Temporary Super Depreciation Allowances for Green and Digital Investments

As an incentive to increase high-impact investment and boost growth, the German Federal Government is planning to introduce a targeted temporary super depreciation allowance to support much-needed green and digital transitions. Using a calibrated multi-sector DSGE model, we find that the temporary super deduction could trigger an uplift of 10 percentage points for green and digital capital spending, turbo-charging green growth ambitions. However, with the temporary measure set to end after two years, there is a risk that business investment could tail off at a crucial time, when post-COVID-19 recovery is levelling out. Thus, additional longer-term climate policies are needed to drive the green transition, facilitated by broad policy packages.

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Year of publication:	2022
Authors:	Funke, Michael ; Terasa, Raphael
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	climate economics \| business taxation \| firm investment \| depreciation allowances \| DSGE model \| Germany

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Series:	CESifo Working Paper ; 9838
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	181165259X [GVK] hdl:10419/263768 [Handle] RePec:ces:ceswps:_9838 [RePEc]
Classification:	E22 - Capital; Investment (including Inventories); Capacity ; E60 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook. General ; H25 - Business Taxes and Subsidies ; Q54 - Climate; Natural Disasters ; Q58 - Government Policy
Source:	EconStor

Persistent link: https://www.econbiz.de/10013353450