Fund-raising and Allocation of Green Climate Fund: Taking Global Pareto Optimality and Fiscal Balance into Consideration

This study analyzes how the Green Climate Fund (GCF) should raise and allocate funds to achieve Pareto optimality in climate governance globally and its own fiscal balance. To make the conclusion more suitable for global climate governance analysis, this study modifies the hypothesis of the public externality model constructed by Baumol and Oates. Subsequently, by comparing the Pareto optimality model of global climate governance and market equilibrium model, this study infers the unique price conditions to induce the market to satisfy Pareto-optimality requirements. Subsequently, this study deduces the rules and the possible ways that must be followed for raising capital and allocating of GCFs while considering global Pareto optimality and fiscal balance. The study observes that the equilibrium results of the international climate game will not achieve the global Pareto-optimality and the financial balance of GCF simultaneously when each country anticipates that the GCF aims to Pareto optimality in climate governance globally and its own fiscal balance.