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Making truth powerful;
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Africa accounts for 15% of the world's population but contributes less than 4% of the CO2 emissions, compared to 27% from China, 15% from the US, and 17% from the EU. This has not, however, protected its people from the effects of climate change. Climate change is projected to displace up to 113 million Africans, with 38.5 million displaced primarily in East Africa.[1]
There is an urgent need for action to address the climate change crisis and mitigate its impacts on the continent. At the center of such action is the question of investments in climate action by state and non-state stakeholders. However, information on resource requirements in relation to what is available is limited.
In this regard, The Africa Centre for People Institutions and Society (ACEPIS) conducted research on financing for climate action in the East Africa region ahead of the Climate Conference (COP27) in October 2022. The research paper explores some of the actions taken to address climate change and highlights a huge financing gap for climate action that requires urgent attention from all stakeholders.
Among the notable findings is that developed economies committed to provide USD 100 billion annually for climate action finance until 2020; however, they have not followed through on their commitments made at the UNFCCC's 15th Conference of Parties (COP15) in 2009. African governments pledged USD 264 billion in domestic public resources to combat climate change. This too falls short of the estimated USD 2.8 trillion required to implement Africa’s Nationally Determined Contributions (NDCs) between 2020 and 2030.
Between 2017 and 2020, cumulative climate finance for developing countries totaled USD 331.4 billion, with Asia receiving the largest share of this finance at USD 121.3 billion. Africa received USD 83.04 billion in climate finance, accounting for 25% of total climate finance to developing countries. Out of the total climate finance to Africa during this period, 35% (USD 28.9 billion) was channeled to sub-Saharan countries. East Africa received USD 12.95 billion, which included both development assistance and domestic resources.
Due to constrained fiscal space that many East African States are working with, they are constrained in terms of finances to invest in climate adaptation and mitigation. To address this challenge, they explore alternative means of raising funds for climate action. Domestically, East African States developed and submitted NDCs, demonstrating their commitment to combating climate change. They have also made efforts to honor the Paris Agreement by allocating funds for climate action in their national budgets. However, these pledges are yet to be fulfilled because the implementation of NDCs and other climate change strategies is dependent on resources (capacity and funding), which remains a challenge in the region.
External sources of climate finance generally consist of multilateral, bilateral, and private flows and are often provided by developed countries. Between 2017 and 2020, bilateral providers channeled 46% (USD 5.9 billion) of total funds to East Africa, while multilateral providers channeled 52% (USD 6.7 billion) of total funds, and private climate financing, which primarily comprised of funding from foundations, accounted for 2% (USD 0.3 billion) of total climate financing.[2] Notably, climate finance from development partners to East Africa increased by 33% between 2017 and 2020, from USD 2.9 billion to USD 3.9 billion. A review of selected East African countries' NDCs, on the other hand, reveals that the region requires USD 223.5 billion for climate action between 2020 and 2030. This shows a significant funding gap, necessitating multi-stakeholder coordination to assist the region's economies to mobilise required resources for climate action.
Figure 1: Climate Financing in Eastern Africa (USD Billions)
Source | Acepis computations based on OECD Development Assistance Committee Statistics
At the centre of the climate finance conundrum, is the reliance on debt instruments which are increasingly exacerbating debt distress risks that many countries in the region are currently grappling with. Between 2017 and 2020, more than half of the climate finance provided in the form of Official Development Assistance (ODA) to East African countries was channeled through debt, indicating a reliance on debt instruments to finance climate action. This raises concerns about debt sustainability risks that the current climate financing mechanism poses to East African States, some of which are already experiencing public debt distress. Notably, Kenya received the greatest share of climate action loans to East Africa, estimated at around 53%, followed by Tanzania (20%) and Uganda (14%). While the majority of debt instruments have been on concessional terms, there have been instances where providers, mostly multilateral development banks, have offered non-concessional and/or non-developmental loans.
To effectively address the climate crisis and mobilize funds to combat climate change, developing countries, require strategies that create the right conditions for public and private investors to invest in climate-friendly projects. A few examples include: enacting legislation requiring new or existing institutions to promote renewable energy; developing an industrial energy efficiency policy; assessing a country's wind energy resources; or availing resources to small businesses in low-carbon sectors.[3]
East African States have made significant progress in trying to combat the effects of climate change. Uganda has taken the lead in combating climate change by developing a Nationally Determined Contribution Partnership Plan (NDC-PP). Kenya also adopted the National Climate Change Action Plan in 2018, an extension of the previous Action Plan, which ran from 2013 to 2017.
