The Atlas of Innovation is a project of IFP
Per-Unit Subsidies & Tax Credits
Tax credits and direct payments that reduce the cost of producing or purchasing each unit of an innovative product or service.
Per-unit subsidies lower the effective cost of innovative products by providing financial support for each unit produced or consumed. These subsidies can take the form of tax credits for producers, direct payments to manufacturers, or rebates for consumers. By reducing costs at the margin, they encourage both greater production and wider adoption of beneficial innovations.
The renewable energy sector provides compelling examples of per-unit subsidies in action. Production tax credits for wind and solar energy have dramatically accelerated deployment by making clean energy cost-competitive with fossil fuels. Similarly, electric vehicle tax credits have helped bridge the price gap between EVs and conventional cars, spurring adoption and enabling manufacturers to achieve economies of scale.
This mechanism is most effective when the innovation already exists but faces cost barriers to widespread adoption, when you want to encourage competition among multiple producers, and when the benefits of the product extend beyond the individual buyer to society at large. Per-unit subsidies allow markets to determine which specific products succeed while ensuring that beneficial innovations can compete on price.