Conference Agenda

The deployment of clean technologies in hard-to-abate sectors is often hindered by high costs and investment risks. Carbon Contracts for Difference (CCfDs) have emerged as a policy tool to mitigate these risks, yet their design raises a central question: Should support be technology-neutral or technology-specific? This paper examines this trade-off in a setting with two competing abatement technologies, differing in both cost structure and exposure to financing constraints. We develop a partial equilibrium model under asymmetric information, where firms’ perceived costs exceed social costs due to technology-specific risk premiums. We compare policy instruments along two dimensions : uniform vs. technology-specific, and prices vs. quotas, covering all four combinations. Uniform instruments introduce systematic distortions in the presence of heterogeneous cost premiums. We find that a technology-neutral quota combined with targeted subsidies corrects allocation distortions and outperforms technology-specific quotas. Similarly, differentiated prices outperform a single uniform price, with welfare gains increasing in the degree of substitutability between technologies. We further develop a microfounded extension, calibrating it to the hydrogen sector in Europe, where green and blue hydrogen compete under spatially heterogeneous conditions. Numerical simulations confirm that technology-specific instruments yield substantial welfare gains when technologies are close substitutes and risk heterogeneity is pronounced. Overall, our findings support an optimal sequencing of policy design, where early-stage technology-specific support gives way to neutrality as competition intensifies and the transition matures.