Energy Strategy Reviews 44 (2022) 100971

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Energy Strategy Reviews

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Climate-related development finance and renewable energy consumption in

greenhouse gas emissions reduction in the Congo basin
Nkwetta Ajong Aquilas a, *, Johannes Tabi Atemnkeng b
a
Department of Agricultural Economics and Agribusiness, University of Buea, P.O Box 63, Buea, Southwest Region, Cameroon
b
Director of Financial Affairs, University of Buea, P.O Box 63, Buea, Southwest Region, Cameroon

A R T I C L E I N F O A B S T R A C T

Keywords: The global increasing trend in total greenhouse gas emissions in recent decades has triggered the need for
Climate change climate-related development financing. This study analyzes the effects of climate-related development mitigation
Climate change mitigation finance and renewable energy consumption on greenhouse gas emissions in the Congo Basin. Using panel data
Climate change policy
from 2002 to 2020, panel regression estimates empirically reveal (1) a minimal significant increase in green­
Energy consumption
Greenhouse gas emissions
house gas emissions with respect to an increase in climate-related development mitigation finance (2) An in­
crease in climate-related mitigation finance significantly promotes the consumption of renewable energy (3) An
increase in renewable energy consumption reduces greenhouse gas emissions (4) An increase in renewable en­
ergy consumption reduces the effect of climate-related mitigation finance on greenhouse emissions. This study
suggest the continuous flow of climate-related development mitigation finance from donor countries and bodies
to developing countries on a more regular basis and the putting in place of a mechanism that tracks climate funds
to ensure that they are effectively used in generating renewable energies such as solar, hydroelectric, biomass,
wind and geothermal energies.

1. Introduction
The recent increasing trend in greenhouse gas (GHG) emissions in
developing countries, due to the reliance on non-renewable energy to
fuel industrialization and economic growth is re-echoing the need to
focus on climate change mitigation [1–4]. For instance, economic
transformation in China, India and Pakistan is powered by
non-renewable energy, which is highly increasing total greenhouse gas
emissions [5–7]. Being the largest world producer of greenhouse gases
(GHGs), China’s objective of peaking carbon dioxide (CO2) emissions by
2030 and becoming carbon neutral by 2060 shows that there is no
indication of slowing down GHG emissions [8]. The increasing CO2
emissions of most of Africa is due to anthropogenic activities and rapid
economic growth, which also heavily depends on non-renewable energy
consumption [9–11]. The increase in GHG emissions in South Asia, East
Asia and Sub-Saharan Africa (SSA) between 1990 and 2018 has been
steady, with SSA recording the lowest levels [12]. Caglar and Mert [13]
posits that the behaviour in total GHGs is explained by the carbon
hysteresis hypothesis, noting that China and India are experiencing
positive hysteresis (continuous increase in emissions) while the United
States, Japan and Russia are experiencing negative hysteresis
(continuous fall in emissions). However, reducing CO2 emissions and the
global impacts of climate change on man and the environment is a
matter of global concern [7,10,14].
Climate change mitigation especially reducing GHG emissions has
become the cornerstone of climate policy initiatives, most recent of
which are the Kyoto Protocol of 1997 and the Paris Agreement of 2015.
Aimed at maintaining global average temperatures below 2 ◦ C, pre­
venting temperatures from increasing beyond 1.5 ◦ C and reaching zero
emissions by 2050 [15], these agreements have earmarked official
development assistance (ODA) as one of the main strategies to tackle
climate change [14]. This strategy calls for funds and investments from
more developed countries (heavy GHG emitters) to support developing
countries with lower but rising levels of GHG emissions and higher
vulnerability to climate change risks and its impacts [16,17]. The 2009
Copenhagen Accord saw developed countries collectively pledging to
mobilize funds in climate action worth 100 billion US dollars every year
by 2020 to support developing countries in producing low-carbon
technology and engaging in climate-resilient development actions.
Within this context, developed countries pledged 30 billion US dollars
between 2010 and 2012 (according to the United Nations Framework
Convention on Climate Change in 2014 as cited in Refs. [18,19].

* Corresponding author.
E-mail addresses: aquilas2020@gmail.com (N.A. Aquilas), jtabiatem@yahoo.com (J.T. Atemnkeng).

