Pakistan’s Climate Finance Opportunity

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Pakistan’s Climate Finance Opportunity

Kashmala Kakakhel outlines how Pakistan is faring in the world of international climate finance.

Pakistan’s Climate Finance Opportunity

A boy carries a pot on his head as he moves through floodwaters at Camp Koruna Akbar in the Pura area of Nowshera District, northwestern Pakistan, August 4, 2015.

Credit: REUTERS/Fayaz Aziz

Pakistan is often referred to as the seventh most vulnerable country to climate change and is in need of innovative technologies and international climate finance to fight impending disasters. In this interview, Kashmala Kakakhel, ‎an economist and independent expert on climate finance, speaks to The Diplomat about the difficulties Pakistan faces in extracting and managing climate finance and how climate change must not be treated as just a threat, but should also be seen as an opportunity to urge Pakistan to find new climate solutions that will improve the way its people live.

What are the latest international developments on the global climate finance front?

To understand the latest developments, we have to go back in time a little.

The issue of climate change has been formally discussed through a multilateral stream under the United Nations over three decades. Negotiations center around who is responsible, and who needs to pay whom. After years of efforts, in 2009, when all the heads of state were to meet for the annual meeting in Copenhagen, there were huge expectations — that a breakthrough on climate change might be in the offing. Unfortunately, those negotiations fell through, but the silver lining was a commitment of $100 billion from developed countries to pay to developing countries to address the impacts of climate change. Details of how this will happen are still being discussed eight years later. One more consequence of this commitment was the Paris Agreement on Climate Change in 2015 — this confirmed political commitment to the cause, and the establishment of the Green Climate Fund (GCF), through which climate finance is being channeled, it further increased confidence in the process going beyond mere negotiations. There is actual money on the table now that developing countries can access.

As of now, the GCF has approximately $10 billion, of which it has committed $2.2 billion to 43 projects globally, which collectively aim to increase climate resilience for 125 million people. With two-thirds of this funding going to Africa and the Asia-Pacific, 41 percent of these initiatives are for mitigating or reducing activities that cause climate change, 27 percent for adapting to the impacts of climate change, and 32 percent address both.

What climate finance projects in Pakistan currently involved in?

It is important to understand the breakdown here. Pakistan, in recent years, has faced extreme flooding (and droughts), and as a result of this has set up institutions such as Rescue 1122 or the National Disaster Management Authority (NDMA), and its provincial counterparts, to respond to extreme disasters. However, adapting to climate change requires more than just emergency response, it needs systematic long-term planning and changing standard ways of business in order to minimize the impact of future disasters. On that front, there are provincial efforts such as the Billion Tree Tsunami Afforestation initiative by the Government of Khyber Pakhtunkhwa (KP). The provincial government has invested $123 million so far, and in fact, it has been able to fulfil its 300,000-hectare commitment to the Bonn Challenge — a global effort which aims to restore 150 million hectares of deforested land by 2020. This is a good example of how domestically, Pakistan can further improve its capacities beyond just emergency response. This project is domestic and has had no international climate financing.

International finance for climate change initiatives coming into Pakistan hasn’t yet been significant. Apart from basic funding for capacity building and other such initiatives, so far, Pakistan received a little over $5 million from a global fund, the Adaptation Fund, for disaster risk reduction activities against glacial outbursts in the Gilgit-Baltistan region. The Adaptation Fund project was a few years ago, now the same project has been upscaled and funding of $38 million approved by the GCF.

We also have some projects with the Global Environmental Facility (GEF) — they vet, approve and disburse funds. Pakistan’s Ministry of Climate Change has a few GEF projects detailed on their website; I believe this funding is also being used for adaptation. In my opinion, our focus on adaptation finance is unfortunate.

Why do you think it’s unfortunate that most of Pakistan’s focus in on adaptation finance? Where would you want to focus?

This is unfortunate because while adaptation finance is very important, we mustn’t miss out on opportunities that mitigation finance can bring to developing countries such as Pakistan. Pakistan is one of the most vulnerable countries to the impacts of climate change, and it needs resources to adapt to climate change; but we must also remember that the global narrative on climate change is morphing into a narrative of opportunities, and we need to pay very close attention to these developments. Despite the United States pulling out of the Paris Agreement, others such as the EU and China are not rolling back their plans, but forging forward to deliver on their climate commitments.

Pakistan needs to play an active role in shaping how the $100 billion will be spent in the coming years. For starters, as an energy-starved country, it should use climate finance as a leverage to diversify its energy mix, move towards renewable energy solutions, bring in the private sector, and develop new business models that will increase employment opportunities in the process and contribute to the economy.

