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)

Democratization, New Leaders, and the Need for Economic Reform: Can Preferential Trading Agreements Help?

Can international institutions help leaders commit economic reform? In this article, we examine how leaders use preferential trading agreements with major powers (European Union and the United States) to promote liberal economic policies. We argue that under democratization, new leaders benefit the most from credible commitment. Using original data on treaty negotiations, our empirical analysis shows that under democratization, leader change greatly increases the probability that the government of a developing country begins treaty negotiations. We also demonstrate that preferential trading agreements are accompanied by liberalization in different sectors of the economy, and this effect is most pronounced if it follows a leader change. These findings support the notion that international institutions enable credible commitment to economic reform

Easing the Pain of Adjustment? Preferential Trading Agreements, Foreign Aid, and Credible Commitment to Economic Reform

In this article, we propose that wealthy donors give foreign aid to developing countries to facilitate political adjustment, such as compensation for losers and side payments to influential elite constituencies, towards mutually profitable economic reform. Only democratic developing countries can credibly commit to using fungible revenue in ways that benefit the donor, so the adjustment effect only applies to democracies. A quantitative test against data on preferential trading agreements lends strong support to the theory. Strikingly, fully democratic developing countries that form a preferential trading agreement obtain a threefold increase in foreign aid in the short run. Additional tests show that this increase is not driven by macroeconomic difficulties and that the beneficial effect on foreign aid is temporary. Both findings are consistent with the theory. An important implication of these results is that if foreign aid facilitates economic reform through preferential trading agreements, previous research could have underestimated the benefits thereof

How solar power could transform rural India

More than one billion people remain without electricity today, many of them in remote rural communities. Research on off-grid solar power in rural India suggests it may hold the solutio

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

United States non-cooperation and the Paris agreement

In June 2017, the Trump administration decided to withdraw the US from the Paris Agreement, a landmark climate agreement adopted in 2015 by 195 nations. The exit of the US has not just raised concern that the US will miss its domestic emission reduction targets, but also that other parties to the Paris Agreement might backtrack on their initial pledges regarding emission reductions or financial contributions. Here we assess the magnitude of the threat that US non-cooperation poses to the Paris Agreement from an international relations perspective. We argue that US non-cooperation does not fundamentally alter US emissions, which are unlikely to rise even in the absence of new federal climate policies. Nor does it undermine nationally determined contributions under pledge and review, as the Paris Agreement has introduced a new logic of domestically driven climate policies and the cost of low-carbon technologies keeps falling. However, US non-participation in raising climate finance could raise high barriers to global climate cooperation in the future. Political strategies to mitigate these threats include direct engagement by climate leaders such as the European Union with key emerging economies, notably China and India, and domestic climate policies that furnish benefits to traditional opponents of ambitious climate policy

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

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

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