Cooperation to Reduce Developing Country Emissions
AbstractWithout effective developing country participation in climate mitigation it will be impossible to meet global concentration and climate change targets. However, developing countries are unwilling and, in many cases, unable to bear the mitigation cost alone. They need huge transfers of resources – financial, knowledge, technology, and capability – from industrialised countries. In this paper, we evaluate instruments that can induce such resource transfers, including tradable credits, mitigation funds and results-based agreements. We identify key constraints that affect the efficiency and political potential of different instruments, including two-sided private information leading to adverse selection, moral hazard and challenging negotiations; incomplete contracts leading to under-investment; and high levels of uncertainty about emissions paths and mitigation potential. We consider evidence on the poor performance of current approaches to funding developing country mitigation – primarily purchasing offsets through the Clean Development Mechanism – and explore to what extent other approaches can address problems with offsets. We emphasise the wide spectrum of situations in developing countries and suggest that solutions also need to be differentiated and that no one policy will suffice: some policies will be complements, while others are substitutes. We conclude by identifying research needs and proposing a straw man to broaden the range of “contracting” options considered.
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Bibliographic InfoPaper provided by Motu Economic and Public Policy Research in its series Working Papers with number 12_03.
Length: 39 pages
Date of creation: Mar 2012
Date of revision:
Climate; finance; cap and trade; CDM; clean development mechanism; developing countries; additionality; international agreements; Durban Platform;
Other versions of this item:
- Suzi Kerr & Adam Millard-Ball, 2012. "Cooperation To Reduce Developing Country Emissions," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1250023-1-1.
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-ENE-2012-03-28 (Energy Economics)
- NEP-ENV-2012-03-28 (Environmental Economics)
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