Working Paper: NBER ID: w23023
Authors: Matthew J. Kotchen
Abstract: This paper contributes to the understanding of how to maximize the impact of publicly provided climate finance to leverage the private sector. Agencies seeking to promote private investment in support of climate change mitigation and adaptation may have a choice between subsidizing projects or pilot projects. Pilots are either scaled down versions of full projects or an experimental phase that generates better information about whether a full project is likely to succeed or fail. Drawing on insights about the value of experimentation for entrepreneurship and raising private capital, the theoretical model developed herein provides guidance about when subsidizing projects or pilots is more efficient.
Keywords: climate finance; public investment; private investment; pilot projects; subsidies
JEL Codes: G18; H2; Q4; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subsidizing pilots (L93) | additional information gained (Y50) |
| additional information gained (Y50) | influence desirability of full project (H43) |
| subsidizing pilots (L93) | optimize resource allocation (D61) |
| subsidizing viable pilots (L93) | maximize benefits per unit of subsidy (H20) |
| size of social benefits associated with the project (H43) | choice between subsidizing projects or pilots (H43) |