In this article, I present a neoclassical realist theory of climate change politics that challenges the idea that cooperation on climate change is compelled alone by shared norms and interests emanating from the international level and questions if instead material factors also play a significant constraining role.
Relative-gains concerns incited by the international resource transfers implicit in climate change policy may compel some states to be prudent in their international climate change efforts and conserve resources domestically for future contingencies, including their own adaptation and resiliency. Neoclassical realism recognises such systemic constraints while also identifying international and domestic factors — a ‘two-level game’ — that explain variation in state sensitivity to relative gains. As a preliminary test of this theory, I compare the latest data on the magnitude, distribution and financial ‘additionality’ of climate funds and carbon markets. Climate funds are found to be more vulnerable to systemic forces identified by neoclassical realism because they are largely drawn from existing official development assistance budgets despite international commitments that funds are ‘new and additional’. Carbon markets engage a relatively broader number of states and, contrary to moral hazard concerns, have been used to a greater degree by states reducing emissions domestically. While there are concerns about whether carbon credits represent genuine emission reductions, the effectiveness of climate funds is equally, if not more, dubious. I conclude that, while imperfect, carbon markets have too often been unfairly compared with an ideal climate finance mechanism that assumes few political constraints on international resource transfers for climate change
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