Moving forward, developing countries, particularly in East Africa, must explore sustainable long-term options for financing action to address the climate change crisis. There is an urgent need for all actors to evaluate the current and projected climate financing architecture to ensure that preferred instruments do not exacerbate the region's debt distress and contracting fiscal space. Special Drawing Rights (SDRs), carbon markets, and debt swaps for long-term financing of climate action are viable opportunities that should be explored.
Protestors calling for Climate Action by governments | Image: Courtesy
The commitment made during COP27 to create a new fund for loss and damage financing[4] and make arrangements to operationalize the Santiago Network is laudable in the fight against climate change. However, it remains to be seen whether this will be translated into action, considering failures to adhere to and fulfill prior commitments. Nonetheless, it is a welcome move.
Moving forward, it is imperative that state and non-state stakeholders work in concerto to challenge developed countries to provide climate finance for losses and damage caused by their contribution to greenhouse gas emissions. The financing could follow the modalities of carbon markets—compensation for global greenhouse emissions. Developing nations should also explore avenues for mobilizing domestic resources to complement global action.
[1] Dungy, D. (2022), Climate change and forced displacement in Eastern Africa, Jesuit Refugee Services, https://jrs.net/en/news/climate-change-and-forced-displacement-in-eastern-africa/?gclid=CjwKCAiAleOeBhBdEiwAfgmXf_7pMJjTi4yi57i_gyT_AAHvsaKE2OG2yH5hCbYCLDzTUJw8ApqwYRoCDKAQAvD_BwE
[2] Africa Centre for People Institutions and Society, (2023), Financing Climate Action in Eastern Africa: Resource streams, gaps and opportunities for sustainable financing, https://www.acepis.org/publication/financing-climate-action-in-eastern-africa-resource-streams-gaps-and-opportunities-for-sustainable-financing/
[3] Brown, L. (2013), 4 Ways the Green Climate Fund Can Support "Readiness" for Climate Finance, World Resources Institute, https://www.wri.org/insights/4-ways-green-climate-fund-can-support-readiness-climate-finance
[4] United Nations Climate Change, (2022), Sharm el-Sheikh Climate Change Conference, https://unfccc.int/documents/624444?gclid=CjwKCAiAioifBhAXEiwApzCzthux9Tit9TyVv4fyXhhgTUQX4Sqde7kUAlNQvih5J7Io7z6rvh_PuhoCeXoQAvD_BwE
Africa accounts for 15% of the world's population but contributes less than 4% of the CO2 emissions, compared to 27% from China, 15% from the US, and 17% from the EU. This has not, however, protected its people from the effects of climate change. Climate change is projected to displace up to 113 million Africans, with 38.5 million displaced primarily in East Africa.[1]
There is an urgent need for action to address the climate change crisis and mitigate its impacts on the continent. At the center of such action is the question of investments in climate action by state and non-state stakeholders. However, information on resource requirements in relation to what is available is limited.
In this regard, The Africa Centre for People Institutions and Society (ACEPIS) conducted research on financing for climate action in the East Africa region ahead of the Climate Conference (COP27) in October 2022. The research paper explores some of the actions taken to address climate change and highlights a huge financing gap for climate action that requires urgent attention from all stakeholders.
Among the notable findings is that developed economies committed to provide USD 100 billion annually for climate action finance until 2020; however, they have not followed through on their commitments made at the UNFCCC's 15th Conference of Parties (COP15) in 2009. African governments pledged USD 264 billion in domestic public resources to combat climate change. This too falls short of the estimated USD 2.8 trillion required to implement Africa’s Nationally Determined Contributions (NDCs) between 2020 and 2030.
Between 2017 and 2020, cumulative climate finance for developing countries totaled USD 331.4 billion, with Asia receiving the largest share of this finance at USD 121.3 billion. Africa received USD 83.04 billion in climate finance, accounting for 25% of total climate finance to developing countries. Out of the total climate finance to Africa during this period, 35% (USD 28.9 billion) was channeled to sub-Saharan countries. East Africa received USD 12.95 billion, which included both development assistance and domestic resources.
Due to constrained fiscal space that many East African States are working with, they are constrained in terms of finances to invest in climate adaptation and mitigation. To address this challenge, they explore alternative means of raising funds for climate action. Domestically, East African States developed and submitted NDCs, demonstrating their commitment to combating climate change. They have also made efforts to honor the Paris Agreement by allocating funds for climate action in their national budgets. However, these pledges are yet to be fulfilled because the implementation of NDCs and other climate change strategies is dependent on resources (capacity and funding), which remains a challenge in the region.
