Global Climate Change Alliance: Intra-ACP Programme

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• Global Climate Change Alliance Intra-ACP
  Programme
• Training ModuleClimate Change Finance
• Module 1 Financing Climate Change
• Ms Isabelle MamatySenior ExpertClimate Support
  Facility

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Module Structure

• Climate change and sustainable development
  linkages
• Mainstreaming climate change into national
  development planning and budgeting
• Financing climate change
• External sources of climate change

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• Climate change and sustainable development
  linkages?

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Climate change and sustainable development
Both adaptation and mitigation support more
sustainable development
Climate change
Biophysical effects
Environment
Sustainable development
Socio-economic impacts
Social dimension
Economy
In turn, the pursuit of sustainable development
enhances societys response capacity
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Climate change and MDGs
Reduce child mortality (Goal 4)
Eradicate extreme poverty hunger (Goal 1)
e.g. Increased incidence of waterborne diseases
Promote gender equality empower women (Goal 3)
e.g. Adverse effects on food security
Potential impacts on MDGs
e.g. Dependence on livelihoods put at risk by CC
Improve maternal health (Goal 5)
Ensure environmental sustainability (Goal 7)
Combat major diseases (Goal 6)
e.g. Higher incidence of anaemia resulting from
malaria
e.g. Heat-related mortality illnesses
e.g. Increased stress on ecosystems and
biodiversity
Source OECD (2009a)
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Adaptation and mitigation measures

• Adaptation and mitigation measures should be
  considered as opportunities to development
  co-benefits towards a green growth
• Mitigation should be compatible with adaptation
  policies and instruments, rely on environmentally
  sustainable practices while adaptation should
  take account of emissions.
• then this helps moving to climate-resilient
  development and low- emissions development
• only if climate change is mainstreamed into
  policymaking and planning

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• Mainstreaming climate change into national
  development planning and budgeting

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Mainstreaming climate change into national
development planning

• There is a strong case for mainstreaming climate
  change into all development planning
• There are entry points for mainstreaming climate
  change at all stages of the policy cycle
• Mainstreaming climate change at strategic
  planning levels supports more integrated,
  effective, efficient and sustainable responses
• But top-down and bottom-up approaches to
  adaptation are complementary and mainstreaming is
  also justified at local level
• Evidence supports both the engagement of key
  actors and the development of a communication and
  advocacy strategy

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Mainstreaming climate change into national
development budgeting

• Climate-related policies and measures can impact
  the national budget in multiple ways
• There are entry points for mainstreaming climate
  change at practically all stages of the budgetary
  process - including at the stage of ex post
  evaluation (PERs)
• It is recommended to set up systems to keep track
  of adaptation- and mitigation-related
  expenditures
• Multiple sources of funding exist to support
  adaptation and mitigation focus on eligibility
  and objectives
• Where conditions are met, budget support is a
  suitable modality for supporting CC mainstreaming
  efforts

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NAPAs and NAMAs

• Many developing countries have now submitted
  their NAPAs ( NAMAs) to the UNFCCC
• NAPAs national adaptation programmes of action
• Help LDCs build national capacities and identify
  priority adaptation projects with developmental
  benefits
• NAMAS nationally appropriate mitigation actions
• These voluntary mitigation measures are
  consistent with a countrys development strategy,
  and are meant to put it on a more sustainable
  development path
• These are a good starting point for addressing
  the climate challenge without compromising
  development objectives

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• Financing climate change

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Global response to climate change under UNFCC (1)

• 165 nations signed the 1992 United Nations
  Framework Convention on Climate Change (UN-FCCC)
  at Rio de Janeiro
• The Convention divides countries into two main
  groups Annex I (developed) non- Annex I
  (developing)

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Global response to climate change under UNFCC (2)

• Annex I (Developed Countries) agreed to reduce
  their GHGs by 5.2 below 1990 levels in 1st
  commitment period 2008 2012
• Convention hinges on three principles
• Common but differentiated responsibility
• Precautionary approach
• Sustainable Economic Growth and Development
• Commitment by developed countries to provide
  funding for the agreed full incremental costs
  of climate change in developing countries under
  Article 4.3 Convention, Kyoto Protocol,
  successive COP agreements and decisions

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UNFCC key decisions on climate finance (1)