https://doi.org/10.1016/j.esr.2022.100971
Received 21 April 2022; Received in revised form 7 September 2022; Accepted 19 September 2022
Available online 28 September 2022
2211-467X/© 2022 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
N.A. Aquilas and J.T. Atemnkeng
However by 2019, 79.6 billion US dollars in total climate finance had
been provided by developed to developing countries, about 20 billion
US dollars short of the 2020 target [20].
More recently, the Glasgow climate pack of 2021, dubbed COP26
provided a chance for the Parties to evaluate the progress already made,
renew and update their commitments towards limiting global average
temperatures to 1.5 ◦ C. With the primordial objective of transforming
the 2020’s in to a decade of climate support and action, the Parties were
urged to increase their Nationally Determined Contributions (NDCs) in
2022 in view of achieving the 2030 targets. It also called on accelerating
development, deploying and distributing technologies as well as
adopting low-carbon emissions policies by governments and acceler­
ating the transition from nonrenewable to renewable energy sources
[21]. This underscores the necessity to understand to what extent
climate finance and renewable energy affects emission of GHGs so as to
properly guide climate policy. This is especially even more important
within the context of African countries, which are still at an early stage
of industrialization and growth but are expected to significantly
contribute in curbing GHG emissions. In this direction, most studies
have however concentrated on general official development finance,
some of which are [1,14,22–26].
The link between climate-related development finance and GHG
emissions has received little attention in empirical literature, but this
body of knowledge is growing and findings are mixed. Some scholars
[16,27–29] contend that climate-related development assistance does
not significantly reduce GHG emissions. Altaghlibi & Wagener [14]
added that conditional climate mitigation finance is ineffective in
reducing GHG emissions, emphasizing the relative importance of gen­
eral or unconditional development finance. Other studies [11,18,30–32]
posit that climate finance significantly reduce CO2 emissions. However,
the conclusions from these studies are premature because of insufficient
empirical evidence, to which this study contributes and also due to the
inconclusiveness of previous findings. Again, while it is true according to
the Paris Agreement that GHG emissions will take longer to peak for the
less developed than developed countries before eventually start
declining (signaling a non-linear relationship between GHG emissions
and climate mitigation finance), literature to the best of the researchers’
knowledge has actually not taken this in to consideration. This study
accounts for this shortcoming by incorporating a quadratic term of
climate related development finance as an independent variable to allow
for the possibility of a maximum turning point level of emissions after a
certain level of climate finance. Typically, GHG emissions are expected
to initially increase with climate mitigation finance, reach their highest
level and start falling as climate finance continues to increase. This idea
reflects an Environmental Kuznets Curve proposition [33–37] and also
sheds light on the possibility of diverting climate aid to other economic
activities.
In order to reduce climate change, countries are increasingly tran­
sitioning to renewable energy technologies [1,3,10,38–40] which is the
main path for reducing CO2 emissions [41], in line with Sustainable
Development Goal (SDG) 7 and the Paris agreement. Caglar & Ulug [42],
Caglar & Mert [13] reiterated that SDGs ease the transition to a low
carbon economy, adding that environmental awareness is increasing to
set countries on the path to achieving the 2030 and 2050 targets. Caglar
et al. [43] add that the sustainability of the environment is a global
problem, which requires keeping global average temperatures below
manageable limits. Only a just transition to renewable energy technol­
ogies can guarantee this. Particularly, the SDG 7 emphasizes access to
affordable, reliable and modern energy by all; increase in the proportion
of renewable energy in the total energy mix and significant improve­
ments in energy efficiency to reduce GHG emissions. According to
Caglar & Ulug [42] and Caglar [44], this process is however complicated
by the fact that research and development expenditures to accelerate
energy efficient technologies are not enough to ensure environmental
sustainability. From the forgoing, it is obvious that understanding the
channels through which climate aid affects GHG emissions is necessary,
2
Energy Strategy Reviews 44 (2022) 100971
to guarantee the effectiveness of climate finance and instill trust in
climate policy, since the direct effect of climate-related development
mitigation finance on GHG emissions offers little explanation on the
place of renewable energy in offsetting the growth of greenhouse gases.
In this respect, two main causal relationships in the climate-related
development finance-GHG emissions channel are analyzed; the rela­
tionship between climate mitigation finance and renewable energy
consumption and that between renewable energy consumption and GHG
emissions.
The first relationship relates to the change in the energy structure as
a result of induced climate financial flows. Increased climate aid is ex­
pected to shift priority from non-renewable energy to renewable energy.
This requires that while climate-related development finance is
increasing renewable energy utilization, it should at the same time be
reducing nonrenewable energy use. Moreover, increased use of renew­
able energy should reduce nonrenewable energy use. Li et al. [45]
analyzed these links and showed that climate-related development
finance significantly increased production of renewable energy while
increasing nonrenewable energy generation also. However, renewable
energies production led to a reduction in nonrenewable energy pro­
duction over time. Unlike [45], the current study approaches the change
in energy structure from the demand side, recognizing that it is the
energy consumption behaviour that stimulates production of energy. In
this regard, the effects of (a) climate finance on renewable consumption
(b) climate finance on nonrenewable energy consumption (c) renewable
energy consumption on nonrenewable energy consumption are consid­
ered. In this study, the effect of climate related development finance on
consumption of nonrenewable energies is explained by the effect of
climate-related development finance on GHG emissions. This is because
GHG emissions do originate from non-renewable energies consumption
such as fossil fuels, so they constitute a proxy for non-renewable energy
(fossil fossils). An increase in GHG emissions in response to an increase
in climate finance would therefore mean that climate finance increases
fossil fuels consumption. We employed GHG emissions to proxy fossil
fuels due to the non-availability of fossil fuels consumption data for
some countries in the study. Again, the effect of renewable energy
consumption on nonrenewable energy consumption can be explained by
the second relationship in the climate finance-GHG emissions channel,
which investigates the effect of renewable energy consumption on GHG
emissions.
The literature investigating the effect of climate-related development
assistance on renewable energy consumption appears to be missing.
Many works have investigated the determinants of renewable energy
consumption, amongst which include [46–51], but none considered
climate finance as a factor. Some have however dwelled on the role of
green bonds in consumption of renewable energy. For instance Ref. [50],
found that green finance significantly reduced instead of increasing the
consumption of renewable energy, arguing that investment in renewable
energies is crowded-out by green investments in housing and trans­
portation. Rasoulinezhad & Taghizadeh-Hesary [51] however held that
green bonds encourage projects in green energy, thereby reducing CO2
emissions. We contribute by adding to previous studies on renewable
energy consumption, focusing particularly on direct climate financial
assistance.
Many studies have analyzed the effect of renewable energy con­
sumption on GHG emissions (the second relationship in the climate-
related development finance-GHG emissions channel), with most
concluding that the adoption of renewable energies reduces GHG
emissions. For instance Refs. [2,3,38,40,52–57] are amongst recent
studies resolving that the use of renewable energy technologies can
reduce GHG emissions and climate change. Renewable energy is more
energy secure than non-renewable energy which only worsens the
environment. While this study adds to this literature, it significantly
contributes by analyzing the interactive effect of climate-related
development finance and renewable energy consumption on the emis­
sion of GHGs, an aspect which to the best of the researchers’
N.A. Aquilas and J.T. Atemnkeng Energy Strategy Reviews 44 (2022) 100971

understanding is completely missing in the literature. This interaction is
particularly important as it helps in understanding whether renewable
energy consumption enhances or worsens the relationship between
climate-related development finance and GHG emissions reduction.
Based on the forgoing, this study sets out to pursue three operational
objectives which are to (1) analyze the effect of climate-related devel­
opment finance on GHG emissions, which is the direct channel (2) assess
the effect of renewable energy consumption on GHG emissions (3)
analyze the interaction effect of climate-related development finance
and renewable energy consumption on GHG emissions. Objectives (2)
and (3) seek to measure the effect of climate finance on GHG emissions
through renewable energy consumption which shows the change in the
energy structure.
The contributions of the current study to previous literature are
worth highlighting. First, the body of knowledge focusing on the com­
bined effect of climate-related development finance and renewable en­
ergy consumption on GHG emissions reduction is very limited. After
close to two decades of serious advocacy for climate protection, more
empirical studies are needed to ensure that climate policies undertaken
at whether at national or global level are informed by empirical evi­
dence. Second, this study is the first to consider the non-linear effects of
climate-related development finance on GHG emissions. Since the GHG
emission levels of the Parties under the climate agreements are expected
first to peak before falling, the idea of introducing a quadratic term of
climate finance is to determine at what level of climate financial support
this peak should occur. This would guide climate policy by matching
climate aid to the evolution of GHG emissions. This is particularly
relevant in the context of developing countries since their GHG emission
levels should take longer to peak relative to developed countries. Third,
while it is generally accepted that renewable energy consumption is the
main path through which GHG emissions can be reduced, the mediating
role of renewable energy consumption on the effect of climate mitiga­
tion finance on GHG emissions reduction is missing in the literature.
This study accounts for this limitation by interacting climate finance and
renewable energy consumption. This interaction is important because it
highlights the place of renewable energy in the energy structure. Fourth
and above all, we have not come across similar studies focusing on the
Congo Basin, a region that possesses high ability to regulate the world’s
carbon emissions, after the Amazon.
After the introductory section, the remainder of this paper is ar­
ranged as follows; Section two presents the materials and methods while
the empirical findings are presented and discussed in section three.
Section four wraps up with the conclusions and policy implications.
2. Materials and methods
tons (Mt) of CO2 yearly, making it a stable carbon sink. The forest is
relatively well preserved and plays a key role in climate change miti­
gation. Congo Basin forests are regarded as a common world asset due to
their importance, reason for which its conservation and management is
the subject of many multilateral treaties [60]. However, anthropogenic
activities are threatening the continued existence due to forest loss while
tree growth is stifled by heat and droughts. Hubau et al. (2020) cited by
Ref. [59] contend that until the mid-22nd century, the sequestration
power of Congo Basin forests might fall by 10%. The net deforestation
rate of this forest which stood at 0.09% from 1990 to 2000 increased to
0.17% in 2005 [61]. The World Wide Fund (WWW) notes that about
90% of CO2 emissions in the Congo Basin are from deforestation and
degradation of the forest. In terms of climate change mitigation, the
three main policy measures adopted by Central Africa are; sustainable
management of forest resources; strengthening of forest governance
and; engagement with the REDD+ (Reducing Emissions from Defores­
tation and forest Degradation, plus sustainable forest resources man­
agement and conservation and the enhancement of forest carbon stocks)
[62]. The foregoing shows how important forests of the Congo Basin are
to the World and underscores the need to continue preserving it both for
the present and future generalizations. Ironically, empirical research
that focuses on the Congo basin is scanty, further necessitating this
study.
2.2. Variables and data sources
Data used in this study was obtained from four recognized secondary
sources. Climate-related development finance data was extracted from
the [20] Development Assistance Committee (DAC) Creditor Reporting
System (CRS). This dataset provides climate-related development
finance statistics from DAC member countries and multilateral devel­
opment bank and other multilateral sources. Data for institutions
(measured by the rule of law) was obtained from the [63]. The estimate
of governance ranges from about − 2.5 for weak governance perfor­
mance to 2.5 for strong governance performance. The World Develop­
ment Indicators of the [12] database provided data for the remaining
variables. Table 1 describes the variables, their units of measurement
and the source (s) from which the data was obtained.
Table 1
Variables, units of measurement and data source.
Short Description of variable Unit of measurement Data
name source

