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Climate finance in Bangladesh: A critical review

  • Published at 05:44 pm January 2nd, 2021

The overwhelming share of climate finance is simply official development assistance repackaged

The concept of climate finance (CF) originated as an obligation of the developed countries under the UN Framework Convention on Climate Change (UNFCCC). There are competing interpretations over CF due to a lack of conceptual clarity in provisions of the UNFCCC. Further, overlapping and fragmented sources, delivery channels, governance processes, and operational challenges stand in the way of defining what ‘climate finance’ is. Also, the difficulty in differentiating between adaptation and development complicates the problem. The focus of this article is to explore the status of CF in Bangladesh. So, we begin with its status internationally. 

At the Conference of Parties (COP15) to the UNFCCC, developed countries pledged $30 billion as fast-start finance (FSF) for the period 2010-12 and as long-term finance, pledged to mobilize $100 billion a year by 2020 to support developing countries. However, the claim by developed countries of delivering about $34 billion by end of 2012 as FSF was severely contested by developing countries.

What is more disquieting is that the overwhelming share of CF (about 76-80%) is official development assistance (ODA) repackaged, according to Oxfam report (2012). Therefore, the overall status of CF delivered to developing countries shows a gap in orders of magnitude compared to the estimated needs. Yet, Parties to the Convention unanimously agreed that CF and development assistance are qualitatively different, and this is reflected in the UNFCCC provisions, such as Article 4.3 (new and additional, adequate, and predictable funding) and Article 4.4, stipulating that industrial countries “shall also assist …. in meeting the costs of adaptation” in the particularly vulnerable countries. The Paris Agreement also obligates the developed countries to provide CF support (Article 9.1) under the Convention principles.  

As the CF could not yet be defined because of opposition by many developed countries, the latest figure of mobilizations shows for an amount of about $79 billion in the OECD report of 2020. However, Oxfam again contests this figure and they come out with a figure of max $22 billion, out of which about 25% goes for adaptation. Of this adaptation money, again less than 20% goes to the particularly vulnerable countries, which number about 100 countries including the LDCs, small island developing states and African countries. Let us now turn to Bangladesh, a country regarded as `ground zero’ of vulnerability.

Bangladesh’s vulnerability and climate effort 

The vulnerability of Bangladesh emanates mainly for its geographical locality, as the lowest riparian country of the Bay of Bengal. Despite Bangladesh’s highly dense population and resource constraints to cope with climate adversities, questions persist whether the country receives its fair share of CF compared to other least developed countries (LDCs).

Over the past few decades, Bangladesh has integrated climate change into its national legal and policy framework, placing a stronger emphasis on conservation of environment, biodiversity and protection of people. The government initiated many policies and acts, such as Climate Change Trust Fund Act (2010), Bangladesh Climate Change Strategy and Action Plan (BCCSAP), Country Investment Plan for Environment, Forestry and Climate Change (CIP-EFCC), Prospective Plan (2021-41) and the 8th Five Year Plan (2021-25).

The BCCTF allocated $447 million (Tk38,000 million) from FY 2009-10 to FY 2019-20 according to a CPD study (2020). The Government of Bangladesh has also set a cumulative budget allocation for 25 ministries/divisions accounting for 56.69%, of which 7.52% is climate-relevant. Based on priority, Bangladesh is planning for the effective utilization and need-based allocation of the proposed climate budget of $2,850 million (Tk242,260 million) for FY 2020-21 – this contrasts with last year’s allocation of 7.81% according to a CPD study. 

“Of this adaptation money, again less than 20% goes to the particularly vulnerable countries, which number about 100 countries including the LDCs, small island developing states and African countries”

The effective use of this budget will require a concerted effort of the government, non-government, private sector, financial and other institutes to monitor the climate budget expenditure, thereby enabling to exercise overall ownership of the concerned in the climate investment process. To that, the ‘Climate Financing for Sustainable Development: Budget Report 2020-21’ calls for the integration of 25 ministries through a programmatic approach in interventions across key thematic areas and cross-cutting issues. The latter may include social and environmental safeguarding, knowledge management, and gender mainstreaming. The Sustainable Development Goals (SDGs) have now made it possible to integrate CF quite easily into the national planning strategies. However, to meet the needs of the vulnerable and end-mile population sustainably, innovative climate-resilient, context-specific, and nature-based solutions should be promoted that enable communities to be resilient beyond the lifetime of project interventions.

