Official development assistance and carbon emissions of recipient countries: A dynamic panel threshold analysis for low- and lower-middle-income countries

Abstract

Better use of official development assistance (ODA) to mitigate carbon emissions in developing countries requires a better understanding of the effects of ODA on carbon emissions. The dynamic panel threshold regression model is employed to explore the effects of ODA and carbon emissions in 59 low-income and lower-middle-income countries. Urbanization is employed as a threshold variable. The proposed model can better reflect endogenous explanatory variables, which indicate the inertial characteristics and dynamic changes of carbon emissions. The first-order lag coefficients of carbon emissions in the proposed model have a significant positive effect, indicating that the growth of carbon emissions in these countries has a strong path dependence. Moreover, when the urbanization of recipient countries is below the threshold value, a 1% increase in ODA leads to a 0.2259% increase in carbon emissions. When urbanization exceeds the threshold value, a 1% increase in ODA leads to a 0.2281% increase in carbon emission. In addition, the conditional convergence level of carbon emission growth in low-urbanization areas is much greater than that in high-urbanization areas. With the development in urbanization, if no effective measures are developed and implemented, there is a risk that carbon emissions of recipient countries might develop from “low-emission balanced growth” to “high-emission balanced growth.”