Investment Subsidies Research Articles

Impact analysis of a construction and demolition waste dumping quota trading scheme in uncertain, cooperative, and non-cooperative scenarios

Construction and demolition waste (C&DW) has emerged as a significant environmental challenge, demanding urgent attention and innovative solutions. In response, this paper introduces a novel approach, the C&DW Dumping Quota Trading Scheme (CDWTS), and presents an optimization model to gauge its deep-seated implications on construction project investments and environmental pollution mitigation. This model considers both collaborative and non-collaborative interactions among decision-makers and effectively addresses the uncertainties inherent in the evaluation process through a proposed Hybrid Defuzzification Strategy (HDS). The HDS integrates distributed robust optimization, fuzzy set theory with risk-oriented, and sensitivity analysis to attain risk hedging that balances economy and robustness in the assessment and analysis of the CDWTS. Numerical testing of the model using data from Nanjing, China offers valuable perspectives for CDWTS stakeholders. Specifically, the CDWTS serves as a powerful tool for encouraging enterprises to internalize the external costs of pollution, resulting in significant environmental improvements and the promotion of cleaner production processes within the construction industry. Notably, the allotment and pricing of quotas are identified as pivotal factors in optimizing environmental benefits. Future implementations of the CDWTS should prioritize the development of equitable and efficient quota allocation methods while ensuring stability in quota pricing. Furthermore, it's vital to recognize the potential environmental risks associated with collusion among enterprises and the utilization of rudimentary recycling technologies. Thus, it is recommended to augment subsidies for technological investments in the recycling process and to enhance supervision and management of enterprise alliances. In conclusion, unlike prior studies that mainly delved into dissecting CDWTS concepts and designing its framework, this paper conducts a comprehensive analysis of CDWTS's economic and environmental benefits while addressing uncertainties. Policymakers should consider adopting the CDWTS and HDS into their waste management toolkits, as well as fully assessing the potential concerns identified in this study. These tools and insights not only assist the construction industry in moving toward cleaner production on its own, but they also address potential barriers for policymakers on a path to "waste-free cities".

Experimental and techno-economic analysis of solar-assisted heat pump drying of biomass

Drying enhances the attributes of biomass, such as storability and heating value. In regions with low solar radiation, solar drying has demonstrated limited economic viability. Hybrid systems, combining solar drying with a stable heat source such as a heat pump, present an opportunity to improve drying performance and achieve cost savings, especially with time-variable electricity pricing. To quantify this potential, we constructed an experimental drying system in Finland, incorporating an air-source heat pump and solar thermal collectors for drying woody biomass. Experimental work, consisting of 316 h of operation in varied conditions, evaluated the performance of the hybrid drying system. Subsequently, we developed data-driven models to estimate drying rates and power consumption in both hybrid and solar operation modes. Finally, these models were integrated into a techno-economic optimization model to assess the economic feasibility of the concept through hourly simulations. Hybrid drying experiments resulted in a significantly improved average drying rate (33.0 kg/h ± 5.4 kg/h) compared to solar drying (9.0 kg/h ± 3.2 kg/h) with a 45% increase in specific electricity consumption. The experimental work also revealed limited operating flexibility in colder temperatures due to an exponentially increasing preheating time (up to 4.2 h at 0 °C). With techno-economic modelling, the simulations yielded a simple payback time of 7.5 years for a commercial-scale drying system without investment subsidies. Applying an optimized operating strategy, system operation shifted on average from hybrid mode (96–33%) to solar mode (3–36%) and inactive state (1–31%) with an increased electricity price level, highlighting the need for advanced operation planning. Commercial deployment should prioritize use cases with high value increase through drying or obtaining compensation from avoided biogenic CO2 emissions through drying, as these two parameters were shown to have the greatest impact on the investment payback time.

Exploring incentive mechanisms for the CCUS project in China's coal-fired power plants: An option-game approach

Carbon capture, utilization and storage (CCUS) is a critical technology for reducing carbon emissions from coal-fired power plants (CFPPs). However, the CCUS project in China's CFPPs is not highly economically feasible, and the existing policies lack effective incentives. This study proposes an option-game approach to explore the incentive mechanisms to promote the CCUS project development in CFPPs, including initial investment subsidy, clean electricity price subsidy, incremental carbon emission allowance, and extra electricity quota. Based on the simulation results of a CCUS project in Guangdong Province, our major findings are as follows: 1) Of the two financial incentives, the clean electricity price subsidy has a better impact on CFPPs, but from a social welfare perspective, the government prefers to implement the initial investment subsidy. With a 0.045 yuan/kWh clean electricity price subsidy, the proportion of CFPPs choosing to invest in the CCUS project increases by 113.72 %. With an initial investment subsidy of 40 %, the proportion of governments choosing to incentivize the CCUS project investment decreases by only 6.08 %. 2) Non-financial incentive mechanisms have a larger impact on CCUS project development than financial incentives. And providing extra electricity quota can increase the proportion of government incentives for the CCUS project by up to 21.88 %. 3) The policy adjustment frequency and the subsidy adjustment magnitude have different levels of impact on the CCUS project.

