Research goals, deliverables and interfaces to the other subprojects

The objective of subproject 1 is to quantify the future employment development within the Lusatian lignite industry. The analysis distinguishes and quantifies direct and indirect employment effects. Direct employment effects arise directly within the lignite industry, whereas indirect employment effects arise within the immediate upstream industries. These employment effects lead necessarily to the question of the economic potentials in the Lusatia region, which could steer through the structural transformation triggered by the phasing-out of lignite-based electricity production. Thus, the results of subproject 1 are incorporated into subprojects 2a and 2b.

In order to determine the extent of the social consequences of a phasing-out, the effects are assessed by model-based scenarios. The underlying assumptions for these scenarios are determined in consultation with the project and practice partners, in particular with subproject 2b.

Two publications are planned within subproject 1:

• Peer reviewed conference contribution, working title: "The German Coal Phase-out – A Review of the Literature"
• Peer reviewed journal paper, working title: "Climate Change and Structural Transformation in the Lusatia Mining Region"

Tasks and methodical approach  

The direct effects are quantified using a power plant dispatch and investment model, which determines, based on input data (e g. fuel prices, but also policy targets regarding the expansion of renewable energies and climate protection), the development of installed capacity and electricity production in Lusatian lignite power plants. The number of employees in the lignite power plants and lignite mines are derived from power plant capacity and electricity production. Indirect effects are determined by input-output analyses.

The objectives of the subproject will be achieved by the processing of the following five work packages:

1. Collecting and analysing literature and data
2. Defining scenarios
3. Adaption and parametrisation of the model
4. Carrying out model calculations and analysing the results
5. Interlinking the subproject with the overall project

Research goals, deliverables and interfaces to the other subprojects

The aim of this subproject 2a is to identify economic development potentials in Lusatia that could provide the basis for an intelligent specialisation of the region (smart specialisation). The employment effects determined in the first subproject will serve as an indicator for the extent of the economic structural change. Both the development potentials within the area of the energy industry (subproject 2b), especially in the area of renewable energies, and the development potentials outside the energy industry in those areas in which the regional innovation system has particular strengths are addressed (subproject 2a).For the identified region-specific economic innovation potentials, a suitable governance structure is to be determined in subproject 3, which optimally activates the potentials and promotes the intelligent specialisation of Lusatia in the best possible way. 

Task and methodical approach

Economic development potentials in Lusatia were last investigated for the Brandenburg part of a study by Prognos AG (Prognos 2013), which aimed to identify so-called fields of competence. This study is based on data with a current margin of 2011. Furthermore, it was only conducted for the Brandenburg part of Lusatia  and is not methodologically based on the current state of scientific literature in regional economics (Farhauer and Kröll 2014, p. 299 ff.) when using indices of spatial concentration and specialisation. An updated and improved analysis of economic potentials is therefore indicated and is to be carried out within the framework of the proposed project according to the availability of data. The subproject starts with a discourse analysis, which examines relevant documents, articles and planning documents for the last 10 years to determine which economic policy priorities were considered promising by the local actors, and which are the most promising. In the next step, development potentials, agglomeration and specialisation patterns are identified on the basis of company databases below the sector level, which can form the basis for a smart specialisation of the region.

Research goals, deliverables and interfaces to the other subprojects

The aim of subproject 2 is to identify potential for economic development in Lusatia. Within the framework of subproject 2b, the focus lies on the endogenous development potentials in the area of the energy transition industry and the associated regional economic effects. The existing structures and competencies of the energy transition industry in the region, the potentials in the various areas of energy transition (electricity, heat, integrated energy and efficiency) and the associated value-added and employment potentials in Lusatia will be analysed. This is done on the basis of selected value chains. As a result, the economic perspective that a transformation towards an energy transition region can offer for Lusatia can be demonstrated.

These findings and results are made available to regional stakeholders from politics, economy and research through publications and events.

Tasks and methodological approach 

Within the frame of subproject 2b, regional value-added and employment effects are determined for different scenarios and selected technology areas of the energy transition. For this purpose, the following steps are pursued:

1. Identification of key energy transition value chains with relevance for Lusatia, focusing on the areas of electricity, heat, integrated energy and energy efficiency based on potential analyses
2. Survey of existing competencies, stakeholders and activities in Lusatia, including regional companies, organisations and research institutions in the field of energy transition
3. Derivation of two to three scenarios to determine the potentials for a target year
4. Validation of the scenarios through interviews or alternatively at the planned project workshops
5. Model-based determination of the regional economic effects for selected areas / technologies of the energy transition and the 2-3 scenarios
6. Deduction of measures and instruments to tap the endogenous energy transition potential with the highest possible regional economic effects

Research goals, deliverables and interfaces to the other subprojects

The overarching goal of this project consists in improving the information base for the rational design of governance structures for regions in transition. Considering the specific case of Lusatia, a number of distinctive features have to be taken account that are typically not observed in other transition processes: a) The structural change is politically intended and prompted. Even though this decision is based on politically valid reasons, the acceptance of the transition process by the local community can be adversely affected if existing and essentially resilient economic structures are called into question. b) In anticipation of the landmark decision to phase out of lignite based electricity production, a number of civil (i.e. non-governmental) society organisations have been founded. They aim at contributing to and helping shape the transition. Their integration in participatory decision making schemes will be of critical importance for the perceived legitimacy of the transition process and eventually its chances of success. c) A significant amount of financial transfers will flow into the region. So far, their spending is being planned top-down and guided by compiled lists of project proposals. However, there is good reason to doubt that this allocation mechanism is efficient. Developing mechanisms instead that include said civil society organisations and engage and mobilise local communities seems worthwhile and necessary.

