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This is an Oxfam International report. The affiliates who have contributed to it are Oxfam GB and
Oxfam Hong Kong.

First Published by Oxfam International in March 2011


Oxfam International 2011

Oxfam International is a confederation of fourteen organizations working together in more than


100 countries to find lasting solutions to poverty and injustice: Oxfam America, Oxfam Australia,
Oxfam-in-Belgium, Oxfam Canada, Oxfam France-Agir ici, Oxfam Germany, Oxfam GB, Oxfam Hong
Kong, Intermon Oxfam, Oxfam Ireland, Oxfam New Zealand, Oxfam Novib, Oxfam Quebec and Oxfam
India.

Copies of this report and more information are available at www.oxfam.org and at

Country Programme Office, Nepal


Jawalakhel-20, Lalitpur
GPO Box 2500, Kathmandu
Tel: +977-1-5530574/ 5542881
Fax: +977-1-5523197
E-mail: oxnepal@oxfam.org.uk

Lead Authors: Katie Wiseman and Raju Pandit Chhetri

Contributors: Michel Anglade, Anthony Scott Faiia, Binay Dhital and Prabin Man Singh,
Shanta Upadhyaya and all individuals interviewed

Support: Environment and Public Health Organisation (ENPHO)

Design and Printing: Graphic Plus Printers

Photographs: Oxfam GB Nepal archive


TABLE OF CONTENTS

TABLE OF CONTENTS I

ACRONYMS III

METHODOLOGY AND LIMITATIONS IV

ACKNOWLEDGEMENTS IV

SUMMARY 1
Outline and purpose of this paper 1
The problem and the need: the big picture 1
Action: the progress, the weaknesses and the challenges 2
Recommendations 4

1. CONTEXT 7
1.1 Poverty, development and aid effectiveness 7
Box 1: Findings from national adaptive capacity... 8
1.2 Politics and the State 9
1.3 Climate change vulnerability 10
1.4 Land Access and Distribution 11

2. EXISTING AND EMERGING NATIONAL SITUATION


ON CLIMATE CHANGE ADAPTATION 12
2.1 International position on climate change 12
2.2 Overview of national structure and programmes 12
Box 2: Findings from National Adaptive Capacity 2010 14
2.3 Technical Assistance Projects and Capacity Strengthening 14

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL I


2.4 Government Policy and Coordination Mechanisms 15
2.5 National Adaptation Programme of Action (NAPA) 15
Table 1: Prioritised Projects under NAPA 17
Figure 1: Framework for NAPA Implementation 18
Box 3: NAPA and National Planning 19
2.6 Strategic/Pilot Programme for Climate .......... 19
Box 4: PPCR Component and Corresponding NAPA ..... 21
Table 2: NAPA and PPCR: overview of key features 23
2.7 Adaptation Fund (AF) 24
2.8 Sources outside the UNFCCC through donor ...... 24
2.8.1 Local Adaptation Programme/Plan of Action (LAPA) 25
Figure 2: NAPA+ and LAPA - a framework for ...... 26
Box 5: Case Study: piloting LAPAs in Nepal from ...... 26
2.9 Civil Society Programmes and Coordination 27
Table 3: Main Climate Change programmes and ...... 29

3. CONCLUSIONS 32

4. RECOMMENDATIONS 36
Figure 3: International climate funding architecture and 38
Figure 4: Proposed Country Level Outline for National 41

REFERENCES 43

II MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


ACRONYMS
ADB Asian Development Bank
AEPC Alternative Energy Promotion Centre
CDM Clean Development Mechanism
CER Certified Emission Reduction
COP Conference of the Parties
DANIDA Danish International Development Agency
DDC District Development Committee
DFID UK Department for International Development
DHM Department of Hydrology and Meteorology
DP Development Partner
EFA Education for All
EPC Environment Protection Council
EU European Union
FAO Food and Agriculture Organisation
GEF Global Environment Facility
GDP Gross Domestic Product
GNI Gross National Income
GoN Government of Nepal
LAPA Local Adaptation Programme of Action
LDC Least Developed Country
LDCF Least Developed Countries Fund
MCCICC Multi-Stakeholder Climate Change Initiatives Coordination Committee
MDB Multilateral Development Bank
MoAC Ministry of Agriculture and Cooperatives
MoE Ministry of Environment
MoFSC Ministry of Forests and Soil Conservation
MP Member of Parliament
MPI Multi-dimensional Poverty Index
MPPW Ministry of Physical Planning and Works
NAPA National Adaptation Programme of Action
NIE National Implementing Entity
NPC National Planning Commission
ODA Official Development Assistance
OECD-DAC Organisation of Economic Co-operation and Development Assistance Committee
PPCR Pilot Program for Climate Resilience
PIU Project Implementation Unit
SPCR Strategic Programme for Climate Resilience
SWAp Sector Wide Approach
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNFCCC United Nations Framework Convention on Climate Change
VDC Village Development Committee
WB World Bank

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL III
METHODOLOGY AND LIMITATIONS
The research was conducted from October to December 2010. The enquiry was framed by
a global research framework with guiding questions that were adapted for the Nepal context.
A detailed literature review was conducted and quantitative data collated from secondary
sources. This was supplemented by a series of semi-structured interviews with key people
in Kathmandu and the UK with some follow up over email and further interviews. The
draft research was discussed and refined following an Oxfam workshops in Bangkok in
Kathmandu on governance of climate finance.

Detailed qualitative analysis from primary sources was limited by peoples availability and
disclosure of information.

ACKNOWLEDGEMENTS
The authors would like to express gratitude to those interviewed for their time and insights.
Support and input was received from Michel Anglade in the Oxfam GB South Asia regional
centre in New Delhi (India), from Anthony Scott Faiia Country Director and from Prabin
Man Singh in the Oxfam in Nepal office. We also thank Environment and Public Health
Organisation (ENPHO) for the support.

IV MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


SUMMARY

OUTLINE AND PURPOSE OF THIS PAPER section draws together some conclusions and
the final section presents a set of recommen-
This paper hopes to provide the reader with dations to key players together with diagrams
a clear overview of the current situation on the financing architecture and a proposed
regarding funding for climate adaptation model for Nepal.
programming and policy in Nepal. It is linked
to an Oxfam global policy brief and series of THE PROBLEM AND THE NEED: THE BIG PICTURE
country researches on the governance of climate
change funding in developing countries. The Despite notable gains in human
research is designed to inform Oxfams advocacy development, Nepal remains one of the poorest
on how climate change adaptation funding countries in the world. Patterns of inequality
should be managed in developing countries so persist. The majority of the population are
that it fulfils the goals and needs of the engaged in subsistence agriculture yet land
marginalised and most vulnerable communities, access and distribution are extremely unequal
with a particular focus on smallholder women and large parts of the country are uncultivable.
farmers. Poverty and exclusion were significant drivers
of the decade-long conflict. The countrys diverse
This paper focuses chiefly at the national topography, fragile ecosystem and poverty make
level, though is cognisant of the great bearing it extremely vulnerable to the negative impacts
that decision making and action at the of climate change.
international level has, particularly on Least
Developed Countries (LDCs). The first section Women in Nepal tend to have lower status
describes the context looking at poverty, aid and heavier workloads. As a consequence Nepal
and development factors, the current political is one of the few countries in the world where
situation and climate change vulnerability. The women have a lower life expectancy than men.
second section details the national situation on With increasing numbers of men migrating to
climate change adaptation policy and find work, the responsibility for feeding the
programming, highlighting key areas of family falls to women. Although women make
progress, weakness and challenges. The third up the majority of the agricultural labour force

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 1


they are largely unpaid family workers, with The Prime Minister established and heads
limited access to land. Poor communities, often the Climate Change Council, tasked with
living in areas most at risk to floods and high-level policy and strategic oversight. The
landslides, are already feeling the impacts of Council has convened a number of times
climate change. A recent Climate Change since its inception.
Vulnerability Index calculating vulnerability
to impacts of climate change over the next 30 The Council has overseen the drafting of a
years places Nepal 4th out of 170 countries.1 Climate Change Policy, which has been
recently approved by the cabinet.
Nepal is poised at a stage of state transfor-
mation. The shift toward a more participatory National Adaptation Programme of Action
and decentralised form of governance and the (NAPA) has been completed with donors
writing of a new constitution, offer considerable supplementing Global Environment Facility
opportunity. Yet, given more than seven months (GEF) funding to ensure a focus on
of leadership vacuum and political stalemate knowledge management, planning and
which has only recently shifted with the election stakeholder coordination. The process has
of a new Prime Minister progress is extremely been credited with being widely consultative,
challenging; impacting significantly on donor incorporating strong gender analysis and
trust and the delivery of aid. This is in a country paying attention to the structures needed to
where foreign aid makes up half the national ensure resources reach down to the
development budget. community level. A multi-stakeholder
coordination forum, web-based information
ACTION: THE PROGRESS, THE WEAKNESSES AND portal and a knowledge management centre
THE CHALLENGES have been established.
The urgent need for focused, coordinated
No funding has been committed as yet for
action to support poor communities to adapt to
identified NAPA projects but recent
climate change is immense and has clearly been
indications are that LDCF will have $10
recognised by government and key decision
12 million for Nepal to be split between
makers at the highest level. This can be seen
UNDP and UNEP and PPCR will fund some
by the considerable progress that has been
NAPA identified initiatives.
made over the past eighteen months to two
years on critical areas of climate and
The draft proposal for the Pilot Program for
development policy and planning. Against the
Climate Resilience (PPCR), managed by the
backdrop of such huge political domestic
Asian Development Bank (ADB) and World
uncertainty and slow progress on funding and
Bank, has been tentatively approved with a
governance at the global level, this is no small
focus on four components. In an effort not
feat. Significant national level programming is
to duplicate what had already been
in early stages of development. With the many
established under NAPA, PPCR used the
positive steps that have been taken, there are
same thematic working groups for planning
still a number of key weaknesses and challenges
and analysis.
ahead. These are highlighted below.
There are several active civil society forums
KEY AREAS OF PROGRESS
that are increasingly given seats at the table
The Ministry of Environment (MoE) has in planning and policy processes. Media
been put forward by government as the clear attention is increasing. The Climate Change
focal point on climate change. A new division Council and main coordination forum
has been created to lead on climate policy established under NAPA include a broad
and programming. range of stakeholders at the national level,
including from civil society organisations.
1Climate Change Vulnerability Index, Maplecroft, http://www.maplecroft.com/about/news/ccvi.html

