Financing Climate Change Adaptation and Mitigation: Key Issues and Options for African Policy-Makers and Negotiators Djimingue NANASTA, ENDA May 2009 / AMCEN Special Session on Climate Change Nairobi, Kenya

Outline of the Presentation Background and Rationale Statement of the issue Background Review of current climate change financing initiatives Existing international financing initiatives The Clean Development Mechanism (CDM) The Funding gap in current funding initiatives Key Principles and Specific concerns for Africa Key principles of the Convention Specific concerns for Africa Description and Analysis of Policy Options Revenue raising Governance Disbursement Policy Recommendations and short-term priorities 2

Background and Rationale The Issue Financing climate change: a major concern for a Copenhagen deal Several proposals put forward to generate new funds Need to consider various policy options Need for policy recommendations 3

Background and Rationale Background Importance of Climate change financing for Africa Africa contributes less than 4% of total GHG emissions Among the most vulnerable to CC Voluntary contributions will not be enough to adapt or mitigate Resources provided by international financing initiatives Proliferation of financing initiatives Reliance on voluntary contributions Less than 15% of pledged funds actually disbursed Resources provided by carbon market CDM proceeds estimated at US$7.4 billion As of October 2008, only 17 out of 1186 projects located in SSA Inadequate tool to support Africas needs against CC 4

Current CC Financing Initiatives Existing International Financing Initiatives Multilateral Initiatives Global Environment Facility: SCCF; LDCF; SPA Adaptation Fund African Development Bank: CEIF; CBFF UNDP: UN-REDD Programme (FAO, UNDP, UNEP); MDG Achievement Fund (MDG-F) World Bank: Climate Investment Funds Bilateral Initiatives Cool Earth Partnership (CEP, Japan) Environmental Transformation Fund: International Window (ETF-IW, UK) Global Climate Change Alliance (GCCA, European Commission) International Climate Initiative (ICI, Germany) International Forest Carbon Initiative (IFCI, Australia) Etc. 5

Current CC Financing Initiatives The Clean Development Mechanism (CDM) Twofold aim: - Mitigation for AI Parties - Sustainable Development for DCs Estimated at US$ 7.4 billion Expected exponential growth Marginal impact: - Only 5% of CDM transactions in Africa in Poor regional distribution: only 2% of projects globally 6

The Funding Gap in current funding initiatives Climate change finance in developing countries: costs vs. funds available (per annum) Sources: Capoor & Ambrosi (2008), Design to Win (2007) Current CC Financing Initiatives 7

Key Principles and Specific Concerns for Africa Key Principles of the Convention Adequate New and additional Equitable Predictable Agreed full costs 8

Key Principles and Specific Concerns for Africa Specific concerns for Africa Direct access Coherence Address adaptation MRVable Accountable to the COP Appropriate: grants vs. loans 9

Description and Analysis of Policy Options Three key functions for any option: Revenue raising Governance Revenue disbursement 10

Auctions of assigned amount units or emission allowances (Norwegian proposal) Uniform global levy on CO2 emissions except for LDCs (Swiss) Levy on international bunkers (LDCs) Levy on mechanisms of flexibility Defined budgetary contributions (G77 and China) Hybrids (Mexico proposal) Other innovative mechanisms (EU, etc.) African Group: - Options are not mutually exclusive - Prioritize a list of the top 3 revenue raising mechanisms - Need for a legally binding agreement Revenue raising proposals include: Description and Analysis of Policy Options Revenue raising proposals include: 11

Policy options for Governance: Two possible approaches: 1. A unified international fund approach 2. A System of multiple financing streams Proposals focus on: A. Creation of new institutional arrangements B. Making efficient and effective use of current institutional arrangements C. Reforming existing institutional arrangements (e.g. GEF) African Group: Full accountability to COP and direct access New financial institution: opposed by AI countries Current institutional arrangements likely to continue Need to support both reform of existing institutions and creation new arrangements Description and Analysis of Policy Options 12

Policy options for Disbursement: Several approaches: 1. Prioritize mitigation activities 2. Prioritize adaptation activities 3. Mitigation and adaptation 4. Grant or debt-based African priorities: Adaptation funding must be grant-based Need to enhance absorptive and response capacity to funds Increased access to funds Equitable distribution Description and Analysis of Policy Options 13

For an international financing mechanism: Revenue raising: For adaptation finance: support auctioning of AAUs and levies on bunkers Support Mexican proposal if : - financial commitments by DCs are removed; - linked to other innovative mechanisms Governance: Support creation new arrangements and reform of existing institutions Disbursement and use: Keep strong push for adaptation funding Keep pushing for grant-based adaptation funding Keep pushing for direct access and equitable allocation of funds Strengthen alliance with other regions/Parties supporting adaptation e.g. AOSIS General: Keep putting pressure on AI countries to honour their commitments under the Convention Policy Recommendations 14

Integrate CC issues into development: Need to raise the issue of CC to a high political priority Be proactive towards existing public funds: e.g. use of programmatic approach; develop adaptation projects/ programmmes Build response capacity to access and use new funds effectively Create carbon market opportunities: o Improve domestic investment framework o Bundling of small CDM projects o Build capacity of regional banking institutions o Help develop new sectors, e.g. renewable energy; REDD; agriculture Establish an African CC investment facility o An overarching fund with multiple funding streams o Directly capture funds for adaptation and mitigation o May include a CDM investment fund Policy Recommendations Short term priorities 15

Thank you! 16