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

Author

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  • Strand,Jon
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.

Suggested Citation

  • Strand,Jon, 2020. "Transformational Climate Finance : Donors' Willingness to Support Deep and Transformational Greenhouse Gas Emissions Reductions in Lower-Income Countries," Policy Research Working Paper Series 9251, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9251
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    Cited by:

    1. Strand,Jon, 2020. "Supporting Carbon Tax Implementation in Developing Countries through Results-Based Payments for Emissions Reductions," Policy Research Working Paper Series 9443, The World Bank.
    2. Strand,Jon, 2022. "Prospects for Markets for Internationally Transferred Mitigation Outcomes under theParis Agreement," Policy Research Working Paper Series 10045, The World Bank.
    3. Strand,Jon, 2021. "Incentivizing Carbon Taxation in Low-Income Countries : Tax Rebating versus Carbon Crediting," Policy Research Working Paper Series 9698, The World Bank.

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