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Georg Zachmann

Growth, austerity and 2020 targets – the case of renewables support Committee of the Regions Roundtable, April 26th. Georg Zachmann. Potential output-enhancing stimulus?. Use stimulus spending to increase the potential output of the economy Difficult task:

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Georg Zachmann

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  1. Growth, austerity and 2020 targets – the case of renewables supportCommittee of the Regions Roundtable, April 26th Georg Zachmann

  2. 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

  3. Growth vs. austerity – the 2008-2010 stimulus Taxcuts in % of GDP • Stimulus largely on consumption (reddish) Spendingmeasures in % of GDP Source: OECD

  4. 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

  5. Growth vs. austerity – the 2011-2012 austerity programmes • Austerity becomes more revenue centered

  6. The case of renewables

  7. 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

  8. Renewables deployment cost • Massive spending on deployment of renewables in recent years • => but isthisreallytherightapproachforreachingthetargets ?

  9. R&D vs. Deploymentcost

  10. Drastic cut-back in some renewablessupport schemes CzechRepublic: 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 %.

  11. But hugefall-outofsuddenstop • Closureofpartsofthesupportedindustry • Drop in credibility -> makesfutureprogrammesmore expensive • Credibility is as important for future policy efficiency as credit ratings

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