Kiel Working Papers, Kiel Institute for World Economics
No 1598:
Does Foreign Aid Reduce Energy and Carbon Intensities in Developing Countries
Bettina Kretschmer, Michael Hübler and Peter Nunnenkamp
Abstract: Advanced OECD countries are widely held responsible to
contain global carbon emissions by providing financial and technical
support to developing economies, where emissions are increasing most
rapidly. It is open to question, however, whether more generous official
development assistance would help fight climate change effectively.
Empirical evidence on the effects of foreign aid on energy and emission
intensities in recipient countries hardly exists. We contribute to closing
this gap by considering energy use and carbon emissions as dependent
climate-related variables, and the volume and structure of aid as possible
determinants. In particular, we assess the impact of aid that donors
classify to be specifically related to energy issues. In addition to OLS
estimations, we perform dynamic panel GMM and LSDVC (corrected least
squared dummy variables) estimations. We find that aid tends to be
effective in reducing the energy intensity of GDP in recipient countries.
All the same, the carbon intensity of energy use is hardly affected.
Scaling up aid efforts would thus be insufficient to fight climate change
beyond improving energy efficiency
Keywords: Energy intensity, CO2 emissions, foreign aid, developing countries; (follow links to similar papers)
JEL-Codes: F35,; Q41,; Q55; (follow links to similar papers)
28 pages, February 2010
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