Subsidy policy selection of elderly care service projects under uncertain actual demand: a real options analysis based on China’s experience

Background Elderly care service projects (ECSPs) aim to provide care services with the help of market forces on the supply side to satisfy the huge demand of the elderly. Subsidies play an important role in motivating the investors to invest in the ECSPs immediately. The optimal subsidy scheme should balance the policy costs and the investors’ interests. Methods Based on the policy background of China, this study applied the real options theory to compare the effects of construction subsidy and operating subsidy on achieving policy goals from the perspective of uncertain actual demand. It introduced numerical examples to identify the optimal subsidy scheme and embedded the data from the Chinese Longitudinal Healthy Longevity Survey (CLHLS) to verify the uncertainty of actual demand. Results The results showed that in the context of uncertain actual demand, operating subsidy has greater advantages in reducing investment thresholds, saving subsidy costs and increasing spillover values. Moreover, a sound quality supervision system, a differentiated operating subsidy scheme and a sustainable growth market demand environment are conducive to increasing the long-term interests of the government and the investors. Conclusions The study emphasized the importance of subsidy selection in the context of uncertain actual demand, and provided a practical reference for policy designers in China and other developing countries to choose the optimal subsidy scheme for the ECSPs.

Socioeconomic and Climatic Impacts of Photovoltaic Systems Operating High-Efficiency Irrigation Systems: A Case Study of the Government Subsidy Scheme for Climate-Smart Agriculture in Punjab, Pakistan

This paper presents the results of a field study conducted in the Punjab, Pakistan, to evaluate the socio-economic and climatic impact of Photovoltaic (PV) systems installed under government subsidy scheme for operating high efficiency irrigation systems (HEIS) i.e., drip and sprinkler irrigation systems. Agriculture provides livelihood to almost half of the rural population and recent energy crisis in the country has adversely affected the rural communities. Farmer’s dependence on fossil fuels has significantly increased for operating irrigation systems which has resulted in high costs of agriculture production. Government of Punjab has launched a subsidy scheme to install PV systems for operating efficient drip and sprinkler irrigation systems on cost sharing basis. Photovoltaic systems having a capacity of 17.30 megawatt, were installed to operate high efficiency irrigation systems at around twenty thousand acres under this subsidy project, that has resulted in an annual saving of 0.0066 billion liters of diesel. The average capacity of installed PV systems was 9.0 kilowatt, which matched the 7.50 horse power of installed water pumps. On average, the cost of a PV system per acre was calculated to be 0.000142 billion PKR, while the cost per kWp was calculated to be 0.000149 billion PKR. The research results show that the installation of photovoltaic systems has increased the adoption rate of high-efficiency irrigation systems, reduced carbon dioxide emissions, and reduced the high operating costs associated with diesel powered pump systems. The primary data about on-farm agriculture and irrigation practices used in this study were collected through in-depth farmer surveys, while the secondary data information came from reports, official documents and statistics issued by the government.

Why don’t employers hire long-term unemployed entitled to a wage subsidy? The employer’s perspective on subsidised employment

Despite a generous system with high wage subsidies for the long-term unemployed and newly arrived immigrants, many Swedish employers do not make use of this opportunity. This study seeks to increase knowledge of why some employers use the opportunity and others do not. Both register and survey data and combined register and survey data are used. One finding is that employers lack information about the subsidy programmes, although employers that had previously employed subsidised workers were much more likely to employ them in the future. Thus, a key policy question is how to present these subsidies to employers to reduce this barrier. The study also found that some employers hired people from these groups from altruistic motives. However, some employers responded that they would not employ a person entitled to a subsidy, regardless of the content of the subsidy scheme.

