Opinion

From climate finance toward

sustainable development finance
Jan Christoph Steckel,1,2,3* Michael Jakob,1 Christian Flachsland,1,4 Ulrike Kornek,1
Kai Lessmann3 and Ottmar Edenhofer1,2,3
Edited by Stéphane Hallegatte, Domain Editor, and Mike Hulme, Editor-in-Chief

Decarbonizing the global energy system requires large-scale investment flows, with a
central role for international climate finance to mobilize private funds. The willingness
to provide international finance in accordance with common but differentiated
responsibilities was acknowledged by the broad endorsement of the Paris Agreement,
and the Green Climate Funds in particular. The international community aims to
mobilize at least USD 100 billion per year for mitigation and adaption in developing
countries. In this article, we argue that too little attention has been paid on the spend-
ing side of climate finance, both in the political as well as the academic debate. To this
end, we review the challenges encountered in project-based approaches of allocating
climate finance in the past. In contrast to project-based finance, we find many advan-
tages to spending climate finance in support of price-based national policies. First, the
support for international climate cooperation is improved when efforts of successively
rising domestic carbon pricing levels are compensated. Second, carbon pricing sets
incentives for least-cost mitigation. Third, investing domestic revenues from emission
pricing schemes could advance a country’s individual development goals and ensure
the recipient’s ‘ownership’ of climate policies. We conclude that by reconciling the
global goal of cost-efficient mitigation with national policy priorities, climate finance
for carbon pricing could become a central pillar of sustainable development and pro-
mote international cooperation to achieve the climate targets laid down in the Paris
Agreement. © 2016 Wiley Periodicals, Inc.
How to cite this article:
WIREs Clim Change 2016. doi: 10.1002/wcc.437

INTRODUCTION emissions considerably above the world average,

significant emission reductions in developing and
E ven though industrialized countries are responsi-
ble for the lion’s share of historical greenhouse
gas (GHG) emissions and display per-capita
emerging economies are necessary to reach ambi-
tious climate stabilization goals. 1 However, grow-
ing energy needs in poor but fast-growing countries
are increasingly served by emission-intensive energy
*Correspondence to: steckel@mcc-berlin.net carriers, in particular coal.2 Taking into account the
1
Mercator Research Institute on Global Commons and Climate recent drop in coal prices, this trend appears likely
Change, Berlin, Germany
2
to continue, at least without targeted policy inter-
Technische Universtät Berlin, Economics of Climate Change, Ber-
lin, Germany
vention. This increases global GHG emissions and
3
Potsdam Institute for Climate Change Impact Research, Research
locks in carbon-intensive infrastructures for the next
Domain III (Sustainable Solutions), Potsdam, Germany decades.3–5
4
Hertie School of Governance, Climate and Energy Governance, Shifting poor countries’ developing paths
Berlin, Germany toward low-carbon growth requires sizable addi-
Conflict of interest: The authors have declared no conflicts of inter- tional investments in renewable energies and energy
est for this article. efficiency. For instance, McCollum et al.6 estimate

© 2016 Wiley Periodicals, Inc.

 Opinion
that in order to achieve the 2 C target, additional
clean energy investments of about US$ 800 billion
per year will be needed globally over the period
2010–2050, most of it in developing countries.
Acknowledging the ‘common but differentiated
responsibilities’ (Ref 7, Art. 2) and addressing finan-
cial constraints often faced by developing countries,8
the recent climate negotiations in Paris reinforced the
goal to mobilize US$ 100 billion of climate finance—
that is, North–south financial flows to support cli-
mate measures—annually, for example, via the Green
Climate Fund (GCF).7 In 2014, OECD9 has esti-
mated climate finance flows to be in the range of
roughly US$ 60 billion.
Focusing on the mitigation challenge in
developing countries, this article argues that aca-
demic research should focus on better understand-
ing the spending side of climate finance, which has
been severely underrepresented in the literature
compared to the revenue raising side. To this end,
we review well-known problems of allocating cli-
mate finance and identify advantages of using cli-
mate finance in support of price-based national
policies. In addition to ensuring recipients’ ‘owner-
ship’ of climate policies, domestic carbon pricing
could become a pillar of sustainable development
by reconciling the global goal of cost-efficient miti-
gation with local priorities, thereby satisfying mul-
tiple principles defined in the Paris Agreement (7, Art.