GHG Greenhouse gas emissions Kilotons (kt) of CO2 World

2.1. Scope of the study per capita equivalent Bank
CDF Climate mitigation Current thousand US OECD
The time period covered in this study is from 2002 to 2020, con­ financea dollars
REC Renewable energy % of total final energy World
strained by data availability, particularly climate-related development consumption consumption Bank
finance data. However, this period was characterized by numerous ef­ CO2 Carbon dioxide emissions Kilotons (kt) World
forts under the United Nation’s umbrella aimed at combatting climate per capita Bank
change which culminated to the 2015 Paris climate agreement including ENI Energy intensity level of Energy supply/GDP ratio World
primary energy Bank
the 2005 Kyoto protocol, Bali Action Plan of 2007, Copenhagen Accord
URB Urbanization People living in urban areas World
of 2009, Cancun Agreement of 2010 and Doha amendment of 2012. To in thousands Bank
this effect, this duration is considered adequate for any impacts of GDP Gross domestic product per Current US dollars World
climate-related development finance on GHG emissions in the Congo capita Bank
Basin to have been felt. But why the Congo Basin? OPEN Openness of the economy Trade to GDP ratio World
Bank
The Congo Basin is the world’s second largest tropical forest after the INST Institutions Estimate of rule of law WGI
Amazon, found in West-Central Africa covering Cameroon, Democratic FDI Foreign direct investment Current US dollars World
Republic of Congo, Gabon, Equatorial Guinea, Congo and Central Afri­ inflows Bank
can Republic. This forest covers an area of approximately 300 million Source: Authors (2022).
hectares, is a source of livelihood to more than 75 million people who a
This variable is used in this study interchangeably and synonymously with
rely on it for food, health and nutrition and stores more than 25% of the climate finance, climate-related development mitigation finance, and climate-
world’s carbon [58]. Harris et al. (2021) as cited by Ref. [59] indicate related development finance and climate aid. It includes only climate aid
that it is the Congo Basin only that can still store close to 610 million intended for climate change mitigation.

3
N.A. Aquilas and J.T. Atemnkeng
2.3. Model specification and justification of variables
Two empirical models are estimated in this study. Equation (1)
captures the effect of climate finance and renewable energy consump­
tion and their interaction effect on GHG emissions while equation (2)
models the causal relationship between climate finance and renewable
energy consumption.
GHGit = βi + β1 CDFit + β2 CDF2it + β3 RECit + β4 CDFit ∗RECit + βij Xit + Vi
+ Uit
(1)
From equation (1), GHG represents greenhouse gas emissions per
capita, which is said to depend on climate-related development finance
(CDF) and its quadratic term (CDF2 ), renewable energy consumption
(REC), interaction between climate-related development finance and
renewable energy consumption (CDF*REC) plus other fundamental de­
terminants of GHG emissions as captured by the vector X, V is the in­
dividual country effect and U is the stochastic term. The subscripts i and
t represent the individual country and time respectively. The quadratic
(CDF2 ) term of CDF represents higher levels of climate-related devel­
opment finance, introduced to allow for possible non-linearity in the
relationship between climate aid and GHG emissions. Since the possi­
bility exist that climate-related development funds can be diverted to
different activities, which may increase rather than decrease GHG
emissions, this implies at some point the effect of such finance on GHG
emissions might turn from negative to positive or vice versa, meaning a
turning point might exist. This idea is logical because under the Kyoto
Protocol and Paris agreements, less developed countries have no
incentive yet to reduce GHG emissions, as their emissions levels are
lower and peaking of emissions is expected to take longer relative to
their developed country counterparts. The interaction term (CDF*REC)
is meant to analyze if the effectiveness of climate finance on GHG
emission reduction depends on renewable energy consumption.
From the literature [16,17,28] it is expected that GHG emissions will
reduce following an increase in climate-related development finance.
Higher levels of climate-related development spending are also expected
to be consistent with a pathway towards renewable energy adoption and
GHG emissions reduction. Moreover, GHG emissions are expected to
reduce as renewable energy consumption increases, following [1–4,7,
16,43,52,57]. Though literature review is silent on the interaction be­
tween climate finance and renewable energy consumption, we expect
the interaction term to be negative since it is expected that climate
finance should increase renewable energy consumption which should in
turn reduce GHG emissions. Thus, renewable energy consumption is
expected to negate the impact of climate finance on GHG emissions.
Apart from climate finance and renewable energy consumption, litera­
ture has recognized energy variables such as carbon dioxide emissions
per capita (CO2) and energy intensity (ENI) and economic variables such
as gross domestic product per capita (GDP), urbanization (URB) and
openness (OPEN) as important determinants of GHG emissions. Their
effect on GHG emissions is expected to be positive. Also, institutions
(measured in this study by the rule of law) is an important determinant
of GHG emissions. Li et al. [28] showed that climate finance is effective
(ineffective) under strong (weak) institutions. In this study, institutions
are expected to increase GHG emissions, owing to the weak institutions
recorded throughout the period of the study.
For increasing levels of climate mitigation finance to produce the
expected reductions in GHG emissions, renewable energy consumption
should respond positively to climate financial flows. This would mean
that climate aid is effectively channeled in the adoption of renewable
energy, which potentially should have a dwindling effect on GHG
emissions. Understanding the causal relationship between climate-
related development finance and renewable energy consumption was
therefore necessitated. This relationship can be represented by equation
(2).
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Energy Strategy Reviews 44 (2022) 100971
RECit = αi + α1 CDFit + α2 CDF2it + α3 Zit + Vi + Uit (2)
In equation (2), REC, CDF, V, U, i, and t were previously defined
while Z is a vector of other main determinants of renewable energy
consumption such as carbon dioxide (CO2) emissions per capita, energy
intensity (ENI), foreign direct investment inflows (FDI), urbanization
(URB) and institutions (INST). The choice of these determinants was
inspired by the empirical works of [46–51] and also contingent on data
availability. Under circumstances where climate finance is not fully
utilized for production and consumption of renewable energy, a linear
relationship is not expected between climate finance and renewable
energy consumption. The squared term of climate finance is also intro­
duced in equation (2) to verify this possibility.
2.4. Estimation procedure
The descriptive statistics of the variables such as mean, standard
deviation, maximum and minimum was first computed to have an
insight in to data characteristics. Following [64], cross section depen­
dence was tested to inform the choice of first or second generation panel
unit root tests on the data. The null hypothesis tested is that
cross-sections are independent, an assumption often made by early
panel data models against the alternative hypothesis that cross sections
are dependent or correlated across heterogenous panels [65,66]. If
cross-section independence is confirmed, then first generation panel unit
root tests [67,68] and the Fisher-type test [69] will be employed to test
for unit root. If cross section dependence is valid, then the second gen­
eration panel unit root test of [70] will be employed in analyzing the
time series behaviour of the data. Unit roots tests are formally conducted
in macroeconomic research to avoid spurious regressions. The power of
these tests is higher in panel data due to an increase in sample size [65,
66].
Due to the inclusion of the quadratic term of climate finance as an
independent variable in our empirical model and the interaction vari­
able between climate-related development finance and renewable en­
ergy consumption, it was relevant to conduct test for multicollinearity.
This was conducted using the pairwise correlation matrix, where mul­
ticollinearity was said to constitute a problem if the correlation coeffi­
cient exceeds 0.8. Das [66] suggests that multicollinearity can amongst
other ways be reduced by centering the collinear variable. Transforming
the variable by differencing can also provide a solution. We adopt these
approaches in this paper.
Standard panel data techniques were applied in this study. Particu­
larly, this study estimated the pooled regression, fixed effects as well as
random effects models, then selected the best model for further analysis
based on the F-statistic for pooled regression and the Hausman test.
Pooled regression imposes the strict restriction that all cross section
units are homogenous over time. The fixed effects model is used to
analyze the impact of variables that change over time across entities. It
controls for time-invariant individual-country features and considers the
effects of heterogenous entities on the individual intercept. The random
effects model assumes random variation across entities which is un­
correlated with the predictor variables and enters in to the model
through variation of the individual or time effect [65,66,71–73]. The
pooled regression and fixed effects models are estimated, then the null
hypothesis that the pooled regression is preferred is tested against the
alternative that the fixed effects model is preferred based on the F-sta­
tistic for pooled regression. The Hausman test is conducted to select
between the fixed and random effects models based on the null hy­
pothesis that the random effects model is consistent.
3. Results and discussion
In this section, we first present the pre-estimation analyses covering
summary statistics, cross section dependence test, unit root tests and
N.A. Aquilas and J.T. Atemnkeng Energy Strategy Reviews 44 (2022) 100971

