Encouraging biogas plant construction in Nepal: should carbon revenues be spent as interest rate subsidies, environmental income payments or purchase subsidies?

<p dir="ltr">Governments and project developers in developing countries can obtain substantial income from carbon revenues as households make the transition to clean energy technologies and reduce their greenhouse gas emissions. These revenues can be used in various ways to encourage further investments in clean energy. In this paper we examine the effectiveness of three alternative policy instruments for supporting this clean energy transition in relation to cooking with biogas plants in Nepal – carbon revenues as purchase subsidies on biogas plants, distribution of environmental income to households for continuing use of biogas plants, or interest rate subsidies related to purchases of biogas plants on credit. Thus far the sectoral focus has been on purchase subsidies, but these are increasingly declining in their effectiveness. Our results identify the effectiveness relative to government cost and carbon emissions reduction from these three types of potential government policy.</p>