Advertisement

Implications of Fiscal and Financial Policies on Unlocking Green Finance and Green Investment

  • Dina AzhgaliyevaEmail author
  • Zhanna Kapsalyamova
  • Linda Low
Living reference work entry
Part of the Sustainable Development book series (SD)

Abstract

Private investment in renewable energy must be scaled up to achieve decarbonization of the global economy, low carbon transformation, and climate-resilient growth. The United Nations advocates that governments should create a level playing field for private investment in renewable energy, where fiscal policies shall be used to incentivize engagement from the private sector. While the studies on renewable energy are abundant and range from unlocking renewable energy investment to effects of environmental policies on innovation, energy efficiency policies, investment policies in renewable energy, and adoption of feed-in tariffs, studies that uncover the determinants of private investment in the renewable energy sector are limited. Unlike the previous literature, which is concentrated on the total green investment, this chapter distinguishes private sector investment and government investment in renewable energy. Using multilevel data from 13 countries over the period 2004–2016, this chapter investigates the impact of four fiscal and financial policy instruments, namely (1) feed-in tariffs, (2) taxes, (3) loans, and (4) grants and subsidies, on private investment in renewable energy. Estimation using multilevel random intercept and random coefficient model provides evidence of the effectiveness of two policy instruments, feed-in tariffs and loans. This study could benefit policymakers and researchers in understanding the factors enabling a scale-up of renewable energy investment.

Keywords

Private investment Feed-in tariff Fiscal policy Green investment Government investment Renewable energy 

