ISS and HSF Seminar Report: Towards COP18 - Developing a national architecture that is equipped for global climate finance
Date: 2012-11-27
Venue: , ISS Pretoria Seminar Room
, Block C
, Brooklyn Court
, 361 Veale Street
, New Muckleneuk
, Tshwane (Pretoria)
1. INTRODUCTION
In partnership with the Hanns Seidel
Foundation (HSF), the Institute for Security Studies (ISS) through its Conflict
Management and Peacebuilding (CMPB) division hosted a half-day seminar under
the theme ‘Towards COP18: Developing
a national architecture that is equipped for global climate finance’. The seminar brought together
researchers, policymakers and practitioners in the field of climate change
policy-related work in South Africa.
The aim of the seminar, which was convened
during COP18, was to discuss how South Africa is preparing itself for global
climate finance. The seminar was also aimed at reflecting on the status of
international negotiations to get a better sense of where the country should be
in terms of national ‘climate finance readiness’.
Tim Walker from the CMPB division of the
ISS chaired the seminar. The speakers were Chantal Naidoo, from the Development
Bank of Southern Africa, and Trusha Reddy, an independent political researcher.
Deliberations followed the ISS/Chatham House rules and this report highlights discussions
that emerged from the seminar.
2. WELCOMING
REMARKS
Tim
Walker, Consultant Researcher, ISS
Tim welcomed participants to the seminar.
In his opening, Tim observed that climate change is a global problem that
requires solutions at the local level, noting that it is for this reason that
South Africa is actively establishing its climate finance architecture to
receive, manage and disburse global funds that are meant to help communities
cope with and adapt to climate change impacts. However, the sufficiency of
global climate change finance as well as South Africa’s readiness to accept
funds from the Green Climate Fund (GCF), which will channel the bulk of $100
billion in long-term finance to developing countries, are questions that remain
unresolved. Tim noted that after two board meetings of the GCF this year,
crucial concerns on its operation will be tabled for decision by the
multilateral forum. South Africa as such has an opportunity to express its ‘readiness’
to receive these funds.
Tim also briefly
highlighted the ISS’ involvement in climate change finance research and related
activities, which began in 2008 with an initial focus on carbon trading in
Africa, developing principles and criteria for just and effective governance of
climate finance in Africa. This work was done in partnership with the HSF. The
immediate importance of the exercise was to inform the African Union position
on climate finance ahead of the United Nations Framework Convention on Climate
Change (UNFCCC) meetings from a research, evidence-based perspective, to allow
African governments and citizens to understand what they need and what to
expect from climate finance and also allow perspectives on Africa to come from
Africa.
3. PRESENTATIONS
3.1 Leading infrastructure development
Chantal Naidoo, Divisional Executive, Environmental Finance, Development Bank of Southern
Africa
Chantal’s
presentation centred on South Africa’s national efforts (Green Fund and interim
mechanisms) and the extent to which these instruments are sufficient for climate
financing.
Chantal underlined some of the principles informing
international climate finance, including the common but differentiated
responsibilities and respective capabilities as well as the new and additional
funds (in addition to Official Development Assistance) and adequate and
predictable funding for South Africa. She also spoke about South Africa’s proposed vision for a climate
fund, which is to create a long-term financing strategy for South Africa’s
green economy transition and climate change programmes. She observed that at
the international level, there is a wide
landscape of climate / green finance channels available to developing countries
that South Africa does have access to. Other sources include bilateral and
multilateral support to South Africa. Bilaterally, these amounts range from US$4,2
billion to US$12 billion in terms of committed support from 2007 to 2014, and US$4
billion to US$11.7 billion for multilateral support from 2010 to 2014,
including co-financing.
Under the UNFCCC, resources available to
developing countries include financial support, technical assistance, capacity
building and technology transfer. South Africa should leverage these resources as a ‘total package’
and ensure that this total package is directly relevant to domestic needs, i.e.
that it bridges gaps within its domestic finance sector. In addition, there is
a growing recognition of the role of private finance in contributing towards
incremental costs of transitioning to low carbon and resource efficient
economy. As such, as a middle-income country, South Africa with more mature
capital markets will not receive equal positioning with less developed countries
than itself, which will be prioritised in terms of accessing the GCF. It will
also be important to engage with pioneering institutional investors (Reg. 28
and CRISA), JSE-SRI, King III, and CDP, crowd-in capital as well as assess the
risk and return profile for the private sector when constructing green/climate
financing.
