Is energy aid a powerful weapon to promote energy decarbonization transition? A global case

Abstract

The energy decarbonization transition in developing countries faces significant financial constraints, and foreign aid directed towards the energy sector provides potential solutions. However, existing research lacks empirical validation of the relationship and mechanisms between energy aid and the energy decarbonization transition. Hence, this study aims to explore the effectiveness of energy aid in driving the energy decarbonization transition in recipient countries and examines the presence of asymmetry and underlying mechanisms. Our findings indicate that energy aid effectively promotes the transition to energy decarbonization, with the most substantial positive impact stemming from aid directed towards renewable energy generation, energy policy, and energy distribution. Moreover, the relationship between energy aid and energy decarbonization transition exhibits asymmetry. Additionally, energy aid indirectly drives the energy decarbonization transition by fostering financial development and enhancing human capital, and its positive impact is further amplified by government quality and the demand for clean fuels. The novelty of this study lies in its comprehensive analysis of the intricate interactions between energy aid and the energy decarbonization transition. These findings have crucial policy implications for international organizations and governments seeking to support sustainable energy transitions in developing countries and enhance the effectiveness of energy aid.