JEL Classification

Q58 Q42 H30 

References

  1. Acosta P, Loza A (2005) Short and long run determinants of private investment in Argentina. J Appl Econ 8(2):389–406CrossRefGoogle Scholar
  2. Afonso A, Jalles JT (2015) How does fiscal policy affect investment? Evidence from a large panel. Int J Financ Econ 20(4):310–327CrossRefGoogle Scholar
  3. Akkina KR, Celebi MA (2002) The determinants of private fixed investment and the relationship between public and private capital accumulation in Turkey. Pak Inst Dev Econ 41(3):243–254Google Scholar
  4. Azhgaliyeva D (2019) Codes for: Implications of fiscal and financial policies on unlocking green finance and green investment. ScholarBank@NUS Repository. Dataset.  https://doi.org/10.25540/TV5A-89QY
  5. Azhgaliyeva D, Belitski M, Kalyuzhnova Y, Romanov M (2018) Renewable energy policy instruments: an empirical evaluation of effectiveness. Int J Technol Intell Plan 12(1):24–48.  https://doi.org/10.1504/IJTIP.2018.10015611CrossRefGoogle Scholar
  6. Bernoth K, Colavecchio R (2014) The macroeconomic determinants of private equity investment: a European comparison. Appl Econ 46(11):1170–1183CrossRefGoogle Scholar
  7. Bhunia P (2017) How the Singapore government plans to boost solar power capacity to 1 gigawatt peak beyond 2020 from 140 megawatt peak today. Available via OpenGov. https://www.opengovasia.com/article/8179-how-the-singapore-government-is-moving-towards-solar-power-capacity-of-over-1-gigawatt-peak-beyond-2020-from-140-megawatt-peak-today. Accessed 21 Feb 2018
  8. Blejer MI, Khan MS (1984) Government policy and private investment in developing countries. Inter Monet Fund Staff Pap 31(2):379–403CrossRefGoogle Scholar
  9. Bloomberg New Energy Finance (2017a) New financial sector investment. Bloomberg database. Retrieved 1 November 2017Google Scholar
  10. Bloomberg New Energy Finance (2017b) Singapore plans Southeast Asia’s first carbon tax from 2019. Available via https://about.bnef.com/blog/singapore-plans-southeast-asias-first-carbon-tax-by-2019. Accessed 21 May 2018
  11. Boh S (2016) World’s largest floating solar photovoltaic cell test-bed launched in Singapore. Available via Straits Times. http://www.straitstimes.com/singapore/worlds-largest-floating-solar-photovoltaic-cell-test-bed-launched-in-singapore. Accessed 21 Feb 2018
  12. Brinsmead TS, Graham P, Hayward J, Ratnam EL, Reedman L (2015) Future energy storage trends: an assessment of the economic viability, potential uptake and impacts of electrical energy storage on the NEM 2015–2035. CSIRO report EP155039. Available via https://www.aemc.gov.au/sites/default/files/content/fa7a8ca4-5912-4fa9-8d51-2f291f7b9621/CSIRO-Future-Trends-Report.pdf
  13. Cardoso E (1993) Private investment in Latin America. Econ Dev Cult Chang 41:833–848CrossRefGoogle Scholar
  14. Cheon A, Urpelainen J (2012) Oil prices and energy technology innovation: an empirical analysis. Glob Environ Chang 22(2):407–417CrossRefGoogle Scholar
  15. Clements B, Jung H-S, Gupta S (2007) Real and distributive effects of petroleum price liberalization: the case of Indonesia. Dev Econ 45(2):220–237CrossRefGoogle Scholar
  16. Datt D (2002) Green budget reform in India: opportunities and challenges. In: Greening the budget case studies. Energy and Resources Institute Press, New Delhi, pp 1–30. Accessed 7 Dec 2017Google Scholar
  17. Energy Market Authority (2017) Intermittency pricing mechanism for intermittent generation sources in the national electricity market of Singapore. Consultation paper. Available via Energy Market Authority. https://www.ema.gov.sg/cmsmedia/Consultations/Electricity/Intermittency%20Pricing%20Mechanism%20Consultation%20Paper%20_1%20Aug.pdf
  18. Eyraud L, Clements B, Wane A (2013) Green investment: trends and determinants. Energy Policy 60:852–865CrossRefGoogle Scholar
  19. Follett A (2016) Germany paid wind turbines $548 million to sit idle. The Daily Caller, 29 Apr 2016. http://dailycaller.com/2016/04/29/germany-paid-wind-turbines-548-million-to-sit-idle Accessed 7 Dec 2017
