CO 2 mitigation in developing countries: the role of foreign aid

This paper empirically investigates the link between foreign aid and pollution, specifically CO2 emissions in developing countries. We use a more complete and recent dataset to re-assess the environmental impact of foreign aid. Focusing on 112 aid recipient countries over the period 1980 - 2013, we find that the effect of aid depends on the donor, with multilateral aid more likely to reduce pollution than bilateral aid for which we find no effect. However, when we more precisely look at the composition of bilateral aid, we find it has an effect when specifically targeted toward environment. This effect is non-linear, since we observe a pollution-reducing effect only for important amounts of bilateral environmental aid