Does Climate Aid Affect Emissions? Evidence from a Global Dataset 1

Sambit Bhattacharyya, Maurizio Intartaglia and Andy Mckay2 4 May, 2016 Abstract: We perform an empirical audit of the effectiveness of climate aid in tackling CO2 and SO2 emissions. Using a global panel dataset covering up to 131 countries over the period 1961 to 2011 and estimating a parsimonious model using the Anderson and Hsiao estimator we do not find any evidence of a systematic effect of energy related aid on emissions. We also find that the non-effect is not conditional on institutional quality or level of income. Countries located in Europe and Central Asia does better than others in utilising climate aid to reduce CO2 emissions. Our results are robust after controlling for the Environmental Kuznets Curve, country fixed effects, country specific trends, and time varying common shocks. JEL classification: D72, O11 Key words: Climate Aid; Emissions; Energy

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We gratefully acknowledge financial support from the European Commission funded Seventh Framework Programme (FP7) project entitled “Knowledge Based Climate Mitigation Systems for a Low Carbon Economy (COMPLEX)” [Grant Number: 308601]. We also acknowledge comments by and discussions with Saeed Moghaer, Elena Rovenskaya, Nick Winder, and Richard Tol. All viewpoints and any remaining errors are our own and do not represent the views of the European Commission. 2 Bhattacharyya: Department of Economics, University of Sussex, email: [email protected]. Intartaglia: Department of Economics, University of Sussex, email: [email protected]; Mckay: Department of Economics, University of Sussex, email: [email protected].

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