  20. Frankfurt School-UNEP Centre/Bloomberg New Energy Finance (BNEF) (2017) Global trends in renewable energy investment 2017. Frankfurt School of Finance & Management GmbH. http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2017. Accessed 7 Dec 2017
  21. Fraunhofer Institute for Solar Energy Systems (ISES) (2017) Recent facts about photovoltaics in Germany. Fraunhofer Institute for Solar Energy Systems, Berlin. https://www.ise.fraunhofer.de/en/publications/studies/recent-facts-about-pv-in-germany.html Accessed 7 Dec 2017
  22. Ghura D, Goodwin B (2000) Determinants of private investment: a cross-regional empirical investigation. Appl Econ 32(14):1819–1829CrossRefGoogle Scholar
  23. Greene WH (2012) Econometric analysis, 7th edn. Pearson, BostonGoogle Scholar
  24. Greene J, Villanueva D (1991) Private investment in developing countries: an empirical analysis. Int Monet Fund Staff Pap 38:33–58CrossRefGoogle Scholar
  25. Hadow N (2017) Keynote address by Lawrence Wong, Minister for National Development and Second Minister for Finance, at the Investment Management Association of Singapore’s 20th anniversary conference on 23 March 2017. http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/Speeches/2017/Keynote-Address-at-the-Investment-Management-Association-of-Singapores-20th-Anniversary-Conference.aspx. Accessed 30 May 2018
  26. Hausman JA (1978) Specification tests in econometrics. Econometrica 46:1251–1271CrossRefGoogle Scholar
  27. Hwee HT (2017) REC to invest S$250m to scale up its solar capacity. The Business Times, 31 Mar 2016. https://www.iesingapore.gov.sg/Media-Centre/News/2016/3/REC-to-invest-S-250m-to-scale-up-its-solar-capacity. Accessed 21 Feb 2018
  28. International Energy Agency (IEA) (2014) World energy investment outlook. OECD/IEA Publishing, ParisGoogle Scholar
  29. International Energy Agency (IEA) (2016) World energy outlook 2016. International Energy Agency, Paris.  https://doi.org/10.1787/weo-2016-enCrossRefGoogle Scholar
  30. International Energy Agency (IEA) (2017a) World energy investment 2017. International Energy Agency, Paris.  https://doi.org/10.1787/9789264277854-enCrossRefGoogle Scholar
  31. International Energy Agency (IEA) (2017b) World energy statistics and balances extended world energy balances. International Energy Agency, Paris.  https://doi.org/10.1787/enestats-data-enCrossRefGoogle Scholar
  32. International Energy Agency (IEA) (2017c) Energy prices and taxes statistics. International Energy Agency, Paris.  https://doi.org/10.1787/eneprice-data-enCrossRefGoogle Scholar
  33. International Energy Agency (IEA) and International Renewable Energy Agency (IRENA) (2017) Joint policies and measures database for global renewable energy. International Energy Agency, Paris. https://www.iea.org/policiesandmeasures/renewableenergy. Accessed 7 Dec 2017
  34. International Monetary Fund (IMF) (2013) Energy subsidy reform: lessons and implications. IMF, Washington, DCGoogle Scholar
  35. International Renewable Energy Agency (IRENA) (2015) Battery storage for renewables: market status and technology outlook. International Renewable Energy Agency, Paris. http://www.irena.org/publications/2015/Jan/Battery-Storage-for-Renewables-Market-Status-and-Technology-Outlook. Accessed 7 Dec 2017
  36. International Renewable Energy Agency (IRENA) (2016) Unlocking renewable energy investment: the role of risk mitigation and structured finance. IRENA, Abu Dhabi. Available via https://www.irena.org/DocumentDownloads/Publications/IRENA_Risk_Mitigation_and_Structured_Finance_2016.pdf
  37. Johnstone N, Hascic I, Popp D (2010) Renewable energy policies and technological innovation: evidence based on patent counts. Environ Resour Econ 45(133):155–165.  https://doi.org/10.1007/s10640-009-9309-1CrossRefGoogle Scholar
