The climate rent curse: new challenges for burden sharing

Original Paper

Abstract

The literature on the “resource curse” has strongly emphasized that large incomes from resource endowments may have adverse effects on the growth prospects of a country. Conceivably the income generated from emission permit allocations, as suggested in the context of international climate policy, could have a comparable impact. Effects of a “climate rent curse” have so far not been considered in the design of permit allocation schemes. In this study, we first determine when to expect a climate rent curse conceptually by analyzing its potential channels. We then use a numerical model to explore the extent of consequences that a climate rent curse would have on international climate agreements. We show that given the susceptibility to a curse, permit allocation schemes may fail to encourage the participation of recipient countries in an international mitigation effort. We present transfer schemes that enhance cooperation and limit adverse effects on recipients.

Keywords

Climate finance International environmental agreements Resource curse Coalition formation Numerical modeling 

JEL Classification

C61 C72 O11 Q54 Q56 

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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.Mercator Research Institute on Global Commons and Climate ChangeBerlinGermany
  2. 2.Potsdam Institute for Climate Impact ResearchPotsdamGermany
  3. 3.Department ‘Economics of Climate Change’Technische Universität BerlinBerlinGermany

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