Supply chain decision based on green investment subsidy and risk aversion.

Considering the risk aversion characteristics of supply chain members, how to effectively design the government subsidy strategy and green supply chain strategy is a realistic and urgent issue. Regarding this, we optimize and compare four three-stage Stackelberg game models between government and a two-echelon green supply chain, namely both manufacturer and retailer risk neutral (BN), manufacturer risk aversion while retailer risk neutral (MA), retailer risk aversion while manufacturer risk neutral (RA) and both manufacturer and retailer risk aversion (BA). The government as the leader decides the subsidy rate of green input cost with the goal of maximizing social welfare; the manufacturer as the first follower makes decisions on product greenness and wholesale price to maximize its own interests; and the retailer as the second follower determines retail prices to maximize its own interests. Employing mathematical reasoning and numerical simulation investigate thoroughly the effects of the government subsidies and the members' risk aversion. Results indicate that an appropriate government subsidy investment has a positive effect on optimal decisions and related benefits. Risk aversion is in favor of improvement of product greenness and social welfare while reduction of retail price. With the increase of manufacturer risk aversion, green subsidy investment rate and retailer expected revenue increase; on the contrary, the wholesale price and manufacturer expected revenue decrease. With the increase of retailer risk aversion, the wholesale price and manufacturer expected revenue increase, while green subsidy investment rate and retailer expected revenue decrease. In the model of BN, product greenness and social welfare are the lowest, while retail price is the highest. BA is opposite to BN. In the model of RA, green subsidy investment rate and retailer expected revenue the lowest, while wholesale price and manufacturer expected revenue the highest. RA is opposite to MA. The government should formulate appropriate subsidy policies to encourage manufacturers to produce green products and raise consumers' green awareness. Enterprises should control their own risk aversion and assess the risk aversion of the other party reasonably.

Committing to Grow: Privatizations and Firm Dynamics in East Germany

This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.

Electoral effects of investment subsidies in national and European elections

ABSTRACT Extensive research has focused on political movements against regional integration and globalisation to understand the causes and consequences of their political success in developed democracies. However, studies on the effectiveness of large-scale institutional efforts to hinder this political development have been limited. My paper investigates the electoral effects of one of the largest investment subsidy programs in the world, the European regional investment policy. Even though it distributes billions of Euros each year to foster economic and social cohesion, it is unclear whether these fiscal transfers produce any tangible electoral effects. I argue that, in this case, supranational institutions have been successful in taking credit, making heavily targeted regions infertile grounds for the electoral success of eurosceptic parties. Leveraging the NUTS-level election dataset (EU-NED) and regression discontinuity models, this paper is the first to investigate the causal link between investment subsidies for less developed regions and electoral support for eurosceptic parties in national and European elections. The analysis shows that high fiscal transfers to less developed regions cause lower levels of Eurosceptic voting.

Do capital incentive policies support today’s digitization needs?

Public support schemes are typically targeted towards capital investments. However, the targeting of digitization investments might not only be a missed opportunity to increase the usage of state-of-the-art digital services in the economy, but might even lower the uptake thereof. This paper exploits variation in the eligibility and the size of potential investment subsidies of German firms in order to analyse the relationship with the firms’ propensity to adopt cloud services. Our empirical results are in line with the hypothesis that capital investment schemes lower the use of cloud services by firms: the higher the potential subsidy for investments, the lower the incentive for firms to adopt cloud services. We consider this finding an unintended policy effect which is highly relevant for policy makers, as the adoption of cloud services has been linked to various benefits on the firm as well as on the aggregate economy level.