External sources of climate finance generally consist of multilateral, bilateral, and private flows and are often provided by developed countries. Between 2017 and 2020, bilateral providers channeled 46% (USD 5.9 billion) of total funds to East Africa, while multilateral providers channeled 52% (USD 6.7 billion) of total funds, and private climate financing, which primarily comprised of funding from foundations, accounted for 2% (USD 0.3 billion) of total climate financing.[2] Notably, climate finance from development partners to East Africa increased by 33% between 2017 and 2020, from USD 2.9 billion to USD 3.9 billion. A review of selected East African countries' NDCs, on the other hand, reveals that the region requires USD 223.5 billion for climate action between 2020 and 2030. This shows a significant funding gap, necessitating multi-stakeholder coordination to assist the region's economies to mobilise required resources for climate action.
Figure 1: Climate Financing in Eastern Africa (USD Billions)
Source | Acepis computations based on OECD Development Assistance Committee Statistics
At the centre of the climate finance conundrum, is the reliance on debt instruments which are increasingly exacerbating debt distress risks that many countries in the region are currently grappling with. Between 2017 and 2020, more than half of the climate finance provided in the form of Official Development Assistance (ODA) to East African countries was channeled through debt, indicating a reliance on debt instruments to finance climate action. This raises concerns about debt sustainability risks that the current climate financing mechanism poses to East African States, some of which are already experiencing public debt distress. Notably, Kenya received the greatest share of climate action loans to East Africa, estimated at around 53%, followed by Tanzania (20%) and Uganda (14%). While the majority of debt instruments have been on concessional terms, there have been instances where providers, mostly multilateral development banks, have offered non-concessional and/or non-developmental loans.
To effectively address the climate crisis and mobilize funds to combat climate change, developing countries, require strategies that create the right conditions for public and private investors to invest in climate-friendly projects. A few examples include: enacting legislation requiring new or existing institutions to promote renewable energy; developing an industrial energy efficiency policy; assessing a country's wind energy resources; or availing resources to small businesses in low-carbon sectors.[3]
East African States have made significant progress in trying to combat the effects of climate change. Uganda has taken the lead in combating climate change by developing a Nationally Determined Contribution Partnership Plan (NDC-PP). Kenya also adopted the National Climate Change Action Plan in 2018, an extension of the previous Action Plan, which ran from 2013 to 2017.
Moving forward, developing countries, particularly in East Africa, must explore sustainable long-term options for financing action to address the climate change crisis. There is an urgent need for all actors to evaluate the current and projected climate financing architecture to ensure that preferred instruments do not exacerbate the region's debt distress and contracting fiscal space. Special Drawing Rights (SDRs), carbon markets, and debt swaps for long-term financing of climate action are viable opportunities that should be explored.
Protestors calling for Climate Action by governments | Image: Courtesy
The commitment made during COP27 to create a new fund for loss and damage financing[4] and make arrangements to operationalize the Santiago Network is laudable in the fight against climate change. However, it remains to be seen whether this will be translated into action, considering failures to adhere to and fulfill prior commitments. Nonetheless, it is a welcome move.
Moving forward, it is imperative that state and non-state stakeholders work in concerto to challenge developed countries to provide climate finance for losses and damage caused by their contribution to greenhouse gas emissions. The financing could follow the modalities of carbon markets—compensation for global greenhouse emissions. Developing nations should also explore avenues for mobilizing domestic resources to complement global action.
[1] Dungy, D. (2022), Climate change and forced displacement in Eastern Africa, Jesuit Refugee Services, https://jrs.net/en/news/climate-change-and-forced-displacement-in-eastern-africa/?gclid=CjwKCAiAleOeBhBdEiwAfgmXf_7pMJjTi4yi57i_gyT_AAHvsaKE2OG2yH5hCbYCLDzTUJw8ApqwYRoCDKAQAvD_BwE
[2] Africa Centre for People Institutions and Society, (2023), Financing Climate Action in Eastern Africa: Resource streams, gaps and opportunities for sustainable financing, https://www.acepis.org/publication/financing-climate-action-in-eastern-africa-resource-streams-gaps-and-opportunities-for-sustainable-financing/
[3] Brown, L. (2013), 4 Ways the Green Climate Fund Can Support "Readiness" for Climate Finance, World Resources Institute, https://www.wri.org/insights/4-ways-green-climate-fund-can-support-readiness-climate-finance
[4] United Nations Climate Change, (2022), Sharm el-Sheikh Climate Change Conference, https://unfccc.int/documents/624444?gclid=CjwKCAiAioifBhAXEiwApzCzthux9Tit9TyVv4fyXhhgTUQX4Sqde7kUAlNQvih5J7Io7z6rvh_PuhoCeXoQAvD_BwE
