Differences in colonial history and access to climate finance

This paper investigates the empirical association of colonial history on the cross-country allocation of global climate finance. Using a 2015–2023 panel of 172 countries, we document a significant ‘colonial penalty’: formerly colonized nations receive disproportionately less climate funding. We examine three distinct mechanisms consistent with this misallocation: institutional frictions that weaken financial transparency; elevated project risks stemming from inadequate social safety nets; and infrastructural lock-in geared towards historical resource extraction, which creates logistical mismatches and raises mitigation costs. Heterogeneity analyses reveal that this negative effect is paradoxically magnified in former colonies with higher levels of income, industrialization, financial development, and corruption. These findings provide novel evidence on the deep historical roots of climate capital disparities. Given the observational nature of our data and the lack of within-country variation in colonial history, our estimates should be interpreted as robust conditional correlations rather than exact causal estimates. We highlight the need to account for historical institutional frictions in the optimal design of global climate transfers.