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On the scope of climate finance to facilitate international agreement on climate change

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  • Kotchen, Matthew J.

Abstract

Can the promise of climate finance help secure an international climate agreement that makes all parties better off? This paper shows that incentive compatible, financial transfers are always feasible and can facilitate a globally efficient agreement if they are bounded by the net benefits of avoided climate damages and forgone economic growth. In contrast, climate finance will generally come up short when based on conventional arguments that seek compensation for foregone economic growth, climate damages (i.e., “loss and damage”), or both. Empirical evidence is provided with a calibrated simulation using the C-DICE integrated assessment model.

Suggested Citation

  • Kotchen, Matthew J., 2020. "On the scope of climate finance to facilitate international agreement on climate change," Economics Letters, Elsevier, vol. 190(C).
    • Handle: RePEc:eee:ecolet:v:190:y:2020:i:c:s0165176520300720
    DOI: 10.1016/j.econlet.2020.109070
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    References listed on IDEAS

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    1. William Nordhaus, 2014. "Estimates of the Social Cost of Carbon: Concepts and Results from the DICE-2013R Model and Alternative Approaches," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 000.
    2. Michael Hoel & Kerstin Schneider, 1997. "Incentives to participate in an international environmental agreement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(2), pages 153-170, March.
    3. Scott Barrett & Robert Stavins, 2003. "Increasing Participation and Compliance in International Climate Change Agreements," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 3(4), pages 349-376, December.
    4. Matthew J. Kotchen, 2018. "Which Social Cost of Carbon? A Theoretical Perspective," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(3), pages 673-694.
    5. William Nordhaus, 2015. "Climate Clubs: Overcoming Free-Riding in International Climate Policy," American Economic Review, American Economic Association, vol. 105(4), pages 1339-1370, April.
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    Cited by:

    1. Nadia Basty & Dorsaf Azouz Ghachem, 2022. "A Sectoral Approach of Adaptation Finance in Developing Countries: Does Climate Justice Apply?," Sustainability, MDPI, vol. 14(17), pages 1-18, August.

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    More about this item

    Keywords

    Climate change; Financial transfers; International agreements;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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