Does it pay to play? How bargaining shapes donor participation in the funding of environmental protection

Multilateral funding for global environmental protection, such as biodiversity conservation, requires donor participation. When are donors willing to participate? We examine a game-theoretic model of multilateral funding for environmental projects in developing countries. Donors must first decide whether to participate in a multilateral institution. They do so in anticipation of a bargaining outcome that depends on their participation decisions. The multilateral institution then bargains with a recipient over the distribution of gains from project implementation. We find that the donors' and the recipient's vulnerability to negative environmental externalities have diverging effects on their participation behavior. As donors' vulnerability to negative externalities increases, their bargaining power decreases and fewer donors participate. But as the recipient's vulnerability increases, more donors participate because their bargaining power grows. These findings can illuminate bargaining over multilateral climate finance and inform the design of international institutions

Funding global public goods: the dark side of multilateralism

The funding of global public goods, such as climate mitigation, presents a complex strategic problem. Potential recipients demand side payments for implementing projects that furnish global public goods, and donors can cooperate to provide the funding. We offer a game-theoretic analysis of this problem. In our model, a recipient demands project funding. Donors can form a multilateral program to jointly fund the project. If no program is formed, bilateral funding remains a possibility. We find that donors rely on multilateralism if their preferences are relatively symmetric and domestic political constraints on funding are lax. In this case, the recipient secures large rents from project implementation. Thus, even donors with strong interests in global public good provision have incentives to oppose institutional arrangements that promote multilateral funding. These incentives have played an important role in multilateral negotiations on climate finance, especially in Cancun (2010) and Durban (2011)

Choosing international organizations: when do states and the World Bank collaborate on environmental projects?

While international cooperation research emphasizes institutional design, states mostly interact with existing organizations. How do states choose organizations for cooperation? We develop a theory of agency choice for development projects, emphasizing the importance of domestic institutions, the scope of cooperation, and the resources of the implementing agency. If states are to cooperate with funding agencies that have abundant resources, such as the World Bank, they must accept more stringent conditions on project implementation. We argue states accept the stringent conditions that resourceful organizations demand if the public goods from project implementation are highly valuable. Empirically, this is the case for democratic states, large projects, and projects that produce national instead of global public goods. We test this theory using data on 2,882 Global Environment Facility (GEF) projects, 1991–2011. The GEF offers an ideal case because various implementing agencies are responsible for the actual projects. States implement projects in collaboration with the World Bank, which has the most expertise and resources among the GEF’s implementing agencies, if their regime type is democracy, the project size is large, and the benefits are primarily national. Qualitative evidence sheds light on causal mechanisms

When international organizations bargain: evidence from the global environment facility

Who gets what in bargaining between states and international organizations (IOs)? Although distributional conflict is unavoidable in international cooperation, previous research provides few empirical insights into the determinants of bargaining outcomes. We test a simple bargaining model of cooperation between states and IOs. We expect that nonegalitarian international organizations, such as the World Bank, secure more gains from bargaining with economically weak than with economically powerful states. For egalitarian international organizations, such as most United Nations (UN) agencies, the state’s economic power should be less important. We test these hypotheses against a novel data set on funding shares for 2,255 projects implemented under the auspices of the Global Environment Facility, from1991 to 2011. The data allow us to directly measure bargaining outcomes. The results highlight the importance of accounting for the interactive effects of international organization and state characteristics

Global patterns of renewable energy innovation, 1990–2009

Cost-effective approaches to mitigating climate change depend on advances in clean energy technologies, such as solar and wind power. Given increased technology innovation in developing countries, led by China, we focus our attention on global patterns of renewable energy innovation. Utilizing highly valuable international patents as our indicator of innovation, we examine the economic and political determinants of energy innovation in 74 countries across the world, 1990–2009. We find that high oil prices and domestic renewable electricity generation capacity both increase innovation. There is no effect for corruption, but our findings suggest that democratic institutions may contribute to innovation. The main implication of our work for policymakers is that increasing renewable electricity capacity in developing countries could significantly contribute to global innovation in renewable energy

Leveraging private capital for climate mitigation: evidence from the clean development mechanism

