The merits of accelerated depreciation for promoting investment in clean transport technologies: A simulation study in the Australian rail freight industry

This article ascertains the viability of promoting accelerated depreciation for newly acquired locomotives and other rolling stock as a means of encouraging technological investment in more efficient and environmentally friendly assets. The study uses a tax-adjusted asset replacement model to evaluate the merits of accelerated depreciation, and then compares the outcomes with alternative incentive schemes. It also examines what would occur if various schemes were used simultaneously.

► A tax-adjusted asset replacement model for new rolling stock is used.
► All hypothetical tax codes are likely to lead to more rapid asset replacement.
► Doubling the depreciation rate is less effective than other options.
► A scheme employing a suite of mechanisms is recommended.