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The Economic Implications Of Tied Aid And Local Content Requirements For Climate Finance

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  • MARÍA VICTORIA ROMÁN

    (Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain†Joint Research Centre (JRC), Directorate B, Growth and Innovation, Unit 5, Circular Economy and Industrial Leadership, Edificio EXPO C/Inca Garcilaso 3, 41092 Sevilla, Spain)

  • IÑAKI ARTO

    (Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain)

  • ALBERTO ANSUATEGI

    (#x2021;Foundations of Economic Analysis Department, University of the Basque Country, Avda. Lehendakari Agirre 83, 48015 Bilbao, Spain)

  • IBON GALARRAGA

    (Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain)

Abstract

The Paris Agreement states that from 2020 developed countries will mobilize at least USD 100 billion per year to support climate action in developing countries. The attainment of this objective involves decisions by donor countries about the channel and destination of climate finance disbursements. This paper explores how the spending conditions associated to different disbursement options can affect the opportunities for donors to expand their exports. In particular, using a Multiregional Input-Output Model, it finds that donors have an economic incentive for choosing bilateral channels that enable to tie aid to the detriment of multilateral ones, such as the Green Climate Fund. On the other hand, local content requirements imposed by recipient countries do not substantially affect donors’ exports, since they do not reduce intermediate exports, which represent a relevant share of the total exports generated by the mitigation and adaptation actions analysed.

Suggested Citation

  • María Victoria Román & Iñaki Arto & Alberto Ansuategi & Ibon Galarraga, 2020. "The Economic Implications Of Tied Aid And Local Content Requirements For Climate Finance," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-25, February.
    • Handle: RePEc:wsi:ccexxx:v:11:y:2020:i:01:n:s2010007820500025
    DOI: 10.1142/S2010007820500025
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