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Why do some economies benefit more from climate finance than others? A case study on North-to-South financial flows

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  • María Victoria Román
  • Iñaki Arto
  • Alberto Ansuategi

Abstract

The Copenhagen and Paris Agreements, in which developed countries committed to mobilise USD 100 billion a year by 2020, indicate that climate finance will continue to grow. Even though economic development is not the aim of climate finance, climate-related disbursements will generate an economic impact on recipient countries’ economies. This impact will also reach other countries (including climate finance donors) through induced international trade. In this paper, we apply a structural decomposition analysis to study why the economic impact of climate finance varies between countries. We focus on specific climate actions and quantify the contribution of four drivers: value-added intensity, domestic multiplier, foreign multiplier and trade structure. The paper helps identifying the factors with the greatest potential to enhance the economic gains of climate finance in each country. This information can be useful for policy-makers trying to design national strategies that exploit the synergies between climate action and economic development.

Suggested Citation

  • María Victoria Román & Iñaki Arto & Alberto Ansuategi, 2018. "Why do some economies benefit more from climate finance than others? A case study on North-to-South financial flows," Economic Systems Research, Taylor & Francis Journals, vol. 30(1), pages 37-60, January.
    • Handle: RePEc:taf:ecsysr:v:30:y:2018:i:1:p:37-60
    DOI: 10.1080/09535314.2017.1334629
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    1. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    2. Jonathan Pickering & Frank Jotzo & Peter J. Wood, 2015. "Splitting the Difference: Can Limited Coordination Achieve a Fair Distribution of the Global Climate Financing Effort?," CCEP Working Papers 1504, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    3. Clemens Heuson & Wolfgang Peters & Reimund Schwarze & Anna-Katharina Topp, 2012. "Which mode of funding developing countries’ climate policies under the post-Kyoto framework?," Discussion Paper Series RECAP15 004, RECAP15, European University Viadrina, Frankfurt (Oder).
    4. Meng, Bo & Chao, Qu, 2007. "Application of the Input-Output Decomposition Technique to China's Regional Economies," IDE Discussion Papers 102, Institute of Developing Economies, Japan External Trade Organization(JETRO).
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