Being vulnerable; it’s attractive to a point. An exploration of the major determinants of climate change adaptation finance allocation.

Abstract

I study the major determinants of climate change adaptation finance allocation. Both the intensive margin decision and the extensive margin decision are considered. All adaptation finance allocations made by OECD Development Assistance Committee nations to eligible developing countries or territories since 2011 are considered. Using a two-step hurdle model to explore the determinants of both selection for and allocation of adaptation finance, I find evidence against donor coordination and strong support for a concave relationship between the vulnerability of countries to climate change and their probability of selection as an adaptation finance recipient. This concave relationship is also present in the second stage of the model which estimates the allocation patterns of donors. This finding is in contrast to a previous study by Betzold and Weiler (2016) which found a strictly positive relationship between vulnerability and the probability of selection. My results suggest that an overall increase in bilateral climate finance should not be expected to impact upon all at risk nations to the same degree. The observed selection and allocation patterns indicate that on average, the nations most vulnerable to climate change are less likely to be selected as finance recipients. In addition, when selected, those most vulnerable tend to receive less finance than their less vulnerable neighbours.