A History of Conditionality: Lessons for International Cooperation on Climate Policy

Abstract

This article surveys the experience of conditionality provisions applied by the World Bank, the IMF, bilateral donors, and the European Union's accession process. Ownership is essential for effective cooperation and requires domestic climate policies to be country-driven and decision-making to be equitable. Bilateral cooperation allows for a direct exchange of expertise and long-term relationships. A multilateral umbrella or multilateral institutions can avoid complexity and detrimental competition between multiple supporters of one developing country, limit the ability of individual countries to abuse the mechanism to exercise geo-strategic interests, and allow for more stringent reactions to non-compliance. In all cases, independent monitoring and review create transparency and objectivity, enhance effectiveness, and protect the interests of all parties. Policy relevance: Past conditionality provisions offer many negative experiences, particularly where international organizations have imposed the prevailing economic paradigm on countries that were in desperate need of finance. The situation for international cooperation on climate change mitigation is fundamentally different. Developing countries can choose whether they want to access international support to enhance the scale, scope or speed of their mitigation actions. Developed countries or international bodies also retain some discretion to choose among possible mitigation actions based on the carbon impact. This creates a double conditionality and the opportunity to jointly design appropriate incentive schemes. Several lessons from the use of conditionality provisions are identified in order to inform the process, institutional setting and design of such incentive schemes.