Climate or development: Is ODA diverted from its original purpose?

We analyze the interaction of climate and development policy that has taken place since the early 1990s. Increasing dissatisfaction about the results of traditional development cooperation and the appeal of climate policy as a new policy field led to a rapid reorientation of aid flows. At the turn of the century, over 7% of aid flows were spent on greenhouse gas emissions mitigation. However, the contribution of emissions mitigation projects to the central development objective of poverty reduction as specified in the Millennium Development Goals is limited and other project types are likely to be much more effective. Adaptation to climate change can be expected to have higher synergies with poverty alleviation than mitigation, primarily through its impact on health, the conservation of arable land and the protection against natural disasters. An analysis of the Clean Development Mechanism shows that projects addressing the poor directly are very rare; even small renewable energy projects in rural areas tend to benefit rich farmers and the urban population. Use of development aid for CDM projects and / or their preparation via capacity building is thus clearly not warranted. --ODA,climate policy,poverty reduction,MDGs,CDM,mitigation,adaptation

UN approval of greenhouse gas emission reduction projects in developing countries: The political economy of the CDM Executive Board

The approval of methodologies and individual projects in the context of the Kyoto Protocols Clean Development Mechanism (CDM) is often an issue of national interest. Decisions of the CDM Executive Board (EB) can thus be expected to be highly politicized. Based on data for about 250 methodologies and about 1000 projects discussed by the EB so far, this paper provides a first econometric analysis of this hypothesis. The results suggest that indeed, along with formal quality criteria, political-economic variables determine the final EB decision. This is most clearly the case for decisions on CDM projects which are far less transparent than those on CDM methodologies. In particular, EB membership of the country or countries concerned raises the chances of a project to be approved. Moreover, clearly, with rising numbers of methodologies and projects, EB decision making has become stricter over time. --International climate policy,CDM,political economy,rational choice,international organization

Climate business for poverty reduction? The role of the World Bank

The World Bank is increasingly active in the area of climate change mitigation. While it justifies this engagement with its poverty reduction objective and its capacity to pave the way for new business activities in developing countries, critics blame the World Bank as a "climate profiteer” and as an unfair competitor in private markets. Our econometric analysis of over 2,000 projects registered until May 2010 under the Clean Development Mechanism (CDM) of the Kyoto Protocol allows us to compare the activities of the Bank with those of other, primarily private actors. The results indicate that hardly any of the CDM projects can be considered as strongly pro-poor. Nevertheless, in comparison to the rest of the CDM projects, the Bank's portfolio shows a relatively clearer orientation towards poor countries. Within these countries, however, the Bank does not show any particular pro-poor focus, and tends to implement those projects that are commercially most attractive. Moreover, there is no evidence of the Bank phasing out its activities once the market becomes fully operational, which goes against its professed pioneering and catalytic role in carbon market

Old wine in new bottles? Does climate policy determine bilateral development aid for renewable energy and energy efficiency?

Since the UN Conference on Environment and Development in Rio de Janeiro in 1992 bilateral and multilateral donors have stressed that development assistance has increasingly been oriented towards climate-friendly interventions. With respect to energy aid, this should lead to a substantial increase in projects related to renewable energy and energy efficiency. Given a new database of hundreds of thousands of bilateral development assistance projects, we can assess whether such a reorientation has indeed taken place. We find that, contrary to expectations, the share of bilaterally-funded renewable energy and energy efficiency projects did not increase over the period from 1980 to 2008. This share fluctuated greatly, following the price of oil, peaking with the second oil crisis of the early 1980s. The impacts of global climate policy treaties are minor or inexistent. ‘Traditional’ renewable energies such as hydro and geothermal declined, while “new” renewables showed two peaks in the early 1980s and late 1990s. Differences between donor countries are huge. Several countries, including climate sceptics such as the US and Australia, but also the UK and Switzerland, saw a consistent decline. The self-proclaimed climate pioneers such as Germany, the Netherlands, Norway and Sweden show peaks related to both the oil crises and international climate policy. Only in Austria, Denmark, Finland and Spain can ‘new’ climate mitigation development assistance be found

Transnational climate governance initiatives: designed for effective climate change mitigation?

