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.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Acosta P, Loza A (2005) Short and long run determinants of private investment in Argentina. J Appl Econ 8(2):389–406
Afonso A, Jalles JT (2015) How does fiscal policy affect investment? Evidence from a large panel. Int J Financ Econ 20(4):310–327
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):243–254
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
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.2018.10015611
Bernoth K, Colavecchio R (2014) The macroeconomic determinants of private equity investment: a European comparison. Appl Econ 46(11):1170–1183
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
Blejer MI, Khan MS (1984) Government policy and private investment in developing countries. Inter Monet Fund Staff Pap 31(2):379–403
Bloomberg New Energy Finance (2017a) New financial sector investment. Bloomberg database. Retrieved 1 November 2017
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
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
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
British Petroleum (BP) (2017) Statistical review of world energy 2017. BP, London. https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-full-report.pdf
Cardoso E (1993) Private investment in Latin America. Econ Dev Cult Chang 41:833–848
Cheon A, Urpelainen J (2012) Oil prices and energy technology innovation: an empirical analysis. Glob Environ Chang 22(2):407–417
Clements B, Jung H-S, Gupta S (2007) Real and distributive effects of petroleum price liberalization: the case of Indonesia. Dev Econ 45(2):220–237
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 2017
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
Eyraud L, Clements B, Wane A (2013) Green investment: trends and determinants. Energy Policy 60:852–865
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
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
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
Ghura D, Goodwin B (2000) Determinants of private investment: a cross-regional empirical investigation. Appl Econ 32(14):1819–1829
Greene WH (2012) Econometric analysis, 7th edn. Pearson, Boston
Greene J, Villanueva D (1991) Private investment in developing countries: an empirical analysis. Int Monet Fund Staff Pap 38:33–58
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
Hausman JA (1978) Specification tests in econometrics. Econometrica 46:1251–1271
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
International Energy Agency (IEA) (2014) World energy investment outlook. OECD/IEA Publishing, Paris
International Energy Agency (IEA) (2016) World energy outlook 2016. International Energy Agency, Paris. https://doi.org/10.1787/weo-2016-en
International Energy Agency (IEA) (2017a) World energy investment 2017. International Energy Agency, Paris. https://doi.org/10.1787/9789264277854-en
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-en
International Energy Agency (IEA) (2017c) Energy prices and taxes statistics. International Energy Agency, Paris. https://doi.org/10.1787/eneprice-data-en
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
International Monetary Fund (IMF) (2013) Energy subsidy reform: lessons and implications. IMF, Washington, DC
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
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
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/s10640-009-9309-1
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
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.n9
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
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
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
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
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
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
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
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 2017
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
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.2014.01.001
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.2016.09.043
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-en
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-M
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.2010.08.007
Rabe-Hesketh S, Skrondal A (2012) Multilevel and longitudinal modelling using Stata. STATA Press, College Station
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.2016.03.063
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.2015.05.035
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.
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
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
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 275–299
Stockman AC (1981) Anticipated inflation and the capital stock in a cash-in-advance economy. J Monet Econ 8:387–393
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
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
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
Wai UT, Wong C (1982) Determinants of private investment in developing countries. J Dev Stud 19(1):19–36
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 40:51–60
World Bank (2017) World development indicators. Available via http://databank.worldbank.org. Accessed 7 Dec 2017
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
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, Heidelberg
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Asian Development Bank Institute
About this entry
Cite this entry
Azhgaliyeva, D., Kapsalyamova, Z., Low, L. (2019). Implications of Fiscal and Financial Policies on Unlocking Green Finance and Green Investment. In: Sachs, J., Woo, W., Yoshino, N., Taghizadeh-Hesary, F. (eds) Handbook of Green Finance. Sustainable Development . Springer, Singapore. https://doi.org/10.1007/978-981-13-0227-5_32
Download citation
DOI: https://doi.org/10.1007/978-981-13-0227-5_32
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-0226-8
Online ISBN: 978-981-13-0227-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences