Adaptive capacity to climate change: Does energy aid matter?

The global call for augmented financial support to satisfy the growing requirements for adaptation funding, essential for enabling vulnerable groups to withstand the ramifications of climate change, has been resonant. Channeling energy assistance to developing countries may serve to ameliorate this shortfall. Through an empirical analysis using a balanced panel dataset comprising 64 countries from 2002 to 2020, the research investigates the role of energy assistance in enhancing the adaptive capacities of developing nations. Our analysis identifies critical areas with pronounced deficiencies in adaptive capacity, primarily situated in sub-Saharan Africa, South Asia, Central Asia, and western South America. The study reveals that energy aid, notably in the forms of non-renewable, policy-related, and distribution assistance, significantly elevates adaptive capabilities. Although this assistance yields significant benefits for countries across various income levels, the impact is relatively greater for higher-income nations. Additionally, energy aid indirectly bolsters adaptive capacity by stimulating innovation, and an improvement in the quality of governance aids in enhancing the effectiveness of energy assistance implementation, especially for lower-income countries. The study concludes by offering nuanced policy insights aimed at donors and recipients alike, with the goal of augmenting the efficacy of aid to improve climate change adaptation. • This article explores the impact of energy aid on climate change adaptive capacity. • We further examine heterogeneity and investigate impact mechanisms. • Energy aid can significantly enhance the adaptive capacity of recipient countries. • Energy aid can indirectly improve adaptive capacity by fostering innovation capacity. • Improved government quality enhances aid effectiveness in lower-income countries.