CLIMATE FINANCE

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A small developing country with the diverse topographical conditions ranging from 60m elevation to 8848m, the vulnerability of Nepal towards climate change is huge. Whether it be the melting glaciers, risks from the glacial lake outbursts flood, disasters like floods and landslides, depletion of water resources or agricultural loss, the threat to the human and nature is alike, and a lot needs to be done for adaptation to make the communities more resilient to the impacts of climate crisis.
A solution for the adaptation and mitigation problems has been put forward as a concept of climate finance, whereby, a budget is allocated for the adaptation to climate change. These are channeled nationally, internationally or regionally. The United Nations Framework Convention on Climate Change (UNFCCC) recognizes that the developed countries need to provide new and additional financial resources to the developing counties to support the latter’s adaptation and mitigation actions and during the 15th meeting of Conference of Parties (COP), developed countries agreed to commit USD 100 billion a year by 2020 to support the developing countries. In the case of Nepal too, it has started seeking accreditation for National Implementing Entities to access resources from Adaptation Fund and the Green Climate Fund. Agricultural Development Bank of Nepal (ADBN) is seeking to become an NIE for Adaptation Fund, while Alternative Energy Promotion Center (AEPC) and National Trust for Nature Conservation (NTNC) are shortlisted to submit their application for accreditation to GCF.
The most serious impacts of climate change can be seen in our agricultural sector, where majority of farmers are experiencing severe droughts in some place and floods in other. According to the ‘Intended Nationally Determined Contribution’ report drafted by the Ministry of Population and Environment Under various climate change scenarios for Nepal, mean annual temperatures are projected to increase between 1.3-3.8 degree Celsius by the 2060s and 1.8-5.8 degree Celsius by the 2090s. Annual precipitation reduction is projected to be at the range of 10 to 20 per cent across the country. In the country’s Himalaya, total estimated ice reserve between 1977 and 2010 has decreased by 29 per cent (129 cubic kilometre). According to the National Climate Change Impact Survey 2016, published by the Central Bureau of Statistics, Government of Nepal, overall, maximum percentage of households (86.1%) reported experiencing drought in past 25 years. Similarly, most of the households have observed change in temperature as well as decrease in monsoon duration and winter rain. Highest percentage of households (84.58%) reported the monsoon is delayed by 1 to 4 weeks while 57.14 per cent households observed delay on winter rain by 1 to four weeks. The survey result shows that 74.29 per cent of total households have observed changes in water sources whereby 84.47 per cent observed decrease in amount of surface water. On the other hand, 79.64 per cent households in urban area and 68.12 per cent in rural area reported decrease in water quality. Likewise, majority of households (74.56%) in mountain region have reported complete drying up of surface water and high percentage (48.81%) in hill area observed complete drying up of the underground water sources. Such changes in water sources have been reported due to insufficient rainfall.
In total, 60.25 per cent households have reported of having observed emergence of new disease in crops while 26.01 per cent households stated the opposite. Highest percentage of households in far-western mountain (96.78%) have observed an emergence of new Disease in crops while only 1.13 per cent households reported in Kathmandu Valley. Similarly, higher percentage of households in the very high vulnerable area (68.94%) under NAPA combined vulnerability index reported emergence of Disease in crops while 49.14 per cent reported so in very low vulnerable area. Moreover, higher percentage of households in temperate zone (68.96%) has reported in emergence of new disease in crops in last 25 years compared to other climatic zones.
Therefore, the maximum focus of our climate finance should be towards making the agricultural communities more resilient, as the highest percentage of population rely on agriculture for their livelihood and it contributes to almost 30% of the national Gross Domestic Product (GDP). According to a report by Oxfam, the country is bearing annual loss of 1.5% to 2% of its GDP due to climate variability and extreme climate event and it is projected to increase to 2 to 3% of the GDP, i.e. about US$ 62.384 billion (2013 est.) by 2050 and that it would require additional US$2.4 billion of investment in aggregate by 2030 to build Nepal’s resilience to climate impacts. But with the case of the banks of Nepal, to not take credit risks, there is no deprived sector lending which makes it hard for the farmers to adapt to the changes.
Also in the context of Nepal, it is essential to distinguish between development and climate finance, and be clear about what criteria makes the budget allocation climate resilience oriented. There is also a need to check the robustness of the climate change budget code. “There is need to move quickly from project delivery to a programmatic approach for public funding of climate change actions from international sources.” (National Planning Commission, Government of Nepal.) There has also been mainstreaming of climate change into the policies of the government of Nepal in the domestic level. In the case of international sources, one of the biggest international climate finance source for Nepal is the DFID. In the funding received, there are some that are on budget on treasury, for instance the LAPA (Local Adaptation Plan of Action), where as there are some that the donors implement themselves, like the Hariyo Ban done under WWF, which is on budget but not on treasury. During consultation of climate finance in 2016, Ram Prasad Lamsal, joint secretary of MoPE (Ministry of Population and Environment) said “Nepal has accessed over 200 million dollar in budget now. As the budget is scattered, there is the need to bring it under one umbrella so that the government can track down how much money Nepal is receiving,”.
The problems that lie during climate budgeting is that most of the budget are used in developmental aspects without the inclination towards climate concerns. Assessment of its efficiency is also a problem. The allocation of climate budget is done by various ministries, and if the investment to climate above 60% is regarded as highly relevant, if its 20-60% its relevant. Only about 2 to 4% of the overall projects is now considered as highly relevant and the highest percentage falls under relevant. But both 22% or 59% are regarded as relevant which is quite a huge difference. So further categorization and grass root monitoring would prove to be more effective. If the communication does not flow from high officials to grass root communities, they cannot deliver. According to the report on climate finance by ISET, Institute for Social and Environmental Transition, “None of the studied projects met the 2011 climate policy’s provision to deliver 80% of budget to locals and the most vulnerable groups. In most cases, local communities received less than half of the budget disbursed and the remainder was used to meet management costs. The performance in budget use was also low in all five projects. Poor institutional capacity at the local level – DDC, VDC and municipalities – and lack of human resources emerge are the key constraints impeding effective budget use. Climate change adaptation activities received little attention from local governments and departmental line agencies because the concerned bodies have multiple responsibilities and sectoral interests. The absence of reflective learning and lack of iterative planning and program implementation characterized all projects that were studied. This deficiency further constrained innovationin targeting investments, thereby limiting the responsiveness of the programs to local context and vulnerabilities.”
Therefore, while much has been done in the climate finance sector, much still needs to be done, and it is important to have grassroot implementation of all the policies.
-Anuska Joshi