Fiscal Feasibility of Countries’ Support Schemes towards their Climate Policies and Targets

As nations increasingly commit to reducing carbon emissions through diverse strategies, the fiscal sustainability of these support mechanisms comes under scrutiny. While essential for transitioning to alternative energy sources, these strategies often come with higher energy costs, raising questions about their long-term viability and the transparency of the associated financial burdens. Equinor has asked the Columbia Capstone team to analyze the clean energy policies of four pivotal nations: the United States, Canada, South Korea, and Japan. The goal of the project was to analyze the fiscal viability and strategic effectiveness of national policies in driving the transition to low-carbon energy sources, with the scope of the work centered on three specific clean energy technologies: hydrogen/ammonia, CCS and low-carbon fuels.

To address these goals, the team conducted a rigorous review of the energy policies related to the three technologies in the four selected countries and identified specific mandates and subsequent regulations related to the three clean energy technologies under consideration. The team analyzed the cost of the policies by classifying them as capped (with their fiscal cost defined) or uncapped (without limits). The team also identified existing financing mechanisms that could mitigate their fiscal costs and assess how critical the three technologies are to the emission reduction targets of the countries’ climate policies. Overall, the final report included assessments of critical risks: general fiscal vulnerability, political, policy, overspending, and execution risks.