pairwise correlation matrix table, then later present the empirical results climate finance was not provided or received for some periods, we
based on panel regression estimates. observe an unstable pattern in the flows, characterized with both very
high and low amounts. The voluntary nature of financial commitments
and contributions under the climate pack can certainly account for this.
3.1. Descriptive statistics of variables

Table 2 shows the descriptive statistics of variables.
The overall sample of this study is 114 constituting 6 cross section
units over the 19 year period, 2002–2020. Except for climate finance, it
can be observed that there are more variations across than within Congo
Basin countries, signifying a heterogeneous pattern in the data, which
points to individual country patterns. The overall variation in climate
mitigation finance (about 130,479,700 USD) is however explained more
by the within country variations (about 115,521,300 USD) than between
country variation (about 65,161,709 USD). This is due to high irregu­
larity and inconsistency in the flows of climate-related development
finance to different Congo Basin countries (OECD, 2022) (Table 3). The
wide disparity between the minimum value (12,660 USD) and
maximum value (87,121,100 USD) of climate finance also attest to this
irregularity. The average amount of climate aid received is 66,560,440
USD, way beyond the least amount. This inconsistency in climate
financial flows clearly indicates that countries that ratified these
agreements, especially developed countries are not keeping their com­
mitments of supporting developing countries in the manner implied by
the Paris climate agreement.
Table 3 shows the flows of climate-related development finance from
all the provider countries to the different Congo Basin recipient coun­
tries. The total amount of climate mitigation finance received for this
region was about 6.7 billion US dollars between 2002 and 2020, which is
only about 6.7% of the total climate finance that is supposed to be
provided by developed to developing countries by 2020. This amount is
judged inadequate for a region that is expected to play a major global
regulatory role in curbing GHG emissions. In addition to the fact that
3.2. Cross-section dependence and unit root test
Results of cross-section dependence test (Table 4) show that the null
hypothesis of no cross section dependence for CO2 emissions per capita,
energy intensity, openness, institutions and foreign direct investment
cannot be rejected since p-values of the cross section dependence test
(CD) for these variables are greater than 0.1. As earlier mentioned, the
[67,68], and the [69] Fisher-type unit root tests are applied on these
variables.
The hypothesis of cross section independence is however rejected for
the remaining variables; GHG emissions per capita, climate mitigation
finance, renewable energy consumption, CO2 emissions per capita, ur­
banization and GDP per capita, since the p-values of the CD test for these
variables are all less than 0.1. The [70] panel unit root test is thus
relevant for testing unit root. Based on cross sectional dependence tests,
the panel unit root test results on the variables are presented on Table 5
for the first generation tests and Table 6 for second generation tests.
From Table 5, the null hypothesis that CO2 emissions per capita,
energy intensity, openness, institutions and foreign direct investment
contain unit roots at level is rejected since their p-values across the LLC,
IPS and Fisher-type tests are all significant. They are integrated to the
order zero, I (0). It can also be concluded from Pesaran’s CADF test
(Table 6) that renewable energy consumption, climate mitigation
finance, urbanization and GDP per capita are all I (0) variables, implying
stationarity at level or no unit roots, since the computed values of the Z
[t-bar] statistic are all significant.
Per capita GHG emissions are however integrated to the order one, I

Table 2
Summary statistics of variables.
Variable Mean Std.Dev. Min Max Observations

GHG emissions per capita Overall 7709.12 8434.81 689.10 34048.14 N = 114
Between 8722.85 787.81 23961.36 n=6
Within 2679.19 − 1530.70 17795.9 T = 19
Climate mitigation finance Overall 66560.44 130479.7 12.66 871,211 N = 101a
Between 65161.79 5853.93 148795.9 n=6
Within 115521.3 − 82145.02 795841.9 T-bar = 16.83
Renewable energy consumption Overall 69.65 29.62 2.87 98.27 N = 114
Between 31.96 8.07 96.38 n=6
Within 4.44 60.70 92.88 T = 19
CO2 emissions per capita Overall 2073.26 3039.23 17.65 11676.32 N = 114
Between 3143.51 32.78 8106.42 n=6
Within 964.01 − 1572.02 5643.15 T = 19
Energy intensity Overall 7.84 6.77 2.14 24.80 N = 114
Between 7.30 2.49 22.33 n=6
Within 1.03 4.70 10.31 T = 19
Urbanization Overall 7,623,148 10,200,000 346,134 40,900,000 N = 114
Between 10,700,000 669770.3 27,900,000 n=6
Within 3,033,726 − 2340,816 20,600,000 T = 19
GDP per capita Overall 4240.96 5400.05 173.80 22942.61 N = 114
Between 5130.54 375.83 13055.35 n=6
Within 2651.60 − 6070.20 14128.22 T = 19
Openness Overall 0.79 0.34 0.29 1.60 N = 114
Between 0.34 0.42 1.24 n=6
Within 0.12 0.43 1.12 T = 19
Institutions Overall − 1.23 0.38 − 1.81 − 0.22 N = 114
Between 0.39 − 1.64 − 0.56 n=6
Within 0.12 − 1.52 − 0.74 T = 19
Foreign direct investment Overall 827.72 987.50 − 793.87 4416.95 N = 114
Between 593.72 29.59 1631.17 T = 19
Within 823.89 − 1086.28 3613.51 n=6
a
There were 13 missing observations for the variable, climate-finance (CAR, 2; Congo, 3; DRC, 1; Equatorial Guinea, 4; and Gabon; 3) giving a total of 101 ob­
servations. The missingness of this variable did not prevent the application of standard panel data techniques, as the hypothesis that the data was missing completely at
random (MCAR) could not be rejected based on Little’s MCAR test (with Prob > chi-square = 0.1348). Forecasting or mean imputation could not be employed to
estimate the missing values due to the high irregularity in the flows of climate-related development finance, as doing this will grossly result in misleading estimates.

