DISCUSSION DOCUMENT. Tracking Climate Finance in Tanzania

Transcription

1 DISCUSSION DOCUMENT Tracking Climate Finance in Tanzania Stephen Godlove 1 Prepared for the Climate Change Expert Group (CCXG) Global Forum on the New UNFCCC Market Mechanism and Tracking Climate Finance March 212, Paris 1 Ministry of Finance, Tanzania 2 The CCXG Secretariat would like to thank the EC for funding for this event, as well as Australia, EC, Finland, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland, UK and US for their direct funding of the CCXG in 211/12. The CCXG Secretariat gratefully acknowledges inkind support from the UK, Denmark, OECD and IEA.

2 Contents 1. Introduction Brief description of the existing system of tracking climate change finance in Tanzania The existing definitions of climate change adaptation and mitigation Methodology Climate change planned and actual expenditure by line Ministry Analysis of Climate Change Expenditure as a Proportion of the Government Budget An Overview of the Resources of Government Climate Change Funding An Overview of the Information Available on International Sources of Climate Change Funding Application of the OECD Creditor Reporting System Policy Markers on Climate Change Mitigation and Adaptation in Tanzania s Government Budget Comparison with Existing Information in the Creditor Reporting System Database to Domestic Tracking Conclusion and recommendations... 11

3 1. Introduction Increasing intensity of impacts of climate change on almost all sectors of the economy in Tanzania has raised concerns from both the general public and within the Government. For instance, current weather variability such as major droughts of 25/26 and major floods in 27/28 caused massive losses in terms of loss of lives, destruction of infrastructure and loss of properties. Impacts include temperature rises, increased stress on ecosystems which is compounded by other related stressors such as decline in crop yields and deaths of livestock, change in landuse and water scarcity due to drying of water sources. Tanzania has been facing recurrent power shortages as most of the electricity is produced from hydropower plants; power outages have caused massive losses in the economy in terms of fall in industrial production and high costs of doing business in the country. Farming is the sector most hit by the impacts of climate change in Tanzania as manifested in poor perennial harvests. The impacts have therefore become real in all sectors of the economy with disproportional burden on the poor and vulnerable people. It is predicted that impacts of climate change in the agriculture sector, where about 8 percent of the population earn their income, will reduce the nation s total GDP by.61 percent by 23. Therefore, if Tanzania's farmers and farming practices do not adapt, the impacts of climate change will be extreme and they will ripple through the country's entire economy as so many other sectors are dependent on agriculture. Apart from agriculture, in recent years, climate change has caused serious power shortages due to lower hydroelectric production leading to poor industrial production; water shortages; and floods which have led to destruction of infrastructure and properties. If impacts of climate change are not addressed properly, it will become increasingly challenging to address critical issues such as food security. It has therefore become apparent that measures for mitigation and adaptation of climate change have to be taken on board when designing and implementing any growth or poverty reduction programme or project. The Government has taken a positive step by indicating climate change related interventions in the National Strategy for Growth and Poverty Reduction. The Strategy emphasizes integration, harmonization and coordination of environmentally sustainable policies and strategies for growth in key growth sectors, including climate change adaptation and mitigation. This shows the importance the Government is now attaching to adaptation and mitigation measures in its development and poverty reduction programmes and projects. Measures that the Government has taken so far to address impacts of climate change include setting up a legal and institutional framework for environmental management through the Environmental Management Act of 24. The Act provides for establishment of climate change units at individual Ministries. The Environmental Working Group, chaired by Vice President s Office (VPO) Environment, is the government led forum for dialogue with development partners on environmental and climate related issues. VPO is the National Climate Change Focal Point (NCCFP) and designated National Authority. The Government has established National Climate Change Steering Committee to provide guidance to National Climate Change focal persons and ensure coordinated actions and participation within various sectors and institutions. A National implementing entity is chaired by the Ministry of Finance and is responsible for managing adaptation funds. Climate Change adaptation has been mainstreamed in the National Sectoral Policies of Tanzania. Therefore, most Ministries are implementing the Environmental Management Act. Funds for implementing the Act and some of the adaptation and mitigation programmes and projects are channeled through the Government budget. This study highlights funds that have been allocated to environment, mitigation and adaptation programmes and projects for the past three fiscal years (29/21 211/212). The study describes the existing system for tracking climate change finance in Tanzania, applies the Rio Markers to the national budget, compares this with existing information in the CRS, and discusses any challenges met during the process and suggests any improvements for the definitions or methodology. However, the amount of resources required to address impacts of climate change is huge. Therefore increased predictable flows of resources as well as harmonization and alignment of efforts are important for addressing impacts of climate change. This study explores both domestic and external funds that have been directed to climate change in Tanzania and systems that are used to manage and track expenditures at the national level. The international financial flows to Tanzania are also analysed to further understanding of the nature of flows and expenditures of the resources.

