Cover: Federal Financial Incentives to Induce Early Experience Producing Unconventional Liquid Fuels

Federal Financial Incentives to Induce Early Experience Producing Unconventional Liquid Fuels

Published Dec 11, 2008

by Frank Camm, James T. Bartis, Charles J. Bushman

Download

Download eBook for Free

Full Document

FormatFile SizeNotes
PDF file 1.6 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Summary Only

FormatFile SizeNotes
PDF file 0.5 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Purchase

Purchase Print Copy

 Format Price
Add to Cart Paperback96 pages $31.50

The government, as a principal, may seek to induce a private investor, as an agent, to build and operate an unconventional-oil production plant to promote early production experience with such plants. Given this goal, facing significant uncertainty about the future, the government wants to limit the cost to the public treasury of doing this. This report offers an analytic way to design and assess packages of policy instruments that the government can use to achieve its goal. It starts with general principles of the economic theories of contracting and agency. Looking across many alternative futures helps the authors design incentive packages that are robust from a private perspective and limit costs to the government. As these principles would predict, cash-flow analysis demonstrates the cost-effectiveness of using investment incentives rather operating incentives and the powerful effect that a higher debt share has on the private rate of return. Cash-flow analysis also reveals specific opportunities that the government has to change course among policy alternatives as it seeks the lowest-cost way to increase the private rate of return associated with a project.

Research conducted by

The research described in this report was sponsored by the United States Air Force. It was also supported by the National Energy Technology Laboratory, United States Department of Energy, and was conducted under the auspices of the Environment, Energy, and Economic Development Program within RAND Infrastructure, Safety, and Environment.

This report is part of the RAND technical report series. RAND technical reports may include research findings on a specific topic that is limited in scope or intended for a narrow audience; present discussions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for research quality and objectivity.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.