As a developing country, we do need to ensure that we are safe from floods and other natural disasters, but at the same time we need to also focus our climate finance on mitigation and make use of our wind corridors, potential hydro energy, and solar solutions.

Is it difficult to approach the GCF for financing?

While the GCF is committed to urgently provide resources to communities and countries impacted by climate change, it is also concerned about the transparency and the proper use of those resources. It does not entertain any proposals directly from any country or organization, unless they are put forward to the Fund through an “entity” that has already been accredited by the GCF. It works through these accredited entities to channel its resources to projects and programs.

There are two types of accredited entities: Multilateral Implementing Entities (MIE) such as the World Bank, UNDP, Asian Development Bank or Deutsche Bank; and National Implementing Entities (NIE), also called direct access entities. They can be government departments, private banks, or non-profits. The problem is that often the standards of developing country organizations are not on par with GCF standards, it takes a long time to meet the stringent accreditation standards of the Fund. So far 54 such entities have been accredited. None from Pakistan as yet. It will be very beneficial for Pakistan to have its own direct access entities, because they will then work with the government to design different projects on the provincial level.

The Fund itself is newly established and is developing its governance structures and systems, while learning from its shortfalls to improve the process. Due to its own teething issues, countries find it frustrating to access the GCF for financing.

Why do each of these projects take so long to receive funding?

Accredited entities have their own established procedures in place. Aligning those with the GCF, and the Fund’s with the entity, usually take time. Now that the GCF has signed mutual agreements with 28 of the 54 entities, money should start moving to approved projects soon.

India had one national entity accredited in 2015, and Bangladesh has also shortlisted and submitted several national organizations for accreditation to the GCF. How far is Pakistan from having NIEs?

The Ministry of Climate Change in Pakistan has set a national process through which it puts forward national/direct access entities to be accredited to the GCF. Following consensus, a number of organizations have been cleared, and currently undergoing the accreditation process with the GCF. We hope to hear good news soon.

Let’s assume that Pakistan has its direct access entities set up, do you think Pakistan is ready to manage international climate funds in a transparent manner?

The GCF has rigorous and stringent reporting methodologies. Firstly, accreditation of entities happens once the GCF is fully satisfied with the fiduciary, social and environmental standards of these organizations, so the entities approved from Pakistan will already have track record of transparent management of finances. Secondly, in addition to the specific internal monitoring systems of the GCF, the Paris Agreement has also committed to establishing a transparency framework by 2018, which will assist in monitoring funding flows from developed to developing countries. To access international finance, transparency systems will automatically be built into the process in the near future, and like other countries, Pakistan will also adopt its domestic systems to align with international monitoring and reporting requirements for internationally funded projects.

As far as the question of Pakistan’s readiness to manage funds is concerned, we already have credible autonomous bodies such as the Public Procurement Regulatory Authority (PPRA), endowed with the responsibility of prescribing regulations and procedures for public procurements by public sector organizations to improve governance, management, transparency, accountability and quality of public procurement of goods, works and services.  Such bodies can easily be engaged for international climate finance as well.

Let’s now talk about the potential of corruption on an even larger scale. There is much talk about double counting of climate finance since its often confused with international aid. Are there safeguards in place to ensure this doesn’t happen?

This issue has been of international concern. Since there is no standard methodology for calculating climate finance, each country, or group concludes its own amount, leading to extremely incongruous results. Developing countries have constantly been pushing for climate finance to be “new and additional” and not repackaging of international development assistance. As a form of success for developing countries, the Paris Agreement has agreed to develop a uniform accounting methodology by 2018, which will be used as a potential safeguard against double counting.

That sounds promising. What is not as promising is that even if Pakistan meets the targets it stated in the Nationally Determined Contributions (NDC) it won’t be meeting the target of keeping global warming below 2 degrees? Is Pakistan lacking in ambition?

Not just Pakistan’s commitments, but the aggregate NDCs of each and every country, globally, only take us to about two-third of the emission reductions required to reach the below 2-degree goal. The gap has been recognized, and for this purpose, as part of the multilateral negotiation process under the UN for climate change, a global stocktaking will take place end of 2018, where countries will be urged to increase their ambitions as set in their NDCs.

What we are lacking in is that we are not treating climate finance as an opportunity. We have systems such as the National and Provincial Disaster Management Authority, and our military to take care of natural disasters, they are focusing on adaptation already. This means that international climate finance should and can focus on bringing innovative solutions to the country, you use that as an opportunity to create more jobs in the country, encouraging more research, and export this research and ideas. Once we develop a business model for mitigation solutions in Pakistan, with the help of climate finance, we will even have our private sector latching on.

Let’s hope the optimism to address climate change continues, and countries continue to support each other to address this global challenge.