Does climate aid matter for reducing CO2 emissions? The case of foreign aid for renewable energy

This article aims to investigate how climate aid devoted to renewable energy contributes to CO2 emissions in recipient countries. Indeed, since the beginning of the 2000s, international agreements between developed and developing countries have promoted the provision of financial aid to the second group of countries to help them fight global warming. We first discuss stylized facts on climate finance devoted to renewable energy and its impact on CO2 emissions. We can see that while the first variable is quickly increasing, the second variable displays a decrease from 2010. Econometric results show that climate aid for renewable energy has a slight impact on CO2 emissions reduction, especially after a threshold. However, despite this optimistic result, the impact is transitory. Indeed, this result can be explained by the fact that developing countries are more preoccupied by economic efficiency than ecological efficiency. However, in countries where a carbon tax is set, the tax contributes to reducing CO2 emissions. Finally, we show that ecological technologies imported through foreign direct investment do not yet play a significant role in reducing CO2 emissions or CO2 intensity.