• 1991 - Creation of the Global Environment
  Facility (GEF) hosted at the World Bank.
• 1992 - Rio Earth Summit- Decision to restructure
  GEF
• 1994 - GEF becomes a permanent, separate
  institution and the financial mechanism of the
  following conventions UNFCC, Convention on
  Biodiversity, Montreal Protocol on Ozone,
  Stockholm Convention on persistent Organic
  Pollutants and UN Convention to Combat
  Desertification.
• 1995 - COP 1 Berlin discussion on Kyoto
  Protocol

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UNFCC key decisions on climate finance (2)

• 1997-COP 3 - Kyoto Adoption of Kyoto Protocol
• (binding commitment on emissions reduction)
• 2001-COP 7- Marrakesh Accords- Rules of
  implementation for the Kyoto Protocol, new
  funding and planning instruments for adaptation
  and establishment of technology transfer
  framework
• 2005- Kyoto Protocol into force
• 2006- Adoption of Nairobi action plan on
  adaptation to assist all Parties (in particular
  LDCs and SIDs in improving and assessing impacts
  of CC and information on practical adaptations
  actions

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UNFCC key decisions on climate finance (3)

• 2007- COP13- Bali Road Map launching of the
  Adaptation Fund
• 2009- COP 15- Copenhagen Copenhagen Accord
  Short term-finance 30 billion USD for 2010-2012
  (Fast start) Mobilisation of 100 USD billion a
  year by 2020 to address developing countries
  needs.
• 2010- COP 16- Cancun Cancun Agreements
  Establishment of a Green Climate Fund to scale
  up long term Finance for developing countries.
• 2011-COP 17 Durban agreement to move into a
  second commitment period for the Kyoto protocol
  in 2013

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Global environment facility (GEF) (1)

• GEF is since 1994 the financial mechanism of the
  following conventions
• UN Framework Convention on Climate Change(UNFCC),
  
• Convention on Biodiversity,
• Stockholm Convention on persistent Organic
  Pollutants
• UN Convention to Combat Desertification.
• Supports activities on management of chemical
  products under the Montreal Protocol on Ozone
• Manages two funds under the UNFCCC
• Special fund for climate change (SCCF)
• Least developed countries fund (LDCF)
• Secretariat of the Adaptation Fund

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How does GEF work ?

• GEF provides grants to programmes embedded in
  national planning
• in eligible countries
• they meet eligibility criteria established by the
  relevant COP and
• are eligible to borrow from the World Bank (IBRD
  and/or IDA)
• and/or they are eligible recipients of UNDP
  technical assistance through country programming
  related to climate change, international waters,
  land degradation, the ozone layer, biodiversity,
  and persistent organic pollutants).
• Resources for the GEF Trust Fund are replenished
  every four years current replenishment period is
  the GEF fifth replenishment - GEF-5 for period
  2010-2014
• Country allocation is provided under the new
  System for Transparent Allocation of Resources
  (STAR) that replaces the former Resource
  allocation Framework (RAF) system under GEF-4
  period

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System for Transparent Allocation of Resources
(STAR)

• STAR covers biodiversity, climate change and land
  degradation
• Allocation is given to individual country taking
  account of their vulnerability
• Minimum Allocation floor (threshold)
• 2 billion for climate change
• 1.5 billion for biodiversity
• 0.5 billion for land degradation
• Maximum allocation (cap)11 of total funds for
  climate change and 10 for biodiversity and land
  degradation
• However STAR provides flexibility for countries
• below the threshold to use the total of their
  allocations across all and any STAR focal areas
  during the GEF-5 cycle
• with a total allocation of up to 7 million to
  allocate these 7 million in any or all of these
  focal areas without having to respect the
  proportions
• To be able to use more than 50 of their
  indicative allocations during the first two years
  (elimination of the GEF-4 fifty percent rule)

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Kyoto Protocol

• Annex I (Developed Countries) agreed to reduce
  their GHGs by 5.2 below 1990 levels in 1st
  commitment period 2008 2012
• Kyoto Protocol is a legally binding agreement for
  emissions reductions by industrialised countries
  through three market-based mechanisms
• Emissions trading carbon market
• Clean development mechanism (CDM)
• Joint implementation (JI)
• 184 Parties of the Convention have ratified its
  Protocol to date.

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Emission Trading under Kyoto Protocol (1)

• Emission trading (Art. 17 of Kyoto Protocol)
• Parties under Kyoto Protocol (Annex B Parties)
  have committed targets for limiting or reducing
  CO2 expressed as levels of allowed emissions or
   assigned  amounts over 2008-2012 period. The
  allowed emissions are expressed as  assigned
  amount units  (AAUs) which can be traded by
  parties that have not used them to parties that
  are over their targets.

