Dirty Work: The Environmental Impact of DAC and Non-DAC Donor Projects

This is a continuation of the First Tranche’s look at the environmental impacts of development assistance. See here for related posts on the subject.


The rise of non-DAC bilateral donors (NDBs) has forced development policy experts to rethink assumptions about the transparency and impact of development finance. The conventional wisdom [pdf] is that NDBs seldom condition their assistance on recipient countries meeting economic, environmental, and political standards, which undermines multilateral commitments made by members of the OECD’s Development Assistance Committee (DAC). However, this assumption rests largely on case study evidence and impressionistic accounts.

The public release of the AidData Environmental Impact CodeDataset makes it possible to examine whether NDBs have “dirtier” grant and loan portfolios than DAC bilateral donors. “Dirty” projects, such as projects that support resource extraction or electricity distribution, can cause environmental harm over the short, medium, or long-term. With a sample extending from 1992 to 2008, the most recent year in the PLAID 1.9 dataset, the graph below shows the proportion of donor commitments to each environmental impact code category.


figurea.png

FigureB.png

 The large chunk of red in the NDB graph (Figure B) indicates that, between 1992 and 2008, 45-80% of the NDBs’ annual development finance flowed to dirty projects. The DAC donors (Figure A) provided far less funding to dirty projects, at 11-43% annually. On the environmentally beneficial side, NDB and DAC donors have similar average flows at 6.6% and 8.8% of their total portfolios, respectively. The other large discrepancy between the two groups occurs in the neutral category, comprising projects without any perceived environmental impact. During this timeframe, DAC donors contributed 70% of their financing per year to neutral projects, while NDBs committed about 30%.

Are the fears about NDBs’ relative disinterest in environmental protection substantiated by these numbers? In my view, it's too early to say. Consider these facts:
dog.pngDAC donors as a whole provided approximately $61.7 billion a year in development finance,
          compared to the NDBs’ $1.05 billion. Therefore, even if NDB projects are “dirtier” on average,
          DAC donors contributed $200 billion more to “dirty” projects than NDBs from 1992 to 2008
dog.pngExisting NDB aggregate statistics may be misleading. For example, NDBs make significant    
          contributions through in-kind technical assistance or cooperation (TA/TC) programs that are 
          difficult to monetize. Peter Kragelund [gated] cites a Brazilian official who estimates that its 
          Technical Cooperation among Developing Countries (TCDC) program may be worth ten times 
          its stated value because Brazil’s  implementation partners do not charge for TC. The PLAID 1.9 
          dataset also lacks information on the most significant and controversial of all the NDBs: China.
dog.pngDonor countries that do not belong to the DAC are by no means an organized, coordinated, or 
          homogenous group: Poland, Brazil, and Saudi Arabia have distinct motives, behaviors, and 
          reporting mechanisms. Nor do they share a common definition of ODA with DAC (or other non-
          DAC) donors, quantitative comparisons of Non-DAC donors are inherently challenging. 
          Therefore, one must be cautious about drawing inferences about "Non-DAC" donor behavior.

In summary, the hard numbers offer some evidence that NDBs engage in “dirtier” projects than DAC donors, but we lack sufficient evidence to make any decisive claims about this issue.

The rise of Non-DAC donors also poses an important normative question: given that NDBs have become a major source of development finance, and developing countries have called for an increase in infrastructure and agricultural projects, should NDBs necessarily be deemed "dirtier" and faulted for providing demand-driven assistance? 


Steven Linett is a former AidData Senior Research Assistant at the College of William & Mary.





Tags: south-south cooperationenvironment

Comments

Quite revealing and interesting statistics, however what would constitute a 'dirty' development project? Still not getting it but I'm very much aware of the fact that some aid from NDBs as well as DBs are sometimes insensitive to environmental concerns and even sometimes turns out to be more business-like than expected. In any case, is there a way to nipping such a phenomenon in the bud before it becomes a tradition????

Clement,<br /><br />Thank you for commenting on the post.<br /><br />To answer your technical question, our coding scheme defines dirty projects in two more specific categories that I combined for this post into a single indicator. The first, Dirty Broadly Defined, consists of “projects that will cause moderate environmental harm over the long term,” such as electricity distribution or hydroelectric power. The second, Dirty Strictly Defined, consists of “projects that cause significant and immediate environmental harm,” like resource extraction or heavy industry. You can read more about the methodology here [http://blog.aiddata.org/2012/06/new-on-aiddataorg-environmental-impact.html].<br /><br />In response to your second question, I think the answer lies in stronger commitments to coordination from all donors (DAC, non-DAC, and multilaterals) and stakeholders in the development community. DAC and UN multilateral commitments (World Commission on Environment and Development, Rio 1992, Rio+20) have definitely attempted to institutionalize more environmentally friendly development assistance. It is clear, however, that impediments continue to persist, and prevent these multilateral goals for sustainable development from being achieved. Ngaire Woods explains this idea in her paper, “Whose Aid? Whose Influence? China, emerging donors and the silent revolution in development assistance,” available as a pdf here [http://www.globaleconomicgovernance.org/wp-content/uploads/ChinaNew%20donorsIA.pdf].<br />