Transformational Climate Finance : Donors' Willingness to Support Deep and Transformational Greenhouse Gas Emissions Reductions in Lower-Income Countries
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 greenhous...
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/541441589828863997/Transformational-Climate-Finance-Donors-Willingness-to-Support-Deep-and-Transformational-Greenhouse-Gas-Emissions-Reductions-in-Lower-Income-Countries http://hdl.handle.net/10986/33798 |
| Summary: | 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. |
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