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Figure 5.10 OECD renewable energy R&D expenditures (Source: Goldstein, 1999).

hydrogen production and infrastructure technologies, electric vehicles, superconductivity, storage, and hybrid configurations.

Fourth, policies to address local air pollution and other environmental considerations should be structured so as to provide as much incentive to renew-ables and energy efficiency as possible. For example, the US SO2 allowance system developed under the Clean Air Act Amendments of 1990 has been a significant economic success in reducing sulfur emissions with minimal market disruption. However, to gain political acceptance, the distribution of allowances was structured so that existing polluters received the initial free allow-ances.8 Another alternative would have been to provide allowances annually to the electric sector based on the electricity produced, not the fuel input. In this way renewable electric technologies would also receive allowances for the electricity they produce. These could be sold by the renewable technologies to the fossil-powered generators. Thus, the renewables would receive the benefit of the allowances rather than the existing fossil-based polluters.

Fifth, identify opportunities to provide limited subsidies to renewables that will allow them to reach the next plateau in their development. Technologies close to market competitiveness are excellent candidates, especially if an increase in their production shows promise of industrial learning and cost reductions. As much as possible, these subsidy programs should be long-term with defined expiration conditions to provide as much certainty as possible to the investment community.

Sixth, establish programs to encourage voluntary purchases of renewable energy by government, the private sector, and by individuals. These "green power" programs have shown some promising results and appear to have great potential.

Seventh, encourage the transfer of technology to the developing world. Industrialized countries should increase efforts to build the markets for renewable energy in the developing world. Tied-aid programs, which encourage hardware sales but discourage competition, should be transformed into technology cooperation initiatives that build commercial markets and trigger private investment.

8 The Clean Air Act Amendments of 1990 did provide for a set-aside of 300 000 allowances for utilities that adopted renewable energy technologies. However, less than 15000 such allowances were claimed because:

1. They expired in 1990.

2. They could not be claimed by non-utility generators.

3. Only utilities adopting certain "integrated resource planning" procedures could claim them.

4. One allowance (one ton of SO2) was allowed for each 500 MWh of renewable electricity provided - one-sixth the amount of SO2 emitted from 500 MWh by those coal-fired generators controlled under the first phase of the SO2 allowance program.

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