2, 9.4, 11.2).
PAST FOCUS OF CLIMATE FINANCE
A large part of the academic literature on climate
finance has been concerned with the question of pro-
viding an accurate account of existing climate finance
flows and discussing options to raise additional
finance. Estimates of private climate finance, which
will supposedly make up a significant share of the US
$ 100 billion commitment, suffer from poor data
quality and are highly sensitive to the way private cli-
mate finance is defined.10 Public climate finance for
developing countries (mainly provided by bilateral
and multilateral institutions, and mainly targeted at
mitigation) amounted between US$ 35 and 49 billion
per year in 2011 and 2012.11 A substantial part of
these funds however resulted from relabeling existing
activities rather than new commitments.12 Bowen13
proposes a number of options to generate public rev-
enues, including international auctioning of emission
quotas, levies on marine and aviation bunker fuel,
and financial transactions taxes. Pickering et al.14
© 2016 Wiley Periodicals, Inc.
wires.wiley.com/climatechange
assess countries’ contributions to international cli-
mate finance under different equity principles.
Relatively little attention has been paid to the
spending side. Notable exceptions draw lessons from
existing funds for project-based financing15 or dis-
cuss the distribution of climate finance funds at the
country level.16,a
Another strand of climate finance literature has
analyzed past experiences with the project-based
clean development mechanism (CDM) and joint
implementation (JI). It highlights the difficulties of
establishing project-level baselines (i.e., determining
whether the projects in question would have been
done independently) and ensuring additionality.24,25
Small(er)-scale projects in particular facing higher
transaction costs usually have not profited from
project-based approaches.26 Moreover, leakage and
doubts with regard to the permanence of achieved
emission reductions are issues hampering the effec-
tiveness of project-based schemes. In addition, while
the CDM was also designed to make contributions to
sustainable socioeconomic development and technol-
ogy transfer, many CDM projects have failed to
make significant progress toward these goals.27
Many of these criticisms also apply to forest-based
crediting schemes, such as REDD.
NOVEL OPTIONS FOR CLIMATE
FINANCE
The GCF board has identified a list of eight ‘key
result areas’ toward which spending activities should
be targeted.28 They each take a different focus,
including cities, agriculture, forestry and energy, and
cover considerable mitigation potential as well as
adaptation needs.1,29 It remains unclear how to iden-
tify the most cost-efficient activities. Also, the pro-
posed actions share the common implementation
issues of project-based approaches described before.
In light of these shortcomings, several authors
have argued for a broad and coherent strategy.30,31
In particular, climate finance is frequently regarded
as an opportunity not only to tackle climate-related
aspects, but also to address sustainable development
in a broader sense. That is, climate finance is seen as
a tool to achieve transformative change to redirect
development patterns away from a lock-in of carbon-
intensive energy infrastructures toward long-term
‘green growth.’32
However, efforts to achieve wide-ranging
changes in economic structures run the risk of being
perceived as interfering with other development
objectives, such as poverty reduction.8 Hence, it is of
 WIREs Climate Change
prime importance to confer ‘ownership’ of climate
policies to recipient countries.32 Climate measures in
developing countries are much more likely to succeed
if they not only aim at reducing emissions, but also
address additional domestic development objectives,
such as ambient air quality, energy security, energy
access, or public transportation.33
Against this background, the task is how to
invest a specific amount of the available climate
finance budget so as to maximize beneficial results in
climate- and other goal dimensions, where specifying
a generalized rule for balancing the prioritization of
different goals is difficult. One straightforward
approach for prioritizing mitigation measures would
select the most cost-effective project on the basis of
country-specific marginal abatement cost curves
based on technoeconomic assessments.34 Another
approach could impose standards on projects that
receive funds, for example, in terms of technologies or
emission intensity. Climate finance could then either
be allocated to firms that comply with these stan-
dards, or handed down via the government budget
(e.g., in the form of tax rebates). Alternatively, the
burden of assessment may be shifted to the project
developers. Within a public procurement procedure,
project developers would compete for the available
funds and propose how much emission reductions
and potentially additional objectives they can achieve
at which costs. Funds would then be allocated to
those projects that credibly promise to achieve emis-
sion reductions in the most cost-efficient manner.31
Such an improved project-based approach could
enhance mitigation efforts but would only set incen-
tives for funded projects. For achieving more struc-
tural climate mitigation impact, the fund’s resources
may be used to support the implementation of broader
national-level climate policies. In the following, we
consider nonprice and price-based national policies.
