Definitions and supply chain troubles stall Germany's climate investment 'super write-offs'

The new German government’s promise to grant companies so-called “super write-offs” for investments in climate-friendly projects could be obstructed by a lack of clear definitions and globally distorted supply chains, business daily Handelsblatt reports. According to the paper, these make precise investment planning difficult. The write-offs have been promoted by finance minister Christian Lindner from the Free Democrats (FDP) as a tool to unlock private capital for climate investments or digitalisation projects. He has promised they will eventually generate higher earnings for the treasury by facilitating necessary investment decisions, an idea widely welcomed by industry representatives. But so far the treasury has not tabled any proposal due to disagreements over what constitutes climate-friendly investments and whether investing companies should merely be allowed to get quicker tax write-offs or actually receive investment premiums. The latter would make the measure significantly more expensive, the article says. Moreover, supply chain troubles create severe difficulties for companies to plan ahead, which means the super write-offs currently rather support urgent investments that would have been carried out also without support, Clemens Fuest, head of economic research institute ifo, told the newspaper.

Financing its ambitious climate action plans is one of the great challenges for Germany’s “traffic light coalition” consisting of the FDP, the Green Party and the Social Democrats. Apart from ideas like the super write-offs, the finance ministry has sought to make more money available for climate action through redirecting unused funds from the country’s coronavirus recovery package to a fund for climate and energy projects, a move that opposition parties have announced to challenge in court.