Is there a trade-off between poverty reduction and climate action? : A glance at the determinants of official development assistance in environmentally relevant sectors

Abstract: In a time where environmental issues are increasingly important and measures are being taken to reduce greenhouse gas emissions and conserve biodiversity, aid that targets sectors relevant for these issues are important to examine. The world is simultaneously taking measures needed to increase economic development around the world, by allocating aid to developing countries. The potential conflict between these two goals, in regard to aid, is that the prerequisites of green development include education and human capital which poorer nations may lack. Hence, there could be a potential trade-off between climate action and poverty reduction in the allocation of official development assistance. By utilizing panel data over countries that receive ODA from 2012-2018 I use an OLS method to estimate the determinants of green aid and other aid, respectively. The study shows that green ODA is notallocated to wealthier countries than other ODA, if anything green ODA is allocated to countries with lower GDP per capita. In addition, the results from this study show that a country's education rate is positively correlated with green ODA. Furthermore, the study suggests that good governance is more important for green aid, than aid in other sectors.