The Paris Agreement of December 2015 set a highly ambitious target for global climate change mitigation, but it remains unclear how it will be reached, and the individual countries’ pledges do not add up to the overall target. Can transnational climate governance initiatives be expected to fill the gap? We assess 109 such initiatives based on four design criteria: existence of mitigation targets; incentives for mitigation; definition of a baseline; and existence of a monitoring, reporting, and verification procedure. About half of the initiatives do not meet any of these criteria, and not even 15% satisfy three or more. Many initiatives were created only for the purpose of networking. Orchestration by national governments and international organizations increases the number of criteria met. On average, the mitigation focus of new initiatives was highest during the “heyday” of the international climate policy regime between 2005 and 2010. While mitigation-oriented entrepreneurial initiatives are generally started only in response to existing regulation, subnational governments and NGOs show some attempts to go beyond that and compensate for insufficient regulation at the national and international level. Yet, given the low overall quality assessment, transnational climate governance initiatives cannot be expected to fill the “mitigation gap.

Climate or development: is ODA diverted from its original purpose?

We analyze the interaction of climate and development policy that has taken place since the early 1990s. Increasing dissatisfaction about the results of traditional development cooperation and the appeal of climate policy as a new policy field led to a rapid reorientation of aid flows. At the turn of the century, over 7% of aid flows were spent on greenhouse gas emissions mitigation. However, the contribution of emissions mitigation projects to the central development objective of poverty reduction as specified in the Millennium Development Goals is limited and other project types are likely to be much more effective. Adaptation to climate change can be expected to have higher synergies with poverty alleviation than mitigation, primarily through its impact on health, the conservation of arable land and the protection against natural disasters. An analysis of the Clean Development Mechanism shows that projects addressing the poor directly are very rare; even small renewable energy projects in rural areas tend to benefit rich farmers and the urban population. Use of development aid for CDM projects and / or their preparation via capacity building is thus clearly not warranted. We further analyze whether the use of development aid for climate policy could be justified as a countermeasure against the emission increase related to successful development itself. However, countries that are achieving an improvement of human development from a low level are unlikely to increase their energy consumption substantially. Only at a level where the middle class expands rapidly, energy consumption and greenhouse gas emissions soar. Thus targeting middle class energy consumption by appliance efficiency standards and public transport-friendly urban planning are the most effective measures to address developing country emissions. Rural renewable energy provision in poor countries has a much higher impact on poverty, but a much lower impact on greenhouse gas emissions. We conclude that while there are valid reasons for long-term collaboration with emerging economies on greenhouse gas mitigation, there should be a separate budget line for such activities to avoid "obfuscation” of a decline of resources aimed at poverty alleviation. Nevertheless, mitigation will remain attractive for donors because it ensures quick disbursements and relatively simple measures of success. Moreover, mitigation activities in developing countries provide politicians in industrialized countries with a welcome strategy to divert the attention of their constituencies from the lack of success in reducing greenhouse gas emissions domesticall

The Political Economy of US Aid to Pakistan

Variations of bilateral aid flows are difficult to explain on the basis of official development objectives or recipient need. At the example of US aid to Pakistan, this paper suggests alternative political economic explanations, notably the relevance of ethnic lobbying and the relevance of US business interests. Time series regressions for the period from 1980 to 2002 and logistic regressions based on votes for the Pressler and the Brown Amendment confirm the significance of these political economic determinants. While in case of the Pressler Amendment, the direct influence of population groups of Indian and Pakistani origins seems to have played a predominant role, the role of ethnic business lobbies appears to have dominated in the context of the Brown Amendment. Time series analysis also provides some evidence for the impact of US business interests based on FDI and exports, but these effects appear to be comparatively small.Public Choice, ethnic lobbying, foreign aid, International Development, Political Economy, D70, F35,

The Business of Development: Trends in Lending by Multilateral Development Banks to Latin America, 1980-2009

In this paper we investigate how country shareholding arrangements affect the lending of multilateral development banks (MDBs) under different economic conditions and over time. To do so, we consider three different types of MDBs - one dominated by non-borrowers (the World Bank), another controlled by borrowing countries (the Corporación Andina de Fomento, CAF), and a third where control is more evenly split between borrowers and non-borrowers (the Inter-American Development Bank, IADB) - and a common set of borrowing countries in Latin America. Descriptive statistics as well as econometric analysis based on seemingly unrelated regression estimation (SURE) and panel regressions indicate that the lending of the three MDBs does indeed react in a systematically different way to specific economic conditions. As a general trend, countries increasingly favor the CAF and IADB as a source of multilateral borrowing, while during crisis times World Bank lending tends to increase significantly and more strongly than lending by the CAF. IADB lending also increases very strongly during crises, but remains at a relatively high level throughout. In line with expectations based on the different shareholder arrangements, the paper also finds links between borrower government policy stances and World Bank/IADB lending, but none for the CAF. --