At the National level,
environmental funds are currently decoupled and these include the Green Fund
(with available funds estimated at R800 million), Drylands Fund and Renewable
Energy IPP Fund. International funds being facilitated by DEA include the
Adaptation Fund, Global Environment Facility, Clean Technology Fund and the
Green Climate Fund (which is still emerging, with South Africa as co-chair).
Chantal also noted that
one of the key risk factors to these national and international funding
mechanisms is that they may not inspire confidence as a ‘family of inter-related
funds’ that deliver impact and crowd in private sector support. She also spoke
at length about South Africa’s National Climate Change White Paper and its
genesis. The goal of the White Paper is to build effective and inclusive
climate finance architecture for South Africa’s climate change and green
economy response. Some of the principles to test in the interim climate finance
coordination mechanisms, however, include the integration of existing
development priorities with climate response; ownership in terms of response
strategies; demand-driven approaches; bridging gaps that exist within the domestic
finance sector;
clarity in terms of increased capacity to absorb
appropriate and relevant technology transfer; strengthening partnerships in
relation to financing, technical assistance, technology and institutions; and leveraging
partnerships in order to effectively
crowd in private sector to facilitate ongoing investment. She also underscored some
of the top down challenges for translating these principles into reality, such
as mobilising the required resources, remaining relevant and appropriate,
achieving cohesion with other climate support measures and remaining
engaged with stakeholders in the process.
In closing, Chantal recommended that in order to make climate finance
relevant, South Africa should:
- Develop a climate finance strategy that
integrates existing and emerging policy and financing instruments, including
the role of market-based instruments.
- Formalise the ‘plan’ into an investment
programme.
- Ensure ‘worlds collide’ in terms of
encouraging discourse between government and financial regulators,
microfinance, public and private and institutional investors.
- Continue engagement with international and
national stakeholders to keep track of and ensure relevant application at the
national level of strategies, for instance by ensuring
alignment
of existing national mechanisms to provide cohesion, co-financing and
innovations e.g. capital markets (IDC’s Green Bond), and
learn
lessons through Green Fund RFP and similar processes to continually refine
the value proposition so as to remain relevant.
3.2 Climate finance: Getting the supply and demand sides right
and ready
Trusha Reddy, Independent Political
Researcher
Trusha
focused her presentation on the supply and demand side of climate change
finance from a civil society’s perspective on the issue. She noted that from
the supply side, the process was ‘inching forward’ in terms of operationalisation
of the Green Climate Fund. It is hoped that disbursement of funds will begin in
2014. A number of board meetings were held in 2012 even though they had been
characterised by wrangling among stakeholders. The host country is responsible
for bringing funding commitments to fruition and South Africa has been
identified as possible co-host. While she noted that participation of civil
society in the climate finance debate is very minimal at present, she added
that it is critical to engage them moving forward as they do offer independent
and important voices as well as play critical oversight roles in climate change
finance debates and processes.
At the
global level, there is recognition that the world is at a watershed period due
to the impact of climate change. As such it is essential that the right systems
are put in place and ensure that they are efficient and address
transformational needs. In particular, Trusha noted that the demand side of
climate finance faces a lot of uncertainties especially politically, for
instance on how much to allocate to developing countries or how to adequately
ensure their needs will be met. Both the demand and supply side therefore need
coherence.
