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Which mode of funding developing countries' climate policies under the post-Kyoto framework?

Clemens Heuson (), Wolfgang Peters, Reimund Schwarze and Anna-Katharina Topp

No 10/2012, UFZ Discussion Papers from Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS)

Abstract: Funding developing countries' climate policies after Cancun (COP16) has a dual goal: firstly, to support mitigation of developing countries in order to sustain the two-degree pathway of stabilising the global mean temperature; secondly, to empower the vulnerable countries in low-income regions to adapt to and recover from the most adverse impacts of climate change. So far, the political and scientific discussion has mainly concentrated on the appropriate level of funding. Referring to the newly emerging climate finance architecture under the post-Kyoto framework, this paper argues that a stronger focus must be put on the question: which mode of funding to choose? This is for the reason that the currently discussed funding instruments, such as earmarking of industrialised countries' transfer payments to developing countries for reducing loss and damages, mitigation, or adaptation costs, may cause fundamental changes in the countries' strategic behaviour concerning mitigation and adaptation efforts. Moreover, some of the instruments fall short of a minimum requirement for the donors to voluntarily provide means, and thus cannot guarantee sustained funding. We develop our results in a non-cooperative two-country framework in which donor and recipient decide on mitigation in the first, and on adaptation in the second stage of the game.

Keywords: adaptation; climate policy; funding; mitigation; non-cooperative behaviour (search for similar items in EconPapers)
JEL-codes: C72 D61 F35 Q54 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ene and nep-env
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