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A study on the economic effects of climate assistance funds

Author

Listed:
  • Jing Zhang

    (Shandong University of Finance and Economics)

  • Xudong Zhu

    (Shandong University of Finance and Economics)

  • Shuang Zi

    (Shandong Management University)

  • Shuai Chen

    (Shandong University of Science and Technology)

Abstract

Climate assistance funds have become a crucial source of support for developing countries in combating climate change. The ability of these funds to fully realize their potential in promoting sustainable development is crucial to the mission of building a shared future for humanity. This study focuses on one of the objectives of climate assistance funds — enhancing the economic development of recipient countries. First, based on the "Unbalanced Growth Model," the paper demonstrates that climate assistance funds can enhance the economic development of recipient countries once they reach a certain level. Second, empirical and robustness tests using data from 117 recipient countries in the OECD-DAC database validate the theoretical findings. The results show that climate assistance funds can positively impact the economies of recipient countries by promoting improvements in innovation and financial development. Additionally, the governance level of recipient countries moderates the economic effects of climate assistance funds, with lower governance levels correlating to a lower impact threshold. Finally, in terms of the choice of financial instruments, Climate mitigation funds are better suited for grants, while climate adaptation funds are more appropriate for loans; in terms of the flow of climate assistance funds, climate mitigation funds significantly impact social development, while climate adaptation funds more strongly affect economic development and environmental protection.

Suggested Citation

  • Jing Zhang & Xudong Zhu & Shuang Zi & Shuai Chen, 2025. "A study on the economic effects of climate assistance funds," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 30(5), pages 1-29, June.
    • Handle: RePEc:spr:masfgc:v:30:y:2025:i:5:d:10.1007_s11027-025-10220-1
    DOI: 10.1007/s11027-025-10220-1
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