Trends in international climate finance flows and frameworks to scale-up, co-ordinate and mainstream climate action

Juan Casado-Asensio (OECD Development Co-operation Directorate)

Benjamin Larroquette (GLECRDS, UNDP-GEF)

LEDS Global Partnership Meeting, Addis Ababa, Ethiopia August 27 2014

Outline

• Towards effective development co-operation

• OECD DAC statistics for measuring and monitoring external

development finance for climate change

• Climate-related ODA trends and patterns to Africa

• Key policy trends and challenges

• CC strategies as basis of integrated planning

• Examples of capacity building initiatives that support CC strategy development

Toward effective development co-operation:

Busan Declaration (2011) and Global Partnership for Effective Development Co-operation

Aid Effectiveness Principles draw from 50 years of development co-operation experience

The Paris Declaration “Pyramid”

• Ownership of development priorities by developing countries

• Focus on results• Inclusive development partnerships• Transparency and accountability

OECD DAC Statistical System

• Development finance statistics are:– reported by members,

international organisations & some non-DAC and charities

– collected within the Creditor Reporting System (CRS),

– monitored by Secretariat (quality controls & reviews)

– transparent - activity-level aid data publically available online – could help partner countries follow commitments on the ground

• Reporting guided by standardised definitions and classifications, e.g.– commitments,

disbursements– sector classifications– Bilateral / multilateral

(avoids double counting)– exchange rates– ODA definition

Climate-related ODA is growing and increasing as a share of ODA

Source: OECD DAC Statistics, May 2014

• Climate-related aid by members of the OECD DAC reached USD 21 bn on average per year in 2010-12, representing 16% of total ODA.

• Mitigation and/or adaptation was the principal objective for 59% of climate-related activities; for the remainder, it was a significant objective.

• Of the total climate-related aid, 58% addresses mitigation concerns only, 25% adaptation concerns only, and 18% addresses both over 2010-12.

2001-03 2004-06 2007-09 2010-120

5

10

15

20

25

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

3% 4%

6%

16%

Principal SignificantShare of Total ODA

US

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Trends in climate-related aid, 3-year annual averages 2001-12, bilateral commitments, USD billion, constant 2011 prices

Notes: 1) This Chart presents a trend based on averages over three years, so as to smooth fluctuations from large multi-year projects committed in a given year. 2) Reporting against the mitigation marker became mandatory from 2006 flows onwards. 3) The adaptation marker was introduced in 2010. Data on total climate-related aid for earlier years mainly relates to mitigation and may underestimate bilateral aid flows to climate change.

• Income groups – MICs are the largest recipient group, but LDCs/LICs receive a higher share of adaptation-related (25%) aid vs. mitigation-related aid (13%).

• Geographical focus – aid is concentrated in a small number of partner countries (though less concentrated in adaptation), with most flowing to Asia followed by Africa.

• Delivery instrument – mitigation-related aid is typically delivered through loans (58%); adaptation-related aid through grants (69%).

Distribution of bilateral climate-related aid

Geographic regions receiving mitigation-related aid2007-2012, bilateral commitments

Geographic regions receiving adaptation-related aid2007-2012, bilateral commitments

Source: OECD DAC CRS, May 2014Source: OECD DAC CRS, May 2014

Asia45%

Africa22%

Unspecified14%

America12%

Europe5%

Oceania1%

Asia35%

Africa28%

Unspecified

19%

Amer-ica

11%

Europe4%

Oceania2%

• Projects – For mitigation: large-volume projects to cut GHG emission reductions (energy, transport, water). For adaptation: many small-volume policy formulation, research, education and capacity building projects, but a small number of large-volume activities on water, agriculture, forestry, fishing and rural development.

• Climate-related aid to Africa has also increased since 2004-06, reaching USD 5 bn per year on average over 2010-12 or 13% of total bilateral aid for the region.

• 52% of all climate-related aid to Africa targets mitigation and/or adaptation as a principal objective.

• Of the total climate-related aid to Africa, 51% targets mitigation only, 32% targets adaptation only and 17% targets both.

How much climate-related bilateral aid is flowing to Africa?

