Grants from climate fund still elusive

Multilateral Development Banks (MDBs) as well as a UN agency have pledged financing climate-change adaptation and- mitigation projects in Bangladesh. The World Bank has made a commitment which is dedicated to the climate-change programmes while the Asian Development Bank and the United Nations Development Assistance Framework (UNDAF) pledged the supports in a manner that the funds include climate projects with other development- and poverty- reduction projects. Whatever might be the mechanism, the funds would be available in terms of loan - be it concessional or commercial.
Finance is flowing, but there is no commitment so far that the funds will be provided as grants or compensation. The worst-affected and the most vulnerable countries to climate change, particularly the least developed ones like Bangladesh, have long been asking for compensation for their losses and damages due to the events of climate change caused by the greenhouse gas (GHG) emission. They argue that the developed countries, which are mainly responsible for GHG emissions, should pay for the losses and damages. So, they demand, the developed countries should contribute enough money to the Green Climate Fund (GCF) and the money should go to the vulnerable countries as grants.
Immediately after the Paris Agreement entering into force on November 4, the global communities, mainly the covil-society organisations, started raising their voice asking for clear commitments by the developed countries to mobilising enough financial support for both adaptation and mitigation. The commitments should be in place in a manner that gives enough confidence to the developing countries - particularly the most vulnerable ones - to adopt climate-sensitive projects. The developed countries had pledged in Paris last year to mobilise US$100 billion in climate finance for developing countries by 2020. The developing countries have placed particular demand for increased adaptation finances, as well as the need for more information on the breakdown between grants and loans.
The World Bank (WB) on October 19 pledged to provide $2 billion over the next three years in fresh funding to help Bangladesh tackle and adapt to the negative impacts of climate change. The funding, however, depends on a successful replenishmentation of an aid package from the International Development Association, the World Bank's fund for the poorest countries, which should be agreed upon in December.
WB Group President Jim Yong Kim made the announcement at a press conference in Dhaka, concluding his two-day visit to Bangladesh. He said: "We must do all we can to support the government in its efforts to adapt to this growing threat." The WB will be paying very special attention to ensuring that Bangladesh becomes more resourceful to battle climate change.
"Bangladesh has a great threat from climate change and funding from many donors has not been flowing as quickly as we think it should, especially as Bangladesh tries to adapt to the climate change," noted the WB chief.
The Asian Development Bank (ADB) has also announced a higher amount of $8 billion in loan under its Country Partnership Strategy to be implemented over a period of five years from 2016 to 2020. The commitment is 60 per cent higher than the previous five-year recipe. Half the funding will be concessional and the rest will carry market-based interest rates. The new strategy aims to help boost the country's economic growth over 7 per cent. A part of the money would be spent on addressing the environmental vulnerability.
The UNDAF has pledged $ 1.2 billion for Bangladesh, which would be disbursed in next four years (2017-20), for implementation of development projects including protection and sustainable management of environment as well as combating the impacts of climate change.
However, it would be very challenging for the country to get concessional credits as those would be tied with conditions that the projects will have to be climate-smart ones. That means the development projects should consider climate change adaptation and mitigation components.
Mr. Jim Yong Kim, during his visit to Bangladesh in October, made it clear that one has to abide by environmental and social safeguards, which were agreed upon by the 189 member-countries, including Bangladesh, to get loan from the WB Group.
In a statement earlier this month, he said the Paris Agreement is the defining principle of their work. That means, ending extreme poverty and fighting climate change are inextricably linked - they cannot do one without the other.
Transparency International Bangladesh (TIB), Committee of Concerned Citizens, and Coastal Livelihood and Environmental Action Network (Clean) at a joint press conference in Dhaka, immediately after the WB's loan commitment, raised their voice against the lending plan. They said it won't be wise to take borrow and urged the government to seek compensations from the countries responsible for climate change.
TIB Executive Director Iftekharuzzaman criticised the countries responsible for climate change and donors for not meeting their pledges of compensations. He called upon the WB to help Bangladesh get compensations instead of doing 'loan business' here.
According to a WB estimate, infrastructure investments around the world would amount to over $90 trillion over the next 15 years - most of which will be in developing countries. The WB insists making sure these investments are low-carbon and climate-resilient, using the Paris Agreement to drive climate-smart policy action, like carbon pricing, to attract the right infrastructure investments.
In a statement just the day before the Paris Agreement entering into force on November 4, the WB President stressed the need for directing concessional finance to help countries make the right choice between high-carbon energy sources and renewable alternatives.  
Renewables surpassed coal last year to become largest source of installed power capacity in the world. Building on this momentum, the global lenders need to focus special attention and action on Asia, where energy demand is growing and some countries continue to look to coal as the solution. Bangladesh has also planned to develop several coal-fired power plants, including the 1320MW one at Rampal, drawing widespread criticism both at home and abroad. Bangladesh, however, plans to develop the power plants mostly depending on loans that will be more expensive than the concessional loans. The Rampal power plant is planned to be implemented with financing from the Exim Bank of India at commercial rate.
Obviously, the multilateral development banks would not provide funds as grants, but the developed countries, which are responsible for the climate change, should provide the fund (US$100 billion) to the vulnerable countries as grants to help them face the ongoing extreme weather events as well as undertake projects to mitigate the GHG emission.       
Experts stress a global financial system that is fit for purpose to factor in climate risks and opportunities. This is vital to mobilise the trillions of dollars in private capital needed to address climate change. Still, many developing countries will continue to need significant amounts of concessional finance for their climate plans. Donor countries have made a strong commitment in Paris, but not yet turned into action.
LDCs like Bangladesh are particularly vulnerable to climate change, with hazards like rising sea levels, extreme weather events, increased droughts and floods and the spread of tropical diseases threatening health and food security. But the countries lack the resources and capacity to adequately protect communities from the devastating impacts of climate change. As a result, the LDCs sought greater commitment from developed countries to provide financial support, technology and capacity building.
While most developing countries have submitted plans to limit their emissions in their climate-change action plans (Nationally Determined Contributions- NDCs) under the Paris Agreement, many have also noted the need for support to carry out their mitigation and adaptation commitments. Bangladesh is also committed to reducing GHG emissions by 5% with its own financing by 2030 and 15% subject to availability of additional external finance.
Preliminary estimates of the total amount of finance required for developing countries to implement their NDCs exceed $4 trillion. However, given that only half of developing countries provided estimated cost figures in their NDCs, the real figure is likely to be much higher.
A key issue in respect of climate finance is also how climate finance is tracked and accounted for. Much of the finance counted as climate finance in official reports, in fact, comes from Official Development Assistance (ODA), which would have been provided as development aid in any case. Much of the climate finance also comes in the form of loans rather than grants. It is important that the finance counted towards the $100b minimum target represents new and additional finance that goes beyond ODA and takes into account the needs of developing countries.
So, the financial mechanism of the Paris Agreement should ensure country ownership, facilitate direct access and provide support while prioritising the most vulnerable countries, particularly LDCs like Bangladesh, to develop quality projects.

The writer is Associate Editor of The Financial Express.  [email protected]