Financing Adaptation in the Water Sector Water and Climate ChangeAdaptation Workshop Sandra Valencia SustainableEnergy & ClimateChangeUnit
March 22nd, 2011 Port of Spain, Trinidad and Tobago
Investments and financial flows needed for adaptation Sector
Costs for developing countries (US$bn per annum by 2030)
Globally: Several tens of billion $ per year will be required for adaptation (estimates between 40 to 170 billion $ globally by 2030)*
Amounts are large in absolute terms,
but small relative to global GDP and investment Existing climate change funds would need to be enhanced at a greater scale Creating a safe future with climate change will require: Shifts in investment patterns, Scaling up funding, Optimizing the allocation of existing funds.
*Source: UNFCCC, Assessing the costs of adaptation to climate change; a review of the UNFCC and other recent estimates, 2009
Difficulties and limitations in estimating the exact costs of adaptation •
Differences in adaptive capacity between countries
Most adaptation measures must be implemented not only in the context of climate change
Uncertainties associated with the methods used to calculate costs of adaptation
The existence of an adaptation “deficit ”
Funding for adaptation for developing countries •
UNFCCC Funds: – GEF:
Enabling activities: adaptation in the context of national communications
SPA (funding as part of the GEF trust fund - projects shall have global benefit
Special Funds under the Convention: –
Adaptation Fund under the KP
Green Climate Fund
Multilateral Funds: – Climate Investment Funds, MDBs (example of SECCI at IDB), etc.
Bilateral Funds Other UN Conventions – Wetlands – Ramsar Convention- Wetlands for the Future Fund –
a Small Grants Fund for Wetland Conservation and Wise Use
• Risk transfer Mechanisms Decisions tend to identify SIDS, LDCs and Africa as most vulnerable and priority countries for finance
Special Climate Change Fund (SCCF) Eligibility and framework to allocate funds
Governance Support services
All developing countries that are Party to the Convention
Council under the GEF
Implementation Source and levels of funds
Through GEF framework â€“ implementing GEF secretariat SCCF priority is adaptation planning and agencies / measures in climate-sensitive sectors. GEF implementing Co-financing required and executing agencies
Voluntary contributions by donors About $ 100 million pledged
Least Developed Country Fund (LDCF) Eligibility and framework to allocate funds
Governance Support services
Under LDCF, LDCs receive support for the preparation of NAPAs as a framework for further funding of immediate needs
Council under the GEF
Prioritizes “urgent and immediate” adaptation needs Supports priority NAPA activity implementation.
Through GEF framework – implementing GEF secretariat agencies GEF implementing and executing agencies
Source and levels of funds
Voluntary contributions by donors About $200 million pledged
SCCF and LDCF – Lessons learned
Experience in designing climate change projects in relation to the development baseline.
Delivering funding through the GEF-managed SCCF and LDCF has been challenging, but has resulted in enhanced national capacity to identify climate change risks and develop projects that complement baseline development activities.
Linking climate change risks with development challenges requires experience that is often limited.
Climate change risks must be translated into the context and language of existing management challenges to have greatest resonance with stakeholders.
SCCF and LDCF - Lessons learned
Project proponents draw heavily on existing climate change assessments such as NAPAs and NCs for developing adaptation projects and initiatives, but there are limitations to their usefulness.
A critical role for development agencies lies in establishing relationships and brokering consultations among actors in climate risk management that may not be familiar collaborators.
Stakeholder-determined adaptation responses are not always the most appropriate middle- to longer-term adaptation strategies.
Existing adaptation deficits and maladaptation to climate risks pose major hurdles to managing climate change risks – there is a clear need for integrated approaches, and for government agencies to work collaboratively on development challenges linked by climate.
Adaptation Fund Eligibility and framework to allocate funds
Governance Support services Adaptation Fund Board
All developing countries that are Party to the Kyoto Protocol Concrete adaptation projects or programs Allocation of resources take into account: GEF secretariat • Level of vulnerability • Level of urgency and risks arising from delay World Bank as • Ensuring access to the fund in a balanced and trustee equitable manner • Lessons learned in project and program design and implementation to be captured • Securing regional co-benefits to the extent possible, where applicable • Maximizing multi-sectoral or cross-sectoral benefits • Adaptive capacity to adverse effects of climate change
Through “Accredited executing agencies” “Direct access” to National Implementing Entities (NIE)
Source and levels of funds 2 % share of proceeds of CDM Voluntary contributions by donors Depending on quantity and price of CERs (until 2012). Assumingly $ 80−300 million per year
US$ 30 billion/ year
Criteria Balanced funding between adaptation and mitigation
EU member states & EU Commission: EUR 2.2 billion mobilized towards its 2010
Countries such as UK & USA counting previous commitments to CIF
Funds should be additional to development aid
Disbursement through international institutions
- pledges are clear, their delivery is uncertain - CIFs and GEF are the primary multilateral institutions of choice
Most vulnerable developing countries prioritized
least developed countries, small island developing States and Africa
EU pledges 2010 16.4
Green Climate Fund
Decision from Cancun Negotiations 2010 Transition Committee
In charge of developing the operational documents and making recommendations to the COP in Durban
Fund Board: equal representation of developed and developing countries
25 developing countries and 15 developed countries
Fund Board: 24-member board - who will be part of the board?
