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Elizabeth Rakowski, International Relations
Faculty Mentor(s): Professor Mehwish Sarwari, Political Science and Public Administration


Does foreign direct investment (FDI) influence climate aid to small island developing states (SIDS)? Small island states such as Fiji have experienced negative consequences as a result of climate change. While SIDS have been vocal in highlighting the detrimental effects of climate change, research shows that action on this issue is needed by both developing and developed states before significant change can occur. Literature shows that developed economies have shown variation in adopting initiatives to address climate change. This paper argues that one mechanism that developing states use to motivate developed economies to respond to climate change is economic interdependence. When smaller, less powerful island states secure FDI from developed economies, they are able to incentivize developed states to provide climate aid. Investors from developed states, such as the United States, remain keen to protect their economic interests in SIDS and are aware of the potential environmental consequences their investments may have. In turn, they provide climate aid in response to these potential concerns. For the reasons stated here, I hypothesize that an increase in foreign direct investment results in an increase in climate aid contributions. Focusing on all SIDS during the period of 1992-2008, a quantitative test is conducted to examine the relationship between U.S. FDI and climate aid commitments. Results show a significant association between U.S. FDI and climate aid, suggesting that the more FDI present in a SID, the more climate aid it receives.

Publication Date

2021

Small Island Developing States and the Influence of Foreign Direct Investment on Climate Aid Commitments
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