NDCs must be built into country budgets, says Moroccan Presidency of COP22

10/11/2016

Dr Nizar Baraka, former Finance Minister of Morocco and a member of the Steering Committee of the Moroccan COP22 Presidency, says that NDCs must be built into national budgets and linked to robust dashboards for reporting progress on implementation and impacts.  And they must be about more than infrastructure
Dr Nizar Baraka is President of the Economic, Social and Environmental Council of Morocco. Photo: CES
Dr Nizar Baraka is President of the Economic, Social and Environmental Council of Morocco. Photo: CES

In a wide ranging interview with NDCi.global, Dr Nizar Baraka, President of the Scientific Committee of the Moroccan Presidency of COP22,  says that climate change and the Paris Agreement to combat it means governments need to change the way they approach their budgeting process.
“In most countries, NDCs are not yet built into budgets, and for most countries they will also need significant international finance mobilisation,” he noted. “That’s why finance ministries need to be heavily involved and that’s why we propose a new approach.  So just as we have budgets that are sensitive to gender, for example, we now need to have budgets that are sensitive to climate change.  The NDCs need to be linked into those budgets and also to indicators of outcomes, with real and robust dashboards, which can be presented every year so that we can see where we are on implementation of the NDCs and on the impacts of the NDCs.  This is the aim by the end of the year of our Presidency of the COP, working with Finance Ministries and the World Bank, to formulate and introduce this new approach to making the NDCs an integral part of our economy.”

To this end, the Moroccan Presidency has invited all finance ministers present at the COP to a meeting on November 16, where it will propose a continuing process of peer exchange on climate action following the COP.

Morocco has ambitious Presidency plans

“The NDCs have to be about the right of all citizens to live in a good environment in all aspects of their lives.”

Dr Baraka, an economist and former Finance Minister of Morocco, is currently President of the Economic, Social and Environmental Council of Morocco, which gives recommendations to the government and parliament on public policies. Looking forward, to the agenda beyond the Marrakesh meetings and to ambitions for Morocco’s Presidency during 2017, he sees success centring around three key objectives.

“First, we want to see a real roadmap on how we can increase finance for adaptation, and real work on adaptation to start.  That’s essential for developing countries.  Second, it’s very important we can build capacity.  Without that, developing countries can’t attract finance. And finally, it’s critical that the NDCs embrace human development.  We have to talk about health, we have to talk about education, we have to talk about migration. It’s very important not to have the NDCs just concentrating on infrastructure projects, the NDCs have to be about the right of all citizens to live in a good environment in all aspects of their lives.”

A $1 trillion opportunity in Africa, but challenges too

Speaking to Dr Baraka on the day a new IFC report estimated a $1 trillion financing requirement in Africa for key elements of the NDCs such as renewable energy, housing and waste by 2030, NDCi.global asked what he saw as the key challenges for African nations in attracting the massive levels of private investment that would be needed to meet these goals.

“We can all see,” Dr Baraka said, “that there are great opportunities in Africa, in the green economy and in the blue economy.  At the same time we have to recognise that to realise these projects we need two things.  First, a good environment for finance, to attract these kinds of investments.  And second, to have public policies that work, and guarantees on certain risks, such as political risk. At present, we see very low leverage of public to private investment. We need to really increase that leverage by taking some of the risks out of these investments.”

Reiterating the importance of building capacity, Dr Baraka pointed out how this is key to African countries being able to create real roadmaps for their national action plans on sustainable development, and to present bankable projects to the international financial markets.  “And its not just countries alone,” said Dr Baraka.  “We also need to accelerate regional projects, where a number of countries work together to create bigger investment opportunities that will attract international capital.”

Speaking specifically about Morocco’s actions, Dr Baraka told NDCi.global that on adaptation the focus has been on food security and green agriculture, as well as a strategy to have much better integrated management of water.  On mitigation, “we have a real vision on renewable energy, with its share increasing to 20% by 2020 and over 50% by 2030. Morocco is now one of the top 5 countries in the world on investment in RE, and has been developing capacity not just on project management but also on research and development of RE solutions.”

