International Sanctions and Climate Finance in Developing Countries: Effects and Transmission Channels

Climate finance is essential to enable developing countries to mitigate greenhouse gas emissions and adapt to climate change. However, geopolitical tensions, such as international sanctions, threaten these financial flows. Since the escalation of the conflict between Russia and Ukraine in 2022, sanctions have disrupted global economic systems, but their impact on climate finance has not been sufficiently studied. This study analyses how international sanctions reduce climate finance in 80 developing countries (2000-2021) using a dynamic GMM panel and quantile regression. The results show that sanctions significantly reduce climate finance, with democratic regimes mitigating this effect. Furthermore, the results show that this negative effect of sanctions varies according to the income level of countries, with lower effects in low-income countries (LIC) compared with low-middle-income countries (LMIC) and upper-low-middle-income countries (UMIC). Poverty, corruption and education mediate this relationship: sanctions exacerbate poverty and corruption while limiting investment in education, thereby undermining institutional capacity to secure and manage climate funds. This study contributes to understanding the unintended consequences of geopolitical measures on global climate goals.