Transformational Climate Finance: Donors' Willingness to Support Deep and Transformational Greenhouse Gas Emissions Reductions in Lower-Income Countries

Jon Strand

No 9251, Policy Research Working Paper Series from The World Bank

Abstract: This paper uses simple analytical models to study high-income donor countries' willingness to pay to supply mitigation finance to low-income countries; how this depends on modality for finance supply; and how it changes as the global greenhouse gas mitigation agenda moves forward. The paper focuses on two modalities: transformational project-based mitigation finance (transitioning from fossil to non-fossil energy use at scale), and transformational policy-based mitigation finance support (implementing comprehensive carbon taxation). These modalities are compared with conventional finance for which donors have lower willingness to pay. High-income countries' willingness to pay is higher when mitigation is combined with carbon taxation; private-sector finance is also more highly incentivized. Reaching the transformational mitigation finance stage can be challenging, as it may require large provision of mitigation finance with negative net returns to high-income countries. Willingness to pay will be higher when high-income countries collaborate in the provision of mitigation finance. The findings show that more effective collaboration can be sustained when it is enforced by an international financial institution that collects and spends the provided mitigation finance to induce efficient mitigation activity in low-income countries and collaboration among donors is enforced by simple tit-for-tat reaction strategies.

Keywords: Climate Change Mitigation and Green House Gases; Energy Demand; Energy and Mining; Energy and Environment; Global Environment; Science of Climate Change; Climate Change and Health; Climate Change and Environment; Climate Change Economics (search for similar items in EconPapers)
Date: 2020-05-18
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://documents.worldbank.org/curated/en/54144158 ... Income-Countries.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9251

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().