5
N.A. Aquilas and J.T. Atemnkeng Energy Strategy Reviews 44 (2022) 100971

Table 3
Climate-related development mitigation finance for Congo Basin countries (current thousand US dollars).
Year Cameroon Central Africa Republic Congo Democratic Republic of Congo Equatorial Guinea Gabon

2002 1388.01 60.3148 60.3148 NA 107.417 294.977

2003 2340.22 180.771 374.385 90.3853 21.0496 292.928
2004 20,526 NA NA 1143.8 NA NA
2005 524.045 2561.51 172.757 5792.31 26.2417 12.6589
2006 11288.2 6279.56 NA 2754.76 NA 11547.6
2007 7103.49 NA NA 5522.28 NA 24640.7
2008 18391.7 135.638 10098.4 71,652 NA NA
2009 795.514 5570.25 2151.51 6411.12 527.43 45.0426
2010 92927.1 73.6384 1487.03 114,616 43.6146 88973.5
2011 119,472 1244.24 1156.41 76198.2 1210.41 19486.7
2012 21641.9 6116.41 39002.4 67708.2 819.4 1253.85
2013 135,975 3272.29 2171.26 299,932 3664.55 62541.9
2014 142,779 17680.8 886.152 242,744 334.992 147,602
2015 47220.7 6317.88 74961.1 242,340 38.6915 25794.9
2016 169,474 13479.5 1128.56 198,618 NA 19721.8
2017 338,179 15700.6 22881.3 365,938 28.1704 24,181
2018 498,406 88866.8 88250.4 236,479 6003.7 3807.76
2019 197,018 115,253 81406.3 206,193 69,114 71020.7
2020 871,211 82303.1 7741.18 534192.2 15.31 65419.6

Source: OECD, 2022. NA = Not available, there were no climate finance flows for these years.

Table 4 Table 6
Cross-section dependence test. Second generation panel unit root tests on variables.
Variable CD test p- Cross-section Variables Pesaran’s CADF test
value dependence
Z[t-bar] Stationarity level
Log of GHG emissions per capita 1388.008 0.001 Yes Log of renewable energy consumption − 2.448** I (0)
Log of climate mitigation finance 1388.008 0.000 Yes (0.044)
Log of renewable energy 1388.008 0.052 Yes Log of GHG gas emissions per capita − 4.660*** I (1)
consumption (0.000) I (0)
Log of CO2 emissions per capita 1388.008 0.554 No Log of climate mitigation finance − 4.773***
Log of energy intensity 1388.008 0.105 No (0.000)
Log of urbanization 1388.008 0.000 Yes Log of urbanization − 3.431*** I (0)
Log of GDP per capita 1388.008 0.000 Yes (0.000)
Openness 1388.008 0.899 No Log of GDP per capita − 2.022** I (0)
Institutions 1388.008 0.512 No (0.022)
Log of foreign direct investment 1388.008 0.109 No
Note: P-values in parenthesis, ***p < 0.01, **p < 0.05, *p < 0.1.
Note: P-values in parenthesis, ***p < 0.01, *p < 0.1.
(1) meaning that they are stationary only after taking the first difference.
Hence they are a difference stationary process.
Table 5
First generation panel unit root tests on variables.
3.3. Pairwise correlations on variables
Levin, Lin Im-Pesaran- Fisher-type test
and Chu Shin (based on
Augmented Table 7 reports the pairwise correlation matrix of the variables used
Dickey-Fuller in the regression. Because of the multicollinearity that is most likely
tests expected between climate mitigation finance and its quadratic term;
Variables Adjusted t W-t-bar/t- Inverse chi- Stationary climate mitigation finance and the interaction term; and between the
bar squared (12) at level quadratic of climate mitigation finance and the interaction term, climate
Log of CO2 − 2.8875*** − 2.4100** 82.2297*** Yes mitigation finance was centered to reduce this correlation.
emissions (0.0019) (0.0142) (0.0000)
The correlations between climate mitigation finance and its squared
per capita
Log of energy − 3.0402*** − 2.1164** 35.2118 *** Yes term (− 0.35) and between the interaction variable and squared term of
intensity (0.0012) (0.0172) (0.0004) climate mitigation finance (− 0.38) are sufficiently low, signifying the
Openness − 1.8378** − 2.4453*** 23.2256** Yes absence of multicollinearity. However, the interaction variable and
(0.0330) climate mitigation finance are strongly correlated (0.97). To resolve this
− 4.1945*** (0.0081) (0.0259) Yes
Log of (0.0000) − 2.2269** 36.5677***
problem, the interaction term was differenced, and this significantly
institutions (0.0315) (0.0000) reduced its correlation with climate mitigation finance to 0.44 as re­
Log of foreign − 1.6620** − 2.5841*** 29.8819*** Yes ported on Table 8.
direct (0.0483) (0.0064) (0.0029) Apart from the strong relationship between per capita GDP and per
investment
capita CO2 emissions with a coefficient of 0.97, all other correlations are
Note: P-values in parenthesis, ***p < 0.01, **p < 0.05, *p < 0.1. low confirming that there is no multicollinearity among the explanatory
variables in our model. The strong correlation between GDP per capita
and CO2 emissions per capita is understandable, given that both vari­
ables are measured in per capita terms. Furthermore, these are only
control variables in the model. For these reasons, the relationship be­
tween them is ignored.

6
N.A. Aquilas and J.T. Atemnkeng Energy Strategy Reviews 44 (2022) 100971

Table 7
Pairwise correlation matrix.
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

(1) D.log of GHG emissions per capita 1.00

(2) log of climate mitigation finance − 0.11 1.00
(3) log of climate mitigation finance sq. 0.13 − 0.35 1.00
(4) log of renewable energy consumption 0.15 0.44 − 0.31 1.00
(5) log of interaction term − 0.05 0.97 − 0.38 0.66 1.00
(6) log of CO2 emissions per capita − 0.06 − 0.37 0.18 − 0.63 − 0.50 1.00
(7) log of energy intensity − 0.01 0.42 − 0.12 0.62 0.53 − 0.77 1.00
(8) log of urbanization − 0.09 0.58 − 0.08 0.54 0.64 − 0.71 0.70 1.00
(9) log of GDP per capita − 0.17 − 0.27 0.16 − 0.62 − 0.41 0.97 − 0.67 − 0.65 1.00
(10) openness 0.08 − 0.31 0.11 − 0.49 − 0.40 0.61 − 0.41 − 0.42 0.59 1.00
(11) institutions − 0.08 − 0.03 − 0.03 0.10 0.00 0.64 − 0.35 − 0.32 0.65 0.15 1.00
(12) log of foreign direct investment − 0.07 0.27 0.04 − 0.02 0.22 0.08 0.17 0.25 0.15 0.47 0.06 1.00

Table 8
Pairwise correlation matrix on variables after differencing the interaction term.
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

(1) D.log of GHG emissions per capita 1.00

(2) log of climate mitigation finance − 0.02 1.00
(3) log of climate mitigation finance sq. 0.11 − 0.10 1.00
(4) log of renewable energy consumption 0.18 0.46 − 0.28 1.00
(5) D.log of interaction term 0.05 0.44 − 0.31 0.16 1.00
(6) log of CO2 emissions per capita − 0.10 − 0.36 0.08 − 0.62 − 0.06 1.00
(7) log of energy intensity 0.07 0.44 − 0.09 0.60 0.10 − 0.76 1.00
(8) log of urbanization − 0.08 0.57 0.05 0.52 0.02 − 0.70 0.68 1.00
(9) log of GDP per capita − 0.20 − 0.25 0.07 − 0.61 − 0.04 0.97 − 0.66 − 0.64 1.00
(10) openness 0.01 − 0.30 0.06 − 0.45 − 0.05 0.56 − 0.34 − 0.39 0.55 1.00
(11) institutions − 0.04 − 0.02 − 0.12 0.07 0.06 0.68 − 0.40 − 0.34 0.68 0.17 1.00
(12) log of foreign direct investment − 0.07 0.27 0.13 − 0.00 − 0.05 0.05 0.22 0.26 0.13 0.46 0.06 1.00

Table 9
Pooled, fixed effects and random effects estimates with GHG emissions as dependent variable.
Variables Dependent Variable: D.Log of GHG emissions per capita

(1) (2) (3) (4) (5) (6)

