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The Compensation Fund for Climate Impacts

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  • 1 Potsdam Institute for Climate Impact Research (PIK), and University of Potsdam, Potsdam, Germany, and Center for International Climate and Environmental Research–Oslo, Oslo, Norway
  • 2 Potsdam Institute for Climate Impact Research (PIK), Potsdam, Germany, and International Finance Cooperation (World Bank Group), Washington, D.C.
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Abstract

Climate change is very likely to lead to undesirable climate impacts. How to compensate for such negative impacts at the international level has, hitherto, received little attention. This article reviews the most frequently discussed grounds for legal obligations of states vis-à-vis climate impacts (damages) and concludes that no convincing mechanism has yet been found to compensate climate impacts. The authors outline an architecture for a voluntary, international compensation fund with specialized, independent climate courts. Subsequently, this article addresses three strategic considerations related to the fund, namely, the incentives for founding it, the merits of double proportionality with respect to contributions and payments, as well as the benefits of employing prediction markets to enhance trustworthiness.

Corresponding author address: Detlef F. Sprinz, Potsdam Institute for Climate Impact Research (PIK), P.O. Box 60 12 03, 14412 Potsdam, Germany. E-mail: dsp@pik-potsdam.de, s.buenau@gmail.com

Abstract

Climate change is very likely to lead to undesirable climate impacts. How to compensate for such negative impacts at the international level has, hitherto, received little attention. This article reviews the most frequently discussed grounds for legal obligations of states vis-à-vis climate impacts (damages) and concludes that no convincing mechanism has yet been found to compensate climate impacts. The authors outline an architecture for a voluntary, international compensation fund with specialized, independent climate courts. Subsequently, this article addresses three strategic considerations related to the fund, namely, the incentives for founding it, the merits of double proportionality with respect to contributions and payments, as well as the benefits of employing prediction markets to enhance trustworthiness.

Corresponding author address: Detlef F. Sprinz, Potsdam Institute for Climate Impact Research (PIK), P.O. Box 60 12 03, 14412 Potsdam, Germany. E-mail: dsp@pik-potsdam.de, s.buenau@gmail.com
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