Investment incentives

An effective transition of the nation s energy base from petroleum to alternate energy sources will require relatively large capital investments. Incentives to make these investments will be influenced by our nation s capability to control its money supply and execute a desired monetary policy. The United States faces the sobering task of designing a technology development plan and implementing it. Its development and implementation will require an effective United States monetary policy. 

As tariffs in the secondary market are market clearing, the owners also collect the full scarcity payments. Hence, the investment incentives should be better than under a marginal cost-pricing regime. The owners rights are pursued, as they are given priority when capacity is scarce, nor are they being inadequately compensated by low tariffs. 

Indeed, investment incentives are explicitly of major importance to the Norwegian authorities57. To new investors this may be an important signal. 

The total investment expenditures incurred at a site have to be calculated in two steps. Equation (3.10) calculates the investments per plant. These are aggregated to the site level and adjusted for government investment incentives, defined as percentage of total investments, in equation (3.11). Investment expenditures are allocated to the time period preceding the commissioning of the technical capacity. A non-negativity constraint (3.54) ensures that plant/production line shutdowns do not lead to negative investment expenditures. 

A single tax rate is assumed for every country (site-specific tax rates could be defined to accommodate cases where tax holidays are granted as a form of investment incentive). 

Foreign investment incentives are affected by Singapore government s Economic Development Board as 5-10% tax-free status for new technology companies or those conducting R D. An investment allowance of 50% may be used in R D. There is a cash grant for training local staff and so on. 

Free allocations to new entrants might influence investment incentives. This can happen in two ways (a) by speeding up investments compared to what would be optimal without free allowances, and (b) by distorting the investment choice between technologies. Though the total CO2 caps remain unchanged, the total socio-economic cost involved in complying with the caps could increase. 

Free allocations to new entrants may also distort competition between Member States by giving different investment incentives in different Member States. In the electricity sector, this could have a serious effect on security of supply in some Member States. As an example, a comparison of the first NAP versions showed that a new power plant would get more free allowances in Germany and Finland than in Denmark - and fewer in Sweden than in Denmark. This is a point of great concern in the Danish power sector. The Association of Danish Energy Companies has estimated that a new gas-fired combined cycle plant in Denmark receives only around 80% of the free allowances it would receive in Germany and Finland. A Danish coal-fired power plant receives only half of the allowances it would receive in Germany and Finland. For both types of plant, a Swedish power plant receives even fewer allowances. 

As noted in the next section, impending plant closures can reduce the incentives to invest in safety and maintain the plant s condition during the last few years of a plant s operation. Of course, most plants will eventually go through a period during which near-term shutdown is anticipated (with the associated reduction in investment incentives that this entails), but deregulation may accelerate the timing of the shutdowns for some plants. 

Integrated plants provide investment incentives associated with cash grants, loan interest rate subsidies, leasing subsidies, tax allowances, etc. These incentives may contribute decisively in increasing the competence of the pulping itself. 

While these new opportunities have led to increased activity and investment, there is evidence that the response of the domestic memufacturing sector has been constrained by limitations in the managerial capacity of the private sector. The existing investment incentive system has not been adequate, by itself, to stimulate new and large undertaking and has resulted mainly in small and scattered investment.... The Binational Entity has been reluctant to award large contracts to Paraguayan suppliers in cases where fulfillment of these orders required plant expansion. 

Recognizing the role of the private sector in the economy, the government of Ethiopia revised its investment law at least three times between 1992 and 2012. The revisions rendered investment incentives more transparent, attractive and competitive. Major positive changes regarding... 

Interest subsidies provide an investment incentive, but have the advantage that they do not have a direct impact on revenues and operating profitability, imlike preferential pricing or other forms of market protection. They may therefore be a constructive means of support in that they do not encourage uncompetitive practices. 

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