Cooperation to Reduce Developing Country Emissions

Suzi Kerr and Adam Millard-Ball ()
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Adam Millard-Ball: McGill University

No 12_03, Working Papers from Motu Economic and Public Policy Research

Abstract: Without 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.

Keywords: Climate; finance; cap and trade; CDM; clean development mechanism; developing countries; additionality; international agreements; Durban Platform (search for similar items in EconPapers)
JEL-codes: H87 Q54 Q56 Q58 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-03
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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