Water and Climate Change Adaptation Workshop Sandra Valencia

1. Financing Adaptation in the Water Sector Water and Climate Change Adaptation Workshop Sandra Valencia Sustainable Energy & Climate Change Unit March 22nd, 2011 Port of Spain, Trinidad and Tobago

2. Investments and financial flows needed for adaptation Globally: Several tens of billion $ per year will be required for adaptation (estimates between 40 to 170 billion $ globally by 2030)* • Amounts are large in absolute terms, but small relative to global GDP and investment • Existing climate change funds would need to be enhanced at a greater scale • Creating a safe future with climate change will require: • Shifts in investment patterns, • Scaling up funding, • Optimizing the allocation of existing funds. *Source: UNFCCC, Assessing the costs of adaptation to climate change; a review of the UNFCC and other recent estimates, 2009

3. Difficulties and limitations in estimating the exact costs of adaptation • Differences in adaptive capacity between countries • Most adaptation measures must be implemented not only in the context of climate change • Uncertainties associated with the methods used to calculate costs of adaptation • The existence of an adaptation “deficit ”

4. Funding for adaptation for developing countries • UNFCCC Funds: • GEF: • Enabling activities: adaptation in the context of national communications • SPA (funding as part of the GEF trust fund - projects shall have global benefit • Special Funds under the Convention: • SCCF • LDCF • Adaptation Fund under the KP • Green Climate Fund • Multilateral Funds: • Climate Investment Funds, MDBs (example of SECCI at IDB), etc. • Bilateral Funds • Other UN Conventions • Wetlands – Ramsar Convention- Wetlands for the Future Fund • a Small Grants Fund for Wetland Conservation and Wise Use • Risk transfer Mechanisms Decisions tend to identify SIDS, LDCs and Africa as most vulnerable and priority countries for finance

5. Special Climate Change Fund (SCCF)

6. Least Developed Country Fund (LDCF)

7. SCCF and LDCF – Lessons learned • Experience in designing climate change projects in relation to the development baseline. • Delivering funding through the GEF-managed SCCF and LDCF has been challenging, but has resulted in enhanced national capacity to identify climate change risks and develop projects that complement baseline development activities. • Linking climate change risks with development challenges requires experience that is often limited. • Climate change risks must be translated into the context and language of existing management challenges to have greatest resonance with stakeholders.

8. SCCF and LDCF - Lessons learned • Project proponents draw heavily on existing climate change assessments such as NAPAs and NCs for developing adaptation projects and initiatives, but there are limitations to their usefulness. • A critical role for development agencies lies in establishing relationships and brokering consultations among actors in climate risk management that may not be familiar collaborators. • Stakeholder-determined adaptation responses are not always the most appropriate middle- to longer-term adaptation strategies. • Existing adaptation deficits and maladaptation to climate risks pose major hurdles to managing climate change risks – there is a clear need for integrated approaches, and for government agencies to work collaboratively on development challenges linked by climate.

9. Adaptation Fund

10. US$ 30 billion/ year Fast-start 2010-2012 http://www.faststartfinance.org/ Source: WRI

11. Green Climate Fund Decision from Cancun Negotiations 2010

12. Possible Sources of Funding for GCF Source: Report of the Secretary-General’s High-level Advisory Group on Climate Change Financing, 2010.

13. CIF: Structure of the Funds Climate Investment Funds (US$ 6.1 Billion) Clean Technology Fund (CTF) (US 5.1 Billion) Objective: To promote investment in clean energies Strategic Climate Fund (SCF) (US 1.0 Billion) Objective: to support targeted programs aimed at providing financing to pilot new approaches at a specific climate change challenge or sectoral response. Pilot Program for Climate Resilience (PPCR) Forest Investment Program (FIP) Program for scaling-up renewable energy in low income countries (SREP)

14. PPCR – Caribbean Pilot • Activities will proceed along two tracks: • Country-based investments in highly vulnerable countries: Haiti, Jamaica and four small island states from the Organization of Eastern Caribbean States (Dominica, St. Lucia, St. Vincent and the Grenadines, and Grenada) • Region-wide activities: focused on climate monitoring, institutional strengthening, capacity building and knowledge sharing • Implementation of a regional PPCR pilot should be characterized by: • Participating countries should share a similar range of climate risks • Enable pilot activities to focus on building responses to climate threats of high relevance to region & countries • Build on existing collaboration on climate sensitive development issues and/or regional programs • Type of regional activities likely to depend on degree of ongoing regional collaboration, capacities, and degree of regional political support of an existing regional institution Haiti program Jamaica program Dominica program Regional program St. Lucia program Grenada program St. Vincent & Grenadines program

15. Bank Response and Lessons Learned SECCI: • An effective initiative to identify opportunities and channel assistance for climate mitigation and adaptation activities • Has evolved into a critical tool for: • Mainstreaming CC into Bank activities • Developing innovation and policy instruments • Scaling-up financing for public and private sector investments Need to articulate better the SECCI support to Bank’s country programming and investment instruments, and improve cross-sectoralcoordination

16. Case study: Peru- Olmos Project IDB-NCAR Partnership • Olmos project: The project aims to promote regional agricultural activity through the development of cultivable lands in the Olmos Region (Northwest Peru), by diverting water from the Huancabamba river through a tunnel across the Andes • IDB’s support: Assess the potential impacts of CC and climate variability on the Olmos project and provide the government with decision support systems to manage the project under climate uncertainties • Main activities: • Development of novel climate scenarios developed through dynamical downscaling using the WRF model, coupled to the land surface model PARFLOW-Noah • Results from climate scenarios will be used to develop a water resource planning model of the Olmos project –looking both at supply and demand in an integrated decision support planning process • Training to technical staff of local govt on a water evaluation and planning tool Project Diagram Study is currently being developed by NCAR

17. AquaFund Fund for innovative solutions in water and sanitation • Facilitates investment in: • water supply and sanitation • water resources management • solid waste management • wastewater treatment Contributes to make these services sustainable and accessible to the poor Goal: Finance 100 cities and 3000 communities by 2011 Who is eligible to receive AquaFund grants? National, sub-national, and local government entities, water and sanitation service providers (public, private, mixed-capital, cooperatives), and academic and research institutions are eligible. NGOs may be eligible at the request of governments.

18. Sources of investment and financial flows • Private sources of funding can be expected to cover a portion of the adaptation costs in several sectors. In particular in the Infrastructure sector where investment in privately own physical assets would be needed. • However, public resources are expected to play a predominant role in all adaptation sectors. • National measures will be needed to encourage/support private sector adaptation and additional sources of funding dedicated to adaptation will be needed.

19. THANK YOU! www.iadb.org/secci Sandra Valencia, svalencia@iadb.org