More than money: does climate finance support capacity building?

Frederik Stender; Ulf Moslener; Willem P. Pauw

doi:10.1080/13504851.2019.1676384

More than money: does climate finance support capacity building?

Frederik Stender (Corresponding author)
, Ulf Moslener
, Willem P. Pauw

Research output: Contribution to journal › Article › Academic › peer-review

11 Citations (Scopus)

Abstract

Effective capacity building is vital for developing countries to enable them to contribute to global efforts to mitigate climate change and adapt to its consequences. This letter provides first empirical evidence on the impact of climate finance on institutional capacity in recipient countries. Using data from the Global Environment Facility (GEF) and a World Bank index, we find a robust positive relation for sub-Saharan Africa from dynamic panel data estimation whereas no such effect is detected across remaining sample countries. While focusing on identification, however, our analysis should be seen as an initial piece of the puzzle. In light of the abundance of different capacity building concepts and definitions in the field of climate change future research is needed to understand the underlying mechanics.

Original language	English
Pages (from-to)	1247-1251
Number of pages	5
Journal	Applied Economics Letters
Volume	27
Issue number	15
DOIs	https://doi.org/10.1080/13504851.2019.1676384
Publication status	Published - 1 Sept 2020
Externally published	Yes

Funding

Insufficient institutional capacities impede many developing countries from implementing effective climate policies. In recognition of this, 113 of them make the implementation of their climate action plans under the Paris Agreement (so-called Nationally Determined Contributions) conditional upon international support for capacity building (Pauw et al. 2019 ). Among others, developing countries typically report capacity gaps of government staff and institutions, as well as capacity needs in mainstreaming climate considerations into national planning, greenhouse gas emission accounting, and vulnerability assessments (UNFCCC 2019 ), all of which may retard adequate response to climate change. The UN climate negotiations addressed this issue by, for example, establishing the Paris Committee on Capacity-building and deciding that the world’s largest dedicated climate fund to support climate activities in developing countries, the Green Climate Fund (GCF), ‘shall ensure adequate resources for capacity-building’ (UNFCCC 2011 , 63). Capacity building, however, has many facets and the absence of both, a generally accepted definition, and systematic monitoring of achievements, may partly explain why it is often perceived as unsuccessful in the field of climate change (Khan et al. 2018 ). Following a large body of empirical literature on the (non-) effects of foreign aid on institutional capacity in recipient countries (e.g. Busse and Gröning 2009 ; Jones and Tarp 2016 ), this letter provides first empirical evidence on the respective impact of climate fund financing. Theoretically, climate finance channelled through climate fund projects could be a stimulator in many ways, including learning-by-doing effects of recipient countries, and knowledge spill-over from implementing agencies. For our analysis, we use data from the Global Environment Facility (GEF) which has ‒by its own account‒ supported capacity development at all levels through funding regular projects and programmes since its inception in 1992 (GEF 2019a ). Our estimation strategy contrasts with the causality provided in Adenle, Manning, and Arbiol ( 2017 ), whose findings reversely suggest that better institutional capacity is associated with a higher number of GEF mitigation projects in a country-year across African countries, implying that lacking capacity limits participation in GEF projects and programs. II. This work was supported by the German Federal Ministry for Economic Cooperation and Development (BMZ).

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 13 Climate Action

Keywords

Climate finance
climate fund
Global Environment Facility
institutional capacity

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10.1080/13504851.2019.1676384

Cite this

@article{0c57326245db4492b8276c814ffe33ba,

title = "More than money: does climate finance support capacity building?",

abstract = "Effective capacity building is vital for developing countries to enable them to contribute to global efforts to mitigate climate change and adapt to its consequences. This letter provides first empirical evidence on the impact of climate finance on institutional capacity in recipient countries. Using data from the Global Environment Facility (GEF) and a World Bank index, we find a robust positive relation for sub-Saharan Africa from dynamic panel data estimation whereas no such effect is detected across remaining sample countries. While focusing on identification, however, our analysis should be seen as an initial piece of the puzzle. In light of the abundance of different capacity building concepts and definitions in the field of climate change future research is needed to understand the underlying mechanics.",

keywords = "Climate finance, climate fund, Global Environment Facility, institutional capacity",

