The Future of Coal (Chapters 6-8)

Government support for this industry innovation occurs in four ways: (1) setting the rules for private sector innovation and technology deployment incentives, e.g., intellectual property protection and R&D tax credits; (2) support for basic scientifi c research; (3) support for pre-commercial technology and engineering development, and (4) support for demonstration projects that inform industry about the technical performance, cost, and environmental risks of a new technology. Support of pre-competitive research by government offers new technology options because private fi rms generally will not make investments whose benefi ts are not easily captured by individual fi rms. Th e rationale for later stage government support turns on other market failures or imperfections. Th ese rationales are sometimes distorted in the political process so as to provide inappropriate subsidies, but signifi cant learning-by-doing economies and social insurance considerations can be, under the right circumstances, sound rationales, along with other features like cost sharing.