An investigation of private public partnerships using real options analysis

<p>This thesis develops a model that investigates aspects of New Zealand’s largest public-private partnership project, the rollout of Ultra Fast Broadband. The model features four cities with different demand and construction-cost characteristics. It is used to study the different choices of the private party (Chorus) and the public party (Crown Fibre Holdings (CFH)). Using a real options approach, we identify two sorts of potential conflicts between the two parties: a timing conflict about the number of cities the two parties would like to develop in each period and a sequencing conflict about the order in which the UFB network is rolled out in different cities. Inspired by the incomplete contracting and information asymmetry literatures, we introduce several incentive schemes (including four subsidy schemes and two fine schemes) that help manage the possible conflicts. We compare both their ability to reduce the conflicts and their sensitivity to the model’s underlying parameters. Overall, there are four main findings. First, the magnitude of the conflict is a non-monotonic function of the inter-city demand differences and the inter-city construction-cost differences; it is an increasing function of the ratio of consumer surplus to producer surplus and of demand volatility. Second, a demand-dependent lump sum subsidy has the best performance among all included incentive schemes in controlling the possible conflicts. Third, the conflict level becomes quite sensitive to the subsidy scheme in two cases. A) When either the inter-city demand differences or the inter-city construction-cost differences turn out to be modest; B) When either the ratio of consumer surplus to producer surplus or demand volatility turns out to be large. The above result may provide some suggestions in managing the optimal subsidy. Last but not least, the requirement that Chorus is willing to participate in the partnership means that the fine schemes are generally outperformed by the subsidy schemes. Relating our findings to the undertaking UFB project, we provide CFH with several practical suggestions that may improve its management of possible conflicts.</p>

An investigation of private public partnerships using real options analysis

<p>This thesis develops a model that investigates aspects of New Zealand’s largest public-private partnership project, the rollout of Ultra Fast Broadband. The model features four cities with different demand and construction-cost characteristics. It is used to study the different choices of the private party (Chorus) and the public party (Crown Fibre Holdings (CFH)). Using a real options approach, we identify two sorts of potential conflicts between the two parties: a timing conflict about the number of cities the two parties would like to develop in each period and a sequencing conflict about the order in which the UFB network is rolled out in different cities. Inspired by the incomplete contracting and information asymmetry literatures, we introduce several incentive schemes (including four subsidy schemes and two fine schemes) that help manage the possible conflicts. We compare both their ability to reduce the conflicts and their sensitivity to the model’s underlying parameters. Overall, there are four main findings. First, the magnitude of the conflict is a non-monotonic function of the inter-city demand differences and the inter-city construction-cost differences; it is an increasing function of the ratio of consumer surplus to producer surplus and of demand volatility. Second, a demand-dependent lump sum subsidy has the best performance among all included incentive schemes in controlling the possible conflicts. Third, the conflict level becomes quite sensitive to the subsidy scheme in two cases. A) When either the inter-city demand differences or the inter-city construction-cost differences turn out to be modest; B) When either the ratio of consumer surplus to producer surplus or demand volatility turns out to be large. The above result may provide some suggestions in managing the optimal subsidy. Last but not least, the requirement that Chorus is willing to participate in the partnership means that the fine schemes are generally outperformed by the subsidy schemes. Relating our findings to the undertaking UFB project, we provide CFH with several practical suggestions that may improve its management of possible conflicts.</p>

Agricultural Water Management Using Two-Stage Channels: Performance and Policy Recommendations Based on Northern European Experiences

Conventional dredging of ditches and streams to ensure agricultural drainage and flood mitigation can have severe environmental impacts. The aim of this paper is to investigate the potential benefits of an alternative, nature-based two-stage channel (TSC) design with floodplains excavated along the main channel. Through a literature survey, investigations at Finnish field sites and expert interviews, we assessed the performance, costs, and monetary environmental benefits of TSCs in comparison to conventional dredging, as well as the bottlenecks in their financing and governance. We found evidence supporting the expected longer-term functioning of drainage as well as larger plant and fish biodiversity in TSCs compared to conventional dredging. The TSC design likely improves water quality since the floodplains retain suspended sediment and phosphorus and remove nitrogen. In the investigated case, the additional value of phosphorus retention and conservation of protected species through the TSC design was 2.4 times higher than the total costs. We demonstrate how TSCs can be made eligible for the obligatory vegetated riparian buffer of the European Union agri-environmental subsidy scheme (CAP-AES) by optimising their spatial application with respect to other buffer measures, and recommend to publicly finance their additional costs compared to conventional dredging at priority sites. Further studies on biodiversity impacts and long-term performance of two-stage channels are required.