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Emission Trading under Kyoto Protocol (2)

• Other traded units under Kyoto are
• A removal unit (RMU) on the basis of land use,
  land-use change and forestry (LULUCF) activities
  such as reforestation
•  An emission reduction unit (ERU) generated by a
  joint implementation project (article 6 of the
  Kyoto Protocol) a country of Annex B party to
  Kyoto Protocol is allowed to earn emission
  reduction (ERUs) from an emission reduction or
  emission removal project in another Annex B
  Party.
• A certified emission reduction (CER) generated
  from a clean development mechanism project
  activity (article 12 of Kyoto Protocol). A annex
  B country Parties to Kyoto Protocol is allowed to
  earn saleable CER from an emission-project in
  developing countries.
• Transfers and acquisitions of these units are
  compiled in the registry systems under the Kyoto
  Protocol

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Financing Adaptation

• Copenhagen Accord 2009 priority of funding for
  adaptation to LDCs, SIDs and Africa
• COP 2010 adoption of Cancun Adaptation Framework
  commitment for support to developing countries
  for adaptation action under the National
  Adaptation Programs of Action (NAPAs)
• Cost of adaptation public versus private finance
• Majority of International climate funding
  instruments are ODA transfers
• Finance through dedicated adaptation funds 21
  of total climate finance approved in 2011
• Uneven distribution poorest countries received
  less

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Financing Mitigation

• Copenhagen COP 2009 commitment to mobilise 100
  billion per year in climate finance by 2020
• Green Climate fund (GFC) Cancun COP 2010
• 2/3 of total climate change since 2008, primarily
  in renewable energy technologies activities (Asia
  Pacific region)
• GEF projects seek to support rural
  electrification using renewable energy
  technologies to reach the poor (exp. Scaling
  Renewable Energy Program of the CIFs
• Need for transformation in policy and regulatory
  frameworks to address mitigation

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Estimating the Costs of climate change

• The estimates of climate change financing needs
  of developing countries are as follow
• mitigation 500 billion to 1100 billion/year
  (UNFCC, 2009 World Bank report 2010 UNDESA
  (WESS, 2010)
• Adaptation 100 billion to 450 billion/year
  (UNFCC 2007 World Bank 2010 Parry et al. (2009)

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• External sources of climate change finance

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Sources of Climate Change Finance

• Public funding (multilateral/bilateral funds)
• National climate funds
• Private-public partnership initiatives (e.g.
  GEEREF)
• Market-based instruments ( market carbon )
  Compliance market (CDM/ EU emissions trading
  scheme)/voluntary market

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• Public funding (multilateral/bilateral funds)

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Complex architecture of the funds
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Main sources of external financing (1)
Source of funding Activities supported
Development cooperation programmes Adaptation and mitigation with a focus on development
Least Developed Countries Fund Preparation and implementation of NAPAs
Special Climate Change Fund Adaptation (priority objective), technology transfers, mitigation in high-potential sectors
GEF Trust Funds climate change focal area Mitigation projects, adaptation demonstration projects and enabling activities
Adaptation Fund Projects and programmes that reduce the vulnerability of communities and sectors to CC
Green Climate Fund(operations not yet started) Channel for future multilateral funding for adaptation and mitigation
Clean Technology Fund Demonstration, deployment and transfer of low-emission technologies
Strategic Climate Fund (SCF) - Pilot Program for Climate Resilience Climate risk and resilience mainstreaming in development planning
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Main sources of external financing (2)
Source of funding Activities supported
SCF- Forest Investment Program REDD- related activities, sustainable forest management
SCF - Program for Scaling Up Renewable Energy in Low-Income Countries Deployment of renewable energy sources
REDD (various streams of funding incl. UN-REDD, which promotes the mainstreaming of REDD strategies in national development) Preparation, pilot implementation and deployment of national strategies for reducing emissions from deforestation/forest degradation
Prototype Carbon Fund Pioneering approaches to mitigation that contribute to sustainable development
BioCarbon Fund Carbon sequestration projects in forests and agro-ecosystems
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Main sources of external financing (3)
Source of funding Activities supported
Forest Carbon Partnership Facility Preparation of national REDD strategies, pilot financial transfers based on verified emission reductions from REDD
Carbon Partnership Facility Long-term, post-2012 mitigation projects
Global Energy Efficiency and Renewable Energy Fund Energy efficiency and renewable energy projects
Global Climate Change Alliance Mainstreaming of CC in poverty reduction and national development strategies Adaptation, DRR, participation in REDD/CDM
MDG Achievement Fund, environment and climate change thematic area Mainstreaming of environmental issues in national and sub-national policies, planning and investment frameworks
Clean Development Mechanism Mitigation projects in developing countries
Voluntary carbon markets Mitigation projects
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Funding by theme