Dr Baraka noted that Morocco now has the world’s lowest price on renewable energy, at US 3 cents per kilowatt for wind power, without any subsidy.  “This is lower than the price for any carbon-generated energy,”  Dr Baraka said, noting also that the government of Morocco phased out fossil fuel subsidies over a period of 18 months, specifically with the aim of signalling the importance of investing in renewables  and giving the private sector opportunities to compete in energy production via renewables.

“Morocco has been pushing an integrated strategy on renewables for 6 years now,” said Dr Baraka.  “This strategy comprises risk-sharing between the national energy agency on building the infrastructure, purchase guarantees so revenues are assured and an R&D capability that is spread not just through a specialist national institute but also cross many university departments.”  With Europe committed through the Paris agreement to having a 20% share of renewables, Morocco expects to become an exporter of renewable energy to its neighbour across the Mediterranean.

Knowledge sharing will be vital to success

As well as institutional capacity building for delivering the NDCs, Dr Baraka stressed the importance of knowledge sharing. “This is why we launched the ‘AAA’ initiative on adaptation of agriculture in Africa to climate change. The innovations in this initiative are not just on ‘smart agriculture’ aimed at increasing sustainable productivity for farmers but also creating revenues from agricultural ecosystem services through the storage of carbon.”   Dr Baraka revealed that 28 African countries are now working with Morocco on the initiative, which is being presented in Marrakesh.

“Micro-insurance for farmers against drought is another area where we have developed instruments that we can share more widely,”  Dr Baraka said, noting that Morocco now has some 1 million hectares covered by such insurance.

“In MENA the World Bank will be upping its spend on adaptation to 30%, and we think the other banks should do the same or more.”

Turning to public finance for the NDCs, we asked Dr Baraka how he saw the role of the development finance institutions, such as the multilateral development banks, in supporting country implementation efforts.

“I see five important roles,” he replied. “First, in financing adaptation. As you know, adaptation is hard to find finance for, because the rates of return are very low. So it’s important the DFIs increase their funding for that.  For example in MENA the World Bank will be upping its spend on adaptation to 30%, and we think the other banks should do the same or more.

Second, they need to help on metrics. On the one hand we need to be able to evaluate the risks and the costs of non-action on climate change, and on the other hand we need measures that everyone accepts on the savings from action.  That would help a lot with adaptation too, because private finance could buy economic offsets, for example.

The third important role is what I mentioned earlier, on improving leverage at the national level.  The DFIs need to help with the institutional capacity building that’s needed, and with helping countries develop policies and regulatory frameworks that will create the right environment for finance and open up markets, for example in renewables.

Fourth, they need to work with the major sources of finance like the sovereign wealth funds and the pension funds, who have huge sums under management but find it very difficult to invest because the risk for them is higher than their normal appetite. For example, a structure we are looking at is to have development banks invest in a project to get it up and running and then after maybe 5 years recycle it into the private finance sector. We have had discussions with international pension funds and they are ready to look at something like that.”

The other major role for the DFIs that Dr Baraka sees, is to help open up the capital markets in Africa, especially to green finance.  “They can help us with developing those frameworks,” he said, “so that the savings of the continent can be put to use in the green economy.”


NDCi.global comment:

In this interview with Dr Baraka, there are some themes for developing nations in common with last week’s interview with Dr Amal Lee Amin of the Inter-American Development Bank. These are:

  1. The importance of institutional capacity building
  2. Helping countries set the right policies and regulatory frameworks; and
  3. Creating roadmaps that lead to the development of bankable projects

It is fascinating to hear the overlay on this from a senior government official, of the need to build NDC implementation and finance into national budgets. It was also interesting to hear Dr Baraka stress the adaptation element of the NDCs that often gets overlooked – also his view that adaptation doesn’t just need to rely on public finance. With imagination and co-operation, there are ways of pulling in private finance to this sphere too.

Sign on to NDCi.global for further commentary about the Climate Action Peer Exchange reported above, bringing Finance Ministries together after the COP, once it has been launched

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