CGD NOTE 359 | - Does Mitigation ODA Reduce Emissions? - Reporting on mitigation ODA is hazy

Gavard and Schoch use a lagged approach to look for the association between past climate finance on subsequent emissions and suggest that the relationship is positive over the five years following commitment: one additional billion dollars of mitigation finance per million tons of national emissions is associated with an increase in emissions by a little over 1 percent. [...] I look at the relationship between 2020 emissions and cumulative mitigation ODA over 18 years, allowing for the current structure of the economy and the historical emissions intensity of output in the country prior to ODA receipt. [...] Indeed, the sign of the coefficient on mitigation ODA is positive: in two economies with similar incomes, levels of industrialization and historical emissions levels, the economy which has received more mitigation ODA between 2002-20 is likely to see slightly higher emissions in 2020 than the country that received less mitigation ODA. [...] While the significance of the result is robust to focusing solely on ODA principally designed to mitigate (excluding ODA “significantly” designed to mitigate), the positive relationship of mitigation ODA loses statistical significance if: you look at the bivariate relationship of emissions against cumulative ODA; you take out countries that received cumulative 10 percent of GNI or more in mitigati. [...] Especially if the financing comes at the cost of development ODA to lower-income countries (and especially quality ODA of the type delivered through the World Bank’s International Development Association), that’s a real loss to the poorest countries that are least responsible for, but will suffer the most from, climate change.