Climate policy induced investments in developing countries: the implications of investment risks
AbstractInternational climate policy has assigned the leading role in emissions abatement to the industrialized countries while developing countries remain uncommitted to binding emission reduction targets. However, cooperation between the industrialized and the developing world through joint implementation of emission abatement promises substantial economic gains to both parties. In this context, the policy debate on joint implementation has addressed the question of how investment risks to project-based emission crediting between industrialized countries and developing countries affect the magnitude and distribution of such gains. In our quantitative analysis, we find that the incorporation of country-specific investment risks induces rather small changes vis-?-vis a situation where investment risks are neglected. Only if investors go for high safety of returns is there a distinct decline in the overall volume of emission crediting and the associated total economic benefits. While the welfare effects of risk incorporation for industrialized countries are unequivocally negative, the implications across developing countries are ambiguous. Whereas low-risk developing countries attract higher project volumes and benefit from higher effective prices per emission credit compared to a reference scenario without risk, the opposite applies to high-risk countries. Sensitivity analysis with respect to higher risk estimates show that shifts in the comparative advantage of emission abatement against high-risk countries may become dramatic as only very low-cost mitigation projects will be realized, driving down the country?s benefits from emission crediting to the advantage of low-risk developing countries. This result is supported by empirical evidence on regional imbalances of activities implemented jointly under the pilot phase of the Kyoto Protocol. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-68.
Date of creation: 2002
Date of revision:
international climate policy; investment risks;
Other versions of this item:
- Christoph Böhringer & Andreas Löschel, 2008. "Climate Policy-induced Investments in Developing Countries: The Implications of Investment Risks," The World Economy, Wiley Blackwell, vol. 31(3), pages 367-392, 03.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yacine Aït-Sahalia, 2001.
"Variable Selection for Portfolio Choice,"
Journal of Finance,
American Finance Association, vol. 56(4), pages 1297-1351, 08.
- Yacine Ait-Sahalia & Michael W. Brandt, 2001. "Variable Selection for Portfolio Choice," NBER Working Papers 8127, National Bureau of Economic Research, Inc.
- Yacine AÏT-SAHALIA, & Michael W. BRANDT, 2001. "Variable Selection for Portfolio Choice," FAME Research Paper Series rp34, International Center for Financial Asset Management and Engineering.
- Ait-Sahalia, Y. & Brandt, M.W., 2001. "Variable Selection for Portfolio Choice," Papers 34, Manitoba - Department of Economics.
- Stavins, Robert, 2004.
dp-04-54, Resources For the Future.
- Robert N. Stavins, 2007. "Environmental Economics," NBER Working Papers 13574, National Bureau of Economic Research, Inc.
- Stavins, Robert N., 2004. "Environmental Economics," Working paper 276, Regulation2point0.
- Stavins, Robert, 2004. "Environmental Economics," Working Paper Series rwp04-051, Harvard University, John F. Kennedy School of Government.
- Saini, Krishan G. & Bates, Philip S., 1984. "A survey of the quantitative approaches to country risk analysis," Journal of Banking & Finance, Elsevier, vol. 8(2), pages 341-356, June.
- Franz Wirl & Claus Huber & I.O Walker, 1998. "Joint Implementation: Strategic Reactions and Possible Remedies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(2), pages 203-224, September.
- Christoph Böhringer & Thomas Rutherford, 2002. "Carbon Abatement and International Spillovers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 391-417, July.
- Alexander, Gordon J. & Baptista, Alexandre M., 2002. "Economic implications of using a mean-VaR model for portfolio selection: A comparison with mean-variance analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1159-1193, July.
- Böhringer, Christoph & Löschel, Andreas, 2001. "Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol," ZEW Discussion Papers 01-58, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Christoph Böhringer & Thomas F. Rutherford & Marco Springmann, 2013.
"Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework,"
V-354-13, University of Oldenburg, Department of Economics, revised Mar 2013.
- Christoph Böhringer & Thomas F. Rutherford & Marco Springmann, 2013. "Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework," ZenTra Working Papers in Transnational Studies 23 / 2013, ZenTra - Center for Transnational Studies, revised Dec 2013.
- repec:old:wpaper:354 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.