Options for structural nonprice policies include
standards such as energy efficiency targets or technol-
ogy specific policies such as renewable or emission
intensity targets. Ownership of funded activities could
be ensured by leaving the choice of the preferred
domestic policies to address domestic needs with the
national governments. Climate finance institutions
could, first, help to establish the required administrative
capacity and platforms to exchange information on
such policies and showcase national experiences. Work-
shops and round tables to this end have emerged at the
United Nations Framework Convention on Climate
Change (UNFCCC) level.35 Second, climate finance
could cover the macroeconomic costs of climate policies
by either directly supporting the policy program or the
public budget. Contributions could also be in kind, for
© 2016 Wiley Periodicals, Inc.
From climate finance toward sustainable development finance
example, transferring mitigation technologies, making
patents publicly available, or offering prizes for the
adoption of established technologies to specific regional
requirements.36 Third, climate finance could assist in
devising and funding compensation schemes that reim-
burse political losers and prevent adverse effects for the
poorest segments of society.
To prioritize, diverse national nonprice climate
policies require information that is often unavailable
and susceptible to manipulation by powerful interest
groups, which may arguably lead to the omission of
cost-effective mitigation options. On the other hand,
standards for new equipment may be more politically
viable as they do not impose new costs on existing
infrastructure.37 By contrast, a nation-wide GHG
price signal provides clear incentives to undertake
emission reductions in a cost-efficient manner. In
principle, emissions will only be generated in activ-
ities where their added value exceeds the emission
price and emissions will be mitigated in areas where
their added value is lower, irrespective of which kind
of project is undertaken. Carbon pricing in particular
increases the costs of coal and improves the competi-
tive advantage of competing technologies such as effi-
ciency measures and renewable energy.
Complementary instruments may be needed to
address additional market failures. Political economy
or transaction cost barriers may even require a tempo-
rary substitution of carbon pricing with standards and
other instruments such as subsidies for low-carbon
energy production, for example, feed-in tariffs.38–40
Sunset clauses for subsidies will however be required
to avoid locking-in a subsidy-based policy mix which
may hamper the introduction of carbon pricing neces-
sary to achieve decarbonization.37,39
We therefore propose that climate finance should
focus on supporting policies that either closely resemble
the incentive properties of a price system or directly put
a price on emissions. We see three main advantages.
First, carbon pricing can be designed in a way that it
becomes a simple, yet comprehensive way to align
incentives and channel investments; second, a price pol-
icy raises revenues that can be put to great use in the
public finance of developing economies (e.g., Ref 41);
and third, climate finance could be used strategically to
stabilize international climate policy cooperation.
LINKING CLIMATE FINANCE TO
CARBON PRICING REFORMS
Direct ways to implement carbon pricing are either a
carbon tax, a tradable permit system, or a hybrid
approach, such as emission trading with a price
 Opinion
corridor.42 Country specifics will determine which
technical design options are most feasible and keep
transaction costs low, for example, in choosing an
upstream or downstream point of regulation.43 It is
generally argued that upstream carbon taxes on fossil
fuels at the point of extraction, import, or distribu-
tion can be superior to downstream regulation at the
point where emissions actually arise. This is particu-
larly true in countries with weak institutional envir-
onments or low administrative capacity to monitor
emissions and collect tax revenues.44
The magnitude of climate finance received is
then determined by the implemented price as well as
the expected emission reductions, with larger
expected emission reductions resulting in larger rev-
enues. Donors and recipients hence need to negotiate
about the carbon price implemented by recipients
and its expected emissions reductions, as well as the
amount of climate finance provided by donors. Simi-
lar results-based financing schemes are already in
their trial phase for specific sectors. For instance,
under the REDD early movers program, Norway
and Germany have made up to US$ 65 millions
available to each Ecuador and Colombia for reducing
deforestation. The payment received emission reduc-
tions at a carbon price of US$ 5 per tCO2.45 For the
purpose of climate finance, the World Bank
announced to increasingly use existing results-based
programs, for example, ‘Program for Results Finan-
cing’ and ‘Development Policy Loans.’46
For individual countries, this setup is similar to
an international emission market, in which they are
net sellers of tradable emission permits. The advan-
tage, however, is that one can have different carbon
prices in different countries. Taking into account,
heterogeneity in countries’ would likely increase the
political acceptability of such pricing schemes.
