• Wednesday, July 17, 2024
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Reimagining sustainable climate financing for developing countries for Post-2020 Paris Agreement Implementation Era

Climate-Change

Mobilising sustainable climate finance for developing countries especially in a post-2020 Paris Agreement implementation and post COVID-19 era has to be holistic, integrated to make the desired impact in developing countries, and this task has to be undertaken jointly and consciously by both developing and developed countries.

Late February, the UK government launched the COP26 private finance agenda ahead of the 2020 UNFCCC Conference of Parties scheduled to hold in Glasgow from 9th to 19th November, 2020. The COP26 private finance agenda was launched with the objective of ensuring that private finance decisions take climate change into account and that the right framework for reporting risk management and returns are embedded in considerations to help finance the transition to a net-zero carbon economy. While mobilising private finance for the climate is very important, the COP26 agenda has been criticized by climate experts for not being holistic and inclusive enough to drive inflow of private finance to developing and low in-come countries.

According to Clara Shakya, Director of Climate Change at the International Institute for Environment and Development (IIED), increasing the visibility of the climate risk through the tools that the agenda sets out, will allow climate investment in poor developing countries that are failing to attract private finance for normal investments. She advocated for commitment to help the poorest countries reduce their climate vulnerability and build governance and institutions that manage their risks. These are countries which currently use more public investment than private investment.

Recently, there has been a buildup in the demand for increasing developing countries’ access to climate finance. Earlier this July, the Green Climate Fund (GCF) hosted high level panelists to a workshop to share their views on available options to developing countries for financing a green and resilient recovery which will inform the work of the United Nations High-Level Initiative on Financing for Development in the Era of COVID-19 and beyond. One of the panelists, Ken Ofori-Attah, Ghanaian Minister of Finance, decried Africa’s payment of 6-8 percent interest for risk premium on lending from institutions such as the African Development Bank (AfDB), especially when the same loan is secured by AfDB at a rate of 0.75 percent, calling it unnecessary, since Africa had not defaulted on its loan repayments in recent times.

He further advocated for the deployment of Africa’s unused special drawing rights (SDRs) which is over $260 billion, to solve her liquidity problems, and also pointed out that African Finance Ministers have proposed a special purpose vehicle with an AAA wraparound for solving Africa’s green infrastructure and sustainable development needs. The same sentiments were echoed last year by Bachir Ouedraogo, Burkina-Faso Energy Minister at the 2019 Green Growth Knowledge Platform (GGKP) – Global Green Growth Week hosted by the Global Green Growth Institute (GGGI) in Seoul, Korea when he decried the huge interests charged on borrowing for green energy projects in Africa.

Other solutions advocated by other panelists such as Rwandan Environment Minister, Dr. Mujawamariya Jeanne d’Arc, included the use of blended finance to solve the misalignment of finance, de-risk finance and catalyse private finance for sustainable development in Africa. This opinion was shared by the GCF Executive Director, Yannick Glemarec, who added that the $17 trillion yielding negative interest rate in G20 counties as at Mid-2019 could be very useful for de-risking investment in Africa and other developing countries towards green resilient recovery and growth.

These ideas aimed at solving the climate finance gap for developing countries are laudable, but their successful adoption will require deliberate, consistent, coordinated, and extensive high level political and diplomatic engagements with the G20 countries to actualise. Unfortunately, other challenges with closing the climate finance gaps are self-inflicted by the developing countries, and they include: lack of interest and understanding by private and government institutions, ministries, departments and agencies (MDAs); lack of coordination and inter MDA rivalry; and selfish abuse of power by National Focal Points (NFPs) or National Designated Authorities (NDAs).

From my research and work to support a few GCF projects for some West African and Asian countries, I realised that Nigeria is significantly under-utilising the financing opportunities that the Clean Development Mechanism (CDM) provides, compared to other countries and was also missing out on utilising the GCF-provided opportunities. For instance, as at 2017, Nigeria had only 4.9 percent of CDM projects registered in Africa, while South Africa had 27.6 percent, Kenya – 8.9 percent, Uganda – 8.1 percent, and Morocco 7.3 percent. Upon returning to Nigeria after my studies in the UK, I took the time to engage government officials on the need for Nigeria to explore the climate finance opportunities that the UNFCCC provides.

A senior colleague in international development who was supportive of my aspiration for Nigeria to access these funds and understood the opportunities Nigeria was missing, helped arrange separate meetings with the then House of Representatives Committee Chairman on Climate Change and the Committee Chairman on Environment and Habitat. I also attempted seeing the Minister of Environment, Amina Mohammed, however, the weekend preceding the week I was to meet her, and she was announced the Under-Secretary General of the United Nations and our meeting facilitator saw no need for our meeting to go ahead.

Even before I met the legislators, and before the failed meeting with the Minister, I had discussed Nigeria’s climate financing gaps with the NDA and Director of the Climate Change Department with emphasis on the need for Nigeria to increase its inflow of climate finance. He pointed out that lack of capacity and resources were challenges the department faces – even when the GCF readiness support programme is designed to solve capacity problems. With further engagements with key stakeholders, we are working on getting a Central Bank of Nigeria entity to become accredited by GCF to access climate finance. However, I got to learn from more experience working on some climate finance projects, that lack of coordination on country climate mitigation and adaptation priorities based on Nationally Determined Contributions, and inter MDA rivalry for funded project leadership and management – i.e. who controls the budget were more obvious challenges.

However, there is a hardly talked about and more concerning challenge of selfish abuse of power by some NDAs in developing countries who have been observed to be reluctant to issue letters of no objection and approve projects or concept notes for entities that indicate interest in accessing climate finance resources (especially national entities which have the capacity to access and manage these projects). Some of these issues were raised at the Finance and Investment session of 2019 Green Growth Knowledge Platform, after an informal session my fellow speakers and I had with some high-level GFC officials. Not only did the GCF officials acknowledge the existence of this challenge, they also acknowledged the need for reforms which they advised that the academia and the civil society must lead.

Unfortunately, the challenges of raising and accessing climate finance by developing countries is a complicated and tiring web that needs to be dismantled by actors that hold positions of influence. An important start would be for developing countries to dismantle barriers to accessing climate financial flows related to weak policy, bad and corrupt institutional and governance structures. The GCF for instance can help with this process by reviewing the structure and responsibilities of the NFP/NDAs.

An alternative could be the mandatory use of online portals by NDAs alongside a credible team of independent assessors who will conduct its affairs in an open, transparent and participatory manner, and publicly announce decisions on its portals, just like the GCF does. On the other hand, the developed countries should strive towards meeting the demands made by African countries to utilize her unused special drawing rights, have interests on borrowing reduced, and commit to its pledge of raising $100 billion per year by 2020.

Okafor Akachukwu is a Science Policy Research Unit (SPRU), University of Sussex trained energy, environment, climate change and sustainability expert. He was a speaker at the Finance and Investment Session of 2019 Green Growth Knowledge Platform (GGKP) held in Seoul, Korea. [email protected]