Climate policy in developing countries and conditional transfers

This paper analyzes the role international transfers may play in international climate policy in consideration of the policy's ancillary benefits, such as air quality improvements. Ancillary benefits are especially important in many developing countries, while climate protection benefits or primary benefits play a minor role on the political agenda of these countries. In contrast, industrialized countries have a strong interest in combating climate change. These often neglected asymmetries between the developing and industrialized world affect the impacts of transfers.Interestingly, as we will show, the cost differentials between different environmental technologies among countries are the crucial prerequisite for the functioning of a transfer scheme and not the cost differentials in the execution of climate policy. This result has been overlooked by standard pure public good approaches.