Assessing costs and benefits of current climate negotiations

Last December 2015, during the twenty-first Conference of the Parties (COP 21) held in Paris, the Parties under the UNFCCC succeeded in reaching the so called Paris Agreement. Given the voluntarily approach adopted, the assessment of the vulnerability of a country to climate change is essential to define action strategies both at national and international levels. Moreover, an active role of Non-Annex I countries in mitigation actions is essential to limit the increase in temperature at 2°C. Thus, the main challenge for the forthcoming years is to persuade developing countries to mitigate. However, given the heterogeneity of countries and their relative differences in costs and benefits related to climate actions, there is need to set out compensating schemes for the most vulnerable countries in order to reach a successful agreement. So far, the main compensating measure under the current climate regime is the Green Climate Fund (GCF). According to this negotiation framework, this paper addresses the debate about the GCF, especially regarding the resource allocation mechanisms that are still under discussion. A climate-economic CGE model is developed with the purpose of taking into account a monetary evaluation of climate change damage costs incurred by all countries as well as a mechanism describing the operationalization of the GCF. The model is used to investigate the role of climate change damages and GCF in influencing the behavior of countries in climate negotiations In particular, the purpose is twofold: i) to investigate costs and benefits of ongoing climate negotiations, with particular emphasis on developing countries, and ii) to examine the role of the GCF as a compensating measure in fostering the realization of a more efficient climate agreement.