Strategic competition and donor interests: An econometric approach to the market for the allocation of climate development aid for renewable energy projects

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• Cristina Penasco Paton (Banque de France)
• Thursday 27 February 2025, 12:30-13:30
• W2.02, CJBS.

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The transition to decarbonised economies is essential for economic development in developing economies and it opens venues for developed countries to think strategically about energy and foreign policy in a changing geopolitical context in which energy security and climate targets need to go hand in hand. Analysing how bilateral aid for renewable energy projects is allocated is crucial to understand if donor countries prioritize social and environmental goals or if their motives are less altruistic and focused on their own economic and strategic benefits in the context of the geopolitics of the energy transition and therefore, if they favour targeted development. To examine how official development aid for renewable energy projects (RE ODA ) is allocated across countries we pay attention to donor and recipient characteristics and interactions but also to donor-donor strategic relationships. We use an estimation strategy that combines quantitative social network analysis and panel data models (pplmhdfe, Heckman selection and an IV strategy) to examine the technical, economic or geopolitical motives determining the allocation of bilateral aid for projects on non-emitting energy sources from 2009 to 2018 with OECD -CRS data. Using the degree centrality of the recipient, the Herfindahl index and the market share of the donors’ RE ODA on the recipients to measure the concentration of RE ODA and, therefore, the importance of a donor within the recipient’s network, we analyse the motivations behind the strategic donations of countries. We find that both political and strategic trade interests connected to the access to critical minerals, energy resources and policy drivers are factors affecting the targeted provision of ODA for low-and-middle income countries while, generally, recipients’ needs are not relevant factors driving the reception of RE ODA .

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