Strategic problems in North–South climate finance: creating joint gains for donors and recipients

Carbon dioxide emissions are growing rapidly in the developing world, and industrialized countries have access to resources that could fund additional mitigation in the global South. In this article, I examine the political economy of North–South climate finance. Building on previous research, I develop a game-theoretic model that includes three key issues in climate finance: incentives for recipient participation, capacity building, and leveraging private finance. The game-theoretic analysis shows how these factors interact and produces several interesting empirical implications. For example, improvements in recipient quality can decrease the donor's capacity building efforts and the probability of successful project implementation.

► Strategic approach to North–South climate finance.
► Emphasis on capacity building and private capital.
► Creating joint gains for donors and recipients.