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From aid to equality: Uncovering the role of climate finance funds in inhibiting carbon inequality

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  • Zhao, Congyu
  • Dong, Kangyin
  • Nepal, Rabindra
  • Goutte, Stéphane

Abstract

Examining inequality of carbon emissions sheds light on disparities in emission levels across different socioeconomic groups, highlighting the need for equitable and inclusive climate action to ensure environmental sustainability and social justice. Based on a country level dataset spanning 33 countries from 2001 to 2019, this paper empirically explores the impact of climate finance funds on carbon inequality, examining their asymmetric relationship, as well as the mediating and moderating effects. Our key findings are as follows. (1) Climate finance funds exhibit a negative impact on carbon inequality, with every 1 % increase in climate finance funds leading to a decrease in carbon inequality by 0.0184 %. (2) The relationship between climate finance funds and carbon inequality varies across quantiles, with its mitigating effect diminishing as carbon inequality levels increase. Moreover, the inhibiting effect of climate finance funds is markedly stronger in developing countries. (3) Artificial intelligence, particularly industrial robot installation and application, plays a crucial mediating role in the nexus between climate finance funds and carbon inequality. (4) The governance capacity of governments demonstrates a positive moderating effect on climate finance funds’ effectiveness in reducing carbon inequality, while climate change vulnerability exerts a negative moderating influence, rendering climate finance funds less effective in reducing carbon inequality. These findings enlighten us with some useful policy implications for narrowing carbon inequality and making better use of climate finance funds.

Suggested Citation

  • Zhao, Congyu & Dong, Kangyin & Nepal, Rabindra & Goutte, Stéphane, 2026. "From aid to equality: Uncovering the role of climate finance funds in inhibiting carbon inequality," International Review of Economics & Finance, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:reveco:v:105:y:2026:i:c:s1059056025007294
    DOI: 10.1016/j.iref.2025.104566
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