Warming or Cooling on World Bank Climate Finance: What Drives Country Demand?

Clemence Landers, Karen Mathiasen and Samuel Matthews
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Clemence Landers: Center for Global Development
Karen Mathiasen: Center for Global Development
Samuel Matthews: Center for Global Development

No 315, Policy Papers from Center for Global Development

Abstract: The climate agenda has been a dominant feature of World Bank reform efforts, with President Banga aiming to both mobilize new resources and increase the proportion of total funding for climate-related projects. The stakes are high: greenhouse gas (GHG) emissions in many borrowing countries are elevated and rising, dimming prospects for meeting the 2030 Paris Agreement target to limit warming to a 1.5 degrees Celsius increase. To date, stakeholders have focused on how to mobilize new funding for climate mitigation reflecting an emphasis on the supply side (e.g., financing) of the agenda. But there has been little analysis on the demand side (or project pipeline). The assumption is that more money will generate more demand. But this does not necessarily follow. In this paper, we discuss major factors that will influence demand for climate mitigation projects, especially from the largest emitters of greenhouse gases (e.g., China, India, Brazil, Indonesia, Mexico). Our assessment is that factors like World Bank borrowing costs and access to alternative sources of finance will likely limit demand absent financial incentives, which could prove costly and difficult to resource at the scale needed to have meaningful impact. We also see a risk that these incentives could be used inefficiently absent a rigorous analysis to identify where they could have the most impact and a robust framework for assessing results.

Pages: 15 pages
Date: 2023-12-11
New Economics Papers: this item is included in nep-ban, nep-ene, nep-env, nep-inv, nep-ppm and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:cgd:ppaper:315

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