Market-based instruments for the implementation of the Montreal Protocol in developing countries
Desai, Nikhil | Mathur, Subodh
The Multilateral Fund (the Fund) for the Implementation of the Montreal Protocol on Substances that Deplete the Ozone Layer (The Protocol) is mandated to meet, on a grant or concessional basis, the agreed incremental costs of developing country Parties to enable their compliance with the control measures of the Protocol. This paper explores alternatives to the current approach that offers efficiency gains --increasing the ozone-depleting substances (ODS) use phaseout for a given sum of money--to the Fund and an individual country; and argues for a national system of controls, in particular, establishing enforceable firm-level limits on ODS use, necessary to ensure that the Fund's assistance, and the country's phaseout strategy, is effective. Toward the first objective, the paper proposes that the Fund's assistance to firms using ODS be seen as a "market" for ODS phaseout and advances a conceptual proposal to use sequential competitive bid auctions at the national level. Secondly the paper argues that whether or not the Fund continues with the project-by-project need assessment approach or permits the use of national competitive bidding for grants, it is imperative that national legal and regulatory structures be established to translate Party-level compliance commitments into firm-level permits or "entitlements," with legal limits on market entry or re-entry or expansion.
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