  38. Klein A, Merkel E, Pfluger B, Held A, Ragwitz M, Resch G, Busch S (2010) Evaluation of different feed-in tariff design options: best practice paper for the International Feed-in Cooperation, 3rd edn. Energy Economics Group & Fraunhofer Institute Systems and Innovation Research, Berlin. Available via http://www.feed-in-cooperation.org/wDefault_7/download-files/research/Best_practice_Paper_3rd_edition.pdf
  39. Laird NM, Fitzmaurice GM (2013) Longitudinal data modeling. In: Scott MA, Simonoff JS, Marx BD (eds) The SAGE handbook of multilevel modeling. SAGE, London, pp 141–160.  https://doi.org/10.4135/9781446247600.n9CrossRefGoogle Scholar
  40. Lawrence Berkeley National Laboratory (2016) Key China energy statistics 2016. China Energy Group. Available via https://china.lbl.gov/sites/default/files/ced-9-2017-final.pdf
  41. Liu Y (2018) Energy efficiency in Singapore’s climate change policy. ESI Bull 11(1):3–4. Available via http://esi.nus.edu.sg/docs/default-source/esi-bulletins/esi-v11-1-2018.pdf?sfvrsn=2. Accessed 30 May 2018
  42. Lopez K (2015) Unleashing private investment in renewable energy. Available via https://blogs.worldbank.org/voices/unleashing-private-investment-in-renewable-energy. Accessed 7 Dec 2017
  43. Low A (2016) Global trends in clean energy investment. Available via Bloomberg New Energy Finance. https://www.bbhub.io/bnef/sites/4/2016/10/BNEF_2016-10-10_Clean-energy-investment-Q3-2016-factpack.pdf
  44. Low M (2018) 2018 as Singapore’s year of climate action. ESI Policy Brief 21:1–4. Available via http://esi.nus.edu.sg/docs/default-source/esi-policy-briefs/2018-as-singapore's-year-of-climate-action.pdf?sfvrsn=2
  45. Low M, Bin S (2017) Singapore’s drive towards energy efficiency: policies for a low carbon future. ESI Policy Brief 18:1–4. Available via http://esi.nus.edu.sg/docs/default-source/esi-policy-briefs/energy-efficiency-policy-for-sustainable-economic-growth-in-singapore-(1).pdf?sfvrsn=2
  46. Mayer JN, Philipps S, Hussein NS, Schlegl T, Senkpiel C (2015) Current and future cost of photovoltaics. Long-term scenarios for market development, system prices and LCOE of utility-scale PV systems. Fraunhofer ISE, pp 1–82. Available via https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/AgoraEnergiewende_Current_and_Future_Cost_of_PV_Feb2015_web.pdf
  47. Mazzucato M, Semieniuk G (2017) Financing renewable energy: who is financing what and why it matters. Technol Forecast Soc Chang 127:8–22.  https://doi.org/10.1016/j.techfore.2017.05.021. Accessed 7 Dec 2017CrossRefGoogle Scholar
  48. Mendick R (2015) Wind farms paid £1m a week to switch off. The Telegraph, 4 Jan 2015. Available via http://www.telegraph.co.uk/news/earth/energy/windpower/11323685/Wind-farms-paid-1m-a-week-to-switch-off.html. Accessed 7 Dec 2017
  49. Nesta L, Vona F, Nicolli F (2014) Environmental policies, competition and innovation in renewable energy. J Environ Econ Manag 67(3):396–411.  https://doi.org/10.1016/j.jeem.2014.01.001CrossRefGoogle Scholar
  50. Obi M, Jensen S, Ferris JB, Bass RB (2017) Calculation of levelized costs of electricity for various electrical energy storage systems. Renew Sust Energ Rev 67:908–920.  https://doi.org/10.1016/j.rser.2016.09.043CrossRefGoogle Scholar
  51. Organisation for Economic Co-operation and Development (OECD) (2016) Fragmentation in clean energy investment and financing. In: OECD business and finance outlook 2016. OECD Publishing, Paris, pp 141–175.  https://doi.org/10.1787/9789264257573-enCrossRefGoogle Scholar
  52. Özler S, Rodrik D (1992) External shocks, politics, and private investment: some theory and empirical evidence. J Dev Econ 39:141–162.  https://doi.org/10.1016/0304-3878(92)90060-MCrossRefGoogle Scholar
  53. Popp D, Hascic I, Medhi N (2011) Technology and the diffusion of renewable energy. Energy Econ 33(4):648–662.  https://doi.org/10.1016/j.eneco.2010.08.007CrossRefGoogle Scholar
  54. Rabe-Hesketh S, Skrondal A (2012) Multilevel and longitudinal modelling using Stata. STATA Press, College StationGoogle Scholar
