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

Wolfgang Peters (), Reimund Schwarze and Anna-Katharina Topp
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Wolfgang Peters: Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)

No 22, Discussion Paper Series RECAP15 from RECAP15, 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.

Keywords: adaptation; climate change; funding; mitigation; Nash bargaining (search for similar items in EconPapers)
JEL-codes: Q54 H41 H87 C72 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2015-11
New Economics Papers: this item is included in nep-ene and nep-env
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Chapter: Pareto Improvements Induced by Climate Funding in a Strategic Adaptation-Mitigation Framework (2017) Downloads
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