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CLIMATE FINANCE CHAOS: An action agenda to untangle the Philippine climate finance mess

Below is a policy brief produced by iCSC with the support of Oxfam. It was released in 07 July 2010 at the Sulo Riviera Hotel during the launch of the report “Financing Adaptation or Funding Chaos? Adaptation, Finance and Philippine Climate Policy.” It was a very good event, received most warmly by civil society organizations that attended the occasion, together with government officials and members of the donor country.

A Finance Agenda for Urgent Climate Action in the Philippines

Climate Action Policy Brief by the Institute for Climate and Sustainable Cities (iCSC)

As the world reels from the devastating impacts of climate change, financing sources for climate resilient development are proliferating at a rate and scale that, from initial appearances, may all but surpass traditional flows of official development assistance. Unfortunately, the scale of resources pledged thus far is far from the scale of financing required to meet the needs of developing countries like the Philippines. Worse, most of the pledges remain just that — pledges virtually written on water, many recycled from previously announced commitments.

Among developing countries, mitigation efforts alone are estimated to cost $140 to $175 billion a year over the next 20 years, with associated financing needs of around $265 to $565 billion. Adaptation investments are projected to average $30 to $100 billion a year over the period 2010 to 2050. Distressingly, only $2 billion of the total $19 billion pledged funds thus far  have been deposited into dedicated climate funds, while only $700 million has been disbursed. *

The failure of Copenhagen to deliver a fair, ambitious and binding deal on urgent mitigation and financing issues, and the threat of another dismal, if not outright collapse, of international climate talks leaves vulnerable developing countries like the Philippines with little choice but to take urgent domestic action. The Philippines must make adaptation to climate change the national imperative. It must ensure that domestic policy measures are consistent with such a position.

Currently, governance chaos reigns over the administration of climate finance that has entered the Philippines, along with funds projected or programmed to come from abroad. As Table 01 will demonstrate, this has skewed domestic climate action towards the wrong priorities. More international climate finance has gone to mitigation efforts instead of adaptation activities. Worse, it appears most of the resources allocated for adaptation programs and projects have come in the form of loans. This is contrary to the position championed by the Philippines abroad, which calls for climate finance to be channeled neither as aid nor charity but as compensatory funding in context and by design.

Action based on immediate, near-term and long-term strategies is critical. Measures must address challlenges related to selecting regions and communities in the country which require urgent adaptation support based on mechanisms that ensure effective fund delivery, fiduciary and transparency requirements that build public trust and which ensure participation by civil society organizations and congressional oversight.

Corruption-proof direct access by local government units and vulnerable communities — direct access that targets the most vulnerable, such as women in agriculture — to climate finance abroad and within the country is critical.

Coordinated action plans and strategies of national and local government units is essential. The role of government institutions, especially those operating under climate change-specific mandates, must be rationalized urgently if domestic financing streams are to be mobilized, consolidated and spent efficiently to raise the adaptive capacity of vulnerable communities. The Philippines must also take urgent steps to directly access untied finance from the Adaptation Fund, a non-donor-driven institution under the UN with funding modalities that, unlike other financial agencies, allow developing countries to avoid having to go through inefficient, bureaucractic and conditionality-heavy multilateral financing from institutions such as the World Bank.

RECOMMENDATIONS:

1.    Establish adaptation to climate change as the national priority. Ensure this position is reflected and mainstreamed in national and local policy measures, documents, processes and programmes.

2.    Ensure the Philippine government continues to champion the Adaptation Fund. The Philippines must call for all new adaptation finance contributions and pledges to be channeled towards the AF, and for AF principles, governance and direct access modality to become the benchmark for future agreed adaptation funds.

3.    Access the AF by helping the Philippine government designate a National Implementing Entity (NIE) fully compliant with fiduciary standards established by the AF Board and accepted transparency and accountability mechanisms. Craft the country proposal for the AF through a participatory, multi-stakeholder and multi-level process.

4.    Establish a National Survival Fund that will democratize access to and create predictable long-term finance streams for urgent adaptation and disaster risk reduction projects and programs benefiting the most vulnerable, particularly women in agriculture.

5.    Call for the immediate, comprehensive review of all climate finance that has entered country coffers. Monitor and, where necessary, block proposed climate finance inconsistent with the international negotiating position of the Philippines, particularly adaptation finance extended as loans or with conditionalities.

6.    Call for the immediate revision of the Implementing Rules and Regulations of the Climate Change Act to ensure the Philippine Climate Change Commission (CCC) exercises more effective, capacity-building, coordinative leadership over the country’s climate action agenda. The CCC must:

  • Act as the Philippine climate knowledge hub and lead capacity-builder, empowering local government units (LGUs) to craft long-term, climate-resilient development agendas.
  • Act as the main climate finance information center, monitoring the amount, mode and use of climate finance accessed from abroad and locally.
  • Exercise leadership by assuming the role of LGU and national department climate action rating agency. This will accelerate the interface between vulnerability-mapping efforts and the mobilization of domestic and foreign adaptation finance, based on registers of vulnerability and local government leadership indicators. Ratings will also greatly help point mitigation-driven finance to LGUs seeking to shift to low carbon pathways.

* World Bank, World Development Report 2010: Development and Climate Change, November 2009; ODI.

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