Temporary Super Depreciation Allowances for Green and Digital Investments

Michael Funke and Raphael Terasa

No 9838, CESifo Working Paper Series from CESifo

Abstract: 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.

Keywords: climate economics; 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: 2022
New Economics Papers: this item is included in nep-dge, nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9838

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