Climate Change Spending in Ethiopia: Recommendations to bridge the funding gap for climate financing

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The Government of Ethiopia considers climate change to be one of its priorities in responding to the country
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  POLICYBRIEFNovember2015  1 The Government of Ethiopia considers climate change as one of its priorities in responding to the country’s long - term development needs The nation’s widely acclaimed Climate Resilient Green Economy strategy has called for annual spending of USD 7.5 billion. With federal budgetary resources for climate change relevant actions estimated to be in the order of USD 440 million per year, and international sources adding an uncertain amount that may be in the tens of USD million per year, there appears to be a major financing gap. Therefore, if the CRGE strategy is to be delivered, much more effort needs to be exerted to mobilise additional resources both domestically and externally.  CivilSocietyandgovernmentrepresentativesattendingtheroundtablediscussionon ‘Ethiopia’sclimatefinancestudy’ on9 th November2015,HiltonHotel,AddisAbaba.Photo:TigistGebru,Oxfam CLIMATE CHANGE SPENDING IN ETHIOPIA  RecommendationstobridgethefundinggapforclimatefinancinginEthiopia    POLICYBRIEFNovember2015  2     Key recommendations to improve the effectiveness of climate finance delivery     Considerationshouldbegiventodevelopanationalsystemtotrackclimatechangespendingonadaptationandmitigationwithinthefederalbudget.AnentrypointforthedevelopmentofsuchasystemcouldbethroughitsintegrationwiththeGTPIIplanningandbudgetingprocess.   Climatechangerelevantspendingthatdoesnotpassthroughthefederalbudget(frombothdomesticandinternationalsources)shouldbecollatedinamannerconsistentwiththefederalbudgettoallowforacomprehensiveassessmentofallrelevantfunding.   TheGo vernment’sNationalCapacityDevelopmentProgramme(2016 -2020)providesanopportunitytoraiseawarenessamongsectorministryplannersonthelikelyclimatechangeoutcomesoftheirdevelopmentplanning,andtodevelopanappropriateplanning,reportingandbudgeting structuretoensurethatpublicinvestmentsareclimate‘smart’.     Awarenessraisingandtechnicalsupportrelatingtoplanningforandreportingonclimatechangeareidentifiedgaps;andtheseshouldbeprovidedtoRegional,ZonalandWoredalevelstaff.Optionstodevelopthebudgetsystemattheselevelsofthegovernmentadministrationtocaptureclimatechangerelevantprogramme/projectspendingshouldalsobeexplored.   Ruralcommunities’engagementinactivitiesthatenhancelandscape carbonstocksshouldbevaluedforcapturingdomesticallymobilisedclimatemitigationfinance.   Climatechangepolicydevelopmentwouldbenefitfromcreatingadditionalspacefornon-governmentactors(includingmicroandsmallbusinessentrepreneursandcommunityleaders)toparticipateinpolicyinfluencingplatformsaroundclimatefinance.   Increasedfinancialsupportfromtheinternationalcommunityisneededtocomplementthesignificantdomesticresourcesbeingallocatedtoclimatechangeactions.Internationalcommitmentsonclimatefinanceneedtoberealised.ThisisnowamatterofurgencyforEthiopia,andformanyother AfricanStates.  POLICYBRIEFNovember2015  3 Introduction Publicspendingonclimatechangeactions,eitherformeasuresthatincreasetheresilienceofcommunitiestoclimate-relatedshocksorthosethatpromotelowcarbondevelopment,isexpectedtoincreaseasnewgovernmentprogrammesandprojectsareimplementedandexistingprogrammesaugmentedtoaddressclimatechangeissues.Inthiscontext,thepresentlevelofsuchspendingcan offerimportantinsightsastohowfarthecountry’sclimatechangepolicy,the ClimateResilientGreenEconomystrategy,hasprogressed.However,thistypeofanalysis  –  apublicexpenditurereviewofclimatechangeactions  –  