2 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


The National Planning Commission has change division for example does not have
developed a climate resilient national responsibility for PPCR.
development plan, through a technical
assistance programme supported by the Over the past two years there have been a
Asian Development Bank (ADB). series of donor-funded capacity building
initiatives to the Ministry of Environment
14 donors signed a compact in 2009 to and National Planning Commission, largely
improve coordination and alignment with in the form of technical assistance through
government. international and national consultants.
Sustaining these initiatives beyond the
A Local Adaptation Programme of Action outputs of consultants and institutionalising
(LAPA) is being developed as part of NAPA, capacity within the ministry remains a
focused on mainstreaming adaptation at the challenge.
local level and strengthening local and mid
level institutions. The programme is in its Qualified technical personnel and scientific
pilot phase, funded by the UK Department knowledge on climate change and risk
for International Development (DFID), management are lacking across government.
outside of government. Climate risks are not sufficiently considered
and integrated into planning in key sectors.
KEY AREAS OF WEAKNESS AND CHALLENGES AHEAD Although the NAPA process went some way
to addressing this through sector technical
Although set to increase considerably the working groups and vulnerability
level of financial resources for climate assessments, the gap is still wide. This is
adaptation is still tremendously inadequate core to some of the components of PPCR and
to meet current needs. current ADB technical assistance.

Lack of faith in the public financial The donor compact brought some level of
management system means that large coordination but funding is still largely
amounts of aid are still off budget and in unharmonised and unaligned to country
the form of stand-alone projects and vertical systems. There is a current danger of further
funding. This has largely been the same for fragmentation.
climate funding, which is fragmented and
donor driven. There is no mechanism to pool The NAPA plan was completed in September
funding for climate work, although the but there is no funding flowing as yet for
government is currently working on options projects.
for this. National systems are not being
sufficiently strengthened. Establishing a The Government of Nepal (GoN) expected
clear picture on climate funding and related PPCR to be used as the financing vehicle to
programmes currently, from both donors deliver NAPA priorities and there has been
and government, is difficult. a struggle against the rigours of PPCR for
it not to be a separate, parallel process.
An effective institutional framework does PPCR has faced criticism in country from
not currently exist. many quarters over its lack of flexibility and
headquarter-driven priorities, over which
MoE is understaffed and under resourced. there is limited national control. The struggle
The set up of a new division to lead on climate to not duplicate NAPAs efforts did result in
change was not accompanied by the the use of the same technical working groups
necessary resources and personnel. and it now looks certain that PPCR
Additionally there is lack of clarity on components will come in to fund some NAPA
responsibilities of key personnel within the initiatives.
divisions of the ministry. The new climate

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 3


The issue of loans as a vehicle for climate into implementation and translate into
financing is highly contentious with sharply action.
divided opinions both for and against. A
clear majority of local civil society Adaptation actions that are happening on
organisations are firmly opposed to loans. the ground are not being documented and
The governments own recently issued there is insufficient capacity to share lessons
climate change policy clearly speaks of widely. Learning from LAPA piloting should
climate justice and the principle of Polluter help to plug some of this gap but resources
Pays. It will be a challenge for the and capacity are still lacking. Although there
government to forge a broader consensus on are active civil society forums that are
this issue taking into account the views of increasingly being invited into planning
civil society and Nepals position as a leading spaces, coordination is a challenge and their
LDC affected by climate change. lack of legal status limits legitimacy and the
possibility for more effective policy dialogue.
LDCF funding for NAPA projects, if and
when it comes, will be split between two UN Despite an existing committee under the
agencies. This will mean extra work for GoN interim legislature and an informal MP
and MoE to coordinate. network, current political priorities and weak
legislative infrastructure mean that oversight
Tension is developing on the funding and is lacking and that wider ownership and
management structure for LAPA. The pilot understanding outside key executive
programme is contracted out to a UK positions has not been sufficiently built.
consultancy firm and implemented by NGOs
in Nepal. DFID views LAPA as its funding RECOMMENDATIONS
vehicle for NAPA, considering a fiduciary
risk assessment concluded its institutional GOVERNMENT OF NEPAL
funding could not currently go through MoE.
However MoE recently expressed Immediate areas to address regarding the
dissatisfaction at the probability that LAPA organisational structure of Ministry of
funding will not come through government. Environment and climate change activities
Ensuring that MoE and other key Decide exact mandate of MoE, its role and
government institutions remain central to functions and how it will interlink with other
the development and implementation of ministries, agencies and departments on
LAPA is critical. climate change. Communicate this within
government.
NAPA and the new Climate Change policy
state that 80% of funds will be spent at the Map existing resources with current and
village/municipal level. Ensuring the delivery planned programmes to clearly assess the
of large amounts of resources to the local capacity gap in terms of financial and human
level remains a great challenge. Although resources and what would be need to fill
there have been improvements in financial this.
management at the local level there are
many bottlenecks at the district level and Fill current vacant positions within MoE.
fiduciary and procurement systems are weak.
Furthering Climate Change Planning and
Existing funding mechanisms are not Policy
designed to deliver resources that prioritise Develop a long -term climate change strategic
the most vulnerable. Gender and plan to underpin the climate change policy.
vulnerability considerations do not seem to
move sufficiently beyond analysis to be built Review current relevant legislation and

4 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


consider where this can be strengthened. Conduct information sessions in parliament
Consider drafting of new legislation to better on key climate change issues, programmes
enforce areas of the climate change policy. and policy.

Development of an institutional structure DONORS


and national funding entity
Take greater leadership in developing and Capacity Building Initiatives
agreeing a detailed roadmap with milestones Jointly commission an external independent
for expediting the establishment of a national review of current capacity building initiatives
climate finance entity that garners sufficient to assess areas of progress and weakness
trust, is transparent and robust and aligned and make recommendations going forward
closely with national systems. Look to better
aid effectiveness models where these do exist Re-examine the current fragmented
and draw lessons for climate funding. approach to capacity building and work
jointly on pooling assistance, using the
Put forward immediate interim options for recently approved Climate Change Policy as
channelling funding through another entity an overarching framework from which to
outside of government that MoE can have a develop a convergent long term strategy for
role in terms of administration and oversight. strengthening climate change capacity within
the MoE and other agencies.
In the establishment of an institutional
framework develop clear principles and Support further strengthening of the
strategies around promotion of gender and governments financial and procurement
social equity, considering how these mechanisms with suitable monitoring to
principles can be reflected within the track improvements.
governance structure as well as distribution
of resources, thematic areas and Finance and Coordination
programming. Build these into any Develop one pooled multi-donor trust fund
monitoring and evaluation framework. as an interim mechanism that can begin to
foster alignment and harmonisation. As an
Build in windows for on-budget (for public interim measure agree options with GoN for
sector projects) and off-budget (for civil channelling this through an entity outside
society projects). of government.

Ensure these processes incorporate broad Clearly communicate minimum conditions


consultation and progress towards for channeling current funding through a
developing the institutional framework is national level climate fund.
communicated widely to stakeholders.
Ensure experiences and constraints of
Develop detailed terms of reference and clear institutional practices as they play out at a
arrangements for decision making bodies national level are fed back to headquarters.
and coordination fora under government.
Clarify how the MCCICC, Climate Change Donors should ensure that climate change
Council, Climate Change Knowledge financing is in addition to and does not
Management Centre and planned Climate displace any existing ODA commitments.
Change Centre will interact and coordinate.
CIVIL SOCIETY
Oversight and Accountability
Revive the Natural Resources and Formalise and improve coordination,
Environment Committee with dedicated broaden coalitions and build evidence
resources, ensuring cross party expertise. Prioritise joint working to improve knowledge

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 5


management and evidence building on Finance Model and Governance
adaptation efforts. Push for consultation and participation
in decision making with government and
Agree on common policy objectives and donors on a national funding entity and
prioritise joint actions across networks and governance structure. Ensure positions are
advocate on these with policy makers. clear and informed and have buy-in of
members.
Consider organising a regular forum to bring
networks together. Advocate for dedicated resources in climate
adaptation projects for gathering evidence
Consider legalising networks and putting and sharing information.
dedicated resources behind a national
secretariat. Seek funding and support outside Advocate for need for sufficient oversight
of Nepal. and accountability mechanisms to be
built into the institutional structure and a
Reach out to make linkages with clear role and legitimacy for civil society.
parliamentarians, educational and research
institutions and media organisations. Advocate for civil society resource envelop
and a clear decision making structure on
Ensure country experiences on finance, resource allocations.
governance, policy and programming is
feeding into and informing international
forums.

6 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


1
CONTEXT
1.1 POVERTY, DEVELOPMENT AND AID heavier workloads. Discrimination against
EFFECTIVENESS women remains in all areas of life principally
related to access and control over resources
Nepal has a per capita GDP of US$ 427, especially property rights and inaccessibility
placing it 157 of 164 countries worldwide2. 31% to services like health and education. Although
of the population falls below the poverty line legal amendments have improved rights for
according to the national poverty line. 55% of women, many discriminatory provisions remain
the population lives on less than $1.25 per day and actual practices are closely linked to marital
and the new Multi-dimensional Poverty Index status, such as inheritance and land rights.
(MPI) measures 65% of the population as multi-
dimensionally poor3. Nepals economy is marked by negative trade
balance and dependence on foreign aid. Total
There has been significant progress in human net official development assistance provided
development. A child born today can expect to by members of the Organisation of Economic
live 25 years longer than in 19704. While human Co-operation and Development Assistance
development has improved over the past decade Committee (OECD-DAC) amounted to US$
and the proportion of Nepalis living in poverty 716,310,000 in 2008 6 , amounting to
has lowered, through increase in remittances, approximately 34% of central government
higher wages and urbanisation, patterns of expense; approximately 6% of Gross National
inequity largely remain the same and gaps Income (GNI). There has been a significant
between the advantaged and disadvantaged decline in Overseas Development Assistance
have widened or remained constant5. Poverty (ODA) between 2000 and 2008 and with the
and exclusion were significant drivers of the political instability there has been a significant
decade-long conflict. Nepal is a country of huge reduction in aid commitments this year.
ethnic diversity with the 2001 census Proportionate funding to the health, education
enumerating 103 distinct castes and ethnic and social sectors has increased substantially
groups. Social indicators are heavily influenced with a resulting decline in agriculture, forestry,
by gender, caste and where people live. and other sectors7.