A Comprehensive Approach to Assess the Impact of Agricultural Production Factors on Selected Ecosystem Services in Poland

The conservation of environmental resources is aimed at ensuring the continuity of ecosystem services for future generations and maintaining ecosystem integrity. Given the extensive reliance of agriculture on the environment, it is crucial to identify factors that impact the quality of ecosystem services (ESs), which can be regulated at large and heterogeneous national or European scales. This research, conducted within the Polish use case of the AGRICORE project, aims to demonstrate the feasibility of establishing indicators depicted in three ES categories, which can be shaped under the actions of the Common Agricultural Policy (CAP). The study was conducted based on national sources, mostly the database of the Central Statistical Office. The analyses of regression showed a significant impact of selected agricultural productivity factors on the key performance indicators (KPIs) assessing the level of selected ESs. The yield of cereal grains, which quantitatively expresses the potential of current crop production, depended to the greatest extent (r = 0.81) on a comprehensive indicator of the agricultural production space suitability, as well as on the rise of the level of nitrogen fertilization (r = 0.68), and also on the reduced share of permanent grassland in the agricultural area (r = −0.53). It was proved that in territorial units, in which the level of nitrogen fertilization per 1 ha was greater, the share of soils with favorable pH > 5.5 was also greater. The gross nitrogen balance had a positive and significant correlation with the level of investment subsidies (r = 0.86), the share of agricultural land in the total area (r = 0.67), and the level of nitrogen fertilization (r = 0.66). Notably, there were positive correlations between the level of environmental subsidies and the increase in forestation (r = 0.68) and also between air quality and the share of cereals in the sowing structure (r = 0.86). Additionally, the impact of agricultural productivity factors on cultural eco-services was found, e.g., the share of ecological land had a positive impact on the number of natural monuments, the area of nature reserves, the number of agritourists, and agritourism nights, while the share of cereals in the sowing structure negatively correlated with the most of analyzed cultural indicators. These results are useful for the development of a module for the ABM model that employs the desired environmental parameters to provide different assessments of the impact of selected agricultural productivity factors and ecosystem services on the economic farm status.

Employment Generation in Telangana State: An Empirical Study on T-PRIDE (Telangana State-Program for Rapid Incubation of Dalit Entrepreneurs) incentives scheme.

The Government of Telangana has rolled out T-PRIDE “Telangana State Program for the Rapid Incubation of Dalit Entrepreneurs” incentives scheme in the year 2014 to foster industrial development which in turn creates employment for rural and urban unemployed youth. The scheme is initiated to for the upliftment of Dalits by providing funding to the SC and ST entrepreneurs. Dalit entrepreneurs get the fiscal incentives in the form of investment subsidy, seed capital, reimbursement of costs incurred in skill upgradation, taxes and other benefits for the establishments under MSME sector. Critical review of literature reveals that there are no studies on evaluating the effectiveness of the scheme from the beneficiaries’ perspective. Hence, the present study is undertaken to fill the research gap. Primary data has been collected from 420 beneficiaries of the scheme on various aspects of the scheme by administering a structured questionnaire. Results of the study indicates that 84.7% of sample beneficiaries are satisfied with the incentives provided under T-PRIDE scheme. Further, it can be said that there in significant association between the beneficiaries’ demographic characteristics and their level of satisfaction. To conclude, if the government creates more awareness about the schemes for Dalit entrepreneurship development among the rural youth it results in more employment generation for the unemployed youth.

Creating an indicator system for the United Nations Sustainable Development Goals in communities and municipalities: Application and analysis in an Austrian case study

Sustainability indicators should implement the United Nations Sustainable Development Goals (UN SDGs). Indicators in literature often consider large sets of actions and are thus complex in application. Therefore, this work derives energy- and resource-related SDG indicators for communities and municipalities with low complexity. Moreover, this work analyzes three different policy paths to promote SDG contribution. The policy paths consider SDG target settings and two different incentive schemes in the form of penalties and investment subsidies. The indicators and policy actions are applied in two case studies for communities and municipalities in Austria. Therefore, an optimization model that considers the case study setups, SDG targets and policy actions is developed. The modeling approach shows applicability and positive contribution to sustainable development by indicators. Moreover, the results show the applicability of the three policy paths. Implementing the target-setting path directly leads to the desired SDG targets and provides insights into the costs for target achievement. The incentive scheme paths also lead to selected targets, but they require a cost assessment of the provided incentive schemes. A combination of both incentive schemes leads to the lowest costs. However, policymakers should implement a workflow that considers all three policy paths for policy action settings.

