The reason is fundamentally political. Newly industrialized countries have a lot of vital economic activity dependent on internal combustion engines, and cannot afford the luxury of replacing them with alternatives. The West does not have the political will and power to worsen starvation in India in order to lower the CO2 emissions caused by engines manufactured and used in India. It's a lot more feasible to subsidize carbon-neutral fuel generation schemes until it's cost competitive for Indian consumers.
In other words, this kind of scheme can be used to essentially ship CO2 emission reductions from one country to another. It replaces a wicked problem with complex political and social components to a mere application of staggering sums of money and resources.