4 2. Brief description of the existing system of tracking climate change finance in Tanzania 2.1. The existing definitions of climate change adaptation and mitigation There are currently no clear definitions of climate change adaptation and mitigation that are adopted by the Government. Interventions presented in the Government budget are broadly defined and there are no specific codes in the budget for climate change related expenditures Methodology To establish budget allocation to finance climate change adaptation and mitigation interventions as well as other environmental related expenditures, the Government budget books for the past three fiscal years were analysed. It is worth noting that the Government budget is presented in four volumes i.e. Volume I Revenue book; Volume II Other Charges and Wages; Volume III Regional and Districts budget; and Volume IV Development Expenditure book. The budget for each Ministry and region as presented in Volume IV was analyzed. Results of the analysis show that all funds for environment, climate change adaptation and mitigation are presented in Volume IV. This indicates that the Government considers expenditure on climate change adaptation and mitigation as development expenditure. So Volume II of the budget was not analyzed as it contains only other charges and wages.

5 3. Climate change planned and actual expenditure by line Ministry The following Table 1 below presents planned and actual expenditure for Ministries that are implementing climate change adaptation and mitigation programmes and projects as well as implementation of the Environmental Management Act. Ministry Project title 29/21* 21/211** 211/212*** Climate Change Adoptation Project 335,8 1,587,414 Montreal Project 75,1 212,81 Ministry of Lands, Housing and Human Settlements Table 1: Ministerial Allocation of Expenditure for Climate Change Adaptation and Mitigation programmes and projects President's Office Environment Ministry of Agriculture and Food Security Ministry of Education and Vocational Training Ministry of Energy and Minerals Ministry of Water and Irrigation Ministry of Home Affairs Ministry of Defence and National Service Ministry of Transport OZone Depleting Substance Project 278,81 Stockhome Conversion Integrating Environment Project into National Strategy for Growth and Reduction of Poverty Lake Tanganyika Environment Management Project Lake Victoria Environment Management Project Climatic Change Adaptation and Mitigation in Tanzania Support to Environment Improvement 271,2 223,81 456,25 23, 571,79 1,31, ,688 1,76,844 2,17,63 5, 5, 5, 95,62 355,5 451,633 6,5, 4,66,211 44,326 1,495,4 Climate Change Adaptation and 68,65 1,45,51 68,65 18, 2,596 New and Renewable Energies 1,24,588 3,971,482 5,365,6 71,4 45, 97, , , 521, 97,995 44,327 97,996 97,996 Total 2,124,598 15,46,718 19,595,855 Note: * Actual expenditure; ** Approved budget; ***Es timated budget