International Support for Bangladesh  

At present, several multilateral and bilateral sources of funds have been operating globally. Bangladesh has accessed some significant bilateral channels of climate funding including DFID, USAID, SIDA, and GIZ. In addition, key international funding sources for Bangladesh include the Green Climate Fund (GCF), Climate Investment Funds (CIF), Global Environment Facility (GEF), among others. In 2012 and 2014, Bangladesh received CF from both bilateral and multilateral agencies. However, CF inflow rather decreased between 2015 and 2016, as data from the Aid Information Management System (AIMS), Economic Relations Division (ERD) show between 2010 and 2016.

Among the multilateral sources of funding, Adaptation Fund, for the first time, approved a grant amounting to $10 million for vulnerable small islands and riverine charland islands in Bangladesh to enhance the resilience of its vulnerable communities. Further, the allocation for the Nationally Determined Contribution (NDC) for FY 2020-21 will be $2,728.5 million (Tk231,921.2 million) to ensure the country’s long-term resilience against climate change.

“Over the past few decades, Bangladesh has integrated climate change into its national legal and policy framework, placing a stronger emphasis on conservation of environment, biodiversity and protection of people”

The Green Climate Fund (GCF), which is known as one of the main vehicles for channeling CF, and Bangladesh till now received Tk351.1 million as a grant from GCF for five projects, that include Climate Resilient Infrastructure Mainstreaming, Enhancing Adaptive Capacities of Coastal Communities, Especially Women, to Cope with Climate Change Induced Salinity, Global Clean Cooking Programme- Bangladesh and Extended Community Climate Change Project-Flood (ECCP-Flood). 

Of this, the grant is $256.5 million which was approved in November 2020, as the first concessional credit line for Bangladesh and the first private sector financing from GCF to Bangladesh to promote private sector investment through large-scale adoption of energy-efficient technologies in textile and garments industries. However, Bangladesh as an LDC should further raise its voice to have CF as grants, especially for adaptation, as promised at Copenhagen in 2009 by the developed countries. For that, the country should continue to remain well-equipped to meet the standards set by the GCF and other adaptation fund windows.

The Pilot Program for Climate Resilience (PPCR) has approved 11 projects in Bangladesh so far with a total fund of $176.66 million of funding and $1049.01 million co-financing. PPCR’s role in improving climate-resilient agriculture and food security, reliability of freshwater supply, sanitation and infrastructure, and enhancing the resilience of coastal communities in Bangladesh has been effective in creating other co-benefits. On the other hand, the Global Environment Facility (GEF) which has funded 43 projects in Bangladesh, has provided a grant total of $160 million, which generated $1,037 million as additional co-financing from other sources including from Bangladesh.

Bangladesh incurs roughly 2.5% loss of GDP each year due to natural disasters. In addition, human development progress sets back through loss of life and livelihood, with an annual average number of 13,200 deaths and millions affected. However, the country receives only about 20% of CF.  Currently, it spends about $3 billion a year to address climate change. This is only one-fifth of the amount the World Bank estimates the country would need as adaptation finance by 2050. 

Despite contextual realities, compounded by Covid-19 emergencies and the influx of 1.2 million Rohingya refugees in Bangladesh, the country has continued to make efforts to strengthen its adaptive capacity. Bangladesh’s Presidency of the Climate Vulnerability Forum (CVF) and Vulnerable Twenty (V-20) group of finance ministers during the 2020-2022 term under the leadership of Prime Minister Sheikh Hasina, gives it a unique opportunity to share its climate experience globally – also foster South-South collaboration, knowledge sharing, and capacity building. So, the two years will remain critical for Bangladesh to champion towards enhanced adaptation and mitigation efforts at this critical time of ‘Planetary Emergency’. 

Sirazoom Munira works in the climate change program of UNDP Bangladesh.

Prof Dr Saleemul Huq is the Director of the International Centre for Climate Change and Development (ICCCAD).

Prof Mizan R Khan is the Deputy Director of the International Centre for Climate Change and Development (ICCCAD).