Is energy aid allocated fairly? A global energy vulnerability perspective

The escalating climate change crisis is causing many developing countries to become more vulnerable to energy-related challenges, highlighting the issue of fairness in allocating energy aid. Given this context, it is important to ensure countries that face higher energy vulnerabilities receive a greater share of energy aid funding. This study aims to assess the impact of energy vulnerability on energy aid allocation using a double-hurdle model and a panel of 124 countries from 2002 to 2019. We rely on an index of energy vulnerability to understand the differences in the amount of aid available to different energy-vulnerable recipients, and study the transmission mechanisms underlying this relationship. Our results suggest that the allocation of energy aid has been largely fair. Specifically, energy-vulnerable countries are more likely to be selected as recipients of energy aid during the selection stage, and subsequently receive a greater share of this aid during the allocation stage. However, this effect is heterogeneous and asymmetric. Donors tend to allocate energy aid to countries characterized by relatively low quality of government, low income levels, and limited access to energy assistance. Furthermore, disparities exist in the impact of energy vulnerability on different types of energy support. Specifically, countries with higher energy vulnerability receive a greater proportion of energy policy and energy distribution aid, but are allocated a relatively small share of aid to their non-renewable energy-generation sectors. Additionally, the relationship between energy vulnerability and renewable energy generation aid is not statistically significant. Our results highlight the importance of considering energy vulnerability when allocating energy assistance, and have both scholarly and practical significance. Our findings also have important policy implications for donors by providing guidance on how to promote a fairer allocation of energy aid.