The sequence matters: Expert opinions on policy mechanisms for bioenergy with carbon capture and storage

This paper presents the results of a globally distributed survey on policies for incentivizing bioenergy with carbon capture and storage (BECCS). The current lack of policy incentives to support the implementation of BECCS constitutes a major deployment barrier. Therefore, scientists and policymakers are now debating the optimal BECCS policy framework. Previous studies have presented theoretical analyses of policy options to spur deployment, yet despite the considerable influence of experts on policy processes, very few studies have explored expert opinions. Drawing on an online survey of experts (N = 46), we explore their policy preferences and whether those preferences differ or converge between experts from different working sectors. The results show that a tax and refund scheme, a flat-rate subsidy, and reverse auctioning are considered more suitable than other measures. Furthermore, most experts agree that rather than a stand-alone policy, a policy mix would be needed in order to support BECCS deployment. Several experts propose a sequence of policies, moving from publicly funded supply-push policies in the short term to budget-neutral demand-pull policies in the longer term. Regarding various subsidy schemes, respondents favor investment subsidies or results-based subsidies based on stored biogenic carbon dioxide. The relatively minor differences in the response patterns between groups of experts suggest that a consensus on a preferred BECCS policy pathway might be forming across different sectors and interest groups. Therefore, our results could inform policymakers on policy instruments for BECCS that are considered most suitable by experts and thus help to shape the policy pathway for BECCS.

Subsidy policy selection for shore power promotion: Subsidizing facility investment or price of shore power?

Government subsidy is recognized as a promising measure to promote the application of shore power technology. In this paper, two widely adopted subsidy strategies, i.e., subsidy for facility investment and subsidy for the price of shore power, are analytically discussed and compared in the Stackelberg game framework. In this game model, the government acts as the leader that sequentially determines the subsidy strategy and amount of subsidy to minimize its total cost. The port operator, acting as the follower, decides the investment scale and price of shore power to maximize its net profit. Furthermore, we consider the investment and pricing decisions of a government-owned port and compare its performance with that of a privately-owned port under the two subsidy strategies. Results show that: (i) Two subsidy strategies have the same effects on the application of shore power with excess subsidy allowed. But if excess subsidy is not allowed, subsidizing the price of shore power is better than subsidizing facility investment in terms of government cost when the marginal benefit of emission reduction is relatively large and the government budget is sufficient; (ii) When ships are price sensitive, government subsidies can induce ports to set a favorable price to attract ships to use shore power; (iii) Compared with a privately-owned port, a government-owned port significantly increases investment scale and reduces the price of shore power, thus attracting more ships to use shore power which leads to lower emissions.

Granting more bang for the buck: The heterogeneous effects of firm subsidies

We estimate the effects of a large program of public investment subsidies targeting Italian firms of different size and age. Investment projects were ranked by numerical scores of project quality and funded until exhaustion of funds. Exploiting this allocation mechanism as an ideal regression discontinuity design, we estimate that subsidies increased investment of marginal firms near the cutoff by 39 percent, and employment by 17 percent over a 6-year period. Smaller firms exhibit higher employment growth upon receiving the subsidy, but larger firms generate more jobs at a lower cost, and younger firms do better than older firms.

How flexible are energy flexibilities? Developing a flexibility score for revenue and risk analysis in industrial demand-side management

With rising and increasingly volatile energy prices, demand-side management (DSM) is becoming attractive within industry to optimize flexible electricity demand and to remain competitive. Despite economic and ecological benefits for companies, DSM implementation is not yet widespread. High effort in flexibility audits and complex optimization models to quantify DSM’s economic potentials represent initial barriers in practice, raising the question whether there is a simple way to analyze economic DSM potential as an initial indicator of successful DSM implementation that requires little data on flexibility characteristics. To address this need, this study develops a flexibility score that describes the degrees of freedom of individual energy flexibility measures (EFMs), i.e. how flexible a flexibility measure is. The flexibility score is tested and validated in a risk-return analysis on 46 real-world industrial EFMs from Germany optimized with integer linear programming (ILP). Analyzing Germany’s Day-Ahead and Intraday markets, the results show an increase in expected revenues and a simultaneous decrease in revenue risk with an increasing flexibility score, outlining DSM investments as attractive. Due to its ease of use, we see industrial companies, aggregators, energy service providers, and (energy) consultancy agencies as target users of the flexibility score. Policymakers can use the flexibility score to identify and design subsidies for energy flexibility investments.

