Our team at SEI-U.S., led by Frank Ackerman, has just released a new model for climate change, mitigation investment, and development that highlights a major dilemma for industrialized countries. The model, Climate and Regional Economics of Development (CRED), is designed to analyze the economic consequences of various climate and development choices, based on what we know about different regions’ current economies and their vulnerability to climate change.

What the model shows is that the most cost-effective way to reduce global emissions and maximize the yield of “green” investment is to target developing countries: Because the impact of every dollar is bigger in a lower-income economy, shifting capital from rich to poor regions has the best payoff.

Developing nations have advocated this approach for years, but industrialized nations have resisted, not wanting climate mitigation to become a vehicle for the redistribution of wealth. In fact, widely used economic models specifically correct for this “problem,” and focus on climate solutions that leave global inequality untouched by design.

Read our working paper to learn more.