Our research aims at the following. First, based on extensive literature studies we will provide a critical review of the current state of knowledge about the political economy of structural change and international best practices. Two survey papers are expected to follow from this. Secondly, we aim to develop a political economy model that integrates insights from behavioural economics. We expect this step of our research to result in one or two papers. Thirdly, we will then apply our model to the specific case of Lusatia and make concrete proposals for efficient governance structures.

The results from this work package feed into other work packages and provide them with a political economy perspective. In turn, the results of other work packages inform our theoretical approach and the derivation of policy advice specific to Lusatia from our research.

Tasks and methodical approach

The first step in our research aims at providing a comprehensive review of the relatively dispersed and methodologically heterogenous literature. The main output will be a critical literature survey that we aim to complete by autumn 2019. The task will be to review and summarise in two survey papers the lessons learned from international experience with structural change and the current state of knowledge regarding the governance of structural change from a political economy perspective.

The second step is devoted to developing a political economy model to represent the governance of structural change theoretically. The main focus will be on stakeholders’ incentives – governments on all levels, regional pressure groups and the corporate sector – and on the political balance that results from their interaction. Different variants of the theoretical model will be developed to represent various heuristics and biases known from behavioural economics. This step in our research is expected to give rise to drafts for one or two theoretical papers by October 2020. These papers will undergo a final revision in light of the results derived in the third step of our research.

The third and final step consists in applying our theoretical results and insights to the specific case of Lusatia. Starting in November 2020 our focus will switch to developing very concrete and viable policy advice for the structural economic change in Lusatia and engage in an exchange with the affected regional stakeholders. This step will cover the remaining time of the project and is expected to give rise to a publication in a policy-oriented journal with an applied focus.

Generally, we also intend to communicate our results to a broader audience and the general public, for example through articles in the national press.

Research goals, deliverables and interfaces to the other subprojects

The overarching objective of subproject “Strategies, Instruments” is to provide evidence-based policy advice to foster innovation in regions suffering from structural change.

First, we analyze strengths and weaknesses of regional innovation systems, which will be affected in the near future by the political induced decline of lignite industries. As market failures might hinder that these regions can cope with structural change, governments set up various support schemes, in particular in the field of innovation. Against this backdrop, the present subproject examines whether there is absorptive capacity for current innovation support programs among regional actors. Finally, we want to analyze whether these programs are effective and worked in the way they were originally intended.

The findings from this subproject are closely linked to the subproject "Development Potentials", which among other things examines economic potentials for the emergence of a smart specialization. Another relationship exists to the subproject "Governance", which identifies best-practice examples of governance structures.

We plan to attend one international conference per year of the project duration. Of special interest are the annual meetings of the German Economic Association and the annual meetings of the European Regional Science Association [ERSA], the Regional Studies Association [RSA] or the Geography of Innovation Conference Series. In addition, a publication in a peer-reviewed journal is planned as well as a contribution in a journal with policy focus.

Tasks and methodical approach

The analysis is structured into three workpackages:

• The first work package analyzes the current structure of innovative links between different types of actors (research, private firms, stakeholders) in lignite regions. For this purpose, we prepare data that provide information about innovative collaboration activities. In particular, we use information on granted collaborative R&D projects and co-patent applications. Our investigations will rely on the toolkit of social network analysis.
• A second work package characterizes policies in the area of innovation. We compare innovation support programs applied at different administrative levels (EU, federal level, federal state level). The aim of this work package is to find differences and similarities in terms of program characteristics (such as the funding objective, addressee, industry focus, etc.). Finally, this work package develops strategies for credible identification strategies to assess causation of innovation policy.
• The third work package presents our results and ensures knowledge across other workpackages.

Research goals, deliverables and interfaces to the other subprojects

The previous discussion on the exit from fossil-fuel energy in Germany are not broad enough in some very important aspects. Some regions, still receive a large part of their value added from lignite-fired power generation. The energy transition may result in the loss of high-quality jobs; this can exert additional pressure on the local demographic situation. The further migration of young and skilled people leads to an increasing ageing and shrinking of the regional population. At the same time, this development leads to losses in purchasing power and added value in the region, as well as to losses of income in municipal budgets, which make it much harder to sustain existing structures or financing future investments. For this reason, additional financial resources are probably needed so that the municipalities can fulfill their task in the structural change.

The subproject deals with the effects of demographic and structural change in Lusatia, in particular on the effects on municipal public budgets and local services for the public interest. This creates a small-scale picture of the effects of demographic and structural changes on the Lusatian living environment (e.g. labour market, purchasing power) and reveals the financial efforts needed to ensure equal living conditions. The focus is on the application of new scientific methods for sustainability assessment. As a result, the municipalities of the region will be given a new tool to better deal with the future uncertainties and for a better evaluation of the sustainability of their financial situation.

Tasks and methodical approach 

In consideration of demographic, structural and other influencing factors, it will first be examined to what extent financial changes arise in the municipal budgets in Lusatia, which arise in addition to the existing investment requirements to deal with structural change and maintaining of municipal services of public interest.

For this purpose, the effects are assessed based on different scenario analyses. The impact on municipal budgets will be assessed using different methods:

• structural sensitivity analysis
• demographic sensitivity analysis
• efficiency analysis
• analysis of public annual accounts