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The recent EU Commission proposal for promoting the supply of power from renewable energy sources was originally based on a pan-European, harmonised tradable green certificate (TGC) scheme. We suggest, on the basis of a multi-disciplinary analysis, that a pan-EU TGC system is not the way forward for Europe. It is vital that the Commission (and the majority of Member States) avoids implementation of such policy designs put forward by a coalition of vested interests. They should instead look at, and act upon, the available evidence from those countries that have experimented with TGCs (e.g. Flanders, U.K. and Sweden) and design policies that stand a better chance of meeting the criteria of effectiveness, efficiency and equity. In particular, the policies must enable EU to meet the immense innovation/industrialisation challenge by inducing the development of a capital goods industry that can, eventually, diffuse a broad range of technologies that use renewable energy sources. Only then can we acquire an ability to implement an industrial revolution in the energy system in a way that broadly meets the criteria of effectiveness and dynamic efficiency.

Of the large industrial countries, Germany is clearly leading with regard to new renewable energy sources, occupying the first rank in terms of installed wind energy capacity, and the second rank in photovoltaics. This capacity is not due to an exceptional natural resource base but to policy, despite the fact that this policy was conducted in a rather lukewarm fashion until 1997. This led to a remarkable expansion of this sector. The red-green coalition, in office since 1998, developed the vision of achieving 50 percent and more of electricity generated from RES by 2050, a goal that seems well accepted by the public but not by the established energy interests or the leaders of the conservative-liberal opposition, even though the cost appears to be comparatively modest. The article gives a historical account of German RES-E policy since 1974 and focuses in particular on the evolution of "feed-in" legislation from 1990 to 2004. The first 15 years of RES-E policy after 1974 were devoted to R&D. Market creation measures only came into effect after 1988; of these, the Feed-In Law was the most important. During the 1990s, it barely managed to survive, but significant improvement occurred after the 1998 election; the new majority greatly strengthened RES-E support, particularly for photovoltaics and biomass. However, this legislation is still not fully accepted on both the domestic and the EU levels.