6 Table 1 above presents actual expenditure for environmental and climate change adaptation and mitigation interventions for the fiscal year 29/21 as well as approved budget for the interventions that was approved by the Parliament in 21/211 fiscal year. The budget for fiscal year 211/212 shows estimates that were presented in the Parliament for approval. It is worth noting that the approved budget is sometimes less than budget that is presented in the Parliament for approval. The development budget is often a victim of budget cuts when Government faces financing challenges, specifically for domestic financing components of the programmes and projects. As the National Climate Change Focal Point (NCCFP) and designated National Authority, the Vice President s Office Environment has been implementing most of the projects. Other Ministries implement mostly activities related to the operationalization of the. Three Ministries, namely the Vice President s Office Environment, Ministry of Education and Vocational Training and Ministry of Energy and Minerals are managing the implementation of interventions for climate change mitigation and adaptation Analysis of Climate Change Expenditure as a Proportion of the Government Budget The Government budget has over the recent years been increasing to finance the Government s growth and poverty reduction programmes and initiatives. A remarkable increase has been in the budgets for providing social services, especially health and education, as well as infrastructure development. The total budget for fiscal year 21/211 and 211/212 recorded an increase of 21.8% and 16.5%, respectively. The development budget has increased at a faster rate (35.2% in 21/211 and 28.9% in 211/212) relative to the increase in recurrent expenditure (16.2% in 21/211 and 1.4% in 211/212). As pointed out above, the Government has been channelling funds for financing climate change adaptation and mitigation interventions through its development budget. Chart 1: Trend of Government Budget (TZS million) 15,, 1,, 5,, 29/21 21/ /212 Recurrent budget Development budget Total Budget During the past 3 fiscal years under analysis, funds allocated to finance interventions related to climate change mitigation and adaptation are considerably low as a percentage of both total and development government budget. As indicated in Table 2 below, for the past 3 years, funds allocated to climate change as a percentage of total and development government budget averaged.91% and.265%, respectively.

7 Table 2: Funds for Climate Change Intervention; total and Development Government Budgets (TZS millions) 29/21 21/ /212 Total budget 9,532,685 11,69,557 13,524,895 Development expenditure 2,825,431 3,819,51 4,924,68 Budget for CC Mitigation and adoptation 2,12 14,397 17,127 Budget for CC as % of total budget.21%.124%.127% Budget for CC as % of development budget.71%.377%.348% Given the level of breakdown available in the Government books, it has not been possible to draw a relevant balance between mitigation and adaptation. This would require further analysis of each programme and project activity to determine the balance An Overview of the Resources of Government Climate Change Funding An overview of the resources of Government climate change funding through its budget indicates that except during the fiscal year 29/21, most resources for the interventions come from external sources. As indicated in the Table below, in the year 21/211 and 211/12, more than 78% of the resources are provided by development partners.

8 Table 3: Sources of Financing for Climate Change Interventions Ministry President's Office Env ironment Ministry of Agriculture and Food Security 29/21 21/ /212 Project Title Domestic resources Foreign resources Domestic resources Foreign resources Domestic resources Foreign resources Climate Change Adoptation Project 4, 295,8 92,14 1,495,4 Montreal Project 15, 6,1 1, 1,495,4 OZone Depleting Substance Project 4, 238,81 1,495,4 Stockhome Conv ersion Project 35, 236,2 4, 1,495,4 Integrating Env ironment into National Strategy for Grow th and Reduction of Pov erty 1, 5, 46,25 3, 1,495,4 Lake Tangany ika Project 198,8 17, 41,79 19, 1,495,4 Act 458,688 4,14 1,36,83 2, 1,495,4 Lake Victoria Env ironment Management Project 5, 5, 5, 1,495,4 Ministry of Education and Vocational Training Ministry of Energy and Minerals Ministry of Lands, Housing and Human Settlements Ministry of Water and Irrigation Ministry of Home Affairs Climatic Change Adaptation 6,5, and Mitigation in Tanzania 1,495,4 Support to Env ironment Improv ement 44,326 1,495,4 Climate Change Adaptation 68,65 354,25 and Mitigation 1,495,4 Act 68,65 18, 1,495,4 New and Renew able Energies 818,765 25,823 1,75, 2,221,482 2,3, 1,495,4 Act Act Act ,495, ,495, ,495,4 Ministry of Defence and National Serv ice Ministry of Transport Act Act Total % of domestic and foreign resources ,495, ,495,4 1,941, ,279 3,24,1 11,847,217 3,885,26 26,917,2 83.4% 16.6% 21.3% 78.7% 12.6% 87.4%