Nepal is one of the few countries in the world There are approximately 30 donors working
where women have a lower life expectancy than in Nepal. The UK is the largest OECD bilateral
men. Women tend to have lower status and donor, with USAID, Japan, Norway, Denmark

2Ethiopia $345/159th; Cambodia $677/142nd. Data of 2009, World Development Indicators database, World Bank
3http://www.ophi.org.uk/policy/multidimensional-povery-index/, Multidimensional Poverty Index, Oxford Poverty and Human Development Initiative, University
of Oxford.
42010 Human Development Report: Asian countries lead development progress over 40 years, UNDP
5Nepal Human Development Report 2009; State Transformation and Human Development, UNDP
6World Bank http://data.worldbank.org/indicator/DT.ODA.ALLD.CD?cid=GPD_54
7Joint Evaluation of the Implementation of the Paris Declaration, Phase II Nepal Country Evaluation Ministry of Finance, Nepal, 2010

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 7


and Germany providing around half the UK to the government is limited. There is limited
volume. India provides substantial aid, use of programme-based and sector wide
including in-kind, China is also a donor, but approaches, the most significant of which are
accurate figures are not known for either. ADB sector programmes in education and health
has been the largest multilateral but is now (see Box 1. below)9. Trust in the public financial
being overtaken by the World Bank 8 . management system amongst donors is low.
Indicative of this is the fact that Nepal has
The long-running conflict severely disrupted dropped to 146 out of 178 countries on
Nepals development agenda and planning cycle. Transparency Internationals Corruption
Following the end of the conflict, Nepal has Perception Index in 2010.
been able to take stronger leadership over its
national aid effectiveness agenda. There have Following the Accra Agenda for Action, the
been some successes in strengthening country Foreign Aid Policy from 2002 has been revised
systems, but the fiduciary risk remains high. and updated, and the Ministry of Finance has
Most aid is still in the form of bilateral projects prepared a draft National Action Plan on Aid
channelled outside the budget. Alignment and Effectiveness.
harmonisation of development assistance is
problematic. The extent to which aid flows are Consultations on these have taken place and
on budget and detail on disbursements provided the documents await approval.

BOX 1: FINDINGS FROM NATIONAL ADAPTIVE CAPACITY ASSESSMENT CARRIED OUT UNDER PPCR
NOVEMBER 201010

The only real sector examples of through the national system and a programme to EFA and the number
budget support in Nepal are in health separate project implementation unit of pooling donors has increased
and education. Progress towards (PIU) has not been used since 2004. significantly to 9 donors with 5 who
greater aid effectiveness has been According to the recent Joint Evaluation are non-pooling partners but work
made, though not without considerable of the Paris Declaration, the education within the SWAp framework.
challenges. There are salutary lessons sector is one of the few sectors in
to be drawn. In consideration of any which the government has shown Although the pooling donors in the
future climate fund that hopes to substantial leadership in aid education sector are using the
channel harmonised donor funding in coordination. countrys financial management system
support to national systems, the they are still using World Bank
government must take leadership in All major donors in the sector decided procurement systems as donors
demonstrating how it will build on these to pool their resources in support of remain unhappy with procurement law.
lessons and overcome the challenges EFA. Even non-pooling donors worked In September 2010, the donor fund
that have been encountered. within the overall sector wide flow to the education sector was put
framework, and activities supported on hold because the audit report
The education sector was the first by them were aligned with sector pointed out anomalies in expenditure
sector in Nepal to adopt a programme strategies and priorities. However, their in schools in some districts. Instead of
approach and the Education for All support did not use the national withholding just those amounts to
(EFA) Programme (2004-2009), was system. those schools, the whole grant amount
developed and implemented through was put on hold, adversely affecting
a Sector Wide Approach (SWAp). The School Sector Reform Programme the activities of the entire programme.
Donor resources are mostly channelled (SSR) (2009-2015) is the follow-up The recent Paris evaluation found that

8OECD DAC Aid Statistics, http://www.oecd.org/departmentand DFID Country Business Plan in Nepal 2009 - 2012
9Paris Declaration 2008 Monitoring Survey
10Joint Evaluation of the Implementation of the Paris Declaration, Phase II Nepal Country Evaluation, Ministry Of Finance, Nepal, 2010 and The Sector-Wide Approach
in the Health Sector; Achievements and Lessons Learned, Ministry of Health and Population, Government of Nepal, May 2010

8 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


education officials saw a positive side was instituted in 2006, with free expenditure in the health sector. Non-
to this as they believe it forces the services made available at district pooled donors make little use of
whole system to become more hospitals at first and then extending to government systems. With
accountable. the primary health care centre level by achievements of the increasing health
2009. The overall spend on health budget, better absorption and related
A Sector Wide Approach (SWAp) has increased significantly (tripling the last improvements in health outcomes,
been followed in the health sector from three years) as did the allocation as a fiduciary risk has also increased, with
2004/05 with the formulation of the proportion of the budget. Ten donors considerable leakage found in the
Nepal Health Sector Programme have signed a Letter of Intent with system11.
Implementation Plan 2004-2010 agreement that all assistance made
(NHSP-IP). Initially funded by two by them to the sector would be The health and education sectors are
pooled partners in 2004/05 (DFID and consistent with the Health Sector dogged by the same problems
World Bank), it increased to four in Strategy, working towards affecting development overall in the
2010 (DFID, WB, AUSAID and GAVI). harmonisation of donor support in country. Political uncertainty means
Various significant structural and policy planning, budgeting, reviewing and frequent changes of Ministers, senior
changes were made after the reporting. However the number of positions remain unfilled and financial
introduction of the SWAp, reducing donors working through this management systems are weak.
fragmentation and enhancing mechanism is still small. The pooled
coordination. A free healthcare policy fund represents less than half of donor

1.2 POLITICS AND THE STATE Minister Madhav Kumar Nepal resigned in
June but continued to fill the role in a caretaker
Nepal is at a cross-road. The decade-long capacity. With the government not fully
conflict formally ended in November 2006 with functioning and leadership positions in many
the signing of the Comprehensive Peace Accord. of the main offices unfilled, the country has
Peace remains extremely fragile. In 2008, the survived on emergency funds. Donors have
country voted in a Constituent Assembly (CA), become impatient and warned that their ability
named a President, elected a Prime Minister, to deliver aid and commit to future resources
formed a coalition government, and set about within the current vacuum is severely
the writing of a new Constitution, with a new challenged. Drafting the constitution, advancing
round of elections planned for 2011. The the peace process and ensuring peace and
Constituent Assembly primarily charged with stability are key immediate priorities of the
writing of the new constitution also functions new Prime Minister.
as a unicameral parliament. However a political
stalemate since June 2010, with a feuding Nepal is divided into 5 development regions,
parliament unable to elect a new Prime Minister 14 zones and 75 districts. Each district has a
has only just shifted after seven months with District Development Committee (DDC) and is
the election of the new Prime Minister, further divided into Village Development
Jhalanath Khanal, the chairman of the Committees (VDC). Each VDC has 9 wards
Communist Party of Nepal - Unified Marxist which is the smallest administrative unit.
Leninist (CPN-UML). The outgoing Prime However, elected political bodies are currently

11Ministry of Health and Population, Government of Nepal (May 2010) The Sector-Wide Approach in the Health Sector; Achievements and Lessons Learned

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 9


absent at the local level, having been dissolved Observed data indicate consistent warming
during the conflict. and rise in the maximum temperatures which
is more pronounced in high altitude regions
The country is undergoing huge political compared to other regions. Accelerated snow
change having emerged from ten years of and glacial melt has increased. There have
conflict: from a monarchy to a republic; from a been more intense rainfall events causing
hegemonic to an inclusive and participatory landslides and floods. Weather patterns are
system of governance; from a heavily centralised increasingly unpredictable. Climate scientists
unitary system to one characterised by expect existing trends will continue, including
decentralisation and autonomy at the regional more intense monsoons, severe and frequent
and local levels. The structural dynamics of floods. Glacial retreat and the threat of glacial
governance at the local level are likely to change lake outburst floods pose unprecedented threats
dramatically. to water supplies and lives15. The impact of
increasingly variable monsoons and intense
1.3 CLIMATE CHANGE VULNERABILITY rainfall on those living in the floodplains of the
Himalayas rivers could be catastrophic,
Nepal is largely an agrarian economy, with potentially affecting up to 1.5 billion people,
the agriculture sector providing over 30% of 600 million in the Ganges river basin alone16.
GDP and supporting the livelihoods of more
than 86% of the population12. Nepal can be The poor are often living in areas most at
divided into three ecological zones: mountains risk to floods and landslides and are more
(arctic/alpine), hills (cool/warm), terai (sub- reliant on local natural resources. According to
tropical). Three quarters of the population are the Food and Agriculture Organization up to
engaged in agriculture yet only about 25% of 3.4 million people are highly to severely food
the total area is cultivable; around 40% is insecure. The World Food Programme and
forested; most of the rest is mountainous13. Ministry of Agriculture report declining food
The main food crops are rice and wheat. Due harvests and rising food prices. As increasing
to the dependence on agriculture, the level of numbers of men are migrating seasonally for
the annual monsoon rain strongly influences work, the responsibility for feeding the family
economic growth. Nepals diverse topography, falls to women. They are walking longer
fragile ecosystems and poverty make it distances to fetch water, fuel and fodder and
extremely vulnerable to the negative impacts are increasingly taking on additional heavy
of climate change. In a recent global Climate burdens as wage labourers and domestic
Change Vulnerability Index (CCVI), prepared workers 17 . According to a study by the
by UK firm Maplecroft, on the basis of calculated International Food Policy Research Institute
vulnerability of 170 countries to the impacts of (IFPRI) using different climate scenario
climate change over the next 30 years, Nepal modelling, decline in crop production due to
ranks fourth14. climate change will be especially pronounced
in South Asia: In South Asia the climate
There is limited reliable and consistent scenario results in a 14-percent decline in rice
climate science data and technology capacity. production relative to the noclimate-change

12Central Bureau of Statistics, National Planning Commission, Statistical Yearbook Nepal.


