FEATURE: Ethiopia’s investment in climate compatible development
Ethiopia’s Ministry of Finance and Economic Cooperation was recently accredited to receive funds from both the Green Climate Fund and the Adaptation Fund. Robi Redda, CDKN’s Ethiopia Country Engagement Leader, and Tesfaye Hailu, CDKN’s Ethiopia Programme Manager, reflect on five factors that contributed to Ethiopia’s success.
Ethiopia’s Ministry of Finance and Economic Cooperation (MOFEC) was one of the 13 new National Designated Authorities (NDAs) accredited by the Green Climate Fund Board on 9 March 2016. This followed the recent decision of the Adaptation Fund Board to approve the accreditation of this same ministry as a National Implementing Entity of the Adaptation Fund, as of February 26, 2016. [Editor: NDAs and NIEs are national, developing country institutions that can receive and disburse the funds’ monies directly, instead of the money flowing through multilateral agencies to in-country projects.]
Ethiopia is already committing significant resources to reduce its greenhouse gases and build resilience to the impacts of climate change, in line with its national development priorities, notably through:
- Intensified natural resource management and afforestation/ reforestation of several million hectares of degraded land, with active voluntary contributions of local communities;
- Investments in a low-emission transport sector, namely the construction of a 5,000 kilometres railway network that will utilise clean energy;
- Increased energy access and power generation from the hydro, wind and solar energy sectors, including the construction and operationalisation of the Ethiopian Grand Renaissance Dam amounting to US$ 4 billion generated from domestic sources.
However, despite this investment Ethiopia still needs to attract and mobilise finance to support its climate compatible development agenda. The country has responded by establishing a national fund, the Climate Resilient Green Economy Facility (CRGE Facility), as a mechanism to mobilise finance from various sources, including domestic and international, and drive investments to build resilience and support green growth. The CRGE Facility, housed within the Ministry of Finance and Economic Cooperation, is responsible for:
- ensuring the availability of flexible, coordinated and predictable funding to support the achievement of national priorities set out under the national Climate Resilience Green Economy (CRGE) Strategy;
- blending diverse sources of climate financing and leveraging public funds to attract private funds; and
- providing a unified engagement point where government, development partners, civil society and other stakeholders can engage and make decisions about climate finance related issues.
Five key lessons from Ethiopia’s accreditation process
Ethiopia identified the Green Climate Fund and Adaptation Fund as important sources for financing potential resilience and green growth interventions in Ethiopia, and initiated the accreditation process. Five important lessons from this accreditation are highlighted below.
- A pre-accreditation exercise to identify and address gaps is essential
An important first step in NIE accreditation is to initially carry out a gap analysis that identifies what needs to be improved in order to meet fund requirements. This exercise will also help develop a ‘blue print’ on how to approach the actual accreditation work and associated processes. In hindsight, a comprehensive pre-accreditation application gap assessment early in the process would have beneficial.
- Prior experience in similar process is critical to fast-track accreditation
The Ministry of Finance and Economic Cooperation’s previous experience in putting in place, refining and implementing improvements to meet specific fiduciary requirements of various funds (e.g. Global Fund), and multilateral and bilateral donors (e.g. the World Bank, the African Development Bank, the UK Department for International Develoment (DFID), etc.) was particularly relevant in demonstrating the existing capabilities of the Ministry in meeting the GCF’s and AF’s requirements. It was also possible to expedite the GCF accreditation process, as the Ministry had already begun preparing for AF accreditation, so could draw from this existing experience.
- Accreditation involves assessing the existing national system beyond specifically assessing a potential NIE
The accreditation process to international climate funds requires an assessment of a country’s fiduciary management and understanding of several aspects for which the National Implementing Entity is not the lead competent national institution. These include aspects like audits, ethics, anti-corruption, anti-money laundering, procurement, and environment/social safeguards. This is why it is important to bring on-board all lead nationally competent institutions such as the Office of the Federal Auditor General, the Federal Ethics and Anti-Corruption Commission, the Public Procurement and Property Administration Agency and others early in the accreditation process. A strong national fiduciary and governance system becomes a pre-requisite to fulfil these accreditation requirements.
- A holistic operational competency of the NIE is critical
The assessment for a NIE accreditation is not just about demonstrating the existence of working and operational documents, but also the demonstration of their operationalisation and use. In this regard, Ethiopia’s NIE was able to demonstrate the use of the existing systems and operational documents ‘on the ground’ and in a cascaded manner at the different levels of its operational units.
- Accreditation requirements often don’t reflect the institutional and operational realities of budgetary/government institutions in least developed countries
During the accreditation process, it was sometimes difficult to understand and relate fund requirements to the Ministry’s operational modalities and existing processes. While the Ministry of Finance and Economic Cooperation demonstrated the rigorous processes required from a budgetary/government institution, some of fund requirements mainly considered financial institutions and banks.
This meant substantial effort was required to demonstrate the Ministry’s existing systems, and strong communication with the funds’ secretariats was needed. Both the Ministry of Environment, Forest and Climate Change (as the designated national authority for these funds), and the Ministry of Finance and Economic Cooperation (as the NIE) engaged consistently with these funds, which helped them respond quickly to their requests.
CDKN supported both accreditation applications and the follow up process. The DFID-Ethiopia Strategic Climate Institutions Programme (SCIP) provided additional funding to CDKN to support MOFEC’s Adaptation Fund accreditation process. CDKN’s technical assistance support to Ethiopia focuses on boosting the country’s prospects to access sources of climate finance. In addition to accreditation support, CDKN has supported Ethiopia’s GCF National Designated Authority (the Ministry of Environment, Forest and Climate Change) to prepare for GCF processes in order to access its funds; and build a project pipeline for potential funding. In 2016, CDKN will continue to support the climate finance readiness agenda in Ethiopia through project pipeline development. Mr. Admasu Nebebe, the MOFEC Director for UN Agencies, Regional Economic Communities and Ethiopia’s national climate fund, the CRGE Facility, highlighted that CDKN support had provided “a key enabler for the realisation of Ethiopia’s ambitious climate change commitment”.
Read more about the CDKN project: Enhancing Ethiopia’s access to green finance.
Image: Adama windfarm, Ethiopia, courtesy CIFOR.