9 4. An Overview of the Information Available on International Sources of Climate Change Funding Within its scope, the study could not find a source of available information on international private sources of climate change funding such as foreign direct investment. This would require further sectoral analysis as well as surveys and discussion with relevant institutions such as the Tanzania Investment Centre which has the mandate to work with direct foreign investments in Tanzania. The lack of a National Climate Change Strategy which could have included a framework and system for tracking flows from private international resources for financing climate change adaptation and mitigation projects and programmes could also explain the lack of a coordinated system for tracking private funds Application of the OECD Creditor Reporting System Policy Markers on Climate Change Mitigation and Adaptation in Tanzania s Government Budget Definition of Climate Change Mitigation and Adaptation In this study, definitions for mitigation and mitigation of climate change are adopted from the International Panel on Climate Change (IPCC) definitions as follows: Mitigation is defined as an anthropogenic intervention to reduce the sources or enhance the sinks of greenhouse gases; whereas adaptation is defined as an adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderate harm or exploits beneficial opportunities. While mitigation tackles the causes of climate change, adaptation tackles the effects of the phenomenon. The potential to adjust in order to minimize negative impact and maximize any benefits from changes in climate is known as adaptive capacity. A successful adaptation can reduce vulnerability by building on and strengthening existing coping strategies. Information available in the Tanzania s Government annual budget books is not comprehensive enough to distinguish between activities related to adaptive interventions from climate change mitigation interventions as climate change is only vaguely described in the budget documents, without distinguishing mitigation and adaptation. This would require further analysis of the respective Ministries Medium Term Expenditure Frameworks (MTEF) and project activities in light of mitigation and adaptation definitions. Intuitively from project titles, however, given the available information, the study marks interventions as a principal (2) or significant; (1) objective related to climate change; or are unrelated to climate change (). Table 4 below indicates objectives of activities in relation to climate change related interventions.

10 Table 4: Objectives of Interventions Project title Ministry principal (2) or significant (1) or unrelated () objective related to climate change 29/21* 21/ /212 Climate Change Adaptation and Mitigation Ministry of Energy and Minerals 2 68,65 1,45,51 Climate Change Adoptation Project President's Office Env ironment 2 335,8 1,587,414 Climatic Change Adaptation and Mitigation Ministry of Education and in Tanzania Vocational Training 2 6,5, 4,66,211 Montreal Project President's Office Env ironment 2 75,1 212,81 OZone Depleting Substance Project President's Office Env ironment 2 278,81 Stockhome Conv ersion Project President's Office Env ironment 2 271,2 223,81 subtotal 68,65 7,46,91 8,134,755 President's Office Env ironment 1 458,688 1,76,844 2,17,63 Ministry of Agriculture and Food Security 1 95,62 355,5 451,633 Ministry of Energy and Minerals 1 68,65 18, 2,596 Ministry of Lands, Housing and Human Settlements 1 71,4 45, 97,996 Ministry of Water and Irrigation 1 199, , 521, Ministry of Home Affairs 1 97,995 Ministry of Defence and National Serv ice 1 44,327 97,996 Ministry of Transport 1 97,996 Integrating Env ironment into National Strategy for Grow th and Reduction of 456,25 23, Pov erty President's Office Env ironment 1 Lake Tangany ika Env ironment Management Project President's Office Env ironment 1 571,79 1,31,245 Lake Victoria Ministry of Agriculture and Food Project Security 1 5, 5, 5, New and Renew able Energies Ministry of Energy and Minerals 1 1,24,588 3,971,482 5,365,6 Ministry of Education and Support to Env ironment Improv ement Vocational Training 1 44,326 97,996 subtotal 2,56,533 7,945,88 1,63,696

