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International Climate Aid and Trade
[Aide Climatique Internationale et Commerce]

Author

Listed:
  • Basak Bayramoglu

    (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Jean-François Jacques

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

  • Clément Nedoncelle

    (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Lucille Neumann-Noel

    (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Foreign aid allocation by donor countries to developing economies is known to be motivated by the donor country's bilateral trade interests. Does this apply also to bilateral climate aid? In this paper, we combine theoretical and empirical analyses to investigate how bilateral trade affects donor countries' allocations of bilateral climate aid. Our theoretical analysis develops a simple model to support our hypothesis that bilateral trade has a positive impact on climate aid transfers. The model highlights the terms-of-trade and positive income effects of climate aid, and predicts a positive relationship between donor countries' exports to and imports from recipient countries and their climate aid transfers. The empirical analysis is based on bilateral climate aid data for 2002 to 2017. We employ fixed effects and instrumental variable-2 stage least square estimations (IV-2SLS) with a shift-share instrument to overcome the endogeneity of trade. Our empirical results show that donors' exports have a significant, robust, positive effect on climate aid transfers.

Suggested Citation

  • Basak Bayramoglu & Jean-François Jacques & Clément Nedoncelle & Lucille Neumann-Noel, 2022. "International Climate Aid and Trade [Aide Climatique Internationale et Commerce]," Working Papers hal-03833067, HAL.
    • Handle: RePEc:hal:wpaper:hal-03833067
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03833067v1
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    Cited by:

    1. Bertille Daran & Clément Nedoncelle, 2025. "The deforestation effect of climate aid [L'effet déforestation de l'aide climatique]," Working Papers hal-05310970, HAL.
    2. Imen Ghattassi & David Dosso & Francisco Serranito, 2025. "Determinants of International Climate Finance: A Gravity Panel Model Approach," Working Papers hal-04984013, HAL.
    3. Yannick Guyonvarch, 2024. "PSAE Brief n°8 - Construire des intervalles de confiance en présence de dépendance multi-grappe ? Quelques clés méthodologiques," Post-Print hal-04939835, HAL.
    4. Bau, Nicolas & Dietrich, Simone, 2025. "What geopolitical returns does ODA bring?," Kiel Working Papers 2305, Kiel Institute for the World Economy.
    5. Lisa Chauvet & Marin Ferry, 2023. "L’efficacité de l’aide : quelles évolutions de la littérature depuis deux décennies ? WP329," Working Papers hal-04141543, HAL.
    6. repec:hal:cepnwp:hal-04984013 is not listed on IDEAS
    7. Dreher, Axel & Lang, Valentin & Reinsberg, Bernhard, 2024. "Aid effectiveness and donor motives," World Development, Elsevier, vol. 176(C).
    8. Ralph Winkler, 2023. "On the Relationship between Adaptation and Mitigation," CESifo Working Paper Series 10371, CESifo.
    9. Zoungrana, Tibi Didier & Lompo, Aguima Aimé Bernard & Toé, Daouda Lawa tan, 2024. "Effect of climate finance on environmental quality: A global analysis," Research in Economics, Elsevier, vol. 78(4).
    10. Yu, Yuyuan & Qayyum, Muhammad & Li, Shijie, 2024. "Trade dynamics of environmental goods within global energy economy and their impacts on green technological innovation: A complex network analysis," Energy Economics, Elsevier, vol. 140(C).
    11. Hoekman, Bernard & Santi, Filippo & Shingal, Anirudh, 2023. "Trade effects of non-economic provisions in trade agreements," Economics Letters, Elsevier, vol. 226(C).
    12. Thanh Ha, Le, 2025. "Gauging the level of dynamic between climate policy and foreign aid in Vietnam," International Economics, Elsevier, vol. 182(C).

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    Keywords

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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