Journal Article

Overstraining international climate finance: when conflicts of objectives threaten its success

Buchholz, Wolfgang, Rübbelke, Dirk

2021

Overview

PurposeClimate finance is regularly not only seen as a tool to efficiently combat global warming but also to solve development problems in the recipient countries and to support the attainment of sustainable development goals. Thereby, conflicts between distributive and allocative objectives arise, which threaten the overall performance of such transfer schemes. Given the severity of the climate change problem, this study aims to raise concerns about whether the world can afford climate transfer schemes that do not focus on prevention of (and adaptation to) climate change but might be considered as a vehicle of rent-seeking by many agents.Design/methodology/approachFuture designs of international transfer schemes within the framework of the Paris Agreement are to be based on experience gained from existing mechanisms. Therefore, the authors examine different existing schemes using a graphical technique first proposed by David Pearce and describe the conflicts between allocative and distributional goals that arise.FindingsIn line with the famous Tinbergen rule, the authors argue that other sustainability problems and issues of global fairness should not be primarily addressed by climate finance but should be mainly tackled by other means.Research limitations/implicationsAs there is still ongoing, intense discussion about how the international transfer schemes addressed in Article 6 of the Paris Agreement should be designed, the research will help to sort some of the key arguments.Practical implicationsThere are prominent international documents (like the Paris Agreement and the UN 2030 Agenda for Sustainable Development) seeking to address different goals simultaneously. While synergies between policies is desirable, there are major challenges for policy coordination. Addressing several different goals using fewer policy instruments, for example, will not succeed as the Tinbergen Rule points out.Social implicationsThe integration of co-benefits in the analysis allows for taking into account the social effects of climate policy. As the authors argue, climate finance approaches could become overstrained if policymakers would consider them as tools to also solve local sustainability problems.Originality/valueIn this paper, the authors will not only examine what can be learnt from the clean development mechanism (CDM) for future schemes under Article 6 of the Paris Agreement but also observe the experiences gained from a non-CDM scheme. So the authors pay attention to the Trust Fund of the Global Environment Facility (GEF) which was established with global benefit orientation, i.e. – unlike the CDM – it was not regarded as an additional goal to support local sustainable development. Yet, despite its disregard of local co-benefits, the authors think that it is of particular importance to include the GEF in the analysis, as some important lessons can be learnt from it.

• Publisher: Emerald Group Publishing Limited
• Subject: Agreements / Attainment / Change agents / Clean Development Mechanism / Climate change / Climate effects / Climate finance / Climate policy / Conflicts of interest / Coordination / Costs / Developing countries / Efficiency / Environmental impact / Environmental policy / Finance / Global environment / Global warming / Greenhouse gases / Industrialized nations / Instruments / International finance / International transfer / LDCs / Learning transfer / Objectives / Outdoor air quality / Paris Agreement / Policy making / Rent / Rent-seeking / Sustainability / Sustainable development / Sustainable Development Goals / Trust funds / Trusts / Writers