An analysis of the behavioral economics of the Green Climate Fund

The Green Climate Fund (GCF), a primary financial mechanism of the Paris Agreement, began its resource mobilizations and funding allocations in late 2015. As of December 2020, it provided funds to 159 projects proposed by the developing country party of the United Nations Framework Convention on Climate Change, and the total approved GCF funding amount was USD 7.3 billion. This chapter provides an overview of the GCF's funding activities with an emphasis on the investment criteria of the Fund. Focusing on the projects that are concerned with energy generation and consumption, we take a closer look at each funded project with its proposed contribution, e.g., the tons of carbon dioxide removed and the number of beneficiaries. The economic analysis consists of three components: 1) Is the funding given to an appropriate public sector?; 2) Is the funding directed to the project which can contribute the most?; 1) Can the funding induce right or perverse incentives of the recipients?