The climate rent curse: new challenges for burden sharing

Peer Reviewed
9 February 2017

Ulrike Kornek, Jan Christoph Steckel, Kai Lessmann, Ottmar Edenhofer

The literature on the “resource curse” has strongly emphasized that large incomes from resource endowments may have adverse effects on the growth prospects of a country. Conceivably the income generated from emission permit allocations, as suggested in the context of international climate policy, could have a comparable impact. Effects of a “climate rent curse” have so far not been considered in the design of permit allocation schemes. In this study, we first determine when to expect a climate rent curse conceptually by analyzing its potential channels. We then use a numerical model to explore the extent of consequences that a climate rent curse would have on international climate agreements. We show that given the susceptibility to a curse, permit allocation schemes may fail to encourage the participation of recipient countries in an international mitigation effort. We present transfer schemes that enhance cooperation and limit adverse effects on recipients.

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Sustainable Development Goals
Publication reference
Kornek, U., Steckel, J. C., Lessmann, K., & Edenhofer, O. (2017). The climate rent curse: new challenges for burden sharing. International Environmental Agreements: Politics, Law and Economics, 17(6), 855–882. doi:10.1007/s10784-017-9352-2

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Publication | 5 May 2020