Climate Finance for Africa

Africa calls for climate finance pledges to be met and mulls carbon tax solution to bridge gap

While Africa has long battled against the poverty that has scarred much of the continent for decades, the combat against climate change is relatively new. But they are not separate struggles. That was the idea that dominated a debate on climate finance at the climate change conference, or COP 17, in Durban.

Key Takeaways from the Roundtable

It was clearly stated that in order for Africa to advance, more finance is urgently needed. Africa has land, water, wind and other natural resources that, if harnessed together with sufficient finance, could lead to great advances in sustainable development.

It was emphasized during the session that Africa has so far not attracted much climate finance. One of the reasons for this is that Africa has very low greenhouse gas emissions and most existing instruments target carbon reductions more than low greenhouse gases growth trajectories.

Emphasizing that we must work to ensure that future climate finance instruments are better suited to Africa, the panel called for the development of an Africa Green Fund to be managed by an African institution, and which would target the specific needs of Africa. Dr Donald Kaberuka of the AfDB stated that his Bank is in a postion to be that institution because of its experience and knowledge.

Much importance was placed on the Green Climate Fund and the fact that it has yet to receive sufficient finance. This led to Mr Ping stating that partners in the Cancun agreement should respect the commitments they made. If we are to move towards a healthier planet, the Green Climate Fund must become operational.
While the developing countries have asked that a substantial part of the funds come from public sources, the West has indicated a preference for private finance, existing development funds and loans as their contributions.

It was stated that the economic troubles in Europe and the United States will prevent any progress on the Green Climate Fund.

Also, it was stated that Africa needs more funds for adaptation than it does for mitigation.

Dr Benito Mueller believed that the climate finance regime in general, and the Green Climate Fund in particular, will have to involve a fundamental devolution of decision-making to National Funding Entities. He said that the most efficient scenario is not to house funds in donor agencies or multilateral funds, but in the recipient countries.

A suggestion to explore the potential for providing climate finance from carbon-related charges on international aviation and maritime transport was made and well received by all panelists. This is just one of the innovative ways of mobilising finance. Even though there are many successful experiences that we can learn from, it is strongly believed that Africa must develop innovative and transparent ways of mobilising funds.

Mr Pravin Gordhan noted the importance of attracting finance instead of waiting for it. He noted that by doing what was possible now, it would demonstrate to the world that Africa is ready and this in turn will encourage others to invest. Mobilising funds needs to be transparent which will help build trust among both donors and beneficiaries.

Background

The social, economic and political impacts of climate change are already being felt by many countries in Africa, with increasing evidence that climate change is directly affecting economic growth and development.  African countries will require significant resources to be able to develop in a way that reduces carbon emissions and increases the resilience of their environment and economy.  Moreover, they need to be equipped to put in place the institutions, knowledge, and policy frameworks necessary for making informed policy decisions and taking steps to catalyze finance and promote low-carbon, climate-resilient development.

The Cancun Agreement noted that, “addressing climate change requires a paradigm shift towards building a low-carbon society that offers substantial opportunities and ensures continued high growth and sustainable development”.  The agreement consisted of a set of decisions anchoring national mitigation pledges and taking some important steps to strengthen finance, transparency in emissions reporting by all countries and other elements of the multilateral climate framework.  One element of the agreements formalized the finance goals set in Copenhagen to mobilize fast-start and long-term climate finance.  As such, a collective commitment was made by developed countries ‘to provide new and additional resources through international institutions, approaching $30 billion in fast start finance for the period 2010-2012’.  Funding for adaptation will be prioritized for the most vulnerable developing countries, which includes LDCs, Small Island Developing States and countries in Africa.

The current UNFCCC funding is generally reported as being far less than the actual needs of Africa and criticized as relying mainly on voluntary contributions. While additional adaptation cost for Africa by 2015 is estimated by Vivid Economics at $20-30 billion, the Climate Funds Update Website  records only $154 million are been implemented within the Africa region through dedicated bilateral and multilateral climate funds.  This reflects the large gap between the climate funds required and made available for Africa and the challenging task required for up scaling the funds to match the continent’s needs.

