Policy announcements and economic activity: modelling the energy transition on the micro-level
Andtreas Schaefer  1@  , Anna Stuenzi  2@  
1 : University of Bath
2 : ETH Zurich

The starting point of this paper is the question whether policy announcements related to the
energy transition have an impact on economic activity. In a first step, we explore empirically if
an impact of policy announcements on microeconomic decision-making of firms can be identified.Methodologically, we apply an event-study approach to test whether credible government announcements in
uence the number of firm entries. To do so, we use data from the Swiss
commercial register to analyse the number of new firm registrations related to green energy
services. Our study reveals a significant relationship between information on future policies
and firm entries. In a second step, we develop a stylised model in order to gain more clarity
about the economic mechanisms behind the empirical observation. The commitment to regulations
and laws, for example subsidies, is core to the credibility of environmental policies as
well as to protect environmental targets against discretionary actions by myopic governments.
Our model comprises strong and weak governments. The latter are unable to commit to their
environmental policy. We show that a weak government has no incentive to mimic the environmental
policy of a strong government such that the public has clarity about the government's
nature. A strong government on the other hand can make use of policy announcements to spur
technological change and green economic activity.


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