13The Future of Nepal's Forests, Outlook for 2020, Ministry of Forests and Soil Conservation, Government of Nepal: The last National Forest Inventory (NFI) was
carried out in the early 1990s. According to that inventory, forest and shrub together cover about 5.83 million ha, which is 39.6% of the total land area of the country.
The rate of forest area decreasing was 1.7% per annum during 1978/79 to 1994, whereas rate of forest and shrub depleting rate was 0.5% per annum during the
same period. Since then NFI has not been done. However, recent studies from 20 Terai districts revealed that the rate of forest cover changed was at an annual
rate of 0.06% during the period of 1990/91 to 2000/2001. Macro level studies and visual interpretations revealed that Nepals forest coverage and condition is
significantly improving due to the Community Forestry (CF) intervention.
14http://www.maplecroft.com/about/news/ccvi.html
15Immerzeel W W, Van Beek L P h and Bierkens M F P (2010) Science 328: 1382-1385.
16South Asia Sustainable Development Department, World Bank, (2009) Shared Views on Climate Change, Chapter 3, p 34
17Oxfam International (August 2009), Even the Himalayas have Stopped Smiling: Climate Change, Poverty and Adaptation in Nepal.

10 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


scenario, a 44- to 49-percent decline in wheat in the country contribute to agriculture. Though
production, and a 9- to 19-percent fall in maize women make up a majority of the agricultural
production18. labour force most are unpaid family workers.
Womens access to land is extremely limited,
1.4 LAND ACCESS AND DISTRIBUTION accounting for only 10.83 per cent of total
landowners and with a combined share of only
Land access and distribution remain 4 per cent of arable land, according the last
extremely unequal. Around 7.5% of rural national census in 200120.
households retain over a third of the cultivated
land area, and a much greater proportion of Following the first land reform legislation
the private property estate overall, with in the 1950s, progress has been slow.
significant parts of it remaining idle. Community forestry in Nepal has demonstrated
Characteristics of feudal land relations remain, that forests controlled and used by communities
such as high level of absentee landlordism, are better conserved than those owned by
large areas of underutilised farmland, and government. Researchers have argued that
failure to reform the conditions of those who looking to these achievements and building a
farm others land, some of whom...remain in new approach to land reform with each
debt peonage until today...despite repeated community determining and managing its own
legislation against this. Insecurity of tenure ceilings and redistribution plan is a logical next
afflicts the entire farming sector, a main cause step21.
of its stagnation19. Around 90 percent of women

18Gerald C. Nelson, Mark W. Rosegrant, Jawoo Koo, Richard Robertson, Timothy Sulser, Tingju Zhu, Claudia Ringler, Siwa Msangi, Amanda Palazzo, Miroslav
Batka, Marilia Magalhaes, Rowena Valmonte-Santos, Mandy Ewing, and David Lee, Climate Change, Impact on Agriculture and Costs of Adaptation, Food Policy
Report, p. 6, IFPRI, October 2009
19Wily, Chapagain and Sharma (Nov 2008) Land Reform in Nepal: Where is it Coming from and Where is it Going?
20Central Bureau of Statistics, National Planning Commission, National Population and Housing Census, Nepal, 2001
21Wily, Chapagain and Sharma, Land Reform in Nepal: Where is it Coming from and Where is it Going?, Nov 2008

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 11


2
EXISTING AND EMERGING NATIONAL
SITUATION ON CLIMATE CHANGE ADAPTATION
2.1 INTERNATIONAL POSITION ON CLIMATE CHANGE developed countries in their actions with regard
to funding and transfer of technology."
Nepal has signed numerous international
treaties and instruments. Nepal became a party Mitigation and carbon market related
to the United Nations Framework Convention activities have been the main response to
on Climate Change (UNFCCC) in 1992, entering climate change but there is now an emerging
into force in Nepal in July 1994. The Kyoto emphasis on adaptation.
Protocol came into force in December 2005. In
most international fora and instruments, 2.2 OVERVIEW OF NATIONAL STRUCTURE AND
including in climate change Nepal positions PROGRAMMES
itself with a group of countries with similar
interests. As a Least Developed Country (LDC) Climate change awareness is growing with
Nepal is a member of the 49 country LDC Group increasing government and civil society
and tends to negotiate as a group with other engagement. There has been relative success
LDC countries. Nepal is also a member of the in building broad ownership across government
G77 and China, however is often dormant over the past two years. However public
within the group. awareness is low. There has been no information
centre in existence until very recently and key
Nepal has attended all several Conference policies and documents are not available in an
of Parties (COP) meetings under the UNFCCC accessible form to the public. There is also no
in order to raise national issues and negotiate environmental monitoring mechanism or legal
an international agreement. Climate change protection for environmental rights.
really became a national agenda following the Consequently accountability and oversight is
peace agreement and in time for the 13th lacking.
Conference of Parties meeting held in Bali,
Indonesia in 2007. Nepal regards the Bali Action There are several Acts and Regulations that
Plan as the basis of negotiations for link directly or indirectly to climate change:
any international instrument under the the Forest Act (1993) and Forest Regulation
UNFCCC. (1995), Environment Protection Act (1996),
Environmental Regulation (1997) and Water
Nepal strongly advocates, with others, that Resource Act (1992). Various sector policies
developed country parties must immediately and strategies underpin these. Major national-
fulfil the commitment made in Article 4.10 of level development and sector plans such as the
the UNFCCC. The article states that "the Master Plan for Forestry Sector and National
Parties shall take full account of the specific Water Plan are relevant to adaptation but
needs and special situations of the least climate risks have not been directly addressed

12 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


in them. The interim three year plan 2008- positive step, the necessary human and financial
2010 addressed climate change risks and resources have not yet accompanied this change.
adaptation directly for the first time22. GoN More fundamentally the mandate of MoE has
also made environmental impact assessments not been clearly decided. It currently oversees
mandatory. rules and regulations and serves as a focal point
for climate work. Many stakeholders have been
Under the last Prime Minister leadership a demanding a dedicated institution that has the
Climate Change Council was established and authority to coordinate and implement
a Climate Change Policy agreed in the cabinet. environmental and climate change laws and
A Natural Resources and Environment policies at the central and sub national levels24.
Committee was also previously established As it stands currently, MoE is a small, nascent
under the House of Representatives to evaluate Ministry with limited technical and operational
policies and programme. It continues under capacity. MoE has stated in various fora that
the interim legislature; however it has been it sees itself as a coordinating agency and given
largely inactive. In addition there is an informal its current limited capacity, implementation
network of MPs on natural resources and should be carried out through line agencies.
climate change. In 1992 the Environment However a coordination role in itself still needs
Protection Council (EPC) was established and significant resources and capacity.
chaired by the then Prime Minister to serve as
the highest decision making body on all matters Nepal is eligible to access finance from the
related to the environment. The EPC ratified UNFCCC Global Environment Facility special
various climate related conventions and funds: the Least Developed Countries Fund
developed vehicle emissions standards, but this (LDCF), Special Climate Change Fund (SCCF),
body has also been largely dormant 23 . and the Adaptation Fund under the Kyoto
Protocol. So far it has obtained a small amount
Nepals National Capacity Self-Assessment of funding through LDCF for the development
to the UNFCCC in 2008 highlighted several of the NAPA plan. Nepal has received a small
challenges in relation to adaptation activities amount of climate change funding through the
including insufficient financial, technological GEF Trust Fund for capacity building,
and human resources. A review of different implemented through UNEP 25 . The most
sectors highlighted a number of barriers such significant national level adaptation
as incomplete implementation of existing plans programmes under development are the
and policies, decreasing budget allocations National Adaptation Programme of Action
(agriculture and irrigation) and limited and (NAPA), with funding from LDCF
unclear guidelines regarding mandates and supplemented by UNDP, DFID and Danida,
roles of devolved structures. under UNDP administration; and the Pilot
Program for Climate Resilience (PPCR), funded
The Ministry of Environment (MoE) is the by the Climate Investment Funds/Strategic
focal point for UNFCCC and climate related Climate Fund, under administration of the
work in Nepal. It became a separate ministry World Bank and ADB. The Ministry of
in June 2010. The Government of Nepal has Environment leads on both of these. At the
created a new division under the MoE called present time there is no funding flowing to
the Climate Change Management Division either of these programmes. The International
headed by the Joint Secretary. This division Centre for Integrated Mountain Development
should be specifically responsible for (ICIMOD) works with MoE to promote the
coordinating climate change work. Although Mountain Alliance Initiative with funding from
the move towards creating a clear focal point Norway and Switzerland. There are a number
and dedicated capacity for climate change is a of other significant adaptation programmes

22 Dixit, A, Scoping Assessment on Climate Change Knowledge Platform in Nepal, ISET-Nepal, 2010
23Ibid
24ADB Technical Assistance Report: Federal Democratic Republic of Nepal: Strengthening Capacity for Managing Climate Change and the Environment
25http://www.gefonline.org/projectListSQL.cfm

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 13


going through Ministry of Forests and Soil donors to a number of ministries. These are
Conservation (MoFSC) and the Ministry of largely operated by teams of international and
Agriculture and Cooperatives (MoAC), in national consultants in project implementation
particular. These are mostly vertical funding units attached to ministries but closely handled
agreements with bilateral agencies, though by their donors. The main projects are: to MoE
there are some more pooled donor funds from ADB, DFID/, DANIDA and UNEP; to the
developing. It is extremely hard to establish National Planning Commission (NPC) from
what is new and additional funding or already ADB and UNDP/UNEP; to the Department of
committed ODA. It is clear from the data in Hydrology and Meteorology (DHM) (which is
table 3 below, that some funds previously under MoE) from ADB, DANIDA and Finland.
committed as ODA are now being classified as These are each separate projects with separate
climate financing. MoUs, financing arrangements and modalities.

