international environmental transfers. the case for international environmental transfers income...
TRANSCRIPT
The Case for International Environmental Transfers
• Income effect – Environmental protection as a normal good– Rich countries have more income to devote to
environmental protection
• Lobbying– Rich countries bear the externalities, but don’t
share profits – Protection is underprovided because
environmental interests are diffuse and producer interests are concentrated
• Interest group organization– NGOs are denser, older, wealthier in the North
Coase theorem revisited
• Without transaction costs, bribery is efficient; property rights don’t matter
• With transaction costs: – search – bargaining – enforcement
suboptimal level of bribes
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 1: Noncredible recipient commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 1: Noncredible recipient commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 1: Noncredible recipient commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 1: Noncredible recipient commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 2: Noncredible donor commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 2: Noncredible donor commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 2: Noncredible donor commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 2: Noncredible donor commitment
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 3: Noncredible conditionality
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 3: Noncredible conditionality
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 3: Noncredible conditionality
Aid agency•Commit Don’t commit
••LDC LDC
Comply ComplyDon’t comply Don’t comply
• •AA AA
Disburse ~Disburse D ~D
C-P-T T+P-
C
C-P P-C
-P-T P+T
-P -P
C -C
0 0
North
South
Problem 3: Noncredible conditionality
Conclusions
• Transaction costs can prevent donors from offering aid in the first place
• The credibility problem need not be on the recipient’s side
• The three types of credibility problems are observationally equivalent
Case Study: bargaining problems and the GEF
• Politics of GEF (Global Environment Facility - 1990 -)– 1990-1993, $1 bil; 1993, $2 bil
• North-South conflict
North
• Global problems, additionality, incremental cost
• “Green” conditionality (“integration”)
•World Bank control
South
•Obtain new funds but avoid new conditionality
•Sustainable development
•UN control
Compromise: unclear objectives, implementation shared by WB, UNDP, UNEP
UNCED (UN Conference on Environment and Development)
• June/92; summit → high stakes
Bargaining problems and GEF
Turf battle + Poor implementation, project selection
Deadlock over organizational mission
Keohane & Levy framework
• Concern → conditionality (concern generally asymmetric)• Contractual environment: limited lending agency discretion
in bargaining; commitment to punishing; monitoring• Capacity → involuntary defection
– WB: most failures due to lack of institutional capacity– On-going funding for recipient governments– Competition from sectoral lobbies in donor countries →
misdirection of funds– NGOs as solution
• Coordination: bilateral, IFIs, NGOs, regional development
banks can reinforce or undermine (Indonesia)
Criticisms
• A laundry list, not a theory• Testing?• Generating intermediate-range
hypotheses• Research design
– More hypotheses than cases– Selection bias
• Still, a useful starting point
Expectations• Expectations: good results in Europe
– High concern– Contractual environment: transparent, institution
dense, multiple linkages
– High capacity
• But volume finds poor results. Why?– Case selection: looking for cases involving financial
transfers (most cases in Europe don’t)
• Success in “coordination” cases in Europe:– LRTAP, Baltic and North Seas pollution,
Mediterranean– Leaders shame laggards
Chloride pollution in the Rhine
• Perfect case for Coasian bargaining– Small “n”; transparency; narrow issue; very accurate
measurement ; winners and losers clear
• Puzzle of the formal outcome: – Netherlands, Germany, Switzerland pay France; – only Netherlands benefits; – Germany, Switzerland are the polluters
• Coase: MdPA lowest marginal cost of reduction
Chloride pollution in the Rhine• But transaction costs (bargaining) interfered
– Incentives to misrepresent– Distributional bargaining
Delay
• Private adaptation → reduced concern
• Decline of mining → reduced problem
Nuclear safety in Eastern Europe
• Remember Chernobyl? • RBMK, VVER-440, VVER-1000• Asymmetric concern → conflict over solution
– Income effect – Austerity programs and the IMF– foreign currency crunch
• Puzzle: West’s weak bargaining position:– Short-term fix → reduced incentives for closure
– Lack of coordination– Capture by Western industry
Other environmental assistance to Eastern Europe
• Expectation: substantial aid because– Trans-boundary effects, lower marginal cost of
abatement in EE– Potential expansion of EU– Institution-rich environment: EU, EBRD, WB, G-24
• Outcome: little aid, less conditionality. Why?
• Principal-agent problems, organizational mission, inertia, other agendas:– World Bank:
• Energy projects• Macroeconomics
– EBRD: • private sector projects• partnership in investment → constrained by
supply of interested investors• need for speed
Other environmental assistance to Eastern Europe
• Lack of coordination in bilateral programs• Why?
Endogenous aid:
Interest groupsDemand for aid
Environmental exports
Other environmental assistance to Eastern Europe
• Examples: nuclear industry, contractors, consultants• Dilemma: if aid programs don’t serve a domestic
constituency, aid amounts will be lower