Mechanizm dotacyjny jako podstawowy mechanizm pomocniczości w polityce opieki nad zabytkami nieruchomymi w Polsce po wejściu do Unii Europejskiej

The article presents the mechanism of targeted grant in the system of policy of care for immovable monuments in Poland as a tool of policy, the architecture of which is based on the principles of superposition and subsidiarity. This mechanism is a tool to eliminate the inefficiencies, shortcomings and weaknesses of the policy systems built on these two principles. The article presents its local, national and European dimension. In the first part, the article introduces the principles of superposition and subsidiarity. Next, it discusses the issue of targeted subsidies for investments in immovable monuments from the central budget of the Republic of Poland, local budgets, the European Union, as well as the Financial Mechanism of the European Economic Area and the Norwegian Financial Mechanism. Author’s indicators were also presented, i.e. the Quantitative Financial Subsidiarity Index (QFSI ) and the Valuable Financial Subsidiarity Index (VFSI ). The summary indicates recommendations in response to the identified areas where the subsidy mechanism does not work properly.

Investment subsidies and redistributive capital income taxation in a neoclassical growth model

AbstractHow do investment subsidies bear on pure redistribution when coupled with capital income taxes? In a heterogeneous agent, neoclassical growth framework it is found that on impact, with no optimizing behavior, investment subsidies are good for growth but bad for redistribution. The opposite holds for capital income taxes. But when the government acts as a Stackelberg leader vis‐à‐vis the private sector (the follower), the optimal feedback policy is by construction time‐consistent and implies that in a long‐run optimum the tax scheme does not distort accumulation. This holds regardless of social preferences. For the feedback Stackelberg equilibrium I find that (pure) redistribution can go either way and capital income taxes are nonzero in the long‐run, time‐consistent optimum, depending on the social weight of those who receive redistributive transfers, the distribution of pretax factor incomes, and the intertemporal elasticity of substitution. It is argued that investment subsidies may be an important indirect tool for redistribution, and may allow for the separation of “efficiency” and “equity” concerns.

Private investment and public stimulus: a bargaining model

ABSTRACT Local governments often provide tax-subsidy programs to attract corporate investment. Using a game-theoretic real options model between a firm and a government, this paper aims to explore the interaction between the government’s tax-subsidy policy and the firm’s investment and financing decisions. The optimal incentive policies are derived for cooperative and non-cooperative bargaining settings between a government and a firm. We show that it is optimal for the government to offer a tax-subsidy combination in the cooperative setting. However, this is not true for the non-cooperative setting, in which the optimal policy is to only levy taxes with no investment subsidy. Whereas firms always have an incentive to rely on debt financing in the non-cooperative setting, firms are reluctant to issue debt in the cooperative setting. Finally, it is generally optimal for the government to collect taxes at a lower rate in the case of high risk high-tech enterprises.

Private Activity Bonds as Investment Subsidy: Evidence from the 1986 Cap on Bond Volumes

Private Activity Bonds as Investment Subsidy: Evidence from the 1986 Cap on Bond Volumes

Effects of multiple prepayments and green investment on an EPQ model

In this paper, an Economic Production Quantity (EPQ) model is formulated with an investment in green operations and deterioration. In the proposed model, the demand rate depends on selling-price as well as green concerning level of the products. The main objective of the study is to find an optimal replenishment time and an optimal green concerning level by considering profit maximization. The effect of multiple prepayments is depicted with a figure. Applying green operation, the manufacturer attracts more customers to earn more profits. Not only that, profit also increases, if the fraction of purchasing cost is paid as multiple prepayments will increase. Multiple prepayments give relief to the customer to gather a huge amount of money at a time that increases the sell of the product. Multiple prepayments generate a surplus cash flow to run the business. Carbon emission is included. Carbon tax is calculated, and government subsidy for green investment is included. A mathematical model is formulated and analysed by considering numerical examples to describe the real-life problems and to give solutions of that problem. Sensitivity analysis with respect to major parameters is performed to analyse the stability of the model. The paper ends with conclusions and a possible outlook of future research directions.

Importing from? Capacity adequacy in a European context

In this paper we ask the question: why has capacity adequacy become a worry in developed countries in general, and Europe in particular, in recent years, and how serious is this problem? While the liberalisation process and the fast move to variable renewable energy sources play a role in this process, they are not the only causes. We discuss the extent to which regulators and policy makers are able to influence the evolution of the market and also consider the role of and challenges created by regional markets and cross-boarder integration. We conclude that policy makers can go into one of two directions. The first option is to ignore cross-border trading in their planning. While this would create security of supply for individual countries, it would come at the cost of very significant investment subsidies. The alternative is to rely on cross-border trade, an option which requires not only close cooperation and coordination, but also significant trust between the jurisdictions and institutions involved, to ensure sufficient capacity. The choice between these options is a political decision, to be made at the national and supranational levels, not by regulators, and even less by market participants.