Why do we need climate finance?
A world that is out of balance with atmospheric carbon is a
world that must adapt.
I know what you are thinking – an increase of two degrees –
it doesn’t sound like much, right? But two degrees is the average worldwide. It
will be higher in some places, and lower in others. Dry places in Africa will get drier. Wet places in Asia will get wetter. A two degrees warmer world is
a world with a 50/50 risk that coral reefs will bleach, and fish stock will migrate. For many small
island states, this means that they
would lose most of their economic revenues from tourism and fisheries.
Mountainous countries such as Bhutan, which experience the melting of glaciers,
would experience water shortages and severe difficulties with their hydropower
production.
We live in a very uncertain world. A world that needs
investment, but in things we haven’t invested in before, or at least never as a
priority. Adapting to a world that is two degrees warmer will cost money. Green
technologies are expensive.
''We don’t know what climate finance is…but we are sure
we need a lot of it''.
So what is climate finance?
There are three prevailing rationales for providing climate finance:
• Climate
justice: Transfer of public resources from north to south to cover the costs of
dealing with the long-term impacts of Climate Change.
• UNFCCC: “New and additional financial resources” by developed
countries for the “full incremental costs” of climate change in developing ones.
• Broadly: Financing for climate change mitigation and
adaptation projects and programmes.
In 2014, global climate finance amounted to approximately
US$391 billion. It is made up of public and private money. The money is split
between financial flows to climate change adaptation and climate change mitigation
projects. To date, there is far more investment
in mitigation (related mostly to energy
and transport systems): US$361 billion
versus US$25 billion.
Investing in the climate is fast becoming a popular notion
in the private sector. Big businesses like Google and The Rockefeller
Foundation are both providing it. But it is by no means mainstreamed. Other
foundations such as the Bill and Melinda Gates Foundation have thus far stayed
out of climate finance.
IFAD partner countries tap into climate finance from
multiple sources. The Fund receives donations from a subset of member states
who contribute to the Adaptation for Smallholder Agriculture Programme (ASAP).
There is also the Global Environment Facility, Least Developed Countries Fund
(LDCF), Special Climate Change Fund (SCCF) and the Adaptation Fund. IFAD uses
this money to ''Climate-proof'' its projects, which effectively means these
projects are investing in specific activities to reduce risks from extreme
weather events, adopt environmentally
sustainable landscape and natural resource management practices, and sequester
organic carbon.
The amount of money pledged by governments has the potential
to make an incredible difference.
But it needs to be accessed, used judiciously,
and replenished.
How does this help smallholder farmers?
For IFAD, climate finance is used to analyse new and emerging risks. The
current generation of smallholder farmers are facing a level of threats and
uncertainties they’ve never experienced before. Understanding the risks that are
emerging in a changing climate is the first step towards preparing for, and adapting
to it.
Climate finance can also help to finance new and innovative
technologies to manage climate risks, which have not been widely considered in
the agricultural sector before. Such technology
can take many forms: Solar panels to power lights and heat water; biogas units,
that can turn human and animal waste into cooking gas and fertilizer; half-moon-
shaped contour bunds that help arrest erosion and turn degraded dry-lands into arable land again;
early warning systems, allowing farmers to know when a flood or monsoon is
coming; improved storage infrastructure, so that farmers can safely store their
harvests before the rains are coming. The list is long, and these are just some
of the ways that smallholders can benefit.
Perhaps the most obvious way that smallholder farmers can
benefit is through improved yields. Using techniques such as conservation
agriculture and agroforestry, farmland can be made more productive. Such
techniques protect the agricultural soils from erosion, whilst intensifying
production over a small farm area.
Take-away messages
Climate finance is out there. There's a lot of it, and the
trend is rising. After Paris's COP21, there is a worldwide commitment to combat
climate change and support developing countries in adopting green and resilient
development pathways. IFAD is ahead of the curve in making climate finance work
for smallholder farmers, but more work
is needed. ''Climate finance is most
effective when used as an incentive to improve and adjust the approach of other
public or private sector investment programmes'', said Gernot Laganda, IFAD's
Climate Adaptation Specialist. Basically, you take a rural development project
that is under development or already active, and you mould it into a climate-smart
programme through the systematic integration of climate finance.
Climate finance is a new source of financing to do development
better. Organisations such as IFAD need to adjust their business processes to
use it well.