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Pareto improvements induced by climate funding in a strategic adaptation-mitigation framework

Author

Listed:
  • 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

We address the international regime of climate finance, which is emerging in the post-Kyoto architecture, and investigate which type of earmarked funding may lead to Pareto improvements for donor and recipient countries. As funding within the post-Kyoto framework is voluntary, sustained finance in the long term can only be guaranteed if all participating countries benefit. In order to rule out for the Bergstrom paradox, which states that recipient countries may end up in a worse-off situation as a consequence of conditional transfers, we presume a framework in which donor countries commit themselves not to reduce their own mitigation efforts. Regarding three types of earmarked climate funding, which compensate either mitigation, adaptation or damage costs, we find that only funds that are directed at mitigation activities boost the global level of mitigation and may induce Pareto improvements. Transferring our results into the political context of the Green Climate Fund, we recommend to prioritize finance of 'energy generation and access', which aims at enhancing mitigation through low-emission power generation and access.

Suggested Citation

  • Wolfgang Peters & Reimund Schwarze & Anna-Katharina Topp, 2015. "Pareto improvements induced by climate funding in a strategic adaptation-mitigation framework," Discussion Paper Series RECAP15 22, RECAP15, European University Viadrina, Frankfurt (Oder).
  • Handle: RePEc:euv:dpaper:22
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    References listed on IDEAS

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    More about this item

    Keywords

    adaptation; climate change; funding; mitigation; Nash bargaining;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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