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THE ECONOMIC IMPLICATIONS OF TIED AID AND LOCAL CONTENT REQUIREMENTS FOR CLIMATE FINANCE

María Victoria Román, Iñaki Arto (), Alberto Ansuategi and Ibon Galarraga ()
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María Victoria Román: Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain†Joint Research Centre (JRC), Directorate B, Growth and Innovation, Unit 5, Circular Economy and Industrial Leadership, Edificio EXPO C/Inca Garcilaso 3, 41092 Sevilla, Spain
Iñaki Arto: Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain
Ibon Galarraga: Basque Centre for Climate Change, BC3, Sede Building 1-1, Scientific Campus of the University of the Basque Country, Barrio Sarriena s/n, 48940 Leioa, Spain

Climate Change Economics (CCE), 2020, vol. 11, issue 01, 1-25

Abstract: The Paris Agreement states that from 2020 developed countries will mobilize at least USD 100 billion per year to support climate action in developing countries. The attainment of this objective involves decisions by donor countries about the channel and destination of climate finance disbursements. This paper explores how the spending conditions associated to different disbursement options can affect the opportunities for donors to expand their exports. In particular, using a Multiregional Input-Output Model, it finds that donors have an economic incentive for choosing bilateral channels that enable to tie aid to the detriment of multilateral ones, such as the Green Climate Fund. On the other hand, local content requirements imposed by recipient countries do not substantially affect donors’ exports, since they do not reduce intermediate exports, which represent a relevant share of the total exports generated by the mitigation and adaptation actions analysed.

Keywords: Climate finance; tied aid; local content requirements; spill-over effects; global multiregional input-output (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S2010007820500025

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