Subsidies Design Considerations: Generally

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In order to design an effective subsidy policy, it is necessary to understand the environmental issues being addressed and the interactions between the subsidy and other policy instruments being deployed. Climate-related subsidies are rarely applied in isolation, so it is crucial to assess how they will interact with regulations, tradable permits, and other policies in place in a particular country. Particularly in developing countries and economies in transition, subsidies should be tailored to local circumstances.

 

Because subsidy design is so context-dependent, a subsidy should be tailored to both a particular country and a particular industry. Generally, successful government activities to promote technological development include both supply-push and demand-pull policies during the period from precommercialization through lead adoption. Research has also identified industry sector characteristics that influence the level of government support necessary: the size, strength, and risk of the private market; industry structure; firm financial capability; firm technological capability; and sources of innovation.