Maximizing the Impact of Climate Finance: Funding Projects or Pilot Projects?

Matthew J. Kotchen

NBER Working Paper No. 23023
Issued in January 2017
NBER Program(s):Environment and Energy Economics, Public Economics, Productivity, Innovation, and Entrepreneurship

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.

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Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23023

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