For Africa, despite the proliferation of climate finance instruments, the continent’s access to these mechanisms remains dramatically low, as compared to other developing regions. Limited access to existing funds is due to a number of constraints including weak capacities of governments to meet international standards and Funds’ eligibility requirements related to preparing project concept note and full proposals; lack of governance and coordination among relevant agencies to leverage existing climate change resources; lack of appropriate regulatory reforms and policies and related national development plans and prioritization of investment; and limited absorptive capacities for timely implementation. In addition, the fragmentation of existing funding instruments further aggravates the situation.  While key sectors such as agriculture, water and energy receive some domestic and donor development financing support, the lack of explicit support to climate change undermines the efforts required to deliver concrete actions.

Africa needs large financial resources and technical capacities to drive adaptation and mitigation efforts. The World Bank estimates that annual spending of $93 billion would be required to improve Africa’s infrastructure .  Of the $93 billion needed to improve Africa’s infrastructure, almost half is to boost the continent’s power supply. It should be noted that if climate finance for mitigation were to focus mainly on the small number of developing countries that are the largest emitters – as the Clean Technology Fund has done – this would leave many countries with very limited financial assistance.   

Clearly, financing climate mitigation and adaptation in developing countries represents a major challenge in the successful outcome of COP-17. The effective mobilization of financial resources is regarded by many as a key area in the negotiations to support large-scale investments in energy and other key infrastructure to meet both development and climate objectives in Africa.  Leveraging climate finance will bring a number of co-benefits:

  • Financing climate change adaptation and mitigation efforts can simultaneously address poverty reduction and sustainable development concerns in Africa.  For example, sufficient hydropower potential exists in Africa to provide twice the continent’s energy access needs, offering the potential to provide electricity to Africa’s citizens and industries and doing so in a climate friendly way.
  • Additional financial resources to Africa will assist the continent to address its adaptation needs by building capacity and skills, apply technologies and promoting long term investments in natural resource development including energy and forests.
  • Climate finance can be a catalyst to leverage private and public resources, open new economic opportunities, promote technology deployment and transform development pathways. One potential mechanism for mobilizing a share of the proposed international climate financing is the UNFCCC Green Climate Fund (GCF), currently under negotiation by Parties to the Convention.
  • The African Development Bank is proposing the establishment of the Africa Green Fund (AGF), with the purpose of receiving and managing resources allocated to Africa, from all sources including the fast-track financing and long term pledges made under the Copenhagen Accord and the Green Climate Fund. The AGF is expected to help finance projects and programs that contribute to climate resilient and low carbon development in Africa.

Discussions will address the various sources and disbursement levels of climate finance, and the potential benefits and limitations for development in Africa.  The panel would see to increase awareness on issues of climate change finance and understanding that African countries need to increase their access to global climate change financing mechanisms in order to effectively mainstream climate change into their development frameworks.  Discussions will also look closer at the potential for using climate finance to stimulate and generate domestic resources for climate action – seen by some as a fundamental step to move towards a positive and nationally owned sustainable development pathway.

On a broader level, the roundtable will increase awareness among African stakeholders of the AfDB’s role in addressing climate change in Africa and enhance partnerships among institutions working on climate change in Africa.

Toward that end, the high level panelists of this roundtable will address, but not be limited to, the following key questions:

Key questions:

  • Why has the disbursement of ‘fast start’ finance been slow?
  • What lessons can we draw from the experience of fast-start finance for as we move towards long term finance?
  • How can Africa’s accessibility to climate funds be increased?
  • How much additional finance is needed by Africa to address adaptation and mitigation in a balanced way?
  • What are the potential sources for money and how will the finance be raised to meet these requirements? How can issues of equity and regional balances be addressed during the funds transfer and division between diverse recipients in developing countries?
  • How to ensure that public climate finance will be used to mobilize substantial private financing?

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