Does climate finance enhance mitigation ambitions of recipient countries?

Abstract

International public climate finance is an important catalyst for curbing growing emissions from developing countries and enabling them to adapt to the impacts of climate change. Developing countries consider the fulfillment of their Paris Agreement emission reduction pledges to be conditional on receiving climate finance. Prior studies have hypothesized that increasing financial support to developing countries will likely increase their climate ambitions. With the availability of updated Nationally Determined Contributions (NDC) and climate finance data, this article empirically explores this question. Using two empirical strategies, this article found positive but statistically insignificant effect of climate finance on the mitigation ambitions of recipient countries. This effect on mitigation ambition was higher for least developed countries but weaker for small island developing states. This article's analysis should be seen as an initial piece of the puzzle. Findings of this article can inform climate financing strategies of donors enhancing trust with developing countries.