Reflecting on Ethiopia's climate finance readiness journey

Reflecting on Ethiopia's climate finance readiness journey

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Date: 20th January 2017
Author: CDKN Africa
Type: Feature
Organisation: Government of Ethiopia
Countries: Africa, Ethiopia
Tags: finance, Green Climate Fund

CDKN has been supporting the Government of Ethiopia in achieving climate finance readiness and mobilisation of climate finance. Tesfaye Hailu reflects on the journey.

The Climate Resilient Green Economy (CRGE) strategy of Ethiopia was launched in Durban in 2011 at COP17 with a goal of reaching middle-income country status by the year 2025 with net-zero greenhouse gas emissions while simultaneously building the resilience of the economy. The CRGE strategy was launched at a time when pledges of “fast-start finance” - a total commitment amount of US$30 Billion, and “long-term finance” - a goal of US$100 Billion per year by 2020 was conceived.

An important development in terms of climate finance was the “Direct Access” mechanism for accredited National Implementing Entities (NIE) to access these funds. The mechanism for Direct Access is believed to instill greater national ownership over funded activities, while maintaining high fiduciary standards and minimising transaction costs. This is in contrast to where funding is channeled through a third party implementing agency, usually a multilateral organisation that is selected by the fund administrators. This opportunity led to the establishment of the CRGE Facility in 2012 under the joint management of the Ministry of Finance and Economic Cooperation (MoFEC) and Ministry of Environment, Forest and Climate Change (MEFCC) to directly access and mobilise climate finance.

Against this background, CDKN commenced giving its support to the CRGE Facility in late 2013 by supporting the MoFEC to be the designated NIE on behalf of the Adaptation Fund. Accordingly, CDKN worked with the CRGE Facility to prepare a comprehensive Adaptation Fund accreditation application for direct access of climate funds of up to US$10 Million. In Early 2015, the Green Climate Fund (GCF) was also capitalised as a long-term financing institution and opened for national and multi- lateral accreditation applicants. Making use of the experience that it had gained, a work stream was added by CDKN to also support the GCF accreditation of the MoFEC, the designated NIE to the GCF. This support was strategic as CDKN could leverage on its knowledge of climate finance readiness and the fiduciary evidence base collated from the Adaptation Fund, as the requirements for both financing entities were very similar.

A comprehensive accreditation application was prepared to enable the MoFEC (NIE) to receive accreditation status on behalf of the CRGE Facility by both the GCF and the Adaptation Fund in early 2016. This accreditation has enabled the NIE to directly apply for climate funds of up to US$60 Million that will be used to implement concrete adaptation and mitigation projects. Direct access to channel resources from the GCF is a significant step towards implementing the CRGE strategy and contributes to the Intended Nationally Determined Contribution.

CDKN's technical assistance to the Government of Ethiopia to access and channel climate finance was broadened by supporting the NIE to meet conditions set out by the GCF Secretariat, as well as supporting the Facility to develop pipeline proposals. Ethiopia’s exposure to drought and floods has been heavily influenced by the El Niño/La Niña phenomenon; in 2015 the country experienced one of the worst droughts in decades that affected the livelihoods of more than 10 million people. This gave the impetus for the Facility to give a priority assignment to CDKN to develop a proposal that would address the vulnerability of drought-affected communities in a transformative manner.

The MoFEC’s accreditation status being limited to only US$50 million and given the scale of the issue, it was strategic that the MOFEC joined hands with the UNDP – a multi-lateral implementing entity that has been accredited by the GCF for projects and programmes to the size of US$250 million. In addition, CDKN supported two priority assignments to prepare proposals that target vulnerable communities to build their adaptive capacity through climate smart agriculture and a third proposal that targets emerging vulnerable cities to grow in a sustainable manner in the future.

As climate change touches various domains, addressing it in a transformative manner required a paradigm shift in designing the proposals. It was critically important that MoFEC steered this process, as it was the central institution that has the clout with all line ministries, bi- and multi-lateral agencies as well as development partners. This was fundamentally important, as the design phase required the involvement of all stakeholders to ensure country ownership and sustainability of the project results. To this end, MoFEC assigned its experts to work with CDKN on leading the pipeline development process and deliver a comprehensive proposal.  Jointly with the UNDP, CDKN developed baseline studies, feasibility studies, environmental  and social safeguards (ESS), gender considerations, and stakeholder consultations.

CDKN was well positioned to deliver this important assignment due to the following:

  • Presence of a dedicated in country national team;
  • CDKN's supplier pool of national and international expertise and its capacity to quickly mobilise capable expertise both nationally and internationally;
  • CDKN's proven track record with the CRGE Facility in delivering assignments in the required period of time; and
  • CDKN's existing good relationships with the line ministries, bi- and multi-lateral institutions as well as development partners.

In realising this project, CDKN directly worked with six sector ministries, more than 20 national and 10 international consultants with expertise in various thematic fields as well as three development partners - DfID, UNDP and GGGI. To this end, CDKN supported the Facility in preparing three concrete pipeline proposals with a combined project value of over US$200 million. As Ethiopia is faced with addressing the aftermath of the drought, two of the three pipeline proposals focusing on building the resilience capacity of vulnerable communities have been given high priority and have been submitted to the GCF and Adaptation Fund. The proposals prepared target over 1 million highly vulnerable communities and are currently being reviewed by the independent panel of experts of the respective financing institutions. The delivery of the project was due to MoFEC’s oversight capabilities and the CRGE Facility’s efficiency in coordinating all actors involved.

CDKN has continued to support the CRGE Facility in addressing the comments from the reviewers and we are awaiting further response. In the interim, CDKN has assigned a team to support the CRGE Facility to further improve its Fiduciary standards and is working closely with CRGE focused sectors as well as regions in creating awareness on climate compatible development. CDKN’s support for the NIE to receive accreditation status has ensured that the appropriate fiduciary procedures and practices are in place, including producing and improving operational manuals and appropriate guidelines for the Facility.

CDKN has been praised for its role in supporting both the NIE and NDA to access climate finance. “CDKN's support to the Facility for the past three years has been unparalleled. The supports commenced with CDKN's advise in bringing timely information on Climate Finance and the mechanisms of direct access. To our appreciation, this information had been eventually followed up by CDKN in supporting the MoFEC receive accreditation status by both the Adaptation Fund and the GCF. This engagement was further followed up by this project in supporting us in developing pipeline proposals to be submitted to the GCF. In this project, CDKN's engagement in providing capable suppliers and also being the forefront development partner in supporting our pipeline preparation efforts is recognised. CDKN's deep engagement with the Facility for the past three years has brought about an immense learning curve to the Facility and staff on Climate Finance through the hands on support that was given and also the timely information that CDKN was providing”, Zerihun Getu – CRGE Facility Coordinator.

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