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

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  • Funke, Michael
  • Terasa, Raphael

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.

Suggested Citation

  • Funke, Michael & Terasa, Raphael, 2025. "Will temporary super depreciation allowances for green and digital investments have knock-on effects?," Journal of Policy Modeling, Elsevier, vol. 47(5), pages 977-998.
    • Handle: RePEc:eee:jpolmo:v:47:y:2025:i:5:p:977-998
    DOI: 10.1016/j.jpolmod.2025.03.003
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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