hasnotbeenmadebeforeinEthiopia.Inresponsetothisgap,in2014theClimateScienceCentreofAddisAbabaUniversity,incollaborationwiththeOverseasDevelopmentInstituteofLondon,carriedoutananalysisoffederalspendingtoestimatethelevelofpublicspendingonclimatechange.Publicexpenditureonclimatechangecancomefromavarietyofsources.Theseincludeinternationalclimatefunds,bilateralandmultilateraldonorfunds,publicfunds,andprivatesectorfinance.Asastartingpoint,publicfundingallocatedthroughthefederalbudgetwasselectedforstudy,assuchspendingismostcloselyalignedwithnationalpolicysettingandinstitutionalarrangements.Inthe2014study,afouryearperiodwasreviewed,between2008/2009and2011/12,whichrepresentedthemostrecentavailablebudgetdata.TwentythreeFederalAgencieswereidentifiedbasedontheirpolicyengagementandspendingoverthefouryearperiodandatotalof158expenditurelinesfromthedevelopmentbudgetwereclassifiedasbeingclimatechangerelevant.Alltheseexpenditureswerethencategorisedbasedonthedegreeoftheirrelevancetoclimatechange.Thisapproachallowedafirst,broadestimatetobemadeofclimatechangerelevantexpenditurethatpassesthroughthefederalbudget 1 .   1  The detailed methodology and in- depth results are documented in the report ‘ Climate Finance in Ethiopia ’, available at: http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/8995.pdf    POLICYBRIEFNovember2015  4 The policy context ThevulnerabilityofEthiopiatotheadverseimpactsofclimatechangehasspurredmuchpolicydebateinrecentyearsandEthiopiaisoneofthefewcountriestohaveformallymergeditsaimsofdevelopingagreeneconomywithbuildinggreaterresiliencetoclimatechangeunderasinglepolicyframework:the2011ClimateResilientGreenEconomy(CRGE)Strategy.Significantly,theCRGEhasnowbeenmainstreamedintothenationaldevelopmentplan,theGrowthandTransformationPlanII(2015-2020).Publicinvestmentinitiativesthathavebeenselectedtofast-tracktheimplementationofthegreeneconomyelementoftheCRGEstrategyincludehydropowerdevelopment,ruralcookingtechnologies,thelivestockvaluechain,andforestrydevelopment.Theseinitiativesrepresentarationalpolicyprioritizationastheyoffertheprospectofimmediateeconomicgrowth,largecarbonabatementpotential,andareattractivetointernationalclimatefinancefundingsources.Theadaptation(orclimateresilience)partofthestrategyhasdevelopedmoreslowlyandthisnowneedstobeenhancedsoastosecurethelivelihoodsofthosemostvulnerabletoclimatechange.Inthatcontext,thefasttrackingoftheclimateresilientstrategiesfortheagricultural,forestryandwatersectorsdemonstrateseffectivesectorprioritisationbyGovernment. The institutional context Followingthe2009climatechangeconferenceinCopenhagenthethenEnvironmentalProtectionAuthority(EPA)becamethenationalflagshipinstitutionforclimatechange. TheEPAoversawthedevelopmentoftheCRGEstrategythathasshapedEthiopia’s approachtoclimatechange.In2014theEPAevolvedintoanewMinistryofEnvironmentandForestsandthen,in2015,itbecametheMinistryofEnvironment,ForestsandClimateChange(MEFCC).Thisnewministrywillplayaleadingroleinmattersrelatingtoclimatechange,nationallyaswellasinternationally.Thisrapid institutionalevolutiondemonstratesthegovernment’sdeterminationtoconsiderclimatechangeasoneofthepriorityareasindealingwiththecountry’slong -termdevelopmentneeds. AsecondinstitutionalinnovationistheCRGEFacilityestablishedwithintheMinistryofFinanceandEconomicDevelopment,nowtheMinistryofFinanceandEconomicCooperation(MoFEC).Designedasasingle,nationalfundingmechanism,thisFacilityisintendedtomaketheadministrationoffundseasierforthegovernmenttodriveandmanageinternationalclimatefunds,donorfundsanddomesticresourcesinacoordinatedmanner.Theinter-ministerialcollaborationbetweenMoFECandMEFCCinmanagingtheCRGEFacilityisakeyinstitutionalarrangementthatwillunderpintheeffectiveimplementationoftheprogrammessetoutintheCRGEstrategy.
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