Incentives for Technology Development and Project Based Mechanisms: Case of Renewable Energy Project

Currently, project based mechanisms under Kyoto protocol are prospering while its critical appraisal and examination of alternative options are undergone in the negotiation for post Kyoto schemes. Here, we investigate the mechanism from the viewpoint of new technological development, which is much awaited as the ultimate resolution for the climate change problem. We first lay out a theoretical model based upon economic theory and hint at possible problems. Then taking up the case of renewable energy projects, we illustrate the presence of the possibly negative effect, and compare this mechanism with other policy options raised in the course of negotiation, utilizing theoretical model based on game theory and theory of industrial organization.