Adaptation and Development Cooperation

The role of ODA in financing adaptation: Findings from Bangladesh, Ethiopia, Nepal and Rwanda, Kenya, The

Gambia and Zanzibar

1. Supporting public policy responses for climate resilient development: Evolution of discourses that shape policy responses to CRGE and Finance

2. Political economy analysis: Understand the knowledge base of actors shaping policy responses + Facilitate reflection and dialogue

3. Case studies: Ethiopia, Rwanda, Bangladesh and Nepal

4. Government Group: Bangladesh, Nepal, Kenya, The Gambia and Zanzibar

BACKGROUND

STUDY OVERVIEW ETHIOPIA

Climate Resilient Green Economy

THE GAMBIALow Emission

Climate Resilient Development

KENYAClimate Resilient Green Economy

RWANDAClimate Resilient Green Growth

ZANZIBARLow Carbon

Climate Resilient Development

BANGLADESHClimate Resilient

Low Carbon Development

NEPALLow Carbon

Climate Resilient Development

1. Gap in demand and supply of climate finance:1. 2012: Estimated USD 359 for investment into adaptation and mitigation (CPI, 2013).2. Ethiopia: In excess of USD 150 billion over the next 20 years. Approximately USD 7.5 billion per

year. In 2012 OECD USD 43.31 million for investment into adaptation and mitigation

2. Investments into adaptation a priority ……but 94 per cent of money invested in 2011 targeted mitigation (CPI, 2013)

3. Public sources of finance support investment into adaptation…..but private investments dominate climate finance accounting for 62 per cent of the total (CPI, 2013)

4. “How can the existing governance and institutional arrangements for climate finance deliver the scale of ambition?” – same old; project based; fragmented…..

FINANCING ADAPTATION: THE CONTEXT

Sources of climate finance

• International and national public finance

• International and national private finance

• Carbon finance

• Philanthropic climate finance

Intermediaries

• Multilateral banks and agencies

• Bilateral agencies

• National agencies

• National financial institutions (development & private banks; micro finance institutions)

• Multilateral , bilateral and national climate funds

Economic & Financial

instruments • Finance

Enhancing Instruments (PPA/Warranties)

• Risk Management Instruments (guarantee; insurance)

• Carbon offset flows

• Grants

• Concessional loans

• Capital (equity, debt financing)

Financial planning systems

• Institutional arrangements

• Budget and planning systems (budget code; MTEF)

• Financial planning tools

Uses & Users of climate finance

• Types of action: adaptation, mitigation, resilience, green economy

• Type of access: private sector, public sector, civil society organisations

Instruments for mobilising, managing and disbursing climate finance

Source Intermediary

Instrument Use & Users

FINANCING CRGE: TRENDS IN DESIGN CHOICES

International and national public finance

International and national private finance

Carbon finance

Multiple financial intermediaries{National financial institutions}

National CC Funds {programmatic financing}

Mix of economic and financial instruments

Financial instruments to match investment needs

Sequencing in deployment

Types of action: adaptation, mitigation, resilience, green economy

Type of access: private sector, public sector, civil society organisations

Planning systems

Financial Policy Legislation & Operational manuals

Institutional arrangementsFinancial management: Bangladesh, Ethiopia, IndiaResource allocation: Bangladesh, Rwanda

Planning and budgetingNepal CC Budget Rwanda on-budget

Rwanda: Phased & targeted approach to choice of intermediary

FONERWA: Public entity (MINIRENA)-Development Bank-Venture capital fund

Ethiopia: IRM

Rwanda: Sequenced approach to deployment of instruments0-1: Grants & performance-based grants2-5: guarantee; concessional loans>5: equity investment

1. Merged objectives at national level: How can money targeted at mitigation ensure adaptation co-benefits

2. Public finance (ODA) plays a key role in supporting investment into adaptation

3. Choose intermediaries that have the potential to leverage additional financial resources and disburse to identified investors and investments

4. Support economic and financial instruments that will incentivise investment into adaptation {look for sequencing}

5. Support financial planning systems that leverage synergy in investment outcomes 1. Build on institutions with existing mandates and capacity 2. Use budget and planning systems

DEVELOPMENT COOPERATION AND ADAPTATION