author = "Frederik Stender and Ulf Moslener and Pauw, \{Willem P.\}",

note = "Funding Information: Insufficient institutional capacities impede many developing countries from implementing effective climate policies. In recognition of this, 113 of them make the implementation of their climate action plans under the Paris Agreement (so-called Nationally Determined Contributions) conditional upon international support for capacity building (Pauw et al. 2019 ). Among others, developing countries typically report capacity gaps of government staff and institutions, as well as capacity needs in mainstreaming climate considerations into national planning, greenhouse gas emission accounting, and vulnerability assessments (UNFCCC 2019 ), all of which may retard adequate response to climate change. The UN climate negotiations addressed this issue by, for example, establishing the Paris Committee on Capacity-building and deciding that the world{\textquoteright}s largest dedicated climate fund to support climate activities in developing countries, the Green Climate Fund (GCF), {\textquoteleft}shall ensure adequate resources for capacity-building{\textquoteright} (UNFCCC 2011 , 63). Capacity building, however, has many facets and the absence of both, a generally accepted definition, and systematic monitoring of achievements, may partly explain why it is often perceived as unsuccessful in the field of climate change (Khan et al. 2018 ). Following a large body of empirical literature on the (non-) effects of foreign aid on institutional capacity in recipient countries (e.g. Busse and Gr{\"o}ning 2009 ; Jones and Tarp 2016 ), this letter provides first empirical evidence on the respective impact of climate fund financing. Theoretically, climate finance channelled through climate fund projects could be a stimulator in many ways, including learning-by-doing effects of recipient countries, and knowledge spill-over from implementing agencies. For our analysis, we use data from the Global Environment Facility (GEF) which has ‒by its own account‒ supported capacity development at all levels through funding regular projects and programmes since its inception in 1992 (GEF 2019a ). Our estimation strategy contrasts with the causality provided in Adenle, Manning, and Arbiol ( 2017 ), whose findings reversely suggest that better institutional capacity is associated with a higher number of GEF mitigation projects in a country-year across African countries, implying that lacking capacity limits participation in GEF projects and programs. II. Funding Information: This work was supported by the German Federal Ministry for Economic Cooperation and Development (BMZ). Publisher Copyright: {\textcopyright} 2019 Informa UK Limited, trading as Taylor \& Francis Group.",

year = "2020",

month = sep,

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doi = "10.1080/13504851.2019.1676384",

language = "English",

volume = "27",

pages = "1247--1251",

journal = "Applied Economics Letters",

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AU - Stender, Frederik

AU - Moslener, Ulf

AU - Pauw, Willem P.

N1 - Funding Information: Insufficient institutional capacities impede many developing countries from implementing effective climate policies. In recognition of this, 113 of them make the implementation of their climate action plans under the Paris Agreement (so-called Nationally Determined Contributions) conditional upon international support for capacity building (Pauw et al. 2019 ). Among others, developing countries typically report capacity gaps of government staff and institutions, as well as capacity needs in mainstreaming climate considerations into national planning, greenhouse gas emission accounting, and vulnerability assessments (UNFCCC 2019 ), all of which may retard adequate response to climate change. The UN climate negotiations addressed this issue by, for example, establishing the Paris Committee on Capacity-building and deciding that the world’s largest dedicated climate fund to support climate activities in developing countries, the Green Climate Fund (GCF), ‘shall ensure adequate resources for capacity-building’ (UNFCCC 2011 , 63). Capacity building, however, has many facets and the absence of both, a generally accepted definition, and systematic monitoring of achievements, may partly explain why it is often perceived as unsuccessful in the field of climate change (Khan et al. 2018 ). Following a large body of empirical literature on the (non-) effects of foreign aid on institutional capacity in recipient countries (e.g. Busse and Gröning 2009 ; Jones and Tarp 2016 ), this letter provides first empirical evidence on the respective impact of climate fund financing. Theoretically, climate finance channelled through climate fund projects could be a stimulator in many ways, including learning-by-doing effects of recipient countries, and knowledge spill-over from implementing agencies. For our analysis, we use data from the Global Environment Facility (GEF) which has ‒by its own account‒ supported capacity development at all levels through funding regular projects and programmes since its inception in 1992 (GEF 2019a ). Our estimation strategy contrasts with the causality provided in Adenle, Manning, and Arbiol ( 2017 ), whose findings reversely suggest that better institutional capacity is associated with a higher number of GEF mitigation projects in a country-year across African countries, implying that lacking capacity limits participation in GEF projects and programs. II. Funding Information: This work was supported by the German Federal Ministry for Economic Cooperation and Development (BMZ). Publisher Copyright: © 2019 Informa UK Limited, trading as Taylor & Francis Group.

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AB - Effective capacity building is vital for developing countries to enable them to contribute to global efforts to mitigate climate change and adapt to its consequences. This letter provides first empirical evidence on the impact of climate finance on institutional capacity in recipient countries. Using data from the Global Environment Facility (GEF) and a World Bank index, we find a robust positive relation for sub-Saharan Africa from dynamic panel data estimation whereas no such effect is detected across remaining sample countries. While focusing on identification, however, our analysis should be seen as an initial piece of the puzzle. In light of the abundance of different capacity building concepts and definitions in the field of climate change future research is needed to understand the underlying mechanics.

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KW - climate fund

KW - Global Environment Facility

KW - institutional capacity

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SP - 1247

EP - 1251

JO - Applied Economics Letters

JF - Applied Economics Letters

IS - 15

ER -

More than money: does climate finance support capacity building?

Abstract

Funding

UN SDGs

Keywords

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