Corporate Income Tax Incentives to Promote Environmentally Sustainable Investment

The paper advances a framework to take stock of CIT incentives across two interrelated policy objectives: stimulating investment in green sectors and processes; and/or encouraging divestment from dirty sectors. It distinguishes three categories of CIT incentives related to the green agenda: (i) green process-oriented incentives, which support environmentally sustainable production processes (e.g., less emission-intensive steel production); (ii) green sector-oriented incentives, whose sector or output support environmental sustainability (e.g., manufacturing of batteries for electric vehicles); and (iii) incentives for polluting (or "dirty") sectors, referring to sectors or outputs that are counterproductive to environmentally sustainable objectives (e.g., fossil fuel based energy production)