  55. Ringel M, Schlomann B, Krail M, Rohde C (2016) Towards a green economy in Germany? The role of energy efficiency policies. Appl Energy 179(1):1293–1303.  https://doi.org/10.1016/j.apenergy.2016.03.063CrossRefGoogle Scholar
  56. Romano A, Scandurra G, Carfora A (2015) Probabilities to adopt feed in tariff conditioned to economic transition: a scenario analysis. Renew Energy 83:988–997.  https://doi.org/10.1016/j.renene.2015.05.035CrossRefGoogle Scholar
  57. Ruzzenenti F, Papandreou AA (2015) Effects of fossil fuel prices on the transition to a low-carbon economy. Working papers 89, Financialisation, Economy, Society & Sustainable Development Project.Google Scholar
  58. Schuknecht L (2017) Singapore’s role in deepening regional green finance, Speech by Lawrence Wong, Minister for National Development and Second Minister for Finance, at the G20 green finance conference on 15 November. Available via http://www.mas.gov.sg/news-and-publications/Speeches-and-Monetary-Policy-Statements/Speeches/2017/Speech-by-Mr-Lawrence-Wong-at-the-G20-Green-Finance-Conference.aspx. Accessed 30 May 2018
  59. Siau ME (2017) Clean energy investments to create 400 jobs, S$500m in business spending. Today, 24 Oct 2017. Available via http://www.todayonline.com/singapore/clean-energy-investments-create-400-jobs-s500m-business-spending. Accessed 21 Feb 2018
  60. Skrondal A, Rabe-Hesketh S (2008) Multilevel and related models for longitudinal data. In: De Leeuw J, Meijer E, Goldstein H (eds) Handbook of multilevel analysis. Springer, New York, pp 275–299CrossRefGoogle Scholar
  61. Stockman AC (1981) Anticipated inflation and the capital stock in a cash-in-advance economy. J Monet Econ 8:387–393CrossRefGoogle Scholar
  62. Taghizadeh-Hesary F, Yoshino N, Inagaki Y (2018) Empirical analysis of factors influencing price of solar modules. ADBI working paper 836. Asian Development Bank Institute, Tokyo. Available via https://www.adb.org/publications/empirical-analysis-factors-influencing-price-solar-modules
  63. Tao J, Azhgaliyeva D (2018) The role of green fintech for Singapore: risks and benefits. ESI Bull 11(1):8–10. Available via http://esi.nus.edu.sg/docs/default-source/esi-bulletins/esi-v11-1-2018.pdf?sfvrsn=2. Accessed 30 May 2018
  64. United Nations Environment Programme (UNEP) (2015) The emissions gap report 2015. United Nations Environment Programme, Nairobi. Available via https://uneplive.unep.org/media/docs/theme/13/EGR_2015_301115_lores.pdf
  65. Wai UT, Wong C (1982) Determinants of private investment in developing countries. J Dev Stud 19(1):19–36CrossRefGoogle Scholar
  66. Wong SL, Chang Y, Chia WM (2013) Energy consumption, energy R&D and real GDP in OECD countries with and without oil reserves. Energy Econ 40:51–60CrossRefGoogle Scholar
  67. World Bank (2017) World development indicators. Available via http://databank.worldbank.org. Accessed 7 Dec 2017
  68. Yoshino N, Taghizadeh-Hesary F (2017) Alternatives to bank finance: role of carbon tax and hometown investment trust funds in developing green energy projects in Asia. ADBI working paper 761. Asian Development Bank Institute, Tokyo. Available via https://www.adb.org/publications/alternatives-bank-finance-role-carbon-tax-and-hometown-investment-trust-funds
  69. Yoshino N, Taghizadeh-Hesary F (2018) Alternatives to private finance: role of fiscal policy reforms and energy taxation in development of renewable energy projects. In: Anbumozhi V, Kalirajan K, Kimura F (eds) Financing for low-carbon energy transition: unlocking the potential of private capital. Springer, HeidelbergGoogle Scholar

Copyright information

© Asian Development Bank Institute 2019

Authors and Affiliations

  • Dina Azhgaliyeva
    • 1
    Email author
  • Zhanna Kapsalyamova
    • 2
  • Linda Low
    • 3
  1. 1.Energy Studies InstituteNational University of SingaporeSingaporeSingapore
  2. 2.School of Humanities and Social Sciences, Environment and Resource Efficiency ClusterNazarbayev UniversityAstanaKazakhstan
  3. 3.Singapore University of Social SciencesSingaporeSingapore

Personalised recommendations