Log of climate mitigation finance 0.007b 0.007b 0.007b

(0.003) (0.003) (0.003)
Log of climate mitigation finance square 0.001a 0.001a 0.001a
(0.001) (0.001) (0.001)
Log of renewable energy consumption − 0.005 0.007 − 0.005 0.007 − 0.005 0.007
(0.014) (0.016) (0.014) (0.016) (0.014) (0.016)
D.log of interaction term − 0.001 − 0.001 − 0.001
(0.002) (0.002) (0.002)
Log of CO2 emissions per capita 0.051c 0.047b 0.051c 0.047b 0.051c 0.047b
(0.016) (0.020) (0.016) (0.020) (0.016) (0.020)
Log of energy intensity 0.028b 0.027a 0.028b 0.027a 0.028b 0.027a
(0.013) (0.015) (0.013) (0.015) (0.013) (0.015)
Log of urbanization − 0.022c − 0.017b − 0.022c − 0.017b − 0.022c − 0.017b
(0.007) (0.007) (0.007) (0.007) (0.007) (0.007)
Log of GDP per capita − 0.094c − 0.072c − 0.094c − 0.072c − 0.094c 0.072c
(0.020) (0.023) (0.020) (0.023) (0.020) (0.023)
Openness 0.032 0.015 0.032 0.015 0.032 0.015
(0.022) (0.025) (0.022) (0.025) (0.022) (0.025)
Institutions 0.040 0.010 0.040 0.010 0.040 0.010
(0.038) (0.046) (0.038) (0.046) (0.038) (0.046)
Log of climate mitigation financet-1 0.005 0.005 0.005
(0.003) (0.003) (0.003)
Log of climate mitigation finance squaret-1 0.001 0.001 0.001
(0.001) (0.001) (0.001)
D.Log of interaction termt-1 0.001 0.001 0.001
(0.003) (0.003) (0.003)
Constant 0.749b 0.343 0.749b 0.343 0.749b 0.343
(0.356) (0.408) (0.356) (0.408) (0.356) (0.408)
Observations 86 80 86 80 86 80
F-statistic for pooled OLS (p-value) 0.9025 0.1156
Number of Congo Basin countries 6 6 6 6 6 6

Standard errors in parentheses.

a
p < 0.1.
b
p < 0.05.
c
p < 0.01.

7
N.A. Aquilas and J.T. Atemnkeng
3.4. Panel regression estimates
3.4.1. Analysis of the effect of climate finance, renewable energy
consumption and the climate finance-renewable energy consumption
interaction on GHG emissions
Table 9 presents the pooled regression, fixed effects and random
effects estimates with GHG emissions per capita as dependent variable.
Columns 1 and 2 are pooled regression estimates; columns 3 and 4 are
the fixed effects estimates while columns 5 and 6 are random effects
estimates. In columns 2, 4 and 6, climate finance and its quadratic term
and the interaction term are lagged by one period to account for time
lags on GHG emissions resulting from climate finance flows. The pooled
regression results are better fitted and preferred to the fixed effect es­
timates since the p-values of the F-statistic for pooled Ordinary Least
Squares (OLS) from the fixed effects estimates are insignificant (0.9025
and 0.1156). Again, random effect estimates reduce to pooled OLS es­
timates because the estimate of the variance of the unobserved effect
from the random effect regression is zero (sigma_u = 0), following [72].
This means that either the pooled OLS model (columns 1 and 2) or the
random effects model (columns 5 and 6) are relevant for further dis­
cussion. Fixed effects regression estimates are not further considered.
From column (1), the coefficients of climate finance and its squared
term (representing higher levels of climate finance) are both positive,
implying that the GHG emissions of recipient countries continued to rise
with increased climate aid, indicating the absence of an EKC type rela­
tionship between climate mitigation finance and GHG emissions. Higher
levels of climate aid significantly resulted to increased GHG emissions
by the recipients, with no turning point level of emissions at which the
GHG emissions were expected to start falling. In column (2), climate
mitigation finance and its squared term still increase GHG emissions
even after being lagged by one year to accommodate the view that
climate aid flows to recipients don’t spontaneously mitigate emission of
greenhouse gases. Thus, the impact of climate finance on GHG emissions
reduction does not really depend on time. This aligns with [11] who
concluded that lagging climate aid by one period had no significant
impact on carbon emission and [15] who found that after four years of
international climate cooperation, total climate technology grants and
loans failed to reduce total CO2 emissions. The finding of this study (that
climate finance worsens rather than reduce GHG emissions) corrobo­
rates findings by Refs. [14,16,27,28] that climate-related development
assistance does not reduce GHG emissions significantly. Mahalik et al.
[29] also found that foreign aid intended for renewable energy increases
CO2 emissions. Though this result is inconsistent with the main objective
of climate-related development financing, which is the lowering of GHG
emissions as much as possible, it however reflects the fact that emission
levels for Congo Basin countries have not yet peaked, reducing their
Fig. 1. Total GHG emissions for Congo Basin countries, 2002 to 2020.
8
Energy Strategy Reviews 44 (2022) 100971
incentive to commit to climate-resilient development. The Paris climate
agreement recognizes that peaking of GHG emissions will take longer for
developing countries compared to developed countries. With less than a
decade to the implementation of the Paris climate agreement, it is
therefore not a surprise that GHG emissions for most Congo Basin
countries continue to increase (Fig. 1). One can therefore posit that the
desired impact of climate aid on GHG emissions in the Congo Basin is not
yet being realized.
Looking at Fig. 1, it can be seen that the general trend in GHG
emissions is upward, though has little fluctuations within the period and
not expected to peak yet. Total GHG emissions are higher for Cameroon
and lower for Gabon relative to other countries in the Basin. Equatorial
Guinea had a steady decline in emissions from 2009 to 2018. According
to Levin & Rich [74], the projected time when GHG emissions will peak
for African countries is not determined. In per capita terms however, the
trend is different as shown on Fig. 2.
Fig. 2 reveals that per capita GHG emissions are higher for Equatorial
Guinea compared to any other Congo Basin country throughout the
study period. However, emissions rose steadily from about 23,952 kt in
2002–33,601 kt of CO2 equivalent per million in 2006 before falling
continuously thereafter till 2017. This can be because of a gradual fall in
total GHG emissions from 2006 (see Fig. 1), coupled with the country
being the least populated in the region. Per capita GHG emissions for
Central African Republic are rising on the average, notwithstanding the
fast increase in the country’s population. For the rest of the countries,
per capita emissions have almost remained constant throughout the
period.
Renewable energy consumption is observed to produce the desired
negative impact on the reduction of GHG emissions, since its coefficient
with respect to per capita GHG emissions is negative. Thus, development
and utilization of renewable energy technologies in production activities
has the potential of slowing down emissions of total greenhouse gases in
the Congo Basin. This finding is consistent with those of [38,52–57]
which have found a reducing effect of renewable energy technologies on
GHG emissions reductions. Quantitative results reveal that per capita
GHG emissions will fall by 0.005% (a very small magnitude) in response
to a 1% increase in renewable energy, all things being equal. This result
is however insignificant. Thus, this study concludes that renewable en­
ergy consumption does not significantly reduce per capita GHG emis­
sions in the Congo Basin. In model 2, which is not our main concern for
this variable, the effect even changes to positive after allowing a time lag
in climate mitigation finance, but is also insignificant. Despite the
negative insignificant effect of renewable energy consumption on GHG
emissions, it is worthy to note that consumption of renewable energies
cannot be neglected, as this remains the primary channel through which
GHG emissions are curtailed. Increased renewable energy use is still
N.A. Aquilas and J.T. Atemnkeng
Fig. 2. GHG emissions per capita for Congo Basin countries, 2002 to 2020.
therefore strongly recommended under these circumstances, in order to
create a more significant impact on GHG emissions per capita. The
interaction term in the current period is negative, consistent with eco­
nomic expectation. This signifies that the joint effect of climate-related
development mitigation finance and renewable energy consumption
actually negated GHG emissions in the Congo Basin within the study
period, again reiterating the need to boost renewable energy technolo­
gies adoption. Increase in the interaction effect by 1% resulted to a fall in
GHG emissions by 0.001% but this effect is insignificant. The magnitude
of this effect is even smaller than in the case of the direct effect of climate
finance and renewable energy consumption. In the lagged one year
period however, the interaction variable is positive and also insignifi­
cant, implying that global warming is still being felt even with increased
energy consumption financed by climate-related aid.
Turning to the other variables, per capita CO2 emissions increase
GHG emissions per capita as is expected and this effect is highly sig­
nificant at 1%. This is not a surprising finding, as CO2 emissions are the
main amongst all greenhouse gases (GHGs). Quantitatively, GHG
emissions per capita rose by 0.051% resulting from a 1% increase in per
capita CO2 emissions. Carbon dioxide emissions constitute a greater
proportion of total greenhouse gases, so it is logical for its effect to be not
only positive but also highly significant. The coefficient of urbanization
is negative, implying that GHG emissions are not yet responding posi­
tively to increase in urban population as expected. Urbanization is
therefore yet to create any real environmental threat in Congo Basin
countries which are less populated relative to most industrialized
countries. The effect of trade openness on GHG emissions is positive.
Thus, the more climate aid recipient countries are opened to the inter­
national community and conditions created for the movement of foreign
firms in to these countries, the more GHG emissions increase, thereby
confirming the pollution-haven hypothesis for Congo Basin countries.
Similar effects of openness on CO2 emissions in developing countries
were also uncovered by Refs. [11,16,31,75].
Furthermore, GHG emissions respond positively to institutions,
which is consistent with the expectation in this study because over the
time scope of this study, the institutional variable—rule of law for Congo
Basin countries was negative, indicating poor institutions which affects
GHG emissions adversely. As part of the implementation of international
climate agreements, national governments are expected to enforce their
voluntary commitments towards mitigating climate change, which can
only be achieved with strong and vibrant institutions. This happens not
to be the case for countries of the Congo Basin, which recorded weak
institutions within the study period. Li et al. [28] find inconclusive ev­
idence of the rule of law on CO2 emissions. Forest governance is a main
institutional policy initiative by Congo Basin countries to combat
climate change, though its contributions cannot yet be quantitatively
9
Energy Strategy Reviews 44 (2022) 100971
measured. Strengthening this policy represents a step in the right di­
rection towards reducing forest-sector related carbon emissions.
An increase in energy intensity directly affects GHG emissions as
should be a priori expected. Put differently, consumption of more energy
in economic activities increases GHG emissions, and this outcome is
significant. This result implies that economic activities depended more
on nonrenewable energy sources such as fossil fuels. Gross domestic
product also negatively but significantly resulted to GHG emissions
reduction, an outcome that sounds unlikely, but not impossible at least
within the context of less developed countries. This finding signifies that
growing the economy will be an effective way of reducing GHG emis­
sions so economic growth should be accelerated. Apart from the
increasing proportion of renewable energy in total final energy con­
sumption for Congo Basin countries, averagely 70% [12], which reduces
air pollution, economic transformation has made services (less polluting
activities compared to agriculture and industry) the dominant economic
sector of the economy. Thus, increased economic growth is associated
with declining levels of GHG emissions, since [56] held that services
reduce GHG emissions. Some empirical works have however upheld the
position that economic growth contributes positively to CO2 emissions
[1,7,28,75] whereas others (which include a quadratic term of gross
domestic product as an independent variable) conclude that gross do­
mestic product significantly increases CO2 emissions but that gross do­
mestic product squared (higher levels of gross domestic product)
significantly negates CO2 emissions [11,15,31,56].
3.4.2. Analyzing the effect of climate finance on renewable energy
consumption
The results relating to the effect of climate-related development
finance on renewable energy consumption (first link in the climate-
related development finance-GHG emissions channel) based on the
pooled OLS, fixed effects and random effect estimates are reported on
Table 10. Similar to Table 9, columns 1 and 2 are the pooled regression
estimates; columns 3 and 4 are the fixed effects estimates while 5 and 6
are random effects estimates. Climate finance and its quadratic term in
columns 2, 4 and 6 are again lagged by one period to account for the
time it takes for renewable energy consumption to respond to climate
aid.
Based on the Hausman test, fixed effects estimates shown by models
3 and 4 are appropriate for further analysis. The results reveal that
renewable energy consumption respond positively and significantly to
increased climate finance, as expected even with lag period and there is
no turning point where increased climate-related development finance
induces a fall in renewable energy consumption. This implies that
climate funds are actually invested in the development of renewable
energy and renewable energy consumption behaviour is aligned with
N.A. Aquilas and J.T. Atemnkeng Energy Strategy Reviews 44 (2022) 100971

