Allocating climate mitigation finance: a comparative analysis of five major green donors

Aidy Halimanjaya

Journal of Sustainable Finance & Investment, 2016, vol. 6, issue 3, 161-185

Abstract: A mitigation finance allocation framework (global needs, recipients’ performance, recipients’ needs and donors’ interests) is introduced as a way to identify determinants according to which individual donors allocate climate mitigation finance across developing countries. A two-part model was used to analyse a three-dimensional Rio Marker panel data set (donor-recipient-time), representing 5 green donors and 180 developing countries in the time period 1998–2010. Overall, while the determinants that the donors used to allocate mitigation finance across countries are heterogeneous, their responses to global needs are almost homogenous. Developing countries with large carbon sinks and good institutional performance tend to be the main destination for major green donors’ mitigation finance. Unsurprisingly, as with environmental aid, and aid more broadly, Japan and France’s allocation of mitigation finance is influenced by their geopolitical interests, which may divert it from its principal objective of mitigating greenhouse gas emissions. One new finding is Japan, Germany, France and Norway’s emerging interest in allocating mitigation finance to their Clean Development Mechanism (CDM) host countries, where they may seek to catalyse their private companies’ investment in green projects but risk overcrowding CDM host countries and promoting global inequality.

Date: 2016
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DOI: 10.1080/20430795.2016.1201412

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