To prevent recipients from shirking their com-
mitments to introduce a price on emissions, climate
finance needs to be deployed on a regular, for exam-
ple, annual, basis. In addition, monitoring of emis-
sions and ex ante expected emission reductions is
fundamental in order to avoid that the incentive
effects of carbon pricing are undone by other policies
to cushion their impacts, such as lowering excise
taxes on energy or introducing hidden subsidies.
International climate finance can initially be
deployed to finance capacity building for designing
country-specific carbon pricing schemes by policy-
makers in these countries, as well as building related
administrative capacities (e.g., reliable systems for
monitoring, reporting, and verifying to build GHG
emission registries), building on the experience gath-
ered in other carbon pricing schemes.
© 2016 Wiley Periodicals, Inc.
wires.wiley.com/climatechange
In a similar vein, removing fossil fuels subsidies
has a comparable effect as price distortions in favor
of fossil fuels are removed. Arguably, a country’s
motivation to do so can vary significantly and is not
limited to climate policy. However, as particularly in
developing and emerging economies carbon prices
are perceived to have negative effects on economic
growth,47 for countries with significant fossil subsi-
dies removing these might be a more appropriate
entry point to carbon pricing than implementing a
positive carbon price. However, removing subsidies
often faces fierce political opposition as the
(intended) shifts in profitability have immediate con-
sequences for the business models of associated inter-
est groups and poor population groups fear net
distributional disadvantages.
Therefore, international funds available for
countries through international climate finance could
be used to compensate particularly affected popula-
tion groups, to ensure they benefit by the internation-
ally supported carbon pricing reform. These could be
implemented via direct cash payments or tax breaks
for low-income households, increased social spend-
ing, and investment to basic infrastructures. Also, it
may be considered to use climate finance to compen-
sate particularly powerful interest groups opposing
the introduction of meaningful carbon pricing.
In addition, a domestic carbon price leads to
additional revenues available for the national budget,
which is potentially relevant for political economy
and public support. Putting a price on emissions is
likely to be a more efficient source of public revenue
than taxing desirable activities, and allow reducing
distortive taxes in exchange.48 Furthermore, carbon
pricing could generate revenues to undertake direly
needed investments in basic infrastructures benefiting
large segments of society, and particularly the poor.
As a starting point, removing fossil fuel subsidies and
investing saved subsidies could finance universal
access to water, sanitation, and electricity in the vast
majority of countries in which access to these infra-
structures is currently lacking.49
From this perspective, recycling carbon pricing
revenues to promote human development—such as
health, education, social security, or infrastructure
access—can be regarded as an operationalization of
sustainable development (see Figure 1). Such an
approach could make an important contribution
toward reaching the United Nations’ ‘Sustainable
Development Goals’ (SDGs). Even though the funds
for these investments would be raised by means of
putting a price on domestic emissions, international
climate finance can play an important role in
strengthening developing countries’ national moves
 WIREs Climate Change
International level
Funds projects directly
International
support
International funds Introduce carbon pricing
for climate finance remove subsidies to fossil fuels
FI GU RE 1 | Schematic representation of international climate finance as usually discussed today (upper panel) and proposed by the authors
(lower panel).
toward emission pricing as outlined above. Arguably,
such an approach would deviate from the current
approach toward climate finance and should hence
be better characterized as ‘sustainable development
finance’ including a political economy perspective.
Finally, key considerations concern the rules
for specifying the volume and modalities for interna-
tional climate finance for mitigation. The extent of
finance has to be negotiated on a case by case basis
such that a country agrees to introduce a carbon
price. First, resources are necessary to build up or
develop the institutional and administrative capaci-
ties that enable the implementation of the policy.