Table 10
Pooled OLS, fixed effects and random effects estimates with renewable energy consumption as dependent variable.
Variables Dependent Variable: Log of renewable energy consumption

(1) (2) (3) (4) 5 6

Log of climate mitigation finance 0.011 0.053*** 0.011

(0.022) (0.013) (0.022)
Log of climate mitigation finance square − 0.008 0.011*** − 0.008
(0.006) (0.003) (0.006)
Log of CO2 emissions per capita − 0.520*** − 0.599*** − 0.161 − 0.062 − 0.520*** − 0.599***
(0.057) (0.054) (0.105) (0.093) (0.057) (0.054)
Log of energy intensity 0.088 0.104 0.451*** 0.500*** 0.088 0.104
(0.115) (0.108) (0.133) (0.127) (0.115) (0.108)
Log of foreign direct investment 0.036 0.032 0.111* 0.102* 0.036 0.032
(0.121) (0.111) (0.066) (0.057) (0.121) (0.111)
Log of urbanization − 0.036 − 0.064 − 1.176*** − 0.809*** − 0.036 − 0.064
(0.064) (0.059) (0.128) (0.122) (0.064) (0.059)
Institutions 1.889*** 2.210*** − 0.053 − 0.019 1.889*** 2.210***
(0.165) (0.160) (0.169) (0.174) (0.165) (0.160)
Log of climate mitigation financet-1 − 0.005 0.027** − 0.005
(0.021) (0.011) (0.021)
Log of climate mitigation finance squaret-1 − 0.004 0.009*** − 0.004
(0.006) (0.002) (0.006)
Constant 18.923*** 20.184*** 30.208*** 24.101*** 18.923*** 20.184***
(1.206) (1.147) (2.234) (2.124) (1.206) (1.147)
Observations 101 95 101 95 106 95
R-squared 0.563 0.511
F-statistic for pooled OLS (p-value) 0.0000 0.0000
Number of Congo Basin countries 6 6 6 6 6 6

Note: Models 1 and 2 are rejected since the p-values of the F-statistic for pooled OLS are significant at 1% level. The fixed effects model is therefore preferred to the
pooled OLS model. The p-value of the Hausman statistic for models 3 and 5 is 0.0000 which is also significant at 1% level, implying model 3 is preferred. Again, the p-
value of the Hausman statistic for models 4 and 6 is 0.0000, meaning model 4 is appropriate. Standard errors in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1.

