Economic Impact of International Carbon Markets on Developing Nations

Abstract This study investigates the economic impact of international carbon markets, specifically the Emissions Trading System (ETS) and the Clean Development Mechanism (CDM), on developing nations. Utilizing a panel data approach, data from 50 developing countries spanning 2000 to 2022 is analyzed to assess how participation in these markets influences economic development. The findings indicate a positive relationship between carbon market revenue and GDP growth, highlighting the potential of these markets to fund infrastructure and renewable energy investments. However, the study reveals that the benefits of technology transfer remain statistically insignificant, suggesting the need for improved integration of technology transfer mechanisms within carbon market frameworks. While the study underscores the promise of carbon markets in stimulating economic growth, it also identifies challenges related to institutional capacity and revenue distribution. Recommendations include enhancing institutional capacities, promoting effective technology transfer, and prioritizing renewable energy investments. These insights contribute to the understanding of how carbon markets can serve as a tool for sustainable development in developing countries.