Second, the UNFCCC specifies that the full incre-
mental costs of climate measures should be covered
by industrialized countries. The level of incremental
costs depends on the level of the carbon price and
© 2016 Wiley Periodicals, Inc.
From climate finance toward sustainable development finance
National level
National
revenues
Incentives for
mitigation
Projects and programs
Climate change mitigation
Sustainable development
Climate change mitigation and
sustainable development
the resulting effects on domestic industry and consu-
mers. We suggest that, as emission pricing shifts
mitigation costs to final consumers, international cli-
mate finance should provide sufficient funds to at
least initially offset adverse distributional effects on
poorer income groups. Future assessments on the
quantitative needs are necessary to identify the vol-
ume of transfers. In any case, international climate
finance could focus on compensating upfront policy
costs—particularly for the poor—thus making car-
bon pricing reform more attractive for the recipient
country. Once policy reform has been fully imple-
mented, domestic carbon tax revenues (or saved
subsidy payments) could be used to cover compen-
satory social policy costs. For example, measures to
make the Iranian fossil fuel subsidy reform socially
acceptable were expected to cost approximately a
 Opinion
third of the subsidies saved (roughly US$
80 billion).50
Using climate finance to support the introduc-
tion of carbon pricing schemes also implies making
climate finance for mitigation conditional:b Recipient
countries could receive funds contingent on introdu-
cing and increasing their level of climate policy ambi-
tion51 and lose access to these funds if they decided to
abolish the policy at a later stage. This would be an
important element to stabilize international climate
cooperation—compensating recipient countries for
increased levels of ambition would set an incentive for
ratcheting-up their climate policy over time, and the
prospect of reduced international transfers mitigates
incentives to reduce their level of ambition.52,53 We
stress that this kind of conditionality does not neces-
sarily imply that recipients’ ownership is undermined
as each country can still prioritize its development
needs. Also, conditionality of climate finance as a tool
to stabilizing international climate cooperation will be
in the interest of all countries to stabilize global coop-
eration. The key challenge will consist in devising
donor-recipient contracts that specify issue areas
where donors’ and recipients’ interests overlap.
CONCLUSION
It is important to not only discuss how financial
flows for international climate finance can be mobi-
lized, but also how they can be spent in a meaningful
way that contributes to climate change mitigation as
well as human development. We argue that putting a
price on carbon has multiple benefits, as it incenti-
vizes cost-effective mitigation efforts across the econ-
omy and hence enables transformative change
toward decarbonization. Making climate finance
conditional on emission pricing can be an important
element for stabilizing international climate coopera-
tion. At the same time, carbon pricing provides addi-
tional funds that can be spent on financing domestic
tax reforms and achieving policy objectives related to
SDGs. Hence, unilateral carbon pricing can be bene-
ficial in developing countries. However, it still faces
various barriers. These can be of administrative
nature as capacities to raise and administer funds are
insufficient. Also, implementation of carbon taxes
needs to consider potential negative effects for the
© 2016 Wiley Periodicals, Inc.
wires.wiley.com/climatechange
poor and political resistance. International climate
finance could initially aim at removing those barriers
and help countries in multiple ways to build up their
own carbon pricing schemes, complementary poli-
cies, and institutions. Giving countries flexibility to
design their own policy schemes and ensuring owner-
ship opens up the possibility to also achieve—by
selecting policies that yield the greatest cobenefits—
other developmental objectives. Such an approach
would embed climate finance in the broader sustaina-
ble development agenda and strengthen ownership
and commitment in recipient countries.
Shifting the priority of climate finance from
project-based disbursement toward support of
national carbon pricing schemes is not a minor
reform of international climate finance but has, as we
argued, great potential to foster both development
and climate change mitigation. While we view ‘get-
ting started’ with this agenda as most important,
much research is necessary to identify the country-
specific requirements to render such policy reform
effective from an efficiency and distributional point
of view. The list of necessary research includes the
following elements: First, identifying the transfer vol-
ume necessary to offset policy costs on a case-by-case
basis. Second, interaction effects with the existing
tax-system—also including subsidies and taxes in the
energy sector—need to be identified and taken into
account when designing the policy. Third, research
needs to analyze the use of carbon revenues to pro-
mote sustainable development. Fourth, national con-
cerns over international leakage and free-riding
incentives have to be addressed by analyzing how the
conditionality of climate finance on the national pol-
icy influences the incentive to raise ambition in the
international context.