production. Average renewable energy consumption in the energy
consumption mix is more than 81% for Cameroon, Central Africa Re­
public, Congo, Democratic Republic of Congo and Gabon put together
and just about 8% for Equatorial Guinea [12]. Lie et al. [45] found that
the assistance behaviour of developed-country climate finance donors
significantly promotes renewable energy creation in the recipient
developing countries thereby optimizing the energy structure. Green
bonds utilization as a financial instrument to fight climate change en­
courages green energy projects [51] but also proved ineffective in pro­
moting renewable energy consumption [50]. Climate change mitigation
financing through green bonds is still in the process in Congo Basin
countries.
The implications of an increase in GHG emissions resulting from
increased climate finance as reported on Table 9 is that increased
climate-related development finance would increase non-renewable
energies consumption instead of reducing it. This is because fossil fuel
energy in developing countries is cheaper and more price competitive
than any forms of renewable energy, and thus present a more attractive
business opportunity to the operators in this sector in terms of market
share dominance. Consequently, developing countries receiving climate
finance tend to still rely heavily on fossil fuels for economic develop­
ment. The shift in energy structure from nonrenewable to renewable
energy will therefore take long [45]. This means the preference for
nonrenewable energy consumption remains high even in an era where
the renewable energies adoption is highly encouraged. Though both
renewable and nonrenewable energy response positively to increased
climate finance in this study, this increase is greater with renewable
compared to nonrenewable energy. This confirms that climate finance
actually transforms the energy structure in favour of renewable energy
consumption, which in turn reduces the emission of GHGs as earlier
established in Table 9.
Turning to the controls in Table 10, CO2 emissions decrease renew­
able energy consumption. Though less developed economies recognize
the adverse environmental consequences of non-renewable energies,
many still depend heavily on it, as it is more affordable, thereby
reducing the consumption of renewable energy which is more expen­
sive. This is supported by Ref. [50] who contends that increased
dependence on CO2 emissions reduces renewable energy. The results
also show that energy intensity significantly increases the consumption
of renewable energy. This result suggests that the volume of renewable
energy exceeds that of nonrenewable energy in the total energy mix.
This is highly desired for a change in energy structure to less polluting
energies. The results further reveal that unconditional official foreign
assistance in the form of foreign direct investment inflows to the Congo
Basin is beneficial for renewable consumption and should be encour­
aged. This signifies that foreign direct investment inflows are partly used
in developing energy efficient development projects, which in turn
promote renewable energy consumption. This is in line with [51] who
finds a positive effect of foreign direct investment but is not consistent
with [49,50] who find a negative effect of foreign direct investment on
renewable energy consumption. The role of institutions in promoting the
consumption of renewable energy is negative but insignificant following
our empirical results. Chen et al. [48] argue that institutions play a
mediating role in renewable energy consumption meanwhile [49] posits
that institutions are detrimental to clean energy consumption. It is
therefore required to strengthen institutional frameworks in Congo
Basin countries, since currently they are weak. Urbanization also ne­
gates renewable energy consumption. This can be explained by the less
expensive or competitive nature of nonrenewable over renewable en­
ergy, which attracts urban residents seeking to minimize high living
costs in cities. The findings relating to the effect of climate-related
development mitigation finance on the energy structure trans­
formation can be summarized as shown on Fig. 3.
From Fig. 3 and following the empirical results presented on Tables 9
and 10 it can be summarized that; (1) Climate-related development
mitigation finance significantly increases both renewable and non-
renewable energy consumption, but its effect on renewable energy
consumption is greater (2) Renewable energy consumption significantly
reduces GHG emissions, suggesting that non-renewable energy con­
sumption is gradually being replaced by renewable and clean energy. In
this sense, the energy structure is transformed to the benefit of modern
and clean energy. Climate-related development mitigation finance
significantly drive up GHG emissions, while the effect of non-renewable
energy consumption (fossil fuels) on GHG emissions, though not tested

10
N.A. Aquilas and J.T. Atemnkeng
Fig. 3. Climate-related development mitigation finance and energy struc­
ture change.
in this study is expected to be positive and significant.
4. Conclusion and policy implications
Recent efforts to mitigate climate change by reducing GHG emissions
within the framework of climate change agreements involve the flow of
climate-related development finance from donor countries to the re­
cipients (mostly developing countries). In this perspective, renewable
energies have been identified as the primary path through which the
impact of climate-related development finance on GHG emissions
reduction can be realized. This study investigated the effect of climate-
related development finance and renewable energy consumption on
GHG emission reduction in the Congo Basin. Particularly, it set out to
analyze the effects of climate finance and renewable energy consump­
tion and their interaction effect on GHG emission in Congo Basin
countries. Data was collected from 2002 to 2020 from the World Bank,
OECD’s Development Assistance Committee Creditor Reporting System,
and World Governance Index. Based on the pooled OLS, the fixed and
random effects regression estimates, this study concludes that there is an
increasing effect of climate-related development mitigation finance on
GHG emissions, even after allowing a time lag of one year to account for
the time in which climate aid is devolved in the production and con­
sumption of emissions-reduction technology. This suggests that increase
in climate finance is promoting non-renewable energy consumption.
Furthermore, renewable energy consumption negatively influences
GHG emissions. The interaction between climate finance and renewable
energy consumption in relation to per capita GHG emissions is negative,
implying renewable energy consumption improves the effect of climate
finance on per capita GHG emissions in the Congo Basin within the
period of study, even after a one period time lag. What this suggests is
that renewable energy consumption has the potential to offset rising
GHG emissions resulting from increased climate finance inflows to re­
cipients. Increase in the emission of greenhouse gases (GHGs) in the
Congo Basin is being exacerbated by factors such as CO2 emissions per
capita, trade openness and institutions which promote the emission of
GHGs. Per capita GHG emissions responded negatively to per capita GDP
and urbanization.
To better understand the effect of climate finance on GHG emissions,
this study analyzed the effect of mitigation finance on the possible
transformation of the energy structure from non-renewable to renew­
able energy consumption. Empirical results indicated that climate-
related development mitigation finance promotes renewable energy
more than nonrenewable energy consumption and that the consumption
of renewable energy reduces GHG emissions. Thus, climate aid is
gradually changing the energy structure from non-renewable to
11
Energy Strategy Reviews 44 (2022) 100971
renewable.
As climate change and its impacts appear to remain visible around
the globe, it is obvious that policy makers, national governments and
international organizations will continue striving to target the problem
by committing financial and engaging in other policy options. Directly,
this study found that climate-related mitigation finance increases GHG
emissions but indirectly, it reduces GHG emissions via increased con­
sumption of renewable energy. As GHG emissions in general and
particularly in the Congo Basin continue to surge, the following policy
options could be adopted; (1) developed countries and climate finance
providers should make regular the financial contributions to developing
countries and step up the amount (2) an international mechanism is
needed to track climate funds to the recipients to ensure that they are
effectively utilized in the development of renewable energies such as
solar, hydroelectric, biomass, wind and geothermal energies which have
the ability of reducing GHG emissions. Reinforcement of the local
institutional frameworks, which is currently weak is strongly needed to
bring this to fruition (3) the Congo Basin should continue ensuring that
foreign direct investment inflows are channeled to the production of
renewable energy technologies (4) countries of the Congo Basin should
accelerate economic growth as an objective, as this reduces rather than
increase GHG emissions, in so doing making sure that this growth is
driven more by renewable energy. Moreover, economic growth of this
region is more recently accounted for by services-which cause less
pollution than agriculture and industry, so it is not surprising that GHG
emissions respond negatively to economic growth.
The empirical findings of this research are by no means exhaustive or
conclusive, as the issue under investigation is fairly recent. More
research is needed to expound on the implications of climate-related
development finance on the attainment of climate goals. In this
respect, further research could focus on climate-related development
financing for mitigation and adaptation, in order to provide policy
makers with a holistic picture of the effect of climate aid on climate
action. Due to data availability problems, this study used data on
climate-related development mitigation financial commitments which
may differ from actual financial flows because of the possibility that
many climate aid donors failed to honour their commitments with re­
cipients. A study that utilizes data (if available) on actual climate miti­
gation financial flows will therefore shed more light on the issue.
Credit author statement
Nkwetta Ajong Aquilas: Conceptualization, Methodology, Formal
analysis, Writing – original draft preparation, Writing – review & edit­
ing, Visualization, Investigation. Johannes Tabi Atemnkeng: Supervi­
sion, Review & Editing, Validation
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
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