For conditional financing of risky low-carbon projects.

Summary A recurrent criticism of subsidies to clean technologies (renewable energies, solar, clean development mechanisms, electric cars, etc.) is the existence of deadweight effects: investments benefit from subsidies that they do not need to be profitable. This paper formalizes this type of situation as the selection of a portfolio of projects by the state in a context of asymmetric information. It shows that a form of guaranteed financing, with reimbursement in case of success, allows to limit windfall effects and public expenditures while maximizing the social benefit in terms of emission reductions. The relevance of the proposed mechanism is illustrated in the context of subsidies for the deployment of infrastructure for hydrogen vehicles.