BOX 2: FINDINGS FROM NATIONAL ADAPTIVE One of the key components of a programme
CAPACITY ASSESSMENT CARRIED OUT of technical assistance from ADB, that has been
UNDER PPCR NOVEMBER 201026 ongoing since 2008, is a grant entitled
Strengthening Capacity for Managing
Climate Change and the Environment.
The National Adaptive Capacity Assessment carried Central to this is working out the much-
out under PPCR identified the following capacity needed organisational framework and
gaps: funding mechanism for climate change
Almost complete absence of climate change risk work. The expected outputs are (i) an
management personnel in key organizations and organisational framework is drafted and
institutions; agreed upon by stakeholders; (ii) a funding
Climate change risk management is not
mechanism for environmental
institutionalized in government, academia, civil society management is agreed upon by
or in vulnerable sectors, municipalities, districts or stakeholders; and (iii) effective public
communities; education, information, and awareness
activities on environment and climate
No training, database, information or guidance exists
change are developed and implemented27.
on planning/constructing climate resilient
development;
According to an ADB document
consultants began work on this in
Insufficient financial resources to effectively integrate February 2010 with an aim to have a
climate change risk management into development national Government institution
planning;
dedicated to managing climate change
Development planning in key sectors (water, and the environment...fully staffed and
agriculture, physical planning) does not consider funded by 201528. This is vital work. It
risks associated with climate change and there are is critical that the planning process takes
no modalities to facilitate such transformational in broad consultations and progress
change in development planning. towards developing the institutional
framework is communicated widely to
2.3 TECHNICAL ASSISTANCE PROJECTS AND stakeholders. It is not clear that this has
CAPACITY STRENGTHENING been happening adequately. In addition the
second and third component of the expanded
In addition to the above there is a confusing NAPA process (which is examined below) should
array of separate technical assistance capacity link in directly with this work and not be a
strengthening projects funded by different duplication of efforts.

26Aide Memoire, Nepal: Pilot Program for Climate Resilience (PPCR) World Bank / ADB / IFC Joint Mission, 15-21 November 2010
27ADB, Climate Change Roadmap, 31 Jan 10
28ADB Technical Assistance Report: Federal Democratic Republic of Nepal: Strengthening Capacity for Managing Climate Change and the Environment

14 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


Given fiduciary risk concerns some major society representatives. It was established in
bilateral agencies say they are not yet able to July 2010.
channel funds through the Ministry of
Environment. Government, and others, argue Two brief overview papers have been
that the ministry needs to be given the work developed by MoE on the Council and MCCICC.
in order to prove itself and to be able to A comprehensive Terms of Reference, clearly
institutionalise the various strands of, often detailing the purpose and functions of these
unlinked, technical assistance that are currently bodies, and the roles and responsibilities of
being provided. Donors need to re-examine the serving members would facilitate more efficient
current fragmented approach to capacity functioning and better public understanding of
building and work jointly on pooling assistance, these bodies. In addition clarification of how
using the recently approved Climate Change the Climate Change Council and MCCICC
Policy as an overarching framework from which interact is needed.
to develop a convergent long term strategy for
strengthening climate change capacity within The Ministry of Environment (MoE) initiated
the MoE and other agencies. a process three years ago to formulate a national
climate change policy. After several national
2.4 GOVERNMENT POLICY AND COORDINATION and sub-national consultations the process was
MECHANISMS put on hold to allow the NAPA plan to be
undertaken first. The drafting was resumed
There are two chief climate change and the policy has been recently approved by
coordination and policy forums currently the cabinet. Focal areas are adaptation, low
operating under the government. The Climate carbon development paths and natural resource
Change Council and Multi-Stakeholder Climate management. The policy plans for the
Change Initiatives Coordination Committee establishment of a semi-governmental Climate
(MCCICC). The Climate Change Council, Change Centre, within a year. The centre will
formed in July 2009, is a 25 member high-level undertake research and provide technical
policy and coordination body formed under the support to the government.
chairmanship of the Prime Minister, with the
secretary of the Ministry of Environment as A Climate Change Coordination Unit within
the Member Secretary. Fourteen different the Climate Change Management Division of
ministers and other senior officials are members MoE has been proposed to coordinate all climate
of the Council. This council has eight experts change related projects implemented by
nominated by government inclusive of NGO, government, donors, Multilateral Development
private sector and academia. The main objective Banks (MDBs) and other agencies. In addition,
of this council is to provide national level policy there is a proposal to establish a project
guidance and long term directions on climate management unit with support from the
change related policy and strategy. respective climate change-related projects.
Although this would be an improvement on the
The MCCICC was formed during the current structure and a positive interim step
preparation of NAPA in July 2010, under the a longer-term option for channeling and
Ministry of Environment. MCCICC is charged harmonising funds, must be developed.
with improving communication and
coordinating climate change initiatives at a 2.5 NATIONAL ADAPTATION PROGRAMME OF ACTION
programme level as well as funding on (NAPA)
adaptation actions, including those identified
under NAPA. The previous Climate Change Nepal embarked on its National Adaptation
Network (CCN) which had been constituted in Programme of Action late, only properly starting
2007 seems to have been folded into this. It in May 2009 and completing it in September
includes members from different line ministries, 2010. Preparation of the NAPA plan was
including local government, donors and civil delayed for various reasons, including funding

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 15


disbursement, coordination issues involving and non-government agencies. Climate
UNDP and limited operational capacity in MoE. vulnerability assessments and GIS mapping
As funding was delayed for so long and hiring were also conducted.
of consultants problematic, DFID was asked
by GoN to step in and provide consultants to The NAPA document states that NAPA
MoE so they could begin NAPA work. prioritization process serves as a basis for the
development of an adaptation strategy that
Since, Nepal was one of the last countries will be able to draw financial resources for
to prepare their NAPA it strived to capitalise implementation from national as well as various
on learning from other countries, to ensure global, multi-lateral and bilateral sources. The
there was a strategic approach with better links Government expects that any and all climate
to other climate change processes and national change adaptation support programmes will
planning, and to mainstream adaptation right carefully consider the NAPA outcomes as a first
down to the local level. In response Nepal step in order to ensure a coherent
undertook an expanded NAPA with three programmatic approach and systematic
components: (1) preparation and dissemination reduction of vulnerability and climate change
of a NAPA document; (2) development and impacts nationwide.
maintenance of a Climate Change Knowledge
Management and Learning Platform and (3) The thematic working groups identified
development of a Multi-stakeholder Framework activities which were then prioritised using a
of Action. Significant co-financing was mobilised common set of criteria and qualifiers. These
from DFID, DANIDA and UNDP to supplement were then clustered into nine combined profiles.
funding from GEF. In addition, to the US$ The total cost of these nine profiles is budgeted
200,000 from GEF (under LDCF), there was a to be US$ 350 million. The document anticipates
further US$ 50,000 from UNDP, US$ 875,000 80% of funds being spent at the village/
from DFID and US$ 200,000 from DANIDA. municipal level, channelled through a
designated implementing line ministry,
The process has been credited with going according to the project. At the district level,
further than other NAPAs in the level of project planning and delivery will be the
consultation and engagement, moving beyond responsibility of the District Coordination
only regional and national consultation Committee (DCC) under DDC. It is envisaged
meetings to incorporate inputs from a wider that a Secretariat under the DDC will be
range of stakeholders and interest groups, responsible for selecting local service delivery
including with vulnerable communities. The agents. Where there are projects that cut across
plan was developed through six thematic or sectors, such as the Promoting Community-
sectoral areas, under a thematic working group based Adaptation through Integrated
were formed, each led by a different line Management of Agriculture, Water, Forest and
ministry: Agriculture and Food Security; Forests Biodiversity Sector, which require much-needed
and Biodiversity; Water Resources and Energy; convergence, details of implementation are less
Climate-induced Disasters; Public Health; and clear. The Ministry of Local Development
Urban Settlements and Infrastructure. Micro- and the Local Government Capacity
level impact assessments were conducted Development Programme should be key
through transect appraisal exercises with to supporting vertical and horizontal
participation from a number of government coordination and delivery.

16 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


TABLE 1: PRIORITISED PROJECTS UNDER NAPA
Estimated Cost
Project Name (in million USD)
1 Promoting Community-based Adaptation through Integrated Management of 50
Agriculture, Water, Forest and Biodiversity Sector

2 Building and Enhancing Adaptive Capacity of Vulnerable Communities Through 44


Improved System and Access to Service Related to Agricultural Development

3 Community-based Disaster Management for Facilitating Climate Adaptation 60

4 GLOF Monitoring and Disaster Risk Reduction 55

5 Forest and Ecosystem Management for Supporting Climate Led Adaptation 25


Innovations

6 Adapting to Climate Challenges in Public Health 15

7 Ecosystem Management for Climate Adaptation 31

8 Empowering Vulnerable Communities through Sustainable Management of Water 40


Resource and Clean Energy Supply

9 Promoting Climate Smart Urban Settlement 30

Total estimated cost 350

The planning process incorporated a clear it is essential that the national machinery of
focus on gender. Gender analyses were the advancement of women is engaged in key
conducted with gender differentiated impacts dialogue and processes related to climate change
assessed. The specialist reviewed all Thematic adaptation for it to effectively play a role in
Working Group reports from a gender promoting gender equality and keeping this
perspective, as well as carrying out a literature high on the MCCICC and Climate Change
review. The findings were represented within Council agenda.
NAPA teams. It is recognised that integrating
gender approaches is key to developing effective Under the second component of the NAPA,
adaptation actions and actions must be guided the Nepal Climate Change and Development
by the findings. The implementation framework Portal was also launched29. This portal should
also gives consideration to the need for a serve as the main forum for sharing climate
structure at the development region or information and knowledge. The Nepal Climate
watershed level that would house experts in Change Knowledge Management Centre
relevant fields including gender and social (NCCKMC) was inaugurated by the Prime
inclusion. What is harder to see is how the Minister on 29 November 2010, also under
analytical work has been incorporated in project funding from NAPA. This centre is launched
profiles and will move to implementation. at the Nepal Academy of Science and
Whilst vulnerability is mentioned, objectives, Technology (NAST) in joint collaboration with
activities, outputs and long term outcomes give MoE. The Centre is organising a nationwide
no mention of gender. It is unfortunate that mobile library including interactive activities.
neither the Ministry of Women, Children and It seems this centre will focus on knowledge
Social Welfare nor the Women Commission management and public awareness whereas
were brought into the NAPA development the semi-governmental Climate Change Centre
process, particularly considering that the that is to be set up within a year will focus on
engagement of a number of ministries across commissioning new research and advising
government has been such a positive element government. As stated earlier, it is unclear how
of the Nepal's NAPA. However the ministry this links in with the third output of the ADB
has now been brought into the MCCICC. technical assistance on effective public
Although there are concerns about its capacity education, information, and awareness
29Nepal Climate Change and Development Portal, www.climatenepal.org.np

