We have investigated how risk considerations affect the economic implications of emission crediting. Our quantitative results show that the incorporation of country-specific investment risks induces rather small changes to the magnitude and distribution of benefits from project-based emission trading vis-a-vis a situation where investment risks are neglected. Only if investors go for high safety of returns, there is an observable decline in the overall volume of emission crediting and the associated total economic benefits. Differences in risk across developing countries then become more pronounced with converse implications for high-risk and low-risk developing countries.
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