Summary
This panel econometric analysis of 36 developing economies (2001–2019) examines whether climate finance and foreign capital inflows drive decarbonisation and environmental quality improvements. The research finds that climate finance contributes positively to environmental degradation mitigation, with stronger effects in lower-middle-income countries where regulatory quality also supports environmental quality. However, the study reports a counterintuitive negative association between foreign capital inflows and human development outcomes, whilst identifying a positive bilateral relationship between climate finance and human development.
UK applicability
This study focuses on developing economy contexts and climate finance allocation mechanisms relevant to UK international development and climate commitments. The findings on regulatory quality's role in translating climate finance into environmental gains may inform UK bilateral aid design, though direct applicability to UK domestic agricultural or environmental policy is limited.
Key measures
Climate finance flows, foreign direct investment, environmental degradation indices, human development indicators, regulatory quality measures
Outcomes reported
The study examined the relationship between climate finance, foreign capital inflows, environmental degradation, and human development across 36 developing economies from 2001–2019. It measured the differential effects of climate finance on environmental quality by income level and assessed bilateral relationships between climate finance and human development.
Topic tags
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