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Opportunities for improving access to Climate Change Finance

From Paris to Marrakesh and beyond: Opportunities for improving access to Climate Change Finance

1st August 2016

Climate change is the single greatest threat to the livelihoods, security and wellbeing of the peoples of the Pacific. This was reaffirmed last year when Pacific Island Forum Leaders identified climate change as one of the top five regional priorities under the Framework for Pacific Regionalism, and at the same time issued the Declaration on Climate Change Action for the UNFCCC COP21 in Paris. The declaration built upon other high level declarations issued by the region prior to COP21.

For Forum countries, the COP21 Outcome (Paris Agreement and Decisions) was generally positive as it incorporates most of the priorities the region had expressed, including the need to reduce the global temperature goal to 1.5 degree Celsius, agreeing to 5-year review cycles of ambitions to cut down emissions, having loss and damage as a standalone article, and ensuring simplified and enhanced access to climate change finance.  



The Pacific is showing leadership in progressing the Paris Agreement. Of the 197 Parties to the UNFCCC, currently there are 178 signatories to the Agreement. All the Forum Member States, except Niue, have signed. Of these, 20 States have deposited their instruments of ratification and six are Pacific Island Countries – Fiji, Nauru, Palau, the Republic of the Marshall Islands, Samoa, and Tuvalu. Unfortunately, the 20 States that have ratified only account for 0.40 percent of the total global greenhouse gas emissions. More effort is needed to ensure the big polluters ratify the Agreement to be able to meet the minimum requirement of 55 Parties and accounting for 55 percent of total global greenhouse gas emissions before the Paris Agreement can enter into force. The remaining Pacific countries should be encouraged to ratify as soon as possible, and promoting the ratification of the agreement at global climate change meetings remains a political imperative for the Pacific.

Going forward to Marrakesh (COP22) and beyond, improved access to climate change finance will remain a critical priority for Pacific Island Countries to effectively implement their obligations to the Paris Agreement, build capacity and support technology transfer, which will contribute to achieving the progress against a range of Sustainable Development Goals (SDGs), including those relating to climate change (SDG 13), oceans (SDG 14), and gender equality (SDG 5).

Outstanding Issues of importance

Climate finance is articulated in Article 9 of the Paris Agreement and supporting COP21 Decisions.  While there has been progress in recognising the needs of Small Island Developing States (SIDS) and Least Developed Countries (LDCs) in Article 9, there are still outstanding issues of importance to the region that  must be addressed at COP22 and beyond.

These include agenda items on ‘Long Term Finance’ (clarity on how developed country Parties will mobilise the pledged US$100 billion per year by 2020 and a new quantifiable figure that shall be mobilised by 2025), ‘Standing Committee on Finance’ (definition of climate finance), and the ‘Adaptation Fund’ (future of the fund and whether it should be part of the Financial Mechanism of the Paris Agreement).

This is an area that regional organisations, through the ‘One CROP Team’ led by the Secretariat of the Pacific Regional Environment Programme (SPREP), will continue to play a key role in supporting Pacific Island Countries at the COP negotiations. Recently the Green Climate Fund Board has decided to apply a simplified process for the approval of micro (up to US$10 million) and small-scale (up to US$50 million) funding proposals submitted by accredited entities, especially by direct access entities. This simplified process will entail a simplified funding proposal template. The GCF Secretariat has also recently developed a simplified readiness proposal template.

Regional Progress with Funding Access

Pacific Island Countries have found it difficult in the past to access multilateral funding sources due to lack of available expertise and capacity to develop bankable projects, complexity in manoeuvring the requirements of different funding sources, limited resources for co-financing, and varying levels of the strength of national public financial management systems and institutions. However, recently the region has made some progress regards funding access.

Fiji and Tuvalu, for example, are the first two countries in the Pacific to access project funding from the Green Climate Fund (GCF). Tuvalu’s US$36 million Coastal Adaptation project with UNDP was approved by the GCF Board at their recent meeting in late June 2016, while Fiji’s US$31 million Urban Water Supply and Wastewater Management project with the ADB was approved in November 2015. These two projects account for 16 percent of GCF project funds approved to date since the Fund approved its first batch of projects in November last year. In comparison, the Caribbean has not yet accessed any GCF project funds.

Other Forum Members have also accessed Readiness Support grants from the GCF. They include Cook Islands, Federated States of Micronesia, Niue, Palau, and Vanuatu, who have been working with a range of readiness delivery partners such as the Cook Islands Ministry of Finance and Economic Management, GIZ, SPREP, The Pacific Community (SPC) and PricewaterhouseCoopers. This accounts for 15 percent of the number of readiness proposals approved. Cook Islands is the first Small Island Developing State (SIDS) to receive its readiness grant disbursement. Fiji has also benefited from a readiness grant from the German Government and this is being jointly implemented by UNDP, UNEP and the World Resources Institute.

