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Developing states grapple with climate finance maze

Fri, 8 Apr 2011 00:41 GMT

Source: alertnet // Megan Rowling

A worker dries rice at a farm house in Dhaka, Bangladesh, on May 7, 2009. REUTERS/Andrew Biraj

LONDON (AlertNet) - Developing nations in need of money to tackle climate change are struggling to access a bewildering array of international funding sources, all with different requirements and procedures, experts say.

From aid offered by individual donor governments, to funds run by the World Bank, the Global Environment Facility and the United Nations, the past few years have seen a proliferation of mechanisms for channeling grants and loans to poorer states to help them adapt to climate shifts, limit their greenhouse gas emissions and pursue low-carbon growth.

"The institutional architecture seems to me like a herd of runaway horses without a rider," said Simon Maxwell, executive chair of the Climate and Development Knowledge Network (CDKN). "You need someone to simplify, simplify, simplify."

Participants at a conference in Oxford this week, hosted by CDKN - an international alliance of business and non-governmental organisations that helps developing-nation decision-makers design and deliver climate change strategies - discussed the widespread lack of understanding over what climate financing is available from where, and how to get a share of it.

One European government official described the situation as "chaos". A website run by the Overseas Development Institute (ODI) suggests there are at least 24 climate change funds.

CDKN, which offers technical assistance on finance among other issues, has recently begun to receive more requests for support in applying for climate change funding, including from three African governments.

Celine Herweijer, CDKN's chief strategy advisor, said countries that put forward well-prepared investment plans tend to be the most successful.

"It's about being proactive in defining what your priority needs are, and how much that costs,” she explained. The next step is to influence donors that are offering relevant funds, or planning to do so, in order to access the money.

Alison Cambray, CDKN's head of technical assistance, noted a concern among African states that Asian and Latin American nations have made more progress in preparing to tap international financing for climate change adaptation and mitigation.

Some African states have struggled to put together proposals in part because of lack of technical capacity and weaker institutions.

Countries should first work out a national strategy for tackling climate change, then map the relevant financing sources, and ensure that ministries and other agencies fulfill donors' criteria for using the money as planned, Cambray said.

Some international funding has been made available for developing countries to prepare national action plans for climate change adaptation, with 45 submitted to the United Nations. But, according to one participant at the Oxford meeting, the process of policy making on climate change varies dramatically from country to country.

In Mozambique, for example, a powerful minister ordered staff to develop three ad hoc climate proposals in a matter of months, while in Uganda, one department put together a sound climate change strategy that has triggered interest at the national level, she said. And in Zambia, the head of the water sector argued successfully that climate change should be integrated into all six national development pillars.

Paul Msoma, who works with parliamentarians across 14 southern African countries on development and environment issues, said politicians in the region must create adequate mechanisms to administer and monitor climate-related spending in an accountable and transparent way.

"It is not just a matter of asking for finance," he said. "The question is do you have the infrastructure to show that you are able to absorb the finances? Are you able to report back? Are you able to utilise the resources as per the agreement with the financier?"

BANGLADESH LEADS THE WAY

Countries that have made progress in forging formal national mechanisms to receive and disburse climate finance include Bangladesh, where coastal settlements are vulnerable to floods and rising seas, and Indonesia, which has signed a $1 billion deal with Norway to preserve its natural forests.

The Bangladesh government has been praised for taking the initiative in expanding and managing international aid for its climate change activities, and setting up a national fund for donors to contribute to.

But a recent case study produced by Merylyn Hedger, a research associate with ODI, points out that the South Asian nation now has several national climate change funds and programmes: two trust funds - one for the government's own money and one for donor contributions; a climate resilience initiative led by the World Bank; and a disaster management programme also supported by donors.

That has raised concerns about fragmentation and duplication of work, which goes against the general trend in aid towards harmonising donors' separate projects. 

"Everyone (I spoke to in Bangladesh) had a very similar vision for 2020, encouragingly, which was that climate change would be essentially part of the development process by then, and there would be convergence on the funding mechanisms. But there's certainly not at the minute," said Hedger. "It's very difficult to see how that's going to happen."

Monitoring which funding routes deliver the best results, and strengthening the Bangladesh government's ability to manage climate finance effectively are key to reaching that goal, she said.

Projects have been slow to start happening on the ground because the government doesn't yet have the right models to spend the $390 million in national and international finance already earmarked for climate change activities, she added.

A similar study by ODI researchers Leo Peskett and Jessica Brown on Indonesia highlights "challenges in terms of coordination and alignment of finance", and points out that many externally funded climate-related projects work outside government systems. This could undermine the "long-term effectiveness of the finance to support sustained responses to climate change", it warns.

Some hope that poorer nations will wrest greater control over climate change finance with the establishment of a new "Green Climate Fund", agreed by governments at December's U.N. talks in Cancun, and due to deliver funding of $100 billion a year by 2020.

But the first meeting of a transitional committee to work on the fund's design was postponed from March to late April after groups of Asian and Latin American and Caribbean nations disagreed over who should attend.

While developing countries may eventually succeed in gaining significant influence over where and how the U.N. Green Fund money is spent, few believe it is likely to unite all the other existing sources of climate finance under one umbrella.

"We've created a bit of a mess and we're going to have to live with it," observed one expert at this week's CDKN conference.

For more information on CDKN's work, visit the network's website.