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International transfers in climate policy channeled from the industrialized to the developing
world either support the mitigation of climate change or the adaptation to global warming.
From an allocative efficiency point of view, transfers supporting mitigation tend to be Pareto-improving
whereas this is not very likely in the case of adaptation support. We illustrate this
by regarding transfer schemes currently applied under the UN Framework Convention on
Climate Change (UNFCCC) and the Kyoto framework.
However, if we enrich the analysis by integrating distributional aspects, we find that
international adaptation funding may help both developing and developed world. Interestingly
this is not due to altruistic incentives, but due to follow-up effects on international
negotiations on climate change mitigation. We argue that the lack of fairness perceived by
developing countries in the international climate policy arena can be reduced by the support
of adaptation in these countries. As we show – taking into account different fairness concepts
– this might raise the prospects of success in international negotiations on climate change.
Yet, we find that the influence of transfers may induce different fairness effects on climate
change mitigation negotiations to run counter.
We discuss whether current transfer schemes under the UNFCCC and the Kyoto framework
adequately serve the distributive and allocative objectives pursued in international climate
policy.