Climate Finance

‌

Africa's access to existing climate finance is marginal. Greater involvement in various funding including Fast Start and Green Climae Fund will be vital.

Key commitments

Africa: Africa: The African Ministerial Conference on the Environment (AMCEN) at the Special Session on Climate Change (Nairobi, 2009) urged that the financial resources for climate change should be new and additional and provided primarily in the form of grants. At the fourth special session on the environment (Bamako, 2011), AMCEN stressed the importance of ensuring direct access to funding, equitable allocation through geographical and needs-based criteria, a balance between adaptation and mitigation, and grant-based funding for adaptation activities. African Ministers also called for the establishment of an Africa Green Fund.

Development partners: Development partners have made several commitments on climate change financing. The 2007 Bali Action Plan underlined the need to provide developing countries with adequate and additional financial resources. In the 2009 Copenhagen Accord, developed countries pledged resources approaching US$30 billion of new and additional ‘fast-start’ finance over 2010–2012 with a balanced allocation between mitigation and adaptation; industrialised countries also commit to jointly mobilize US$100 billion per year by 2020.

What has been done to deliver on these commitments?

Africa: Africa: The continent has created a common platform for climate negotiations. At COP17 in Durban, the African Union Commission (AUC), the United Nations Economic Commission for Africa (UNECA), the African Development Bank (AfDB), and the Republic of South Africa co-hosted some 100 roundtables, exhibitions  and high-level conferences covering all aspects of climate change in Africa. To help expand the Clean Development Mechanism (CDM), the African Development Bank recently launched the Africa Carbon Support Programme (ACSP) to promote CDM activities.

Development partners: Under the aegis of the UNFCCC and the Kyoto Protocol, three funds have been established: (1) the Least Developed Countries Fund (LDCF) with US$425 million pledged to date to help least-developed countries prepare and implement national adaptation programs of action or NAPAs; (2) the Special Climate Change Fund (SCCF), with US$216 million pledged to support adaptation and mitigation projects in all developing countries; and (3) the Adaptation Fund (AF), funded from a 2% levy on proceeds issued to (CDM) projects, which has received cumulative receipts of US$255 million. In addition, the Global Environment Facility (GEF) has used contributions to the GEF Trust Fund to support climate related projects.

Much larger funding initiatives have been set up outside of the UNFCCC. Most noteworthy are the Climate Investment Funds (CIF), channeled through the World Bank Group and the four regional development banks to help developing countries pilot low-emissions and climate resilient development. The CIFs have received pledges of US$9 billion from 13 donors. A number of specialized funds such as the Congo Basin Forest Fund, the Forest Carbon Partnership Facility, the MDG Achievement Fund and UN-REDD Programme have been established to help to reduce emissions from deforestation and forest degradation and to promote energy efficiency and renewable resources (see also Topics 5 and 6).
In addition to the multilateral funds, estimates of international publicly funded finance flows from bilateral sources to mitigation and adaptation-related activities could be as high as US$23 billion in 2010 according to the OECD/DAC which gathers information on funding related to the “markers” of the Rio Conventions.
Fast Start Funding: As of November 2011, fast-start funding pledges totaled US$28.2 billion.
Longer-Term Funding: The Green Climate Fund was established at COP16 in Cancun to channel for a substantial part of future climate change financing. At COP17 the Fund’s governing instrument was adopted. The World Bank will serve as interim trustee for the Fund. Most operational details and more importantly, funding issues, remain to be finalised; the first meeting of the Board is scheduled in April 2012. Private capital investment will be essential to meet funding pledges and will need leverage by public funds to reduce risk and capital costs.

What results have been achieved?

Disbursements relative to needs are off track by orders of magnitude and the bulk of climate finance has targeted mitigation. The two GEF-managed climate funds for developing countries have disbursed a total of US$206.8 million, of which about 30% went to Africa. Since the Adaptation Fund became operational in 2009, a total of US$30 million has been approved with approximately 40% benefiting Africa. While some US$16.2 billion has either been requested or budgeted under the Fast Start fund, consolidated data on disbursements are not yet available and are estimated to be much smaller. Moreover, questions remain as to the ‘additionality’ of these flows and enhanced reporting provisions will be essential for their successful tracking.

With CIF support, about 50 developing countries are piloting transformations in clean technology, sustainable management of forests, increased energy access through renewable energy, and climate-resilient development. US$459 million has been disbursed. From all climate funding sources, US$1.2 billion has been approved for sub-Saharan Africa, of which US$379 million has been disbursed as of end-November 2011. The large gap between approved and disbursed funding suggests serious bottlenecks in programme implementation.

Africa’s access to carbon finance has been marginal but is slowly improving. Carbon offset markets through the CDM, a major catalyst of low-carbon investments in developing countries, have resulted in US$27 billion inflows to developing countries between 2005-08, 70% of which has gone to China. The value of the offset market represented by the sale of CDM emission credits fell sharply in 2009 and 2010 because of the global crisis and the uncertainty regarding the post-2012 legal arrangements on global emission reduction. Twenty-three African countries had submitted a total of 204 CDM projects as of March 2012 accounting for 2.6% of all CDM projects, a 35% increase over the previous 12 months.

The rapidly evolving landscape of climate change finance brings increased complexity and imposes new challenges to developing countries on how to access resources and develop methods to monitor and evaluate the results. Within the overall framework of aid effectiveness, it is critical that African countries, with the help of the development partners, build on existing institutions and programmes to manage the additional resources at the national level.

What are the future priority actions?

Africa
•Develop plans and initiatives to effectively and efficiently use climate change finance and ensure accountability of resource use;
•Strengthen capacities to better engage in CDM and REDD+ processes.

Development partners
•Accelerate disbursements of fast-start funding of US$30 billion over 2010–2012;
•Expedite the formal launch of the Green Climate Fund and the formal establishment of the Standing Committee of the Financial Mechanisms;
•Support reforms, such as streamlining CDM registration and emission credit issuance, to make existing carbon market mechanisms more relevant and accessible to Africa.  .