Leveraging on the $100 billion Climate Change Global Commitments in Eastern Africa

13 Jan, 2022 Article 23

By Timothy Ranja

With contributions from the ICPAC Climate Change Technical Working Group.

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Climate finance is critical for achieving low carbon and climate-resilient development. However, access to climate finance remains a challenge to most African countries. Climate finance is gaining momentum after a decline in 2020 due to COVID-related constraints. During COP 26, it comprised a significant portion of the agenda and the final COP text.

The $ 100 billion debate dates back to 2009 when developed countries committed to jointly mobilize the amount annually to support developing countries in reducing emissions and adapting to climate change. The prior commitment was by 2020, and the commitment was expected to be extended for another 5 years through 2025.

A climate finance gap has been defined as the difference between the estimated costs of meeting a given climate change target and the amount of finance available to do so.

The recent UNEP Adaptation Gap Report estimates the annual adaptation costs in developing countries to be in the range of $70 billion; it might even reach $140–300 billion in 2030 and $280–500 billion in 2050. The commitments by developed countries to honor the $100 billion to address developing countries’ needs is still below expectations. By 2019, only $79.6 billion had been provided and mobilized by developed countries.

To implement the Nationally Determined Contributions (NDCs), substantial financial resources are required both at the national and sub-national levels. The draft IGAD Climate Change Strategy estimates that $4.02 billion will be required to implement actions in the strategy at the regional level. By the end of November 2021, six IGAD member states had submitted their updated NDCs and increased their ambitions as well as their chances of donor funding.

In Ethiopia for instance, $316 billion is required, of which 20% is unconditional and 80%is conditional. The NDC highlights Ethiopia’s desire to utilize the carbon markets to meet the target. For Kenya, the total cost of implementing mitigation and adaptation actions in the updated NDC is estimated at $62 billion. Kenya commits to mobilize resources by meeting 13% of this budget and will require support for 87% of the budget.

In Somalia, the estimated cost of implementing its NDC is approximately $55.5 billion for the period 2021- 2030. As for South Sudan, it is estimated that the country will need a total of $100 billion for the implementation of all NDC interventions and strategies over 10 years. Of this, international investments of $93.5–93 billion will be required, while $6.5–7 billion will be financed domestically by the Government of South Sudan.

Climate justice advocates for equal funding for adaptation and mitigation. Although COP26 concluded without consensus on the loss and damage funding, there was notable increase in pledges by developed countries and a deal on carbon markets. For instance, the UK indicated it will double its climate finance to $11.6 billion between 2020 and 2025. The US pledged $11.4 billion per year by 2024 and$3 billion specifically for adaptation.

The European Commission announced a new pledge of Euro 150 million for the adaptation fund. Japan also made a contribution of $10 billion in additional climate finance in the next five years. Another development was the private sector climate financing commitments.

UN Special Envoy on Climate Action and Finance, Mark Carney, announced that more than 450 banks, insurers, and asset funds with $130 trillion under management had committed to set science-based targets in line with net-zero emissions by 2050. In addition, financial institutions representing nearly $9 trillion in assets pledged to uproot deforestation from their investment portfolios.

Despite the new funding, member states in Eastern Africa might not be able to tap into these climate financing opportunities. This is based on the Climate Development Mechanism experience where more than 80% of climate funds mobilized went to middle-income countries with Africa hosting less than 10 percent of the funds.

Lack of familiarity with the reporting requirements, unlimited standards, and stringent due diligence have been a key barrier. The private sector will play a key role in assisting IGAD member states in meeting their NDC implementation gap requirements. Barriers to leveraging private sector climate finance include lack of attractive host country frameworks and bureaucratic procedures. Domestic banks are also averse to taking risks due to limited understanding of low carbon opportunities.

Moving forward, although the $100 billion promise might not be realized soon, the available public funds can be used to leverage private sector investment in climate change.

Laws

IGAD member states should develop and implement appropriate policies and frameworks to attract private climate change finance. This can include legal frameworks and incentive mechanisms such as subsidies and taxes. The private sector should also be involved in designing the implementation phase of the NDCs.

A recent ICPAC institutional and capacity assessment needs and gaps survey of IGAD members found out that resource mobilization and capacity to develop bankable climate change projects for external funding was weak. The study concluded that this is likely to hamper the country’s ability to take advantage of existing international sources of climate change finance such as the Green Climate Change Fund (GCF).

In addition, it’s not possible to determine how much funds are allocated to various climate change programs without climate change tracking frameworks. Kenya is among the few countries with a climate change expenditure framework. A recent report indicated that $2.4 billion in climate-related investments flowed into Kenya in 2018 with the private sector contributing an estimate of $979 million.

Therefore, there is need for capacity building of the regional member states to deal with complexity related to accessing climate finance. Regional Economic Communities(RECs) such as IGAD can play a catalytic role by assisting to create an enabling environment.

References

  1. UNEP 2021. Adaptation Gap Report 2021. https://www.unep.org/resources/adaptation-gap-report-2021
  2. Report by the Standing Committee on Finance on the first report on the determination of the needs of developing country Parties related to implementing the Convention and the Paris Agreement
  3. Communicated every five years, NDCs periodically demonstrate Parties’ mitigation and adaptation intentions, while also describing how the NDCs will be achieved. Following the submissions of initial NDCs (i.e., prior and during UNFCCC COP21 in 2015), the first NDC revision was nine months ahead of the relevant COP (March 2020).
  4. https://www.climatepolicyinitiative.org/publication/the-landscape-of-climate-finance-in-kenya/