NOTES
a
Further work on climate finance disbursement is found in
‘gray literature’ on country-level distribution17 and on prin-
ciples of climate funds disbursement.18–23
b
Note that this opinion piece focuses on mitigation
finance. The only condition applied for adaptation finance
should be the allocated funds that are indeed employed for
effective adaptation measures.
 WIREs Climate Change
REFERENCES
1. IPCC. Climate Change 2014: Mitigation of Climate
Change. IPCC Working Group III contribution to
AR5 New York, NY: Cambridge University
Press; 2014.
2. Steckel JC, Edenhofer O, Jakob M. Drivers for the ren-
aissance of coal. Proc Natl Acad Sci 2015, 112:
E3775–E3781.
3. Kalkuhl M., Edenhofer O., Lessmann K. Learning or
lock-in: optimal technology policies to support mitiga-
tion. Resour Energ Econ 2012, 34:1–23.
4. Unruh GCU. Understanding carbon lock-in. Energy
Policy 2000, 28:817–830.
5. Erickson P, Kartha S, Lazarus M, Tempest K. Asses-
sing carbon lock-in. Environ Res Lett 2015, 10:84023.
6. McCollum D, Nagai Y, Riahi K, Marangoni G, Calvin K,
Pietzcker R, Van Vliet J, van der Zwaaan B. Energy
investments under climate policy: a comparison of global
models. Clim Change Econ 2013, 4:1340010.
7. UNFCCC. Paris Agreement, 2015. Available at: http://
www.cop21.gouv.fr/wp-content/uploads/2015/12/l09r01.
pdf. (Accessed January 12, 2016)
8. Jakob M, Steckel JC. How climate change mitigation
could harm development in poor countries: how cli-
mate change mitigation could harm. WIREs Clim
Change 2014, 5:161–168.
9. OECD. Climate Finance in 2013–14 and the USD
100 Billion Goal. Paris: Organisation for Economic
Co-operation and Development (OECD) in collabo-
ration with Climate Policy Initiative (CPI); 2015.
Available at: http://www.oecd.org/env/cc/Climate-
Finance-in-2013-14-and-the-USD-billion-goal.pdf.
(Accessed July 15, 2016).
10. Stadelmann M, Michaelowa A, Roberts JT. Difficulties
in accounting for private finance in international cli-
mate policy. Clim Policy 2013, 13:718–737.
11. Buchner B, Stadelmann M, Wilkinson J, Mazza F,
Rosenberg A, Abramskiehn D. The Global Landscape
of Climate Finance 2014. Venice: Climate Policy Initia-
tive; 2014. Available at: http://climatepolicyinitiative.
org/wp-content/uploads/2014/11/The-Global-Landscape-
of-Climate-Finance-2014.pdf. (Accessed March 3, 2015).
12. Michaelowa A, Michaelowa K. Old wine in new bot-
tles? Does climate policy determine bilateral develop-
ment aid for renewable energy and energy efficiency?
Int Dev Policy 2011, 2:60–86.
13. Bowen A. Raising climate finance to support develop-
ing country action: some economic considerations.
Clim Policy 2011, 11:1020–1036.
14. Pickering J, Jotzo F, Wood PJ. Splitting the difference:
can limited coordination achieve a fair distribution of
the global climate financing effort? Environ Polit
2015, 15:4.
© 2016 Wiley Periodicals, Inc.
From climate finance toward sustainable development finance
15. van Kerkhoff L, Ahmad IH, Pittock J, Steffen W.
Designing the Green Climate Fund: how to spend
$100 billion sensibly. Environment 2011, 53:18–31.
16. Cui L, Zhu L, Springmann M, Fan Y. Design and anal-
ysis of the Green Climate Fund. J Syst Sci Syst Eng
2014, 23:266–299.