To mitigate climate change, states must make significant investments into energy and other sectors. To solve this problem, scholars emphasize the importance of leveraging private capital. If states create institutional mechanisms that promote private investment, they can reduce the fiscal cost of carbon abatement. We examine the ability of different international institutional designs to leverage private capital in the context of the Kyoto Protocol's Clean Development Mechanism (CDM). Empirically, we analyze private capital investment in 3749 climate mitigation projects under the CDM, 2003–2011. Since the CDM allows both bilateral and unilateral implementation, we can compare the two modes of contracting within one context. Our model analyzes equilibrium private investment in climate mitigation. When the cost of mitigation is high, unilateral project implementation in one host country, without foreign collaboration, draws more investment than bilateral contracting, whereby foreign investors participate in the project

Laissez faire and the Clean Development Mechanism: determinants of project implementation in Indian states, 2003–2011

India is the world’s second-largest host of projects implemented under the Kyoto Protocol’s Clean Development Mechanism (CDM). There is, however, considerable variation in the distribution of CDM projects implemented across different Indian states. While a large body of the literature examines cross-national variation in the implementation of CDM projects, few studies have analyzed the determinants of sub-national variation in different national contexts. We theorize that given India’s laissez-faire approach to CDM project implementation the availability of profitable climate mitigation opportunities and the political stability are two factors that promote CDM project implementation. Using sub-national data collected from a variety of sources, we conduct systematic analysis that provides empirical support for a set of hypotheses regarding the effects of these variables on project implementation. First, we find that states with a lot of public electricity-generating capacity and industrial capital implement more CDM projects than other states. Additionally, project developers rarely propose CDM projects during election years as a result of high levels of political uncertainty associated with those years. Our findings show that India’s liberal approach prevents the central government from using the CDM to promote sustainable development in less developed states. In India and other host countries where coordinated national policies to maximize their gains from CDM projects is absent, there is a paucity of project implementation in states that need it the most

Explaining differences in sub-national patterns of clean technology transfer to China and India

The Kyoto Protocol’s Clean Development Mechanism (CDM) has the capacity to incentivize the international transfer of environmentally sound technologies. Given that both countries are expected to have similar incentives when managing the distribution of technology transfer within the country, why do sub-national patterns in the allocation of projects with technology transfer differ? Using comparable political–economic data compiled for China and India, we offer an explanation for these differences. In China, where the government regards the CDM as a tool for achieving sustainable development, technology transfer is concentrated in provinces that need it the most and that are most conducive to receiving transfers (i.e., economically less developed, yet heavily industrialized provinces). In India, where the government takes on a “laissez-faire” approach to the CDM, neither level of economic development nor that of industrialization affects clean technology transfer. In this regard, although the incentives are similar, the capacity to pursue them is not comparable. We test these hypotheses using data on CDM technology transfer across Chinese provinces and Indian states during the 6-year period from 2004 to 2010

Understanding environmental policy preferences: new evidence from Brazil

We examine the relationship between socio-economic factors and public opinion on environmental policies in Brazil, drawing on a survey conducted in June 2012. There are few systematic studies of the determinants of environmental preferences in emerging economies, and Brazil is a particularly interesting case because of its democratic political system, rapid economic growth, and importance for the global environment. In general, we find that the Brazilian public is highly supportive of environmental protection. To explain variation in environmental preferences, we focus on the effects of income and education. Many previous studies suggest that both should have positive effects, but the empirical evidence is mixed. Indeed, we find that income has no effect on environmental preferences. However, education is a strong predictor of environmental preferences. While college education is not necessary for environmental awareness, there is a large difference between Brazilians with primary and secondary education. For policy, the findings imply that investment in secondary education can raise environmental awareness, regardless of income levels

Information and energy policy preferences: a survey experiment on public opinion about electricity pricing reform in rural India

A common argument for the lack of economic reform in developing countries is popular opposition. If current economic policies are dysfunctional, could information about alternatives sway the voters? We examine if a simple argument emphasizing the need to increase electricity prices for improved supply can change public opinion in the case of India’s power sector reforms. The evidence comes from a survey experiment in rural Uttar Pradesh, which is both India’s largest state and has one of the lowest levels of household electrification. As expected, people respond to information about the relationship between electricity pricing, capacity investment, and reliability of supply by increasing their support for higher prices. However, no corresponding increase is observed for privatization of electricity generation. For external validity, we analyze an existing national survey on electricity privatization conducted in 2004/2005, finding patterns that support our argumen