increased investment in clean electricity in combination with a rising cost of carbon will most likely lead to higher electricity prices. We examine the impact from changing electricity prices on European manufacturing employment and find a negative elasticity for the most electricity-intensive sectors. Since these sectors are unevenly spread across countries and regions, the negative employment impact from increasing electricity prices will also be unevenly spread. Policymakers should be well aware of this and take mitigating actions to ensure a positive public sentiment towards environment-related price increases. (JEL J23, H23, Q28, Q43)
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Bijnens et al. (2021) studied this question.
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