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 17


activities, unless the ADB work is directly of funds actually get down to the local level and
supporting the development of these bodies. preventing fragmentation across a number of
Detailed clarification of mandates, coordination line ministries with a relatively small and
mechanisms and resources will be needed. nascent ministry charged with coordination
and consolidation. Funding for NAPA projects
In terms of NAPA implementation the is still not entirely clear. NAPA has been
document lays out a framework. MoE is submitted for endorsement and funding under
responsible for overall coordination and LDCF and it has been indicated that there will
reporting and liaising with the Climate Change be around $10 12m available. It looks likely
Council the apex body responsible for policy that this funding will be split between UNEP
coordination and the main coordination forum and UNDP, with UNEP supporting biodiversity
established under NAPA, the MCCICC (Multi- and ecosystem projects (NAPA projects 5 and
Stakeholder Climate Change Initiatives 7) and UNDP supporting community adaptive
Coordination Committee). capacity initiatives (NAPA projects 2 and 3),
although clearly this funding will only go some
The NAPA document was approved by the way to meeting the projected budget for these
cabinet in September 2010. The intention was projects under NAPA. Design for this is
that the three components would come together currently underway. The decision to split
and be developed more or less simultaneously. funding between two UN agencies will require
The reality is that the preparation of the NAPA extra attention to coordination and ensuring
document took longer to get off the ground than clear strategic direction. Hopefully the
anticipated and activities under the other two coordination structures that have been
components are only now being rolled out. There established under NAPA will enable this. A
are large operational issues to work out around number of NAPA initiatives should also be
an effective delivery mechanism to ensure 80% picked up under PPCR, as is examined below.

FIGURE 1: FRAMEWORK FOR NAPA IMPLEMENTATION30


Policy and Advisory Bodies (CCC and NPC)

MCCICC
Ministry of Environment as Focal Ministry
(CC Programme Coordination and Monitoring Unit)
Coordination

10% of budget

Monitoring
evaluation

Implementing Line Ministry(ies)


Central

and
Self

Programme/Project Coordination Committee (PCC)

Regional Technical Support and Coordination Units/s


Planning, monitoring
10% of budget

District Coordination Committee (DCC)


Coordination

(at District Development Committee to the extent possible)


Monitoring
evaluation
Functional

and reporting

Implementing Line agency (ies)


and
Self

Local agencies/NGO/CBO Private Sector/s


Implementation

Planning and coordination at VDC/Municipal level


80% of budget

Monitoring
evaluation

Programme/project implementation through existing community


and
Self

level organization/s like CFUG, different FGs, Irrigation Groups and


other interest groups

Acronyms: CCC: Climate Change Council, NPC: National Planning Commission, MCCICC: Multi-stakeholder Climate change
Initiatives Coordination Committee, CC: Climate change, CFUG: Community Forestry User Group, FG: Farmers' groups

30Ministry of Environment, National Adaptation Programme of Action, Government of Nepal, September 2010

18 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


BOX 3: NAPA AND NATIONAL PLANNING
The Government has recently adopted a new three year conservation and climate change, identifying agencies
plan 2010 2012 (TYP). The key expected outcomes and ensuring roles and responsibilities for NAPA
of the plan are to prepare and implement a national implementation. The TYP also focuses on the need for
framework on climate change adaptation and mitigation, developing partnerships amongst donor agencies, NGOs,
disaster risk reduction, poverty reduction and poverty local bodies, CBOs and other agencies, and to take an
environment initiatives. Several strategies are included initiative to establish an international research centre on
under the TYP to link environmental and climate change climate change.
policies to development. Sustainable development,
poverty reduction and responding to climate change ADB has been supporting the National Planning
are seen as very much interlinked and interdependent. Commission (NPC) with the three year interim
development plan to mainstream climate change into
To implement the strategies, the TYP has made the the plan and make it climate smart. This project has
MoE responsible for coordinating all activities related to recently come to an end.

2.6 STRATEGIC/PILOT PROGRAMME FOR CLIMATE and articles in the mainstream media31. The
RESILIENCE (SPCR/PPCR) arguments against the loan component in Nepal
mirror those arguments that have been made
Nepal is one of the nine PPCR recipient for a number of years at the international level.
countries. PPCR is broken into two stages: first As Muller articulated in a paper in 2008: Given
phase is for the analysis, coordination and the patterns of differentiated (historic)
planning across ministries to mainstream responsibilities, the costs for developing country
adaptation into development plans and the adaptation are seen as debts to be borne by the
second phase for the implementation of the still largely responsible industrialised world,
plans and programmes. PPCR is completing and debts cannot be repaid by loans, or even
the first stage of planning in Nepal. A project by grants if that notion is interpreted in
team, largely of consultants, currently sits terms of the provider of the funds doing the
within MoE. The draft proposal for a Strategic recipient a favour. Moreover, given this pattern
Program on Climate Resilience (SPCR) was of differentiated responsibilities, there are also
reviewed during an ADB/World Bank joint very strongly held views on the importance of
mission in November and has been tentatively an equitable distribution of the burden of such
agreed. The next joint mission is planned for funding32.
early February 2011. The initial funding
committed for PPCR in Nepal was US$ 60 PPCR development started as NAPA
million, divided between grant and loan. There planning was underway. Expectations were
are ongoing discussions that this will increase that PPCR would align under NAPA and could
to US$110 million: a 50 million grant and 60 be used to finance identified NAPA projects.
million concessional loans. At the same time the Climate Change Policy
was being drafted by government and there
The loan component of PPCR is highly was a strong push for improved coordination
contentious with sharply divided opinions both between donors. There was optimism that
for and against. A clear majority of local civil donors would work jointly with government to
society organisations are firmly opposed to loan, develop a comprehensive and coordinated
which is also evidenced by the recent reports strategy for programming and financing

31Khadka, N.S. Climate Injustice? Kathmandu Post Oped, January 27th, http://www.ekantipur.com/the-kathmandu-post/2011/01/27/oped/climate-
injustice/217751.html; Khadka, N.S. Nepal climate loan hit by opposition storm, BBC, February 3rd 2011, http://www.bbc.co.uk/news/science-environment-12357200;
Bhushal, R.P Loan to Fight Climate Change The Himalayan Times, 24 January 2011:
http://www.thehimalayantimes.com/fullNews.php?headline=Loan+to+fight+climate+change+&NewsID=274153
32Benito Mller, International Adaptation Finance: The Need for an Innovative and Strategic Approach, Oxford Institute for Energy Studies, EV 42, June 2008

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 19


adaptation. The two project teams for NAPA NAPAs remit was around urgent and
and PPCR came together to look at how this immediate needs. It is noteworthy that these
could work. are seen as mutually exclusive as opposed to
striving to ensure that they are brought together
The Prioritization Planning Process Draft for a comprehensive and strategic approach to
document of PPCR states that it will build on climate change adaptation. It now seems certain
the comprehensive, inclusive and country-driven that PPCR will fund some of the activities
process to develop Nepals NAPA33. However identified under NAPA. The recent PPCR Aide
it also emphasises that NAPAs are intended Memoire states that the design of the
to cover urgent and immediate needs for components is complementary and reinforcing
adaptation whereas the PPCR is focused on to NAPA35. Yet distinctions between resilience
long-term goals of achieving development that and adaptation and short-term and long-term
is climate resilient. Although the NAPA measures are still stressed by the MDBs as
document states that prioritised projects include reasons for distinguishing between PPCR and
urgent and long term adaptation strategies34. NAPA. Recently GoN has also been using these
Additional activities have been undertaken to distinctions in countering arguments against
address what were considered gaps in NAPA loans 36 . However, these distinctions seem
and to ensure compliance with PPCR guidelines. increasingly opaque and unhelpful to other
These include: assessment of climate change climate change actors.
risk; adaptive capacity assessment; definition
of priority action needs; resilience assessment; Four inter-related components have been
cost/benefit analysis; design of implementation proposed for the Strategic Program on Climate
modalities. The same Thematic Working Resilience: Building Climate Resilience of
Groups, established under NAPA, have been Watersheds and Water Resources in Mountain
used in the development of PPCR. Eco-Regions ($45 million with a combination
of grant and credit, lead: MoFSC); 2. Building
After the first joint PPCR mission of ADB Resilience to Climate-Related Extreme Events
and World Bank, hopes for alignment began to (approximately $40 million with a combination
dissipate with concerns arising that PPCR was of grant and loan: lead: MoE/DHM and MoAC);
developing its own process, with little 3. Mainstreaming Climate Change Risk
government ownership. On the other hand, the Management in Development (US$10 million
MDBs expressed their concern that NAPA was (anticipated grant financed, lead: MoE); and 4.
not developing quickly enough as well as Building Climate Resilient Communities
stressing that PPCR had its own set of through Private Sector Participation
guidelines. As seen in the paragraph above, it (approximately $13 million with a combination
was felt that PPCRs focus was on strengthening of grant and loan).
national systems on a long-term basis, whereas

33PPCR Prioritization Planning Process Draft www.ppcrnepal.gov.np


34Ministry of Environment, National Adaptation Programme of Action, Government of Nepal, September 2010, p. xiv.
35Nepal: Pilot Program for Climate Resilience (PPCR) World Bank / ADB / IFC Joint Mission, 15-21 November 2010
Aide Memoire.
36For example the justification for taking a loan made by MoE recently was that it was not to be used for adaptation projects but instead long-term resilience: The
loan is not at all going for adaptation projects they are actually for climate resilience that include long term projects like, for instance, building bridges, embankments,
development of resilient seeds in agriculture... http://www.bbc.co.uk/news/science-environment-12357200

20 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


BOX 4: PPCR COMPONENT AND CORRESPONDING NAPA ACTIVITIES37

PPCR Component Corresponding NAPA Activities

Component 1: Integrated Watershed Management in Churia to ensure ecosystem and community adaptation
Building Climate Resilience of to climate change
Watersheds and Water
Resources in Mountain Eco- On-farm soil and water conservation initiatives to support hill and mountain communities
Regions vulnerable to climate change.

