Economist Proposed Climate Payments for Global South
Michael Greenstone suggested direct carbon pricing transfers to citizens to curb emissions outside the OECD.
Updated on Oct. 2, 2026 in Environmental
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Economist Michael Greenstone has proposed a new climate finance model that would provide direct payments to citizens in developing nations contingent on the adoption of carbon pricing. The strategy aims to replace ineffective moral appeals with economic incentives to address the reality that 82 percent of future emissions are expected to originate outside wealthy OECD countries.
Why it matters
Greenstone argues that traditional climate finance models have failed, necessitating a shift toward market-based mechanisms. By incentivizing countries to implement carbon pricing, the proposal targets the Global South where emission growth remains the highest.
A prior emissions trading trial in Surat involving 150 textile plants achieved a 99 percent compliance rate. Enforcement relied on strict penalties, specifically fines set at ten times the permit value for any firm falling short.
The players
Michael Greenstone
He is an economist and co-author of the book Just Economics alongside Abhijit Banerjee and Esther Duflo.
OECD
This is an international organization consisting of mostly wealthy, industrialized countries that contributed most accumulated carbon.
The details
The proposal focuses on bypassing government bureaucracy by sending carbon pricing payments directly to individuals. It draws on evidence from market-based trials in India, including a particulate matter scheme in Surat and a current sulphur dioxide market project in Maharashtra.
Timeline
The Surat Emissions Trading Scheme was first mooted in 2010.
Global leaders are expected to convene for the annual climate meet in Turkey in November 2026.
The Big Picture
This proposal extends the precedent established by the Surat emissions trading scheme to a global policy framework. It marks a departure from traditional state-to-state climate aid by emphasizing direct individual incentives and market-based compliance structures.
If adopted, this model could fundamentally change how climate aid impacts the personal finances of citizens in developing nations. Future industrial regulations in these regions may see stricter enforcement modeled after the high-penalty compliance structures seen in previous market trials.
The takeaway
Direct financial incentives represent a shift away from reliance on diplomatic moral appeals to drive climate action. Future success for such models depends on the ability to replicate high-compliance market enforcement at a national level.
Further reading
For more on shifts in climate policy and environmental economics, visit the Environmental section.
Source note: This article includes information reported by The Hindu.
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