Rethinking the mineral fertilizer subsidy scheme to promote environmental protection in Italy

Nitrogen fertilizers are essential inputs into modern agriculture, however the use of large amounts of mineral fertilizers in Italy caused, in the last three decades, severe environmental impacts such as eutrophication of waters and soils, loss of biodiversity, and drinking water pollution including human health risks. To date, regulatory instruments, such as the Nitrate Directive applied to reduce and manage mineral fertilizers showed scarce results in terms of environmental protection. Meanwhile the EU Common Agricultural Policy (CAP) subsidy scheme continues to encourage intensive agriculture and the national fiscal policy includes VAT reduction to 4% for mineral fertilizers. The aim of this paper is to propose a reform of direct and indirect fertilizers’ subsidies considering multiple fiscal options to adjust and eliminate some harmful incentives. The elimination of direct subsides shows the ability to generate a financial effect of €252.54 million per year. As for indirect subsidies for chemical fertilizers, their fiscal remodelling by bringing back the VAT rate from 4% to 22%, has the ability to generate revenues for the state of €597.40 million. The proposed subsides reform has the capacity to generate a significant revenue for the state amounting to €849.94 million every year, which may be used for investments in organic farming and sustainable agriculture practices.

Nihil novi sub sole: The Need for Rethinking WTO and Green Subsidies in Light of United States – Renewable Energy

US–Renewable Energy is the last in a series of WTO disputes involving subsidies schemes with local content requirements. Local content requirements (LCRs) are highly discriminatory and trade distortive instruments and therefore all cases concerning green energy have been found to violate WTO law. However, recent jurisprudence has developed a different definition of prohibited LCRs under the GATT and the SCM agreement, the latter allowing for some leeway to define origin of products under a government subsidy scheme. Depending how the subsidy scheme is framed, it will be able to be excused from the GATT's more stringent prohibition of LCRs, this raises question of consistency in the application of the LCRs prohibition. Moreover, we review a simple and robust approach that modern welfare economics suggests for framing discussions of subsidy policy. We apply this approach to the case of renewable energy subsidies and discuss some complexities with respect to local content requirements. In conclusion, this allows us to critically assess and review proposals to increase coherence between WTO subsidy policy and green energy promotion policies and submit proposals to achieve better suited WTO subsidy rules.

Growth and Economic Performance of the Norwegian Wind Power Industry and Some Aspects of the Nordic Electricity Market

Electricity has been produced in Norway in hydropower plants since 1877. The first wind power plant was put into operation in 1986. The growth in wind power production was weak in the first years after the turn of the millennium, but after Norway joined the Swedish subsidy scheme Tradable Green Certificates in 2012, there was significant growth in the wind power industry. While most of the hydropower production in Norway is owned by the public sector, the majority of wind power production is owned by foreign investors. Since wind power has been very much discussed in Norway, a levelized cost of energy (LCOE) model that can be well suited for this type of discussion is presented. The point here is that one must include all the costs, including the externalities. The Norwegian electricity market is dominated by a single player: Nord Pool. Ninety-six percent of all the electricity produced in Norway is sold through the power exchange Nord Pool, and the prices set by Nord Pool affect the finances of all the electricity producers in Norway, as well as producers in Scandinavia and the Baltic countries. This paper is a survey of the growth, development of production and economic performance of the Norwegian wind power industry and some aspects of the electricity market in the Nordic countries.