Climate financing approaches and systems: An emerging country perspective

Abstract

Emerging countries like India, China and Russia who are under pressure to contribute to a mandatory mitigation regime in the forthcoming climate protocol also view the issue of financing as crucial to their future role in ensuring a low carbon pathway of growth. Whether they contribute to the process of mitigating climate change, both developing countries and emerging economies are vulnerable to global warming. The central proposition advanced in this paper is that any global climate financial architecture that recognizes the fact that mitigation and adaptation are inter-linked, the latter being conditioned by the former, has the best chance of success. The paper seeks to demonstrate that as investments on mitigation rises, risks on adaptation projects decrease, thus contributing to improved risk adjusted return from adaptation projects. With reference to coastal, water and degraded lands ecosystems in India, the paper demonstrates how higher levels of mitigation efforts reduce the capital costs of adaptation activities in developing countries. The paper also suggests that carbon markets need to be reformed through improved and varied functions that facilitate technology transfer, provide differential prices for different carbon products, facilitate enhanced access by developing country sellers and enable efficient carbon price discovery for sellers from developing world.