Attracting climate finance is crucial for Ethiopia's ambitious climate goals, yet a significant gap exists in stakeholder representation, particularly from the energy sector. To effectively channel investments, Ethiopia
I had the privilege of attending the climate finance summit/workshop organized by FSD Ethiopia in Addis Ababa, Ethiopia on 19 Dec 2024 under the theme โCharting Ethiopiaโs climate resilient future through innovative and inclusive climate finance. ย
I take the moment to reflect on the workshop and on the general climate finance mantra of Ethiopia as follows. I call myself as an energy expert as opposed to climate finance or whatso ever. Yet, I would like to Triger a discussion as the two are highly related.
Despite the importance and timeliness of the topic, the workshop primarily attracted financial dignitaries, with limited representation from project owners, particularly those in the energy sector. This significant gap was further emphasized by the absence of notable representatives from the energy, agriculture, and industrial players, hindering meaningful discussions. It’s crucial to remember that climate finance cannot effectively flow into a country without a robust pipeline of bankable projects, which originate from these vital sectors.
As climate talks and negotiations ongoing on global stages, I think, Ethiopia is, somehow, on track in delivering its climate ambition.
A macro view of all the following key files indicate a significant commitment towards the global climate ambition.
In terms of actions, look no further than the green legacy initiative [more than 32 billion forest, agro-forest and ornamental seedlingsย planted since its launching in 2019], and the significant renewables capacity additions over the last few years, singularly paid from national resources.
With minimal GHG emission contribution as compared to the developed world, Ethiopiaโs GHG reduction contribution cannot be overlooked, and it has to be supported.
As stated in Ethiopiaโs updated NDC communication to UNFCC, the estimated resources required for implementing the mitigation and adaptation interventions alone costs USD 294,724,780,000 of which the government of Ethiopia is committed to financing approximately 20% as unconditional contribution, whilst 80% will be conditional contribution. This is huge, right?
In the same report, Ethiopia indicates its interest to participate in carbon markets offered through the Paris agreement based on environmental integrity and robust accounting systems in place. Leveraging its experience in participating in few carbon market initiatives such as the Kyoto protocolโs CDM, voluntary carbon standards as well as emerging bilateral approaches, it sees carbon markets as instruments to increase mitigation ambition, and calls for interested parties to work together in cooperative approaches.
In my limited research and experience, there is a lot of good intention on a policy level but that is far from enough to attract climate financing in to the domestic market.
To effectively attract and utilize climate finance, Ethiopia needs to establish a robust framework. This includes:
Clear institutional, legal and regulatory frame work, carbon certification standards [ along with MRV system] and Bankable projects that accounts emission reduction goals from sectors are truly necessary.
Off course, the country can continue to rely on consensus or voluntary based meager climate financing or do the home work in advance and unlock a bigger and more sustainable climate financing options. In my experience, no matter how much a country makes a noise, no one [ particularly private sector] dares to deploy/invest resources in to a country that has no clear legal and regulatory framework. Climate finance is not different if not more complex.
The house of peopleโs representative of FDRE has recently approved the establishment of the Green Legacy and Degraded Landscapes special fund amounting up to 1% of the annual budget. I think, this can be a useful tool to mobilize domestic resources and voluntary climate financing from partners in the short term. It is, however, limited in its scope until the country develops clear carbon market strategy, institutional and legal frameworks and carbon certification standards along with an MRV system. ย ย
Interestingly, and by the time I am drafting this piece, I read a positive story on GGGI Ethiopia LinkedIn feed announcing its partnership with the Ministry of Planning and Development of Ethiopia to develop Ethiopiaโs National Carbon Market Strategy and the Legal Framework to implement it in line with international best practices. I strongly call everyone who has an expertise to rally around this badly needed and delayed initiative.
I acknowledge that workshops and knowledge management initiatives contributed in creating the knowledge and needed partnerships but when key stakeholders are equally engaged.
The energy sector plays a vital role in Ethiopia’s climate future. Whether as an emitter [ Few Industrial use cases such as coal and diesel] or a contributor to renewable energy [the national grid driven by renewables], it must be actively involved in discussions and in the development and implementation of the carbon market strategy. It equally applies to other key sectors.
Ethiopia aims toย build a low carbon economic development, given the local and global contexts. To achieve its ambitious low-carbon development strategy and contribute to global climate goals, Ethiopia needs international support. Earning this support requires developing a robust carbon market strategy, legal framework, and standardization/MRV systems โ all in collaboration with key stakeholders.
