Cooperation to Reduce Developing Country Emissions

39 Pages Posted: 17 Mar 2012

See all articles by Suzi Kerr

Suzi Kerr

Motu Economic and Public Policy Research Trust

Adam Millard-Ball

University of California, Santa Cruz - Environmental Studies

Date Written: March 15, 2012

Abstract

Without effective developing country participation in climate mitigation it will be impossible to meet global concentration and climate change targets. However, developing countries are unwilling and, in many cases, unable to bear the mitigation cost alone. They need huge transfers of resources – financial, knowledge, technology, and capability – from industrialised countries. In this paper, we evaluate instruments that can induce such resource transfers, including tradable credits, mitigation funds and results-based agreements. We identify key constraints that affect the efficiency and political potential of different instruments, including two-sided private information leading to adverse selection, moral hazard and challenging negotiations; incomplete contracts leading to under-investment; and high levels of uncertainty about emissions paths and mitigation potential. We consider evidence on the poor performance of current approaches to funding developing country mitigation – primarily purchasing offsets through the Clean Development Mechanism – and explore to what extent other approaches can address problems with offsets. We emphasise the wide spectrum of situations in developing countries and suggest that solutions also need to be differentiated and that no one policy will suffice: some policies will be complements, while others are substitutes. We conclude by identifying research needs and proposing a straw man to broaden the range of “contracting” options considered.

Keywords: climate, finance, cap and trade, CDM, clean development mechanism, additionality, international agreements, Durban Platform, developing countries

JEL Classification: Q54, A56, Q58, H87

Suggested Citation

Kerr, Suzi and Millard-Ball, Adam, Cooperation to Reduce Developing Country Emissions (March 15, 2012). Available at SSRN: https://ssrn.com/abstract=2024633 or http://dx.doi.org/10.2139/ssrn.2024633

Suzi Kerr (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand
+64 4 383 4250 (Phone)
+64 4 383 4270 (Fax)

Adam Millard-Ball

University of California, Santa Cruz - Environmental Studies ( email )

1156 High Street
Santa Cruz, CA 95064
United States
1-831-459-1838 (Phone)

HOME PAGE: http://envs.ucsc.edu/faculty/singleton.php?&singleton=true&cruz_id=adammb

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