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Which mode of funding developing countries’ climate policies under the post-Kyoto framework?

Author

Listed:
  • Clemens Heuson
  • Wolfgang Peters

    (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))

  • Reimund Schwarze

    (Europa University Viadrina and Helmholtz Centre for Environmental Research (UFZ))

  • Anna-Katharina Topp

    (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))

Abstract

Funding developing countries’ climate policies after Cancun (COP16) has a dual goal: firstly, to support mitigation of developing countries in order to sustain the two-degree pathway of stabilising the global mean temperature; secondly, to empower the vulnerable countries in lowincome regions to adapt to and recover from the most adverse impacts of climate change. So far, the political and scientific discussion has mainly concentrated on the appropriate level of funding. Referring to the newly emerging climate finance architecture under the post-Kyoto framework, this paper argues that a stronger focus must be put on the question: which mode of funding to choose? This is for the reason that the currently discussed funding instruments, such as earmarking of industrialised countries’ transfer payments to developing countries for reducing loss and damages, mitigation, or adaptation costs, may cause fundamental changes in the countries’ strategic behaviour concerning mitigation and adaptation efforts. Moreover, some of the instruments fall short of a minimum requirement for the donors to voluntarily provide means, and thus cannot guarantee sustained funding. We develop our results in a non-cooperative two-country framework in which donor and recipient decide on mitigation in the first, and on adaptation in the second stage of the game.

Suggested Citation

  • 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).
  • Handle: RePEc:euv:dpaper:004
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    References listed on IDEAS

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    1. Ficre Zehaie, 2009. "The Timing and Strategic Role of Self-Protection," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(3), pages 337-350, November.
    2. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2016. "Development Aid and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 429-450, February.
    2. Karen Pittel & Dirk Rübbelke, 2013. "Improving Global Public Goods Supply through Conditional Transfers - The International Adaptation Transfer Riddle," CESifo Working Paper Series 4106, CESifo.
    3. Altaghlibi, Moutaz & Wagener, Florian, 2019. "Unconditional aid and green growth," Journal of Economic Dynamics and Control, Elsevier, vol. 105(C), pages 158-181.
    4. 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.
    5. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2013. "Equity, Development Aid and Climate Finance," GRI Working Papers 123, Grantham Research Institute on Climate Change and the Environment.

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    More about this item

    Keywords

    adaptation; climate policy; funding; mitigation; non-cooperative behaviour;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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