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EXECUTIVE SUMMARY
This report is prepared for a study on climate financing, institutional structure, and budget tracing in Ethiopia. The general objective of the study is to identify the current situation and future trends of climate financing, institutional capacity, and budget tracing in Ethiopia so as to inform Oxfam, partners and all other stakeholders in the discussion for evidence-based decisions and actions to ensure meaningful and informed participation of citizens in social and financial accountability of climate financing at both national and local levels.
The study used a mixed methods approach that involves collecting and analyzing primary and secondary data generated through a literature review and qualitative data collection tools. The study undertook a review of relevant international-, national-, and regional-level policies, laws, agreements, and conventions related to climate financing, institutional structure, and budget tracing. The document review exercise facilitated identification of the global and national climaterelated projects and programs implemented and the financial flow to the country over a range of years. In addition, the study conducted field visits to sample study areas to collect primary data using focus group discussions (FGDs), key informant interviews (KIIs), and secondary data from relevant sector ministries, bureaus, and offices. The study applied qualitative and quantitative data analysis, interpretation, and analytical report writing approaches.
The document review findings established a high level of vulnerability of Ethiopia and its population to climate change adversities. The vulnerabilities of the country emanate from its high dependence on rain-fed agriculture and natural resources, and its relatively low adaptive capacity to deal with the impacts of climate change. The high vulnerability and low adaptive capacity of the country are manifested in underdevelopment of water resources, low health service coverage, a high population growth rate, low economic development, inadequate road infrastructure, weak institutional structures, and low awareness (MoPD, 2022).
Droughts and desertification are the most destructive climate-related natural hazards in Ethiopia and have increasing intensity, frequency, and impacts. Climate models suggest that the country will experience 1.5–30C warming by 2050 (World Bank, 2021a), unless remedial actions are taken as soon as possible.
The close links between climate change and Ethiopia’s economy are reflected in the strong relationship between gross domestic product (GDP), growth rate and rainfall variability. A study by the World Bank on Economics of Adaptation to Climate Change (World Bank, 2010), projects that unless steps to build resilience are effective, climate change will reduce Ethiopia’s GDP growth by between 0.5 and 2.5 percent each year. In a worst-case scenario, in 25 years, Ethiopia will have only half the potential total GDP it could have attained and this will be because of the negative impacts of climate change.
Increasing climate resilience is thus an urgent priority for Ethiopia. The issues of climate change have been accorded high attention by the current and previous administrations during the last three decades. The recent nationwide green legacy has been going on in all the regions, zones, woredas, and kebeles of the country. The country’s climate change priorities are to reduce emissions by 68.8 percent by 2030, reforest and restore up to 15 million hectares of land, and implement diverse adaptation interventions across agriculture, water, forestry, transport, urban, health, water, sanitation, and health (WASH), health, and other sectors. The country has been implementing different climate change interventions, with strategic focus on climate change adaptation measures, followed by climate mitigation interventions.
The study reviewed and analyzed climate-related projects and programs implemented in Ethiopia, taking into account the Paris Agreement as a starting point and continuing up to the very recent years based on available data. The study relied on two databases for the purpose. It used the CRGE database from 2016–2022 and the Organization for Economic Co-operation and DevelopmentDevelopment Assistance Committee (OECD-DAC) database from 2016–2021.
According to the findings of both databases, Ethiopia has attracted funding for thousands of climate-related projects and programs since the Paris Agreement. A review of the OECD-DAC data reveals that developed countries have funded 2,409 climate change-related projects and programs in Ethiopia between 2016 and 2021. The review of the CRGE database reveals that Ethiopia has registered a total of 1,747 climaterelated projects and programs implemented between 2016 and 2022. According to the OECD-DAC database (the recipient perspective), climate-related development finance provided to Ethiopia between 2016 and 2021 amounts United States dollar (USD) 8.8 billion (Commitment–2021 column of the database), with 62.3 percent dedicated to adaptation measures, while the climate-related development finance flow to Ethiopia stands at USD 8.14 billion (Commitment–Current column of the database), with 68.3 percent allocated to adaptation measures. The OECD-DAC database calculated climate finance flow applying the Rio marker. The database excludes general budget support such as the development cooperation modality, imputed student costs, debt relief, administrative costs, development awareness, and refugees in donor countries. Consequently, the total amount of financial resources recorded and indicated in the database for climate adaptation and mitigation purposes is relatively small compared to the figures provided by the CRGE database and other related reports.
The analysis of the CRGE database reveals a total of USD 88.5 billion committed budget and disbursement of USD 70.3 billion in the country between 2016 and 2022. This includes USD 40.6 billion committed and USD 31.9 billion disbursed in grant form, USD 41.2 billion committed and USD 35.4 billion disbursed loans, USD 4.5 billion committed and USD 1.6 billion disbursed financial support for technical assistance, USD 1.7 billion committed and USD 1.3 billion disbursed through in-kind supports, and USD 474 million committed and USD 87.9 million disbursed for treasury supports. The CRGE database lacks categorization of funding into adaptation and mitigation efforts, as well as which funding has overlapping measures (both adaptation and mitigation measures).
The climate change interventions in Ethiopia have clear governance. The country has put in place an institutional structure to implement CRGE and nationally determined contribution (NDC) interventions. The financial aspect of the CRGE is overseen by the CRGE Facility in the Ministry of Finance (MoF), while the Environment, Forest and Climate Change Commission (EFCCC) is responsible for technical aspects and day-to-day administration, as well as developing guidelines and rules for CRGE implementation. The institutional arrangements reflect a cross-sector, multidisciplinary approach organized through bodies like the inter-ministerial and management committee. Most relevant line ministries have inhouse CRGE directorates, units, or bureaus that focus on climate change policy implementation. However, the climate financing governance of the country lacks transparency and accountability. It doesn’t have strong institutional capacity and arrangements or involvement of communities and civil society organizations (CSOs).
Primary data collection across all the study areas revealed the complete absence of approaches and tools used to enhance the participation of citizens and CSOs in climate financing. There is no formal mechanism for enhancing community participation, transparency, and accountability in the efforts toward climate change adaptation and mitigation interventions. The projects and programs implemented using the government budget have no formal mechanisms of involving communities, other citizens, and CSOs in the planning, implementation, monitoring and evaluation, and budget tracking and the like accountability issues. Participation of citizens and CSOs in budget tracking and tracing to enhance transparency and accountability lacked actual implementation across all the study regions, zones, and kebeles.