Trends in climate-related aid to Africa, 3-year annual averages2004-12, bilateral commitments, USD billion, constant 2012 prices

Source: OECD DAC Statistics, August 2014

Notes: 1) This Chart presents a trend based on averages over three years, so as to smooth fluctuations from large multi-year projects committed in a given year. 2) Reporting against the mitigation marker became mandatory from 2006 flows onwards. 3) The adaptation marker was introduced in 2010. Data on total climate-related aid for earlier years mainly relates to mitigation and may underestimate bilateral aid flows to climate change.

Which sectors are targeted by climate-related aid? Top 5 sectors receiving 86% of total climate-related aid to Africa over 2010-12

2010-12, bilateral commitments, USD billion, constant 2012 prices

• Climate-related aid is concentrated in the energy sector (mitigation-related aid), followed by the agriculture forestry, fishing and rural development, and water sectors (adaptation-related aid).

• Mitigation-related aid in the energy sector is concentrated in electrical transmission and distribution and renewable energy generation (increase energy access and grid connectivity, integrate renewables).

Electrical transmission

and distribution

29%

Wind 21%

Power generation

from renewable

sources17%

Geothermal 14%

Hydro7%

Solar 5%

Energy Admin

6%

Other1%

Source: OECD DAC Statistics, August 2014

Access 1,000s of activity-level data through the new data visualisation tool

Online http://www.oecd.org/dac/stats/rioconventions.htm

Data on bilateral climate-related aid commitments from members of the OECD DAC.

• Trends and composition in climate-related aid

• By provider, recipient, by sector, and instrument.

• Access to activity level data

• 3-minute introduction video• Latest statistical flyers• Definitions & additional

guidelines• Details of events

1 We are on the ground in 177 countries and territories worldwide: we understand the local context

3

2 We provide climate change mitigation expertise, with a $4 billion project portfolio in sustainable energy

4 We implement a detailed approach for developing Low-Emission, Climate-Resilient Strategies

Access to electricity (on- and off-grid):

$260m + $900m in co-financing*

Energy efficiency and

conservation:

$265m + $1.2bn in co-financing

Sustainable transport systems:

$85m + $820m in co-financing

* Project portfolio amounts relate to the period 1992-2010

Statistical downscaling of General Circulation Models

Municipal climate impact scenarios

UNDP’s Low Emission Climate Resilient Development Strategies

The United Nations Development Programme

We provide expertise on adaptation , with a project portfolio in excess of $ 2 billion (including $750 million + in grants)

Countries are:• increasingly preparing LEDS, LECRDS, NAPS,

NAMAs and other cross-cutting strategies to support their transitions to a low emission and climate resilient economy

• recognizing inter-sectoral nature of adapting to “new reality” , i.e., role of key line ministries and other partners to reduce risks and mitigate emissions in integrated manner

• facing critical challenges in implementing these strategies and actions: capacity, coordination, mainstreaming into development policy, financing

Trends

• National capacities are required to navigate complex landscape and allow countries to access different forms of relevant finance and deliver integrated development benefits

• Funding mechanisms not widely established to deliver integrated CCA and CCM benefits; focus on one or another

• Need to catalyze private finance: public finance alone is insufficient to meet demands of climate challenge, must catalyze greater volumes of private finance

• Limited alignment between climate and development: to drive economy-wide transformation, and to mainstream climate expenditures into planning and development policy

Key Challenges

Green LECRDS, NAPs, LEDS, NAMAsA Basis of Integrated Planning

Supporting national systems to integrate climate and development helps countries to plan effectively and allocate finance, as well as identify appropriate sources of finance and policy mechanisms – LECRDS, LEDS, NAMAs, NAPs can form basis

Strategic Planning

• Assess needs and priorities, and identify barriers to investment

• Identify policy mix and sources of financing

Accessing Resources

• Directly access finance

• Blend and combine finance

• Formulate project, progamme, sector-wide approaches to access finance

Coordinated Implementation

• Implement and execute project, programme, sector-wide approaches in integrated manner

• Build local supply of expertise and skills

Monitor, Report & Verify

• Monitor, report, and verify flows

• Performance-based payments

LECRDS, LEDS,NAPs, NAMAs

NAPAs NAPA follow up projects NAPA follow-up projects (under development)

NAP Support

From supporting countries to prepare NAPAs to accessing finance to implement urgent priorities

