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Climate Change, Green Growth and Aid Allocation to Poor Countries


  • Stefan Dercon


With serious impacts of climate change looming in a few decades, but current poverty still high in the developing world, we ask how to spend development aid earmarked for the poor. Poverty reduction tends to be strongly linked to economic growth, but growth impacts the environment and increases CO2 emissions. So can greener growth that is more climate-resilient and less environmentally damaging deliver large scale poverty reduction? Can aid be used for effective poverty reduction now without affecting carbon emissions substantially? We argue that there are bound to be trade-offs between emissions reductions and a greener growth on the one hand, and growth that is most effective in poverty reduction. We argue that development aid, earmarked for the poorest countries, should only selectively pay attention to climate change, and remain focused on fighting current poverty reduction, including via economic growth, not least as future resilience of these countries and their population will depend on their ability to create wealth and build up human capital now. The only use for development aid within the poorest countries for explicit climate-related investment ought to be when the investments also contribute to poverty reduction now, including for increasing resilience to current impacts of environmental shocks, or when the investments done now have serious intertemporal ‘lock-in’ problems so that they have implications also for when climate change bites by 2050. In our conclusions, we offer a series of concrete principles to judge development spending.

Suggested Citation

  • Stefan Dercon, 2014. "Climate Change, Green Growth and Aid Allocation to Poor Countries," CSAE Working Paper Series 2014-24, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2014-24

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    References listed on IDEAS

    1. Ravallion Martin, 2010. "Do Poorer Countries Have Less Capacity for Redistribution?," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-31, December.
    2. Hallegatte, Stephane & Heal, Geoffrey & Fay, Marianne & Treguer, David, 2011. "From growth to green growth -- a framework," Policy Research Working Paper Series 5872, The World Bank.
    3. Stefan Dercon, 2014. "Is Green Growth Good for the Poor?," World Bank Research Observer, World Bank Group, vol. 29(2), pages 163-185.
    4. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2009. "Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates," American Economic Review, American Economic Association, vol. 99(2), pages 198-204, May.
    5. Martin L. Weitzman, 2013. "Tail-Hedge Discounting and the Social Cost of Carbon," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 873-882, September.
    6. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," World Bank Research Observer, World Bank Group, vol. 17(2), pages 141-166, September.
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    More about this item


    Green growth; poverty; environmental externalities;

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F35 - International Economics - - International Finance - - - Foreign Aid

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