Morten Grindaker`s webpage

Green Waste: (Mis)allocation of Green Investment Subsidies

Abstract:
We test for and measure the misallocation of public subsidies for green investment projects in private firms. The context of our study is a major green investment subsidy program in Norway. Combining a model of optimal subsidy allocation with detailed data on project-level carbon emissions and subsidy amounts, we find that policymakers could have achieved the same level of carbon emission reductions for 38% less expenditure. The observed  misallocation is driven in roughly equal parts by two factors: A failure to predict and select the projects with the highest carbon emission effects per subsidy dollar, and a willingness to forego carbon emission reductions to favor specific technologies and sectors, such as construction and transportation.