11 Chart 2: Number of Interventions with Principal versus Significant Objectives /21 21/ /212 Principal objective Significant objective Chart 2 above indicates that for fiscal year 29/21 to 211/212, the number of projects with significant objectives is higher than projects with principal objectives and a number of the later has increased from 9 interventions in 29/21 to 15 interventions in 211/212. This could be due to increased number of Ministries that have incorporated implementation of in their MTEFs. The Act provides for a legal and institutional framework for sustainable management of environment; an outline of principles for management, impact and risk assessments, prevention and control of pollution, waste management, environmental quality standards, public participation, compliance and enforcement; a basis for implementation of international instruments on environment; the implementation of the National Environment Policy; the continued existence of the National Environment Management Council; and the establishment of the National Environmental Trust Fund and other related matters. As indicated in Chart 3 below, the percentage of budget for activities with principal objectives has been increasing over the past three years recording remarkable increase from 3% in 29/21 to 48% of total expenditure on climate change related interventions. This is partly explained by the higher costs associated with climate change mitigation and adaptation activities as well as the increased number of specific projects executing the activities as indicated in Chart 2. Chart 3: % of expenditure allocated to activities with significant and principal objectives 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 97% 48% 52% 55% 45% 3% 29/21 21/ /212 principal objective significant objective

12 4.2. Comparison with Existing Information in the Creditor Reporting System Database to Domestic Tracking The OECD s Creditor Reporting System (CRS) for year 29 and 21 was analyzed to identify climate related activities. The summary of the activities are presented in Annex 1. The number of climate change related activities as presented in the CRS is considerably higher than projects/activities that are presented in the Government budget. For instance, whereas more than 5 interventions are recorded in the CRS in 21, a total of 18 related interventions are recorded in the Government budget. This means a big chunk of activities are not captured in the Government budget system. The CRS provide relatively more details as it describe each intervention and indicate purpose and sector in which intervention is implemented. 5. Conclusion and recommendations Impacts of climate change have become increasingly intense on most sectors of the economy in Tanzania. Therefore, to ensure sustainable economic growth and poverty reduction, the Government and Development Partners have increased their focus on interventions for mitigating and adapting to the impacts. A number of related activities, as recorded in the Government budget, have increased over the last three years. However, given the level of detail in the Government books, it is not possible to identify and separate specific interventions for mitigation and adaptation of the impacts. Identification of adaptation and mitigation interventions require further analysis of each of the project activities in light of given mitigation and adaptation definitions. Currently there is no comprehensive framework and system to track domestic and foreign funds that are spent on the related activities. The OECD CRS provides more comprehensive information on interventions that are financed through external sources. However, information on private foreign direct investments related to climate change is not captured in either the Government budget or the CRS. Therefore, comprehensive tracking of climate change finance in Tanzania requires a system that can track domestic, foreign and private direct foreign investment flows of funds. Going forward, design of specific codes for climate change related expenditures would facilitate their tracking. The OECD CRS is a very useful tool for tracking foreign resources and therefore an important source of information when complemented with domestic and private direct foreign investment funds.