• Split of overall funding by theme
• Source www.climatefundsupdate.org

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Gaps in climate funds flows (1)
Fund Pledged Disbursed
Adaptation Fund 254.95 25.61
Clean Technology Fund 4433.00 384.00
Congo Basin Forest Fund 165.00 15.71
Forest Carbon Partnership Facility 436.90 11.35
Forest Investment Program 599.00 14.00
GEF Trust Fund - Climate Change focal area (GEF 4 2006 - 2010) 1032.92 915.70
GEF Trust Fund - Climate Change focal area (GEF 5 2010 - 2014) 1141.00 1.00
Global Energy Efficiency and Renewable Energy Fund 169.50  
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Gaps in climate funds flows (2)
Fund Pledged Disbursed
International Climate Initiative 680.40 562.10
International Forest Carbon Initiative 216.27 47.60
Least Developed Countries Fund 379.86 107.71
MDG Achievement Fund Environment and Climate Change thematic window 89.50 83.30
Pilot Program for Climate Resilience 982.00 55.00
Scaling-Up Renewable Energy Program for Low Income Countries 352.00 6.00
Special Climate Change Fund 206.39 86.10
UN-REDD Programme 150.84 117.90
Total 32719.05 2666.90
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Financing NAPAs

• NAPAs focus on immediate and urgent needs of the
  LDCs to adapt to cliamet change. Only 20 of
  NAPAs needs are being met from dedicated climate
  funds
• 46 countries have developed NAPAs focusing on
  agricutlture food security and water projects

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Difficulties in capturing resources for
developing countries (1)

• Internal difficulties in developing countries
• Problem in designing projects
• Sequencing
• Coordination
• Lack of absorptive capacity

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Difficulties in capturing resources for
developing countries (2)

• Difficulties related to the funds
• Proliferation of funds runs contrary to the Paris
  Declaration principles for aid effectiveness
• Complication of reporting, monitoring and
  verification of financial commitments
• Heavy administrative burden placed on recipient
  countries

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Funds evaluation ground level reality
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• National climate funds

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National climate funds

• Several countries have now established a
  national climate fund (trust fund) to
• channel and manage external funding related to CC
• leverage existing funds and initiatives (incl.
  those financed with national resources)
• support the mainstreaming of climate-related
  programmes and projects into national development
  strategies
• Expected benefits
• Alignment of external funding with national
  priorities
• Building of national capacities and institutions
• Scaling up of the response to climate change

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• Private-public partnership initiatives

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Private-public Linkages

• Many climate change responses, especially in
  relation to mitigation will involve the private
  sector (exp. Energy efficiency), therefore
  government should
• Involve private sector representatives to the
  climate change task-force and/or other national
  committees/councils
• Involve the private sector in setting amended
  national standards and codes to respond to the
  challenge of climate change
• Assist the private sector to take up climate
  change responses by providing incentive schemes,
  and by initiating public-private partnerships
• Identify and seek the support of private
  enterprise in national climate change initiatives
  and in particular, the Clean Development
  Mechanism.

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• Market-based instruments

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Market carbon structure
Australia, EU, Canada, Japan, New Zealand, USA
CSR
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Market-based Instrument Challenges(1)

• Challenges in host countries
• Lack of institutional capacity
• Lack of financing and information
• Perceptions of investment risk
• Small size (e.g. small volume) of emissions
  reductions

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Market-based Instrument Challenges (2)

• Uncertainty over a second commitment period
  (after 2012) for the Kyoto Protocol raises
  questions about the future of the CDM
• Private Public partnership challenge in
  designing instruments to address private sector
  risk while ensuring public accountability for
  delivering impact and results (incl.
  developmental and social co-benefits)

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• Turning words into action

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Discussion

• Questions and answers
• General discussion and sharing of experiences
  concerning the use of the existing climate change
  funds and market-instrument mechanisms and
  difficulties encountered by your organisation
  and/or country

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• Thank you
• Contact Dr. Pendo MARO, ACP Secretariat
  pendomaro_at_acp.int or 32 495 281
  494www.gcca.eu/intra-acp