Publication

Transfer Design and Incentives for Nationally Appropriate Mitigation Actions in Developing Countries

Abstract

Transfers would play a key role in the implementation of Nationally Appropriate Mitigation Actions (NAMAs) in developing countries. In this paper, we analyze the desirable features of such transfers - i.e., individually rational, budget-balanced, anti-incentives for free-riding and misrepresentation. We model NAMAs as a non-cooperative, one shot game. We consider NAMAs under two alternative transfer schemes: a horizontal equity-based transfer and an “optimal” transfer scheme that we call à la Weikard. Our analysis is further refined by the inclusion of the notion of pivotal countries. We find, firstly, that both transfer schemes may allow the implementation of an individually rational and budget-balanced NAMAs portfolio; secondly, that the transfer à la Weikard is more effective in avoiding free-riding. Thirdly, both transfer schemes fail to avoid misrepresentation of costs and benefits from reductions in greenhouse gas emissions. Finally, pivotal countries for NAMAs are the most interested in its implementation even if they are the largest transfer contributors.

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Related concepts (33)
Transfer payment
In macroeconomics and finance, a transfer payment (also called a government transfer or simply fiscal transfer) is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.
Greenhouse gas emissions
Greenhouse gas emissions (abbreviated as GHG emissions) from human activities strengthen the greenhouse effect, contributing to climate change. Carbon dioxide (), from burning fossil fuels such as coal, oil, and natural gas, is one of the most important factors in causing climate change. The largest emitters are China followed by the US, although the United States has higher emissions per capita. The main producers fueling the emissions globally are large oil and gas companies.
Developing country
A developing country is a sovereign state with a less developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreement on which countries fit this category. The terms low and middle-income country (LMIC) and newly emerging economy (NEE) are often used interchangeably but refers only to the economy of the countries.
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