Promotion and up-scaling of Multi Use System (MUS) for the benefit of poor and vulnerable
communities in mid-hills and Churia range of Nepal

Up scaling and implementation of non-conventional irrigation systems in water stressed


areas.

Construction of water retaining structures as sustainable adaptation measures to address


the effect of climate change.

Integrated wetland management

Promotion of rainwater harvesting structures and technologies.

Water supply source conservation (quality as well as quantity) and strengthening programs
of existing projects affected by source reduction

Component 2: Flood management to reduce the vulnerability of communities and increase their adaptive
Building Resilience to Climate- capacity
Related Extreme Events
Community-based disaster risk reduction with climate change dimension

GLOF monitoring and disaster risk reduction

Early warning system development in disaster prone areas

Interlink climate change with DRR and enhancement of institutional capacity at different
levels

Management of existing hydrological and meteorological network at DHM and up-scaling


the services

Strengthening forecasting / early warning and surveillance system on climate change &
health in Nepal

Component 3: Building capacity to enhance community adaptation to climatic hazards


Mainstreaming Climate Change
Risk Management in
Development

Component 4: Enabling climate vulnerable communities sustain livelihoods by improving access to agricultural
Building Climate Resilient services
Communities through Private
Sector Participation Increasing community climate adaptive capacity through improved production and marketing
systems

37Nepal: Pilot Program for Climate Resilience (PPCR) World Bank / ADB / IFC Joint Mission, 15-21 November 2010

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 21


Gender has not been significantly addressed and implementation framework make no
in the draft programme document 38 . The reference to gender considerations. The Ministry
component on watersheds and water resources of Women, Children and Social Welfare seems
makes the most direct reference: addressing to have had no involvement.
the availability of water in mountain ecosystems
can help Nepal meet its social inclusion goals. Control of PPCR decisions seems largely to
The burden of carrying water usually falls to be in the hands of the banks headquarters and
women and children, so addressing their multi- on many issues MDB staff in-country seem to
use water availability needs and increasing have their hands tied. Other donors and
their access to water resources will help in government have found it hard to engage and
addressing gender issues39. It is not clear how the space to influence the process has become
addressing multi-use water availability needs increasingly smaller even though the
per se will specifically target women or how governments of these donor countries are major
gender will be explicitly built into the project funders of PPCR. Concerns have been increasing
design and monitoring to tackle some of the that the aspirations of PPCRs stated objectives
structural issues that result in women having and the reality are far apart.
inequitable access to water resources. The
second component on resilience to climate- During a joint ADB and World Bank mission,
related extreme events includes establishment donors and civil society raised the possibility
of appropriate micro-insurance programs for of PPCR funds being channelled through a
vulnerable farming communities, home owners multi-donor trust fund. It was made clear that
and women, most probably as a public/private creating such a fund was not within the
sector partnership. Again, differentiated mandate of PPCR nor was it possible for PPCR
strategies and targeting are not addressed. funding to flow through such a fund40. This
Similarly the proposed institutional structure rigidity is unhelpful.

38Part 1 Nepals Strategic Program for Climate Resilience - Consultative Draft (20/11/10)
39Ibid, Annex 4
40Nepal: Pilot Program for Climate Resilience (PPCR) World Bank / ADB / IFC Joint Mission, 15-21 November 2010 Aide Memoire

22 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


TABLE 2: NAPA AND PPCR: OVERVIEW OF KEY FEATURES

NAPA SPCR/PPCR

Timing May 2009 started developing plan. March 2010 started developing plan.

Funding to date US$1.325m: 200,000 (from GEF/LDCF); 50,000 $225,000 for technical assistance (from Strategic
UNDP; 875,000 DFID; 200,000 DANIDA Climate Fund)
supplemented in country.

Governance and Multi-donor trust fund under UNFCCCs Global Multi-donor trust fund outside UNFCCC through
operational Environment Facility, LDCF Climate Investment Fund
mechanism
Global under GEF Assembly, Council, Secretariat. Global - PPCR Sub-Committee (PPCR-SC)
Guidance of the Least Developed Countries Expert oversees operations and activities of the Pilot
Group Program. Governed by SPCR sub-committee
guidelines
WB serves as Trustee
WB/IBRD serves as Trustee
In country, pooled fund under UNDP
In-country managed jointly by World Bank and
Operated under separate Project Implementation ADB.
Unit under MoE with international and national
consultants. Operated under separate Project Implementation
Unit under MoE with international and national
consultants.

Design process Six thematic or sectoral areas, under a thematic Used NAPA thematic groups for consultations.
working group headed by different ministries.
Carried out further or new assessments beyond
Involved series of consultations around the country, NAPAs.
reviews and appraisals.
Milestone decisions through WB/ADB missions
Focus on knowledge management and
stakeholder coordination through additional donor
funding in-country.

Plan approved by the Cabinet.

Content Identified over 40 projects, prioritised 9, under Four inter-related components with some cross-
different themes and sectors over with NAPA identified priorities.

Anticipates 80% of funds being spent at the Implemented through designated project
village/municipal level, channelled through a management units, with component coordination
designated implementing line ministry MoE is committees chaired by secretaries of the respective
responsible for overall coordination and reporting component lead agencies.
and liaising with the Climate Change Council
Climate change program steering committee will
MCCICC (Multi-Stakeholder Climate Change monitor results and provide coordination, chaired
Initiatives Coordination Committee) established by Minister of MoE. MoE secretariat.
as main coordination forum.

Budget Budgeted US$ 350 million for 9 prioritised projects Anticipated budget of $110m: 50m grants & 60m
loans.

Current status Currently no funding for projects. Draft proposal tentatively agreed. Next mission
and Next steps due for Feb 2011 to finalise and agree funding.
Looks likely that 10 12m. will come from LDCF,
split between UNEP and UNDP for
implementation.

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 23


2.7 ADAPTATION FUND (AF) National Implementing Entity (NIE), and it
awaits a decision. The government hopes that
The Adaptation Fund was established by several NAPA projects will be funded. Whether
the Parties to the Kyoto Protocol of the UN Nepal will be able to access direct funding will
Framework Convention on Climate Change be critical. Donors view this as a testing ground
(UNFCCC) to finance concrete adaptation for MoE to prove its capacity.
projects and programmes in developing
countries that are Parties to the Kyoto Protocol. 2.8 SOURCES OUTSIDE THE UNFCCC THROUGH
The Fund is financed with 2% of the Certified DONOR FUNDING IN COUNTRY
Emission Reduction (CERs) issued for projects
of the Clean Development Mechanism (CDM) There are a growing number of scattered
and other sources of funding. initiatives classed as climate change activities,
being funded by bilateral and multilateral
As Tandon and Vogt state the fund has a donors, as highlighted above and detailed in
number of unique features in its ownership, table 3 below. It is hard to obtain a clear picture
access, funding, revenue generation, governance of all these initiatives from donors or
and legal structure, and has garnered a government partly because there are differing
heightened sense of awareness and anticipation definitions between agencies of what constitutes
in the international environmental a climate change programme and partly because
community41. It has created particular interest there is a lack of coordination amongst donors
as it allows direct access to funding by Parties, and within government between the various
as opposed to through a third party ministries that are implementing climate
implementing agency, usually a multilateral, change activities. The more significant pieces
as is the model with other climate funds. It is of funding are all in the form of projects either
seen as an important development to secure implemented through Ministry of Environment,
greater national ownership over funded Ministry of Forests and Soil Conservation or
activities, whilst maintaining high fiduciary Ministry of Agriculture through separate MoUs
standards and minimising transaction costs42. or contracted out to private companies and
The Adaptation Fund Board has recently implemented by NGOs. There has been an
approved its Operational Policies and attempt to improve alignment with government
Guidelines which allow eligible Parties, seeking and information sharing and coordination
financial resources from the Adaptation Fund, between donors. MoE brought 14 donors
to submit proposals either directly through together to sign a donor compact in September
their accredited National Implementing Entity 200944. Though no funding was guaranteed
(NIE) or using the services of Multilateral under this it was seen as an important step in
Implementing Entities (MIEs). All project agreeing to harmonise and align actions on
proposals require the endorsement of the climate change in support to the government.
authority which has been designated by the However little over a year on from signing the
relevant Government to make such donor compact indications are that there is
endorsements43. danger of further fragmentation, with
disagreements over PPCR, at the critical time
In order to qualify for funding Nepal has when significant levels of funding for climate
submitted its fiduciary risk assessment with change adaptation might start flowing 45 .
Ministry of Environment nominated as the

41In The Hands of Women: Climate Change Finances, Oxfam Internal Background Paper, Nidhi Tandon, Erich Vogt, June 2010)
42Climate Finance Policy Brief No.4, Design Challenges for the Green Climate Fund, Bird, Brown and Schalatek, Heinrich Bll Stiftung and ODI, January 2011
43www.adaptation-fund.org
44Compact on Climate Change in Nepal: An Understanding between the Government of Nepal, Ministry of Environmental and development partners on ways to
address climate change challenges, September 2009.
45See table 3 which represent current funding sources, projects and government implementing agency.

