Towards a Framework for National Climate Finance Governance in Africa

Introduction

The provision of climate finance to support urgently needed adaptation and mitigation action, has entered a watershed period. There is broad consensus about both the urgency and the need to ensure that the supply of climate finance is adequate to meet demand, the needs of developing countries and the imperative for transformation, but also that it will be effectively and efficiently used.

The environment on both the demand and the supply side is very dynamic. On the supply side there is complexity, with a plethora of new and not-so-new funds and financing instruments although largely the utilised sources of funding have remained the same, and regrettably few, in number. On the demand side there is, concomitantly, uncertainty. Many developing countries struggle to navigate the administrative complexity on the supply side and to cope with the political uncertainty that surrounds the question of whether there is going to be sufficient climate finance to meet the needs of developing countries.

The history of climate finance is relatively short. There are no ready-made prescriptions. Decision makers are having to think on their feet, as they craft an appropriate response to the challenge. This discussion paper seeks to contribute to the thinking that is going on globally in relation to a number of key issues, including: how best to organize the channelling of climate finance to recipient countries; and its effective and efficient absorption and implementation at national level during the crucial period ahead, when new funding instruments such as the Green Climate Fund (GCF) are readied to come on stream.

As a new literature on climate finance emerges, it is possible to identify a number of key elements of the new landscape that are likely to be decisive, both internationally and domestically. These elements include familiar questions around effectiveness, monitoring and evaluation, as well as other vital questions such as how much of the public investment in climate finance should be used to attract private sector participation in climate action.

But arguably the first and foremost consideration must be the governance of climate finance. Because there is a broad consensus in favour of so-called ‘direct access’ to climate finance, much attention is being paid to the term ‘country readiness’ – a disputed and/or not clearly understood new term that appears in the GCF’s governing instrument, but which is probably concerned with questions such as: Are the institutions at national level (and, conceivably, provincial and local/municipal level) properly equipped to receive and deploy climate finance?

In turn, therefore, it is inevitable that there will be an appropriate focus on the architecture that will govern climate finance, both on the supply and the demand side, within a country context. Without assurance of strict fiduciary standards being fulfilled, and sufficient transparency and accountability, it is hard to imagine that those developed countries that are being urged to fill the coffers of the climate funds will be enthusiastic about doing so. In a sense, the future of climate finance depends heavily on getting the governance of climate finance flows in recipient countries ‘right'.