Bhutan NAPA Process

Reducing Climate Change-induced Risks and Vulnerabilities from Glacial Lake Outburst Floods in Punakha-Wangdi and Chamkhar Valleys

31 countries- Supported to prepared NAPAs

50 LDCs – Supported to access climate finance to address adaptation

needs

•Low Emission Capacity Building Programme (LECB)• EC, Germany - BMU/ICI, Australia

• National Adaptation Plan Support Programme (w/ UNEP)• LDCF

• National Communications Support Programme (w/UNEP)• GEF

•National Adaptation Programmes of Action (NAPAs)• GEF

•Climate Public Expenditures and Institutional Reviews (CPEIR)• Canada-SIDA, multiple partners, LDCF, SCCF

•Climate Finance Options website (w/ World Bank)• World Bank, UNDP

• NIE Accreditation Support Programme - AF Direct Access• UNDP

• GCF Readiness Programme (w/ UNEP, WRI)• Germany

Capacity building support forEnabling and foundational initiatives

• Project developed by UNEP and UNDP• Together with GEFSEC, IFAD, WFP, UNITAR, WHO, GIZ

• $2 M USD, duration 2 years, financed by LDCF• Leveraging and building on other ongoing

initiatives• Designed with inputs and suggestions made by

LDCs, LEG and several key donors and is consequently establish a support mechanism around three main pillars

• Institutional support• Technical support• Knowledge brokering

NAP Support Programme

NAP Support Programme

To support LDCs to commence process of integrating medium- to long-term planning for adaptation to climate change within, or aligned with, current development planning and budgeting processes

• Identification of gaps (information, capacity [technical and functional], institutional)

• Making linkages to other ongoing initiatives• Making tools and approaches available to LDCs to

support key steps in NAP process• Exchanging lessons learned and knowledge through

South-South and North-South Cooperation.

Low Emission Capacity Building (LECB) Programme:

• Objective: Build capacities to design and implement Low Emission Development Strategies and national mitigation actions in the public and/or private sectors

• Five main work areas• GHG inventory management systems• Nationally Appropriate Mitigation Actions (NAMAs)• Low-Emission Development Strategies (LEDS)• Measurement, Reporting and Verification (MRV)• Mitigation actions in selected industries/private sector

• Funding: $40 million covering 25 countries; funded by European Commission, Germany and Australian Government.

• Implementation period: 2011-16

• Sectors: Energy, transport, industries, waste, agriculture. Industries include cement, fertilizers, mining, construction, chemicals

LECB Contribution to Addressing Capacity/Coordination/Financing Challenges

• Design strategic, long-term national vision for low-emission development aligned with national development goals

• Remove technical, financial and institutional barriers to scale-up mitigation action

• Improve GHG emission scenarios and the underlying information base to ensure well-informed decision making and a business case for climate change mitigation

• Assess sustainable development impacts (co-benefits) of NAMAs & LEDS and design systems to capture these impacts

• Support climate finance “readiness” efforts, including how to catalyse public finance to attract private sector investments

LECB Contribution to Addressing Capacity/Coordination/Financing Challenges (cont’d)

• Put in place a multi-stakeholder framework for coordination with relevant institutions, national steering committee, technical working groups

• Maximise use of national experts with tailored technical assistance provided, based upon country needs

• Focus on institutional capacity building to support a country-driven process to enhance the skills required for accessing finance and implementation

• Learn from diverse capacities and experiences, ranging from LDCs to medium-income countries and large emerging economies

LECB – Implementation challenges

• A country-driven process subject to political changes • Priority setting for NAMAs are very lengthy and complex

due to competing agendas among sectoral ministries• Scope of work (i.e. number of sectors and NAMAs)

tends to be overambitious• Implementation of mitigation actions and MRV politically

charged in many countries• Incipient institutional support to NAMAs and LEDS • Weak technical capacities to undertake thorough NAMA

formulation and implementation

Existing UNDP Tools and Guidance in English – some available in French, Spanish, Russian

http://www.undp.org/climatestrategieshttp://climatefinanceoptions.org/cfo/index.php

Thank you!

juan.casadoasensio@oecd.orgbenjamin.larroquette@undp.org

For further information:www.oecd.org/development/environment-development/climate-partnership.htm

www.climatefinance-developmenteffectiveness.org/partnership-for-climate-finance-and-development.html