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Growth, austerity and 2020 targets – the case of renewables support Committee of the Regions Roundtable, April 26th Georg Zachmann
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Potential output-enhancing stimulus? Use stimulus spending to increase the potential output of the economy Difficult task: –Find quickly deployable investment –At the same time, do not crowd-out private investment 2
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Growth vs. austerity – the 2008-2010 stimulus Stimulus largely on consumption (reddish) 3 Tax cuts in % of GDP Spending measures in % of GDP Source: OECD
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Growth-friendly austerity? In the short term: Cutting public spending where private sector is likely to overcompensate In the long term: Use the crisis imperative to cut the most distorting tax- breaks and unproductive public expenditures which flourished in good times 4
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Growth vs. austerity – the 2011-2012 austerity programmes Austerity becomes more revenue centered 5 Greece Original version of IMF/EU Programme (May 2010) 11.1% GDP (2010-13) 47.8% expenditure 36% revenues 16.2% * structural ref. Reinforced Medium Term Fiscal Strategy (June 2011) 12% GDP (2011-15, on top of what is already implemented) 52.5% expenditure47.5% revenues Property tax on electricity- powered buildings (September 2011) About 1% GDP per year (2011-14) --100% revenues Portugal IMF/EU EFF Programme (May 2011) 10.6% GDP (2011-13) 68% expenditure32% revenues Emergency measures due to fiscal slippages (August 2011) 1.1% of GDP (2011) --100% revenues
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The case of renewables 6
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Why state support for renewables? Emission reduction –Direct: lower emission per Joule –Indirect: lower emission reduction cost (learning) Security of supply –Lower energy import dependency Industrial policy –Local value content –Infant industry Global benefit National benefit
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Renewables deployment cost Massive spending on deployment of renewables in recent years => but is this really the right approach for reaching the targets ? 8 Wind Deployment cost in Million USD Solar Deployment cost in Million USD FranceGermanyU.K.SpainFranceGermanyJapanU.S. 1980s -62 - - - - - - 1990s 467,589 805 3,084 - 240 1,537 184 2000s 12,93739,808 11,736 27,940 6,600 119,944 26,219 17,545
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R&D vs. Deployment cost 9 Wind RD&D SUM Total RD&D in Million USD (2010 prices and PPP) Solar RD&D SUM Total RD&D in Million USD (2010 prices and PPP) FranceGermanyU.K.U.S. FranceGermanyJapanU.S. 1980s 6238127639319557303087 1990s 827995302288576341232 2000s 202652326182827099891729 Wind Deployment cost in Million USD Solar Deployment cost in Million USD FranceGermanyU.K.U.S.FranceGermanyJapanU.S. 1980s - 62 - 3.967 - - - - 1990s 467.589 805 2.147 - 240 1.537 184 2000s 12.93739.808 11.736 84.436 6.600 119.944 26.219 17.545
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Drastic cut-back in some renewables support schemes 10 Czech Republic: From 1 January 2011, the FIT for PV systems put into operation between 1 Jan 2009 and 31 Dec 2010 is subject to a tax of 26 %.
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But huge fall-out of sudden stop Closure of parts of the supported industry Drop in credibility -> makes future programmes more expensive Credibility is as important for future policy efficiency as credit ratings 11
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