The role of market-based incentives in promoting low carbon development in developing countries

The economic advancement that society has experienced in the past two centuries is largely based on a carbon intensive development model. This is now causing a vexing problem because the exploitation of fossil fuels is a leading cause of global climate change. As developing countries advance energy-intensive developmental agendas, a more sustainable approach is necessary to facilitate growth without the accompanying negative environmental externalities inherent to the business as usual approach. The purpose of this thesis is to explore the relationship between market-based incentives (MBIs) for reducing greenhouse gas emissions and the underlying host country context. The main research question is: How does host country context affect MBIs in developing countries? The theoretical framework is drawn from the literature on market based environmental policy, and links to the literature on governance in areas of limited statehood. The thesis links five distinct empirical papers to present a cohesive body of research. The experience of the internationally mandated Clean Development Mechanism (CDM) is explored via qualitative comparison between China and South Africa, and between Zambia and South Africa. A quantitative analysis of utilisation and underlying host country indicators is also presented to further understand the antecedents of CDM uptake at the national level. Furthermore, South Africa's nationally mandated promotion of renewable energy is explored. This includes a comparison with Germany to highlight how key considerations of renewable energy promotion vary between a developed and developing country. The research finds MBIs in developing countries, both internationally and nationally mandated, to be highly dependent on the overall host country context. The key aspects identified include 1) host country prioritisation of low carbon development; 2) supporting structures and policies that generate awareness, build capabilities and encourage private sector participation; and 3) access to finance, with a specific focus on cost of capital. The findings support the market-based environmental policy literature that suggests an effective regulatory framework by the state is a necessary condition for MBIs in developing countries. However it also shows that the regulatory framework alone is not a sufficient condition for successful implementation of MBIs in the developing world. Consequently, the overall host country context determines private sector interest in and the success of MBIs in developing countries.

Grantor dc:publisher.institution

School of Management Studies

Year dc:date.issued

2013

Author dc:creator

• Fay, John G

Advisor dc:contributor.advisor

• Hamann, Ralph

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/10459

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/10459