Mitigation incentives with climate finance and treaty options

Jon Strand

Energy Economics, 2016, vol. 57, issue C, 166-174

Abstract: Future greenhouse gas (GHG) mitigation action of current non-climate-policy (NP) countries is considered to take two alternative forms: 1) “climate finance” payments received in return for future reductions in its GHG emissions below a defined “baseline”; and 2) join a “climate treaty” whereby the required emissions reductions are formally binding. It is assumed that baselines defining climate finance payments, and required emissions reductions under a treaty, depend positively on current emissions. It is then shown that making such future options available reduces current GHG mitigation in NP countries, leading to higher emissions in the short run. This effect is stronger when future climate finance payments are higher; the required relative emissions reductions under a treaty are greater; when commitments under a treaty are longer-lasting; and mitigation targets depend more on current emissions. Such short-run increases in emissions can (sometimes, more than) fully eliminate the effect of the subsequent policy. When climate finance and treaties are both future alternatives, more generous climate finance can make it harder and more expensive to induce the country to join a climate treaty.

Keywords: Climate finance; GHG emissions treaties; GHG mitigation (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:57:y:2016:i:c:p:166-174

DOI: 10.1016/j.eneco.2016.05.003

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