What role fiscal policies are playing in green finance?

To increase the rate of return in green projects, fiscal policies play a significant role where the share prices in the private sector’s investment can be elevated. Tax relief and tax credit can be widely used by such countries so that renewable energy deployment can be promoted. The tax credit production can be extensively used by the US to promote wind energy and tax credit investment in solar energy. Tax credits can be used by companies so that the income tax deductions can be reduced or investment in renewable energy can be utilized in exchange for corporate taxes.

Tax and investment tax credits production has been extended until 2020 by the US.

The tax revenue can be returned also from the spillover effect originated by private investment in green energy projects. The spillover effect is discussed in various green energy projects related to other sectors and the gross domestic product of the region. Spillover effect can be defined as the tax revenue of local or central government that can be increased from a region where countries could be partially refunded or the investors in private-sectors can increase the return rate of these projects as discussed by Yoshino and Taghizadeh-Hesary (2018).

Community-based funds and village funds can be suitable for small and medium-sized green projects. To support solar and wind power, a Hometown Investment Trust fund can be a trusted fund based on community service.

Source:- Handbook of Green finance by Jeffrey D. Sachs.

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