Climate Change Finance - Adaptation Starts Here

By Ajay Chhibber

At the beginning of this year I visited the Ekipe village in Vanuatu to meet with rural women, men and children. UNDP has helped this community to establish regular access to sources of fresh water, helping the villagers to deal with the problem of increased water salinity due to the rising sea levels. Yet climate change is the issue of survival not only in Vanuatu but in all Pacific islands. Their successful adaptation will require investments much larger in scale than one village at a time.

The funding availability will depend on the outcome of international climate change negotiations. Just before the Cancun round, the UN Secretary-General’s Advisory Group on Climate Finance has concluded that it will be “challenging but feasible to reach the goal of mobilizing US$100 billion annually for climate actions in developing countries”. According to the same panel, which included globally recognized authorities such as Larry Summers, Nicholas Stern and George Soros, as well as Hon Bob McMullan from Australia, for the small island developing states the funding will come mostly in the form of grants and highly concessional loans.

However, achieving the numerical $$ target is not a panacea, especially if the new funding is to be disbursed through disjointed projects and separate donor channels as had been often the case. Unless well prepared for, the financial influx can add significant strains on national systems of public finance and have little impact on climate change adaptation. For climate finance to be quickly accessed, effectively absorbed and wisely spent, it will be crucial for governments and donors alike to ramp up their policies, budgets and aid systems. Few concrete actions can help to strengthen effectiveness of the climate finance in the Pacific.

First, it is timely that island countries move from the environment-focused to the whole-of-government approach to climate action. If the climate change adaptation were to be fully integrated into national policy agendas as a cross-cutting priority, then national ownership of the climate action would need to expand far beyond environment departments (which are often under-resourced) and involve climate-proofing of all sector policies. The whole-of-government approach will also require much closer coordination between central and line ministries, between national and provincial authorities, and between legislative and executive branches.

Linked to that, the climate finance should be seen as public investment in building climate resilient future of Pacific island countries rather than just an additional funding stream. By associating climate finance with broader development objectives the countries will begin to integrate donor funding with domestic resource mobilization. This will ensure that externally sourced funds help to address and reinforce national priorities and contribute to the integrity and effectiveness of national budgets. Integrated domestic-external sourcing of climate finance is also essential for the sustainability of adaptation related initiatives.

And thirdly, the donors will need to move away from individual projects as a primary instrument of delivering climate finance to the sector-wide and area-based programs. Today a Pacific island government compiles dozens of donor reports every month, receives several donor missions every week and deals with multiple bilateral and multilateral donors every day. All of this is taxing rather than enhancing their absorptive capacities. While some overlap can be reduced through improved coordination within the governments, the donors should consider joint rather than stand alone interventions as default option for channeling climate finance. And as national absorptive capacities increase, further progress towards direct budgetary support will be in order.

All of this would form lengthy agenda for any government, let alone the small national administrations of Pacific island countries. Identifying policy interventions with strong multiplier effect will help. In this regard the region can learn from experiences of other developing countries, several of whom are pooling various aid channels through multi-donor climate funds. In Indonesia and Cambodia, for example, the multi-donor climate funds are enabling the governments to drive the aid effectiveness, to reduce donor overlap and to cut the transaction costs. In both cases UNDP has helped to set up the trust funds and is administering them on interim basis before the appointment of national trustees or transition to direct budgetary support.

The Pacific can offer relevant experiences of its own – such as the Tuvalu Trust Fund, which was established in 1980s with support from New Zealand, United Kingdom and UNDP as an alternative mechanism of delivering untied development aid. This “homegrown” model, as well as the lessons learned with the multi-donor climate funds in Asia, will help to design the Pacific-specific strategies of ramping up national absorptive capacities for climate finance.

We are at the cusp of a new era when dramatic surge in climate finance from public and private sources is likely to transform the international development paradigm. As such, if used wisely the new funding can help the countries to adapt to climate change not only through climate-proof infrastructure and disaster risk reduction, but also by empowering local communities and addressing the needs of most vulnerable groups. Having already placed climate finance on the agenda of the Pacific Forum Leaders and its ministerial groups, the region is well positioned to become a global trend-setter in climate change adaptation. Ultimately, the sharper focus on climate finance effectiveness will help to bring about climate-resilient future and better human development opportunities for villagers in Ekipe and in many other communities spread across the vast Pacific Ocean.

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Ajay Chhibber is Assistant Secretary-General of the United Nations, Assistant Administrator of the United Nations Development Program and Regional Director for Asia and the Pacific

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