Does regional bias affect to the climate change adaptation aid flows by recipient need?

Abstract

This paper examines donor countries’ motivation on climate change adaptation finance flows, using the bilateral panel data reported on Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) Creditor Reporting System (CRS) from 2012 to 2017. Applying the two-stage Cragg’s model, the donors’ decision step is divided into (1) whether they give or not and (2) how much they give once they have decided to give. At each stage, the donor random effect and time fixed effect are adjusted at the same time. Empirical results show that the vulnerability of recipient countries to climate change has a positive effect on climate change adaptation aid on average, with mixed results on recipient merit and donor interest. However, when donors are regionally grouped, the results show more variation in outcomes in terms of donors’ motivation and recipient region. For instance, European donors tend to consider recipient needs as measured by the ND-GAIN vulnerability index; whereas, Asian donors do not show such a tendency at the allocation stage. Eastern and South-Eastern Asian recipients are more likely to receive climate change adaptation aid from Asian donors at the allocation stage but not from European donors. In the absencce of meta system to measure which recipient countries are less benefited compared to their climate change vulnerabiltiy level in the climate change adpatation finance flows, the results raise concerns on double inequality that still exists in countries left behind with a lack of climate change adaptation capacity and the need to consolidate schemes on aid distribution purposed to climate change adaptation among donor countries.