CLIMATE FINANCING IN NEPAL
Climate change and climate financing have been the pressing issue today. Climate financing is financing channeled by national, regional and international entities for climate change mitigation and adaptation projects and programs. They include climate specific support mechanisms and financial aid for mitigation and adaptation activities to spur and enable the transition towards low-carbon, climate resilient growth and development through capacity building, R&D and economic development. In a narrow sense, it is a transfer of public resources from developed to developing countries, in light of their UN Climate Convention obligations to provide “new and additional financial resources,” and in a wider sense, refer to all financial flows relating to climate change mitigation and adaptation.The sources and governance of climate finance have been widely debated since the 2009 climate change summit in Copenhagen, where industrialized countries committed to giving $100 billion a year in additional climate finance from 2020 onwards. The outcome has been the creation of a new organization, the Green Climate Fund (GCF), which will be the main channel through which climate finance is allocated.
In our country, Nepal, erratic rainfall is detrimental to the rain-dependent agriculture sector that contributes to almost 30% of the national Gross Domestic Product (GDP). The country is bearing an annual loss of 1.5% to 2% of its GDP due to climate variability and extreme climate events. This will increase to 2 to 3% of the GDP, i.e. about US$ 62.384 billion (2013 est.) by 2050. It requires additional US$2.4 billion of investment in aggregate by 2030 to build Nepal’s resilience to climate impacts. Nepal will have to explore financial resources within and outside the country to meet the growing adaptation costs. In 2011, Nepal approved its climate change policy which provisioned the clear reference of spending 80% of climate change budget at a local level which is being pioneered through Local Adaptation Plans for Action(LAPA).
For the last four years, the Nepal government has been allocating budget under the climate change category in the national budget. For the fiscal year 2016/2017, the allocation from the government on climate change financing is 19.22% of the national budget. In the fiscal year 2015/2016, the allocation reached to 19.45% compared to 10.7% and 10.2% in 2014/15 and2013/14 respectively. A study of Oxfam Nepal in 2014 showed that 44.36% of adaptation funding was in the forest and biodiversity sector, followed by 26.94% in multi-sector projects and 16.41% in climate-induced disasters.
Many agencies and actors play a crucial role in channeling and utilizing climate finance in Nepal. These include international donors, government institutions, UN Agencies, Multilateral Development Banks, private sector agencies, I/NGOs, local institutions and user groups. These groups of actors play pivotal role in accessing finance and implement actions for climate resilient development and support the vulnerable communities in the country. Developed countries provide finance to Nepal via their own bilateral agencies and international organizations. The World Bank, Asian Development Bank (ADB) and International Financial Corporation (IFC) have also accessed finance to help build climate resilient Nepal. They are gradually increasing their internal climate investment portfolios. As a Least Developed Country, it also accesses finance from dedicated climate-related international funds established under the United Nations Framework Convention on Climate Change (UNFCCC). For instance, Nepal has projects under the Least Developed Countries Fund (LDCF), Adaptation Fund (AF), Global Environment Facility (GEF) including the GCF.
Though the climate finance is being implemented, institutional and governance barriers have been the issue. Lack of trust, clarity on roles and responsibilities and coordination is constraint between ministries, donors, government and civil societies in term of capacities, transparency, and accountability. A weak monitoring system, law enforcement and policy dilemmas on climate change have become a serious problem.It is further damaged due to high political interferences and corruption cases. The political instability in the center is affecting the financial planning and budgeting system as well as largely on the government’s development program and reach in rural areas. The climate financing is more controlled by donor agencies and non-governmental organizations whereas local people lack direct access to financial resources.
Nepal has neither accessed funds nor used effectively the money it has received and donors’ reluctance to climate financing in Nepal is diminished by documented corruption and distrust of Nepal government’s capacity to manage finance. The Government of Nepal has made a commitment to climate change adaptation in terms of policy documents but not yet in terms of practice. The governance failure is due to problem of institutions (between formal institutions including organizations, structures and systems and informal institutions such as norms and practices). The project implementation particularly on procurement of goods and services are often burdened with lengthy decision making procedures is challenging; implementing any projects from national to local level is time consuming and confusing on the role of actors.
Nepal has to explore further opportunities in accessing international funding not only to finance large adaptation gap but also to contribute in its ambition of working on low carbon resilient development that bring co-benefits to the country. Climate financing is important component and should be mobilized properly not only in Nepal but also in other developing nations. A separate arrangement for the provision of technical assistance to climate change programs should be developed and private sector should be involved in implementation. National vision needs to be drawn to guide the development of new and additional funding flows up to 2020 and beyond. Government and its development partners should consider drawing up a Joint Financing Arrangement (JFA). A climate finance sub-committee should be established to take forward the financing agenda and act as national discussion group. Project delivery approach should be moved to programmatic approach for public funding from international sources. The government should create a public website to act as national information hub.The keys to fighting corruption are transparent payrolls, budgets and decision makers, explanations of why decisions are made, input from citizens and monitoring by independent sources. These are technical necessities for an anti-corrupt system, but more importantly, there must be a political will to make them a reality. Climate finance could change the face of our future for the positive, but it is up to people and governments to invest in it and save our planet.
A climate finance subcommittee should be established to take forward the financing agenda and act as a national discussion group. Project delivery approach should be moved to programmatic approach for public funding from international sources. The government should create a public website to act as a national information hub.The keys to fighting corruption are transparent payrolls, budgets and decision makers, explanations of why decisions are made, input from citizens and monitoring by independent sources. These are technical necessities for an anti-corrupt system, but more importantly, there must be a political will to make them a reality. Climate finance could change the face of our future for the positive, but it is up to people and governments to invest in it and save our planet.