Financial incentives to mobilise local citizens as investors in low-carbon technologies: A systematic literature review

Abstract

Mobilising greater levels of private finance through local citizen investment in low-carbon technologies can help bridge the capital shortfall to meeting climate objectives, while also building societal support for the low-carbon transition. Within this context we undertake a systematic review of literature assessing the impact of technology-specific economic and financial incentives promoting greater levels of investment in low carbon technologies from local citizen investors, both individuals and community groups. We focus in particular on the impact of feed in tariffs compared to quota schemes, grants, tax incentives and soft loans. The analysis suggests that local citizen investors do not necessarily act in an economically rational manner in response to these incentives. It underscores the importance of understanding the preferences of target demographics, the local context, as well as the characteristics of the technologies in question, and suggests interventions should be considered as part of wider policy packages. While identifying challenges to be overcome through instrument design, we find that feed-in tariffs, grants and tax incentives can be successful in mobilising greater levels of investment from local citizen investors, but that soft loans tend to be less effective as a stand-alone instrument. The review identifies areas meriting further exploration in this emerging field of research.