Does climate aid also follow trade? Distinguishing and testing different logics of climate aid allocation to trade partners in the case of EU

The European Union (EU) is one of the biggest donors of bilateral climate-related development aid. It presents itself as a partner for developing countries to support their efforts for a green transition and adaptation to climate change. At the same time, the EU is a major trade power that has been shown to often prioritize trade interests over other objectives when push comes to shove. While the literature on climate-related development aid has shown that donors tend to allocate more aid to more vulnerable countries, the broader literature on development aid has repeatedly confirmed that donors also tend to allocate more aid to their more important trade partners. This raises the question to what extent EU climate-related development aid is indeed targeted towards climate mitigation and adaptation needs or whether there is rather a strategic trade-related calculation underlying the EU’s decision to allocate such aid. To answer this question, we theoretically develop several distinct logics that connect trade relations and climate aid allocation. We build on existing literature that, despite finding a consistent relationship between trade and development aid, is rather ambivalent concerning the specific theoretical underpinning of this relationship. It often remains limited to references to a desire by donors to deepen commercial linkages and boost their exports. However, when thinking more carefully about the logic underlying the link between trade and aid, several possible mechanisms arise, and only some of them reflect a strategic interest of donors. The paper aims to investigate to what extent the established finding that aid tends to follow trade is really the result of strategic calculations by donors seeking to further enhance trade, or whether it might rather be a byproduct of an established relationship and greater familiarity between trade partners. We test the corresponding hypotheses on the case of climate-related aid provided by the EU. We empirically move beyond the common practice in the literature of linking total aid to total trade flows at the country level and instead disaggregate both in order to probe which logic is most likely at play. Against the backdrop of the ever more pressing challenges posed by climate change, the growing need for climate aid and pledges by developed countries to meet this demand, the paper thus seeks to improve our understanding of donor motivation when making allocation decisions.