17. Bowen A, Campiglio E, Herreras S. The “optimal and
equitable” climate finance gap. Available at: http://
www.cccep.ac.uk/Publications/Working-papers/Papers/
200-209/WP-209---Bowen-et-al.pdf. (Accessed May
6, 2015)
18. Bird N, Brown J. International climate finance: princi-
ples for European support to developing countries.
EDC2020 Document de travail Report No. 6, 2010.
Available at: http://www.indiaenvironmentportal.org.in/
files/EDC_2020_Working_Paper_No_6.pdf. (Accessed
May 22, 2015)
19. Bird N, Brown J, Schalatek L. Design challenges for
the Green Climate Fund. Heinrich Böll Stiftung
(Climate Policy Brief ) Report No. 4, 2011.
20. Bird N, Glennie J. Going beyond aid effectiveness to
guide the delivery of climate finance. ODI Background
Note, 2011. Available at: http://www.odi.org/resources/
docs/7106.pdf. (Accessed May 22, 2015)
21. Benito Müller. Performance-based formulaic resource
allocation—a cautionary tale Some Lessons for the
Green Climate Fund from multilateral funding. OIES
EV Report No. 60. The Oxford Institute for Energy
Studies, 2014.
22. Müller B, Pizer W. Developed Access modalities: les-
sons for the Green Climate Fund from existing prac-
tice. Working Paper Report No. 14–03. Nicholas
Institute for Environmental Policy Solutions, 2014.
23. Vieweg M. Options for resource allocation in the
Green Climate Fund (GCF): possible allocation princi-
ples and criteria—mitigation. Report No. 4, 2013.
24. Schneider L. A Clean Development Mechanism with
global atmospheric benefits for a post-2012 climate
regime. Int Environ Agreem Polit Law Econ 2009,
9:95–111.
25. Schneider L, Kollmuss A. Perverse effects of carbon
markets on HFC-23 and SF6 abatement projects in
Russia. Nat Clim Change 2015, 5:1061–1063.
26. Trotter IM, da Cunha DA, Féres JG. The relationships
between CDM project characteristics and CER market
prices. Ecol Econ 2015, 119:158–167.
27. Paulsson E. A review of the CDM literature: from fine-
tuning to critical scrutiny? Int Environ Agreem Polit
Law Econ 2009, 9:63–80.
28. GCF. Analysis of the expected role and impact of the
Green Climate Fund. Report No. GCF/B.09/06. Green
Climate Fund, 2015.
 Opinion
29. IPCC. Climate Change 2014: Impacts, Adaptation,
and Vulnerability. IPCC Working Group II Contribu-
tion to AR5 New York, NY: Cambridge University
Press; 2014. Available at: http://www.ipcc.ch/report/
ar5/wg2/. (Accessed September 16, 2016)
30. Jones B, Keen M, Strand J. Fiscal implications of cli-
mate change. Int Tax Public Finan 2013, 20:29–70.
31. Jakob M, Steckel JC, Flachsland C, Baumstark L. Cli-
mate finance for developing country mitigation: bless-
ing or curse? Clim Dev 2015, 7:1–15.
32. Winkler H, Dubash NK. Who determines transforma-
tional change in development and climate finance?
Clim Policy 2015, 18:1–9.
33. Jakob M, Steckel JC, Klasen S, Lay J, Grunewald N,
Martinez-Zarzoso I, Renner S, Edenhofer O. Feasible
mitigation actions in developing countries. Nat Clim
Change 2014, 4:961–968.
34. Vogt-Schilb A, Hallegatte S, de Gouvello C. Marginal
abatement cost curves and the quality of emission reduc-
tions: a case study on Brazil. Clim Policy 2014, 0:1–21.
35. Rietig K. Reinforcement of multilevel governance
dynamics: creating momentum for increasing ambi-
tions in international climate negotiations. Int Environ
Agreem Polit Law Econ 2014, 14:371–389.
36. Kremer M. Patent buyouts: a mechanism for encourag-
ing innovation. Q J Econ 1998, 113:1137–1167.
