The paper derives an efficient allocation rule of adaptation aid from a donor to the recipient nations, which is different from the traditional development aid literature. The design of the allocation rule takes care of the optimum reaction of the nations on receipt of the aid. It suggests that the allocation rule must take care of (i) distributional weight of the recipients on the donor’s welfare, (ii) their vulnerability to climate change, (iii) their efficiency in using the aid and (iv) their mitigation response to the aid. It discusses the way these factors can be incorporated in an implementable rule by use of the available data. The score of a nation derived from the first three factors requires an upward/downward adjustment if the adaptation aid leads to an increase/decrease of the mitigation effort of the country. A nation receiving a higher score is rewarded with higher allocation of aid. The paper suggests as a rule of thumb that the aid in the form of technical assistance requires a downward adjustment and the aid in monetary form requires an upward adjustment in the score.
In this paper an impure public good model is applied to analyze the effects of introducing a green good, i.e. a consumption good that contributes to preservation of environmental quality. I distinguish three types of consumers: “grays”, who consume the green good and a private good; “greens”, who consume the green good and make additional donations to environmental organizations; and “edge” consumers, who consume only the green good. With respect to environmental quality I find that the gap between voluntary provision and optimal provision is unaffected by the introduction of the green good, no matter if consumers are gray or green. However, in the case of gray agents environmental quality is improved in absolute terms after the green good has been launched whereas it remains at the same level as before if consumers are green. The effect of the green good on the social welfare gap is more likely to be beneficial if agents are gray. The gaps with respect to environmental quality and social welfare are both closed if the agents are edge consumers.
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