Tasks: ● Legal and institutional arrangements ● Fund Board Rules of Procedure ● Financial instruments, funding windows and access modalities ● Complementarity with other funds and institutions ● Role of secretariat ● Independent performance evaluation ● Standards, safeguards and accountability ● Expert and technical advice mechanisms ● Stakeholder input and participation
Capacity to provide “direct access” to national institutions, without the intervention of international implementing agencies Trustee with competence to administer the fund and adhere to fiduciary standards: • WB invited to serve as interim Trustee subject to review after three years A Standing Committee has also been established to ensure the Fund does not sit empty, by assisting the COP in mobilizing financial resources and measuring, reporting and verifying their delivery
Possible Sources of Funding for GCF
Source: Report of the Secretary-Generalâ€™s High-level Advisory Group on Climate Change Financing, 2010.
CIF: Structure of the Funds Climate Investment Funds (US$ 6.1 Billion)
Clean Technology Fund (CTF)
Strategic Climate Fund (SCF)
(US 5.1 Billion)
(US 1.0 Billion)
Objective: To promote investment in clean energies
Pilot Program for Climate Resilience (PPCR)
Objective: to support targeted programs aimed at providing financing to pilot new approaches at a specific climate change challenge or sectoral response.
Forest Investment Program (FIP)
Program for scaling-up renewable energy in low income countries (SREP)
PPCR – Caribbean Pilot Activities will proceed along two tracks: • Country-based investments in highly vulnerable countries: Haiti, Jamaica and four small island states from the Organization of Eastern Caribbean States (Dominica, St. Lucia, St. Vincent and the Grenadines, and Grenada) • Region-wide activities: focused on climate monitoring, institutional strengthening, capacity building and knowledge sharing Implementation of a regional PPCR pilot should be characterized by: • Participating countries should share a similar range of climate risks • Enable pilot activities to focus on building responses to climate threats of high relevance to region & countries • Build on existing collaboration on climate sensitive development issues and/or regional programs • Type of regional activities likely to depend on degree of ongoing regional collaboration, capacities, and degree of regional political support of an existing regional institution
Haiti program Dominica program Regional program
St. Lucia program St. Vincent & Grenadines program
Bank Response and Lessons Learned
An effective initiative to identify opportunities and channel assistance for climate mitigation and adaptation activities Has evolved into a critical tool for: ● Mainstreaming CC into Bank activities ● Developing innovation and policy instruments ● Scaling-up financing for public and private sector investments
Need to articulate better the SECCI support to Bank’s country programming and investment instruments, and improve cross-sectoral coordination
Case study: Peru- Olmos Project IDB-NCAR Partnership Olmos project: The project aims to promote regional agricultural activity through the development of cultivable lands in the Olmos Region (Northwest Peru), by diverting water from the Huancabamba river through a tunnel across the Andes Project Diagram
Study is currently being developed by NCAR
IDB’s support: Assess the potential impacts of CC and climate variability on the Olmos project and provide the government with decision support systems to manage the project under climate uncertainties Main activities: Development of novel climate scenarios developed through dynamical downscaling using the WRF model, coupled to the land surface model PARFLOW-Noah Results from climate scenarios will be used to develop a water resource planning model of the Olmos project –looking both at supply and demand in an integrated decision support planning process Training to technical staff of local govt on a water evaluation and planning tool
AquaFund Fund for innovative solutions in water and sanitation Facilitates investment in: • water supply and sanitation Contributes to make these services • water resources sustainable and accessible to the poor management • solid waste management • wastewater treatment Goal: Finance 100 cities and 3000 communities by 2011 Who is eligible to receive AquaFund grants? National, sub-national, and local government entities, water and sanitation service providers (public, private, mixed-capital, cooperatives), and academic and research institutions are eligible. NGOs may be eligible at the request of governments.
Sources of investment and financial flows •
Private sources of funding can be expected to cover a portion of the adaptation costs in several sectors. In particular in the Infrastructure sector where investment in privately own physical assets would be needed.
However, public resources are expected to play a predominant role in all adaptation sectors.
National measures will be needed to encourage/support private sector adaptation and additional sources of funding dedicated to adaptation will be needed.
Sandra Valencia, svalencia@ iadb.org