37. Hallegatte S, Fay M, Vogt-Schilb A. Green industrial poli-
cies: when and how. Report No. 6677. The World Bank,
2013, October. Available at: http://ideas.repec.org/p/wbk/
wbrwps/6677.html (Accessed September 16, 2016)
38. Fay M, Hallegatte S, Vogt-Schilb A, Rozenberg J,
Narloch U, eds. Decarbonizing Development: Three
Steps to a Zero-Carbon Future. Washington, DC:
World Bank Group; 2015. 164 p. (Climate change and
development series).
39. Kalkuhl M, Edenhofer O, Lessmann K. Renewable
energy subsidies: second-best policy or fatal aberration
for mitigation? Resour Energ Econ 2013, 35:217–234.
40. Clements B, Coady D, Fabrizio S, Gupta S, Shang B.
Energy subsidies: How large are they and how can
they be reformed? Econ Energ Environ Policy 2014, 3.
doi:10.5547/2160-5890.3.1.bcle.
41. Keen M, Parry I, Strand J. Planes, ships and taxes:
charging for international aviation and maritime emis-
sions. Econ Policy 2013, 28:701–749.
42. Goulder LH, Parry IWH. Instrument choice in environ-
mental policy. Rev Environ Econ Policy 2008, 2:152–174.
43. Joas F, Flachsland C. The (ir)relevance of transaction
costs in climate policy instrument choice: an analysis
of the EU and the US. Clim Policy 2016, 16:26–49.
© 2016 Wiley Periodicals, Inc.
wires.wiley.com/climatechange
44. Aldy J, Ley E, Parry I. What is the role of carbon taxes
in climate change mitigation? Report No. PREM
Notes; No. 2. Washington, DC: World Bank, 2008.
Available at: https://www.openknowledge.worldbank.
org/handle/10986/11147. (Accessed Feburary 27, 2016)
45. Goldstein A. REDD Early Movers Program Expands
to Ecuador and Colombia. Washington, DC: Ecosys-
tem Marketplace—A Forest Trends Inititative; 2014.
Available at: http://www.ecosystemmarketplace.com/
articles/redd-early-movers-program-expands-ecuador-
colombia/ (Accessed July 15, 2016).
46. World Bank. World Bank Group Climate Change
Action Plan. Washington, DC: World Bank; 2016.
Available at: http://pubdocs.worldbank.org/en/
677331460056382875/WBG-Climate-Change-Action-
Plan-public-version.pdf. (Accessed July 15, 2016).
47. Staub-Kaminski I, Zimmer A, Jakob M,
Marschinski R. Climate policy in practice: a typol-
ogy of obstacles and implications for integrated
assessment modeling. Clim Change Econ 2014,
5:1440004.
48. Edenhofer O, Jakob M, Creutzig F, Flachsland C, Fuss S,
Kowarsch M, Lessmann K, Mattauch L, Siegmeier J,
Steckel JC. Closing the emission price gap. Glob Environ
Change 2015, 31:132–143.
49. Jakob M, Chen C, Fuss S, Marxen A, Edenhofer O.
Development incentives for fossil fuel subsidy reform.
Nat Clim Change 2015, 5:709–712.
50. Lindebjerg ES, Peng W, Yeboah S. Do policies for
phasing out fossil fuel subsidies deliver what they
promise? UNRISD Working Papers: Report
No. Working Paper No. 2015-1. Geneva: United
Nations Research Institute for Social Development
(UNRISD); 2015. Available at: http://www.unrisd.org/
80256B3C005BCCF9/httpNetITFramePDF?ReadForm
&parentunid=170D2DA8A96A5352C1257DC40050
C975&parentdoctype=paper&netitpath=80256B3C00
5BCCF9/(httpAuxPages)/170D2DA8A96A5352C1257
DC40050C975/$file/Lindebjerg%20et%20al.pdf.
(Accessed July 15, 2015)
51. Cramton P, Ockenfels A, Stoft S. An international
carbon-price commitment promotes cooperation. Econ
Energy Environ Policy 2015, 4:1–14.
52. Kornek U, Edenhofer O. The strategic dimension of
financing global public goods. Working Paper, 2016.
53. Edenhofer O, Ockenfels A. Climate policy at an
impasse. In: Cramton P, MacKay DJC, Ockenfels A,
Stoft S, eds. Global Carbon Pricing We Will If You
Will. Cambridge, MA: MIT Press.