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Raising climate finance to support developing country action: some economic considerations

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  • Alex Bowen
Abstract
This article explores the principles that should guide efforts to raise finance for climate action in developing countries. The main conclusions are that, first, there is an important role for private finance, which would be facilitated by having pervasive and broadly uniform emissions pricing around the world. Second, public finance is warranted by a range of market - and policy - failures associated with climate change and its mitigation. Third, raising tax revenues may be preferable to borrowing as a means of raising public finance, although the economics is not clear-cut. Public finance theory advocates taxing 'bads', a number of which have escaped the tax base so far. However, it discourages hypothecation of specific revenue streams to particular uses. Fourth, how much could or should be raised by the many specific proposals for finance for climate action in developing countries is often uncertain. So is how multiple schemes would interact. Several schemes could depress carbon prices. Earmarking is often assumed to be justified despite arguments to the contrary. Fifth, two sets of proposals do particularly well when judged against this analysis: (i) expanding the scale and scope of the Clean Development Mechanism (CDM) and (ii) expanding the use of international financial institutions' balance sheets.

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  • Alex Bowen, 2011. "Raising climate finance to support developing country action: some economic considerations," Climate Policy, Taylor & Francis Journals, vol. 11(3), pages 1020-1036, May.
    • Handle: RePEc:taf:tcpoxx:v:11:y:2011:i:3:p:1020-1036
    DOI: 10.1080/14693062.2011.582388
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    References listed on IDEAS

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    Cited by:

    1. Kempa, Karol & Moslener, Ulf, 2015. "Climate policy with the chequebook: Economic considerations on climate investment support," Frankfurt School - Working Paper Series 219, Frankfurt School of Finance and Management.
    2. Pickering, Jonathan & Skovgaard, Jakob & Kim, Soyeun & Roberts, J. Timmons & Rossati, David & Stadelmann, Martin & Reich, Hendrikje, 2015. "Acting on Climate Finance Pledges: Inter-Agency Dynamics and Relationships with Aid in Contributor States," World Development, Elsevier, vol. 68(C), pages 149-162.
    3. Joyeeta Gupta & Arthur Rempel & Hebe Verrest, 2020. "Access and allocation: the role of large shareholders and investors in leaving fossil fuels underground," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 20(2), pages 303-322, June.
    4. Oberlack, Christoph & Eisenack, Klaus, 2012. "Overcoming barriers to urban adaptation through international cooperation? Modes and design properties under the UNFCCC," The Constitutional Economics Network Working Papers 03-2012, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    5. Alex Bowen & Emanuele Campiglio & Sara Herreras Martinez, 2017. "An ‘equal effort’ approach to assessing the North–South climate finance gap," Climate Policy, Taylor & Francis Journals, vol. 17(2), pages 231-245, February.
    6. Michael Jakob & Jérôme Hilaire, 2015. "Using importers’ windfall savings from oil subsidy reform to enhance international cooperation on climate policies," Climatic Change, Springer, vol. 131(4), pages 465-472, August.
    7. Kamleshan Pillay & Jorge E. Viñuales, 2016. "“Monetary” rules for a linked system of offset credits," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(6), pages 933-951, December.
    8. Luis Abadie & Ibon Galarraga & Dirk Rübbelke, 2013. "An analysis of the causes of the mitigation bias in international climate finance," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 18(7), pages 943-955, October.
    9. Oberlack, Christoph & Neumärker, Bernhard, 2011. "Economics, institutions and adaptation to climate change," The Constitutional Economics Network Working Papers 04-2011, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    10. Dina Joseph & M Vetrivel, 2023. "Climate Change and Sustainability: The Role of Finance in Driving the Transition to a Greener Future," Shanlax International Journal of Management, Shanlax Journals, vol. 11(1), pages 51-53, July.
    11. Jonathan Pickering & Paul Mitchell, 2017. "What drives national support for multilateral climate finance? International and domestic influences on Australia’s shifting stance," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(1), pages 107-125, February.
    12. Tanya O'Garra & Susana Mourato, 2016. "Are we willing to give what it takes? Willingness to pay for climate change adaptation in developing countries," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 5(3), pages 249-264, September.
    13. Sam Fankhauser, 2017. "Adaptation to Climate Change," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 209-230, October.
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    15. Christian Haas & Karol Kempa, 2023. "Low-Carbon Investment and Credit Rationing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(1), pages 109-145, October.

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