Trusha also detailed at length the
importance of making climate finance work for women due to the gendered impact
of climate change on women. As such, climate change financing policies and
processes should:
- Ensure
that women are engaged in climate policy making and planning though:
- Inclusion of women in the
implementation of the National Climate Change Response Policy, particularly the
development of the adaptation plan
- Enabling women to participate
in local level planning such as community planning for adaptation or mitigation
projects
- Building capacity across
government departments to better understand climate change and gender
- Enable
simple, free access to information for women
- Promote
gender balance in decision-making forums
- Enable
capacity building of women to improve their access to climate finance
- Work
with communities to better understand their needs from and use of climate
finance
- Create
a mechanism for coordination of climate finance
- Create
funds for local communities to facilitate quick, easy access to funding
for vulnerable groups
In concluding, Trusha stressed some of the main priorities that may ensure
just and effective climate change financing at the national and local level. She
recommended that climate policy be based upon the environmental and
developmental needs of a country and region, using bottom-up approaches that ensure nested
projects at an appropriate scale. In addition, funding must match the specific adaptation
needs of affected recipients and this funding should delink public from
private sources. Climate change financing processes must also ensure developing
countries free and unencumbered access to appropriate renewable energy technologies
and other sustainable approaches and inclusive decision-making processes that maintain
viable, effective and just outcomes. Furthermore, the livelihoods and rights of
indigenous and local communities should also be prioritised and guarantee the
integrity of emission reducing projects by implementing safeguards in
assessment criteria of projects. This is in addition to making emission
reductions count towards national targets.
Moreover, policy formulation,
planning and implementation of programmes should be coordinated as a matter of
urgency if competing and conflicting approaches are to be avoided by instilling
complementary policies, planning and implementation among public institutions
in developing countries. National and sub-national implementing institutions should
also be capacitated to ensure upward and downward accountability, which is key
to the successful implementation of climate finance.
4. PLENARY
DISCUSSIONS
Discussions that emerged from the plenary
noted the following:
- The National Energy
Regulator has been underperforming, with only 75 per cent efficiency in
terms of delivering on project funding. This can be attributed to poor
prioritisation by officials, e.g. use of such funding for travelling etc.
As a result, funding has not trickled down to the projects the Fund is
intended for. The National Treasury has traditionally not tracked the use
of these funds but is increasingly recognising the need to do so. The
government is also aware of the poor impact of current interventions and a
working group has been set up at the national level to track these
finances, although debates on how best to achieve these are still
occurring.
- Flexibility and access
are some of the critical principles informing the design of the Green Fund
and these are based on the outcomes of five case studies whose outcomes
informed the White Paper. The idea was to have a fund with public and
private financing and at the moment development of this process is at a
very early stage. Green cities and towns, and natural resource management are
some of the windows for funding. Due diligence is followed in approving
proposals for project funding with over 500 proposals received so far.
- The DBSA is currently
undergoing internal reorganisation, but coordinating mechanisms do exist
for engaging with international and regional partners involved in
development financing. Indeed, there are shared platforms in which the
DBSA and other regional partners involved in development financing such as
the African Development Bank can engage. The DBSA is also exploring
opportunities to co-finance projects with such partners.
- More work in terms of
coordination with partners, monitoring and evaluation of finances is still
needed. The issue of climate change financing does not necessarily have to
be a separate ‘financing’ issue. Unfortunately poor negotiations with
stakeholders, fragmentation of government departments and competition
within the private sector are challenges to a more cohesive and
coordinated approach in climate financing in South Africa.
- Most countries prefer a
more democratic process for determining how the GCF is spent since
previous funding attempts have failed.
- Some countries such as
the United States prefer the IMF, but other countries are reluctant granted
the IMF’s track record on financial policies for developing countries, for
instance the failed structural adjustment funds whose negative impacts are
still being felt at present, especially by developing countries.
- Women are still facing
many challenges in accessing funds for implementing their projects.
Current efforts are focused on creating coherence and better-coordinated
responses to gender-related concerns.
- Government departments
are highly fragmented, which is a hindrance to efforts on mainstreaming
climate finance in various departments.
- There is a need to move
towards clean energy sources. It is important to also track or map government
performance in terms of commitments, plans and strategies for dealing with
emissions.
5. CLOSING
In summarising the discussions, Tim noted
that the deliberations had raised more questions than answers as there are no
tailor-made solutions or ‘one fit’ models for climate financing strategies.
However, addressing some of the crucial issues that keep recurring, for
instance the ‘greening’ of development funds and the importance of
mainstreaming within government departments, are key to effective climate
financing.
In closing, Tim thanked the HSF for its partnership,
as well as the speakers and participants for their attendance and contributions
to the discussions.
This event is made possible through funding from the Hanns Seidel Foundation