Will temporary super depreciation allowances for green and digital investments have knock-on effects?

Michael Funke and Raphael Terasa

Journal of Policy Modeling, 2025, vol. 47, issue 5, 977-998

Abstract: As an incentive towards twin digital and green investment in the corporate landscape, the German Federal Government has suggested 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 crucial green and digital capital spending, turbo-charging decarbonization and digitization ambitions. However, with the temporary corporate tax policy measure set to end after two years, there is a risk that the higher investment expenditures are levelling out afterwards.

Keywords: Green deal; Digitization; Business taxation; Firm investment; Depreciation allowances; DSGE model; Germany (search for similar items in EconPapers)
JEL-codes: E22 E60 H25 Q54 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:5:p:977-998

DOI: 10.1016/j.jpolmod.2025.03.003

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