The Green Climate Fund

The Green Climate Fund has a commitment of around US$10.3 billion, of which 50 percent will be for adaptation and 50 percent for mitigation. This year the GCF Board has set a target of investing up to US$2.5 billion. Midway into the year, the board has only approved projects worth US$250 million. This year the GCF Board has set a target of investing up to US$2.5 billion. Midway into the year, the board has only approved projects worth US$250 million.

There are two pools of funding:

(i) project/programme funding, and

(ii) readiness and project preparatory grant.

Each developing country can access up to US$1 million per year as Readiness Support, and can request for project preparation support of up to US$1.5 million with a priority given to direct access entities and to small-scale projects.

As a region, we are strategically placed to gain further access to funding from the Green Climate Fund. The region has several voices at the GCF Board. Australia is currently a Co-Chair of the GCF Board and  Samoa is the SIDS representative on the Board. PIFS has been recently accredited as an Observer to the GCF Board Meeting and participated in two board meetings already. PIFS has also been endorsed as a Readiness Delivery Partner to the GCF. SPREP is a Regional Implementing Entity (RIE) to both the GCF and the Adaptation Fund and SPC is seeking to be an RIE to the GCF. Currently there are no National Implementing Entities (NIEs) from the region (although few Pacific countries are seeking NIE accreditation). Accredited Multilateral Implementing Entities (MIEs) working in the region include UNDP, UNEP, ADB, World Bank, Conservation International, AFD, European Investment Bank, IUCN, KfW, International Finance Corporation, World Meteorological Organisation and World Food Programme. Pacific Island Countries must be proactive in working with the right accredited entity to submit project proposals.

A Pacific GCF Regional Workshop at the Forum Secretariat in Suva from 1 – 4 August, organised by the Green Climate Fund and the Government of Australia, is expected to identify priorities for project pipeline development and how accredited entities and partners will support Pacific Island Countries in their engagement with the Fund.

Apart from the Green Climate Fund, there are other key sources such as the Global Environment Facility (GEF Trust Fund, LDC Fund & Special Climate Change Fund), the Adaptation Fund, the Climate Investment Fund and other bilateral and multilateral funds managed by the banks. In terms of accessibility, almost all Pacific Island Countries have gained access to the Global Environment Facility. Solomon Islands, Samoa, Papua New Guinea and Cook Islands have accessed project funding from the Adaptation Fund. Tonga, Samoa and Papua New Guinea have accessed national tracks from the Climate Investment Fund managed by the World Bank. However, most of the climate finance being accessed by the region is derived from bilateral sources.

Into the Future

Going forward, countries should be strategic and innovative in their engagement with different funding sources. Countries must also remain flexible and open to working with different funding sources and financial instruments (grants, loans, concessional loans etc). For example, the Smaller Island States (SIS) Leaders in their recent meeting in Palau have explored the idea for joint-country programming to access GCF resources, the prospect of a regional climate fund, and the need for improving the scope of the current Pacific Catastrophe Risk Assessment and Finance Initiative (PCRAFI). These are areas that PIFS in collaboration with other CROP agencies (SPREP and SPC) and partners (ADB, World Bank, GCF) will progress work on over the next couple of months.

In addition countries should continue to build their readiness to access and manage global climate change finance by strengthening their institutions and coordination mechanisms as well as implementing public financial management reforms. PIFS and UNDP in partnership with other CROP agencies and partners have been supporting Pacific Island Countries through national climate change finance assessments using the Pacific Climate Change Finance Assessment Framework and the Climate Public Expenditure and Institutional Review. Also the work undertaken through the Forum Compact Peer Reviews has proven useful to countries. Building and supplementing capacity at the country level must remain a priority for the countries themselves and donors. Utilising backstopping mechanisms such as the Regional Technical Support Mechanism (RTSM) administered by SPREP on behalf of CROP agencies will be beneficial for capacity-constrained countries.

Authors:

Exsley Taloiburi – Acting Climate Change Finance Adviser, Pacific Islands Forum Secretariat /

Email: exsleyt@forumsec.org

Scott Hook – Economic Infrastructure Adviser, Pacific Islands Forum Secretariat /

Email: scotth@forumsec.org

Recommended Reading

1. PIFS Climate Change Finance work and reports

(www.forumsec.org/pages.cfm/strategic-partnerships-coordination/climate-change/)

2. Pacific Climate Change Portal (www.pacificclimatechange.net/)

3. Guide on Key Funding Sources for Climate Change and Disaster Risk Management (Click here to view)

4. Climate Funds Update (http://www-cif.climateinvestmentfunds.org/)

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