13 Annex 1: Climate Change Impact Interventions in Tanzania (Extracted from OECD's Creditor Reporting System) Commitment Disbursed YEAR Description (USD) (USD) Project title 29 Energy Research Climate Lack of Resilience in African Smallholder Farming: Enhancing Adaptiv e Capacity of 29 Local Communities to Pressures of Climate Change Lack of resilience in African smallholder farming: Enhancing adaptiv e capacity of local communities to pressures of climate change Ex ploring UrbanRural Interdependence and the Impacts of Climate Change in 29 Tanzania and Malaw i Ex ploring Urbanrural Interdependence and the Impacts of Climate Change in Tanzania and Malaw i Managing Risk, Reducing Vulnerability and Enhancing Productiv ity Under a 29 Changing Climate Managing risk, reducing v ulnerability and enhancing productivity under a changing climate Managing Risk, Reducing Vulnerability and Enhancing Productiv ity Under a 29 Changing Climate 7.44 Managing risk, reducing v ulnerability and enhancing productivity under a changing climate 29 Community Based Adaptation in Africa (CBAA) Community Based Adaptation in Africa (CBAA) SubSaharan African Cities: A Fiv ecity Netw ork to Pioneer Climate Adaptation 29 Through Participatory Research and Local Action SubSaharan African Cities: A Fiv ecity Netw ork to Pioneer Climate Adaptation through Participatory 3.45 Research and Local Action Canadian Phy sicians For Aid And Relief Farmers First Program / 29 Canadian Phy sicians for Aid And Relief Programme Les Fermiers D'abord Canadian Phy sicians for Aid and Relief Farmers First Program / Canadian Phy sicians for 3.97 Aid and Relief Programme les fermiers d'abord 2 29 Adv erse Impacts Of Climate Change Adv erse Impacts of Climate Change GCCA Global Climate Change Alliance: Allocation From Sw edish Contribution to GCCA Global Climate Change Alliance: Allocation 29 Tanzania from Swedish contribution to Tanzania 29 SELIOUSNIASSA Wildlife Protection Corridor SeliousNiassa Wildlife Protection Corridor 29 Culture and Climate Performance Multisectoral 29 Green Resources Natural resources 29 Consultancy on PAF Indicators for Climate Change Climate 29 Appraisal of NGO REDD Pilot Project Proposals Climate 29 Preparation for REDD Show casing Climate 29 Consultancy on Env ironment and Climate Change Multisectoral 29 Facilitation for REDD Strategy Climate 29 REDD Pilot Project by Mpingo Conserv ation Project (MCP) Climate 29 REDD Pilot Project By TATEDO Climate 29 REDD Pilot Project by Africa Wildlife Foundation Climate 29 REDD Pilot Project by Jane Goodall Institute Climate 29 TFCG Community REDD Programme Climate 29 Climate Change Impacts, Adaptation And Mitigation in Tanzania (CCIAM) Climate 29 Support to Donor Coordination in Tanzania on Climate Change Climate 29 Consultancies for the Climate and Forest Programme Multisectoral 29 Climate Change in Tanzania Booklet Climate 29 Climate Change Accountable Grant Climate 21 Disaster Prev ention and Preparedness 3.8 Climate 21 Disaster Prev ention and Preparedness 7.39 Climate 21 Climate Change in Tanzania Climate Change in Tanzania 21 Improv ement of Mateorological Disaster Responsiv ess for African Countries Climate 21 Climate Change and Disaster Prev ention Climate 21 Disaster Prediction and Warning System Climate 21 Electricité&Eau Propre À Bushangaro3ème Tranche Energy 21 Green Resources AsSao Hill Sawhill Cdm 83.5 Climate 21 Green Resources PDD For Biomass Waste Methane Mitigation 9.99 Climate 21 Study District Lev el Carbon Partnership in Tanzania Climate 21 Preparations for Dev elopment of National Carbon Monitoring Centre Climate 21 Monitoring REDD PreProject Climate 21 Facilitate Organization of REDD SADC Workshop In Tanzania Climate 21 WCS REDD Readiness In Southw est Tanzania Climate 21 REDD Pilot Project by WWF Climate 21 REDD Pilot Project by Care International in Zanzibar Climate 21 Climate Change Adaptation 5.2 Climate 21 Consultancy on PAF Indicators for Climate Change 1.4 Climate 21 Preparation for REDD Show casing Climate 21 Dev elopment of PDDS for CDM Projects Climate 21 Consultancy on Env ironment and Climate Change 1.81 Env ironment 21 REDD Pilot Project by TATEDO Climate 21 REDD Pilot Project by Mpingo Conserv ation Project (MCP) Climate 21 REDD Pilot Project by Africa Wildlife Foundation Wildlife 21 Facilitation for REDD Strategy Climate 21 TFCG Community REDD Programme Climate 21 Climate Change Impacts, Adaptation and Mitigation in Tanzania (CCIAM) Climate