24 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


2.8.1 LOCAL ADAPTATION PROGRAMME/PLAN OF DFID has committed funding for four years
ACTION (LAPA) for the programme it calls Reducing the
Climatic Vulnerability of the Poor. An initial
One of the most significant programmes in pilot phase - which is currently underway - and
development for climate adaptation coming subsequent implementation, has approximately
through bilateral funding in country is the 17.3m (10,730,000) of DFID funding. The EU
Local Adaptation Programme of Action/ is also likely to join a pooled fund for LAPA
Reducing the Climatic Vulnerability of the Poor. implementation. Indications are that the EU
During NAPA development the idea of Local will contribute a further Euro 19.4m
Adaptation Plans of Action (LAPA) were (approximately $26.3m). The pilot phase is
suggested as a way to scale up community- managed by the private consultancy firm
based strategies and integrate top-down and HTSPE, and sub-contracted for implementation
bottom-up approaches to mainstream to seven NGO partners for implementation
adaptation into planning. Given the delays across ten districts. Six of these projects follow
and time constraints of NAPA it was concluded the six NAPA themes. Although this is not fully
that LAPA could not be taken up during NAPA incorporated in NAPA, MoE sits on a Steering
planning. DFID agreed with MoE that it would Committee and considers LAPA as integral to
take on the funding and design, in close NAPA. As the NAPA document states Lessons
alignment with NAPA. The same consultants learned from LAPAs implementation [will]
have been used for design as were used in the contribute greatly to policy refinement and
early stages of NAPA development. DFIDs formulation. Nepal considers need-based
intention is for LAPA to be its vehicle for LAPA as one of the practical approaches to
funding NAPA sectoral work at the community analyze critical and site-specific climate issues
level. and address them accordingly with peoples'
participation.
The LAPA is a plan prepared at the local
level by a multi-stakeholder team including The NAPA implementation framework
vulnerable communities. It involves recognises the important role of village
decentralised and bottom-up planning processes development committees and municipalities in
and aims to identify local adaptation needs. It local development planning with plans to
should also strengthen institutional support them to incorporate adaptation
mechanisms for ensuring consolidated and perspectives into their local development plans,
coordinated adaptation responses. In a recent aligning fully with the NAPA.
paper on LAPA, Regmi and Karki lay out the
vision to develop a system of adaptation In recent discussions DFID made clear that
planning that does three things: LAPA implementation would continue to go
through a managing agent, given MoEs capacity
Enables communities to understand constraints. MoE has stressed that funding
changing and uncertain future climatic does not need to go through MoE but should
condition and engage effectively in the go through government, channelled to the
process of developing adaptation priorities; appropriate line agencies. It is unclear how this
will be resolved. As funding comes in to support
Implements climate resilient plans that are identified NAPA projects and full
flexible enough to respond to changing implementation of LAPA develops it is essential
climatic and vulnerability conditions; and that these initiatives can remain linked and
aligned. Ensuring that learning and capacity
Informs programmers and catalyses for LAPA implementation is systematised
integrated approaches between sectors46. within government and shared widely with

46Regmi BR and Karki, G; Local Adaptation Plans in Nepal, Tiempo Climate Newswatch, issue 76, July 2010, pp 21 24.

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 25


networks and active organisations, will be critical. It is too early to be drawing lessons from LAPA
but its design and the pool of funding provide enormous potential to support vulnerable communities
in the scale up of adaptation actions and integration of these into higher level processes. Used
strategically LAPA and NAPA could mobilise further funding and continue to support a
comprehensive and country-owned response to climate change adaptation.

FIGURE 2: NAPA+ AND LAPA - A FRAMEWORK FOR CLIMATE RESILIENT


DEVELOPMENT

A FRAMEWORK FOR CLIMATE RESILIENT DEVELOPMENT


NAPA+ - Central multi-stakeholder coordination;
lesson learning; knowledge management;
climate science

Tourism and industries


Forest and biodiversity

Health and sanitation


Agriculture and food

Water and energy

Priority-setting trade-offs
Infrastructure
security
Urban
Financing

LAPAs: Community prioritises trade-offs;


implementation tracking future climate; informing
integrated support from sectors.

Regmi BR and Karki. G; Local Adaptation Plans in Nepal, Tiempo Climate Newswatch,
issue 76, July 2010, pp 21-24.

BOX 5: CASE STUDY: PILOTING LAPA IN NEPAL FROM REGMI, B AND KARKI, G.47

One of the existing models that LAPA and disadvantaged people using Planning through community forestry.
design...will draw on is that of the wealth ranking. This is done using existing
Livelihoods and Forestry Programme mechanisms such as Community
(LFP). This has been piloting a LAPA- Key to the success of the LFP Forestry User Groups and Public and
type approach to forest management programme (is) effective formalized Institutional Land Management
in over 300 VDCs since 2009. The local institutions known as groups. The Community Adaptation
community forestry programme...has Community Forestry User Groups. Planning programme covers 512
helped enhance rural livelihoods - The LFP supports the Community village development committees and
hence providing climate change Forestry User Groups by providing 2292 community groups (about 50
adaptation benefits - by conducting technical and financial backstopping per cent of the total number of LFP
wider livelihoods-based and to help them understand, plan and Community Forestry User Groups)
community development activities at implement forestry and climate in 15 districts. Rather than creating
the community level. Community change related activities...The LFP new mechanisms, the LFP has used
forestry has provided livelihood has recently started developing... existing mechanisms to develop
opportunities...by using pro-poor adaptive capacity...by systematically community adaptation planning in
inclusive approaches that target poor developing Community Adaptation support of the most vulnerable

47Regmi BR and Karki, G; Local Adaptation Plans in Nepal, Tiempo Climate Newswatch, issue 76, July 2010, pp 21 24.

26 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


communities and people. The User Groups and their network grassroots-level community-based
process started with sensitization of provide very strong sustainable adaptation funding to help innovative
local communities on climate change grassroots-level institutions that can users and vulnerable households
issues, developing guidelines for field take the lead on natural resources access resources and obtain support
facilitators/ practitioners, enhancing conservation and management. The for their adaptation plans. The LFP
the capacity of more than 500 local piloting of local-level adaptation initiatives...provide good lessons for
facilitators/community practitioners planning and community-based LAPAs. The NAPA will build on
on vulnerability assessment and adaptation is done by mobilizing learning from the LFP, particularly
adaptation planning, and supporting these 300 User Groups and the from the pilot projects, on institutional
the preparation of adaptation Village Development Committee-level design, institutional linkages and
plans...targeting poor and vulnerable forestry coordination committees. natural resource management
households. The Community Forestry The programme has also established interventions.

2.9 CIVIL SOCIETY PROGRAMMES AND uncertainty of climate impacts means to current
COORDINATION programming and are starting to review
their projects to examine how to meaningfully
There are a number of civil society integrate climate change adaptation into
programme, research, and networking their work48. These experiences are vital to
initiatives being undertaken on climate change. informing policy and national-level
As with current government programming, programming.
defining what constitutes a climate adaptation
programme is not entirely clear but initiatives Several forums on climate change exist in
are certainly growing within organisations and the country. The Climate Change Network
discourse is becoming more prominent. WWF Nepal (CCNN) is a loose coalition of various
has been supporting the development of the organisations, including national and
Climate Change Policy with government and international NGOs and donors including DFID,
implements two adaptation specific projects in JICA and UNDP. The forum was established
Langtang and Indrawati river sub-basin. CARE, to share information. It meets several times a
Oxfam and Practical Action are also active year. The NGO Group on Climate Change is a
international NGOs. LiBird is one of the most forum of local-level organisations working on
prominent national NGOs, with Environment the ground on climate change, set up with a
and Public Health Organization (ENPHO), strong community-based focus as an
Clean Energy Nepal (CEN), and FECOFUN information-sharing platform. CAN Nepal is a
(Federation of Community Forestry User loose alliance of organisations who are members
Groups in Nepal), Nepal Forum of of Climate Action Network South Asia
Environmental Journalists (NEFEJ) also (CANSA). CANSA is the regional node Climate
important actors. Action Network International. The main
objective of the alliance is to disseminate
With limited funding and a nascent information, discuss and lobby on climate
knowledge base many of these organisations policies at a national and international level.
are in the early days of addressing what the It organises various events and workshops to

48SAGUN and Libird, Climate Change Impacts on Livelihoods of Poor and Vulnerable Communities and Biodiversity Conservation: A Case Study
in Banke, Bardia, Dhading and Rasuwa Districts of Nepal, CARE Nepal, 2009

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inform climate negotiations at the international These networks have not yet played a
level. Only NGOs and INGOs can be members significant role in gathering information and
of the alliance. Representatives of NGOs are advocating around financing and governance
also on the MCCICC and the Climate Change at the national level, although recently there
Council though the lack of formal and detailed has been a fairly strong collective voice
terms of reference for both these bodies and advocating against the PPCR loan. This is in
any contractual arrangements for members part because discussions tend to be held behind
limits their effectiveness and the degree to closed doors and the issues are opaque. However
which they can serve as accountable these alliances can be maximised by members
representatives. examining the impact, or lack, of current
financing and governance models on climate
As these are loose and informal alliances, programmes in the communities where they
representing a large and diverse number of work and use platforms strategically to agree
organisations coordination and effective common key policy objectives and actions. To
information flow is a challenge. Activity has achieve this entails a level of structure and
tended to be centred in Kathmandu and formalisation as well as the need for dedicated
dominated by the larger international and resources.
national NGOs. However some deliberate cross
over in membership between the networks, As climate adaptation initiatives are growing
attempts to make better linkages and increasing and organisations struggle to understand what
attention to organisation and information flow this means to their programming, there is an
is beginning to address these weaknesses. Lack increasing need to prioritise good knowledge
of legal status can also a barrier to progressing management practices. It is critical that
work and dialogue with policy makers. There resources and capacity are put into building
is some resistance to spending time and energy knowledge and gathering evidence to
on formalising these platforms amongst demonstrate what is working and what is not
members, who have little spare time and working. Only once this is happening
resources and believe their work is in systematically, can successful actions be scaled
implementation at the community level. The up, learning more widely shared and effective
difficulty comes in presenting a coherent and policy and advocacy platforms built. The media
informed voice to policy makers and ensuring has a growing voice and private sector,
that the evidence from programming and local parliamentarians and government institutions
knowledge feeds into decision making. Clearly at the local level are also critical players.
these NGOs are not the sole purveyors. However Climate networks need to reach out to
they are often at the forefront of working with educational institutions and the scientific
communities and community organisations; community as well as build stronger linkages
innovating, piloting initiatives and seeing the to the media and parliamentarians. These
results of policy implementation. As a collective alliances need to continue to explore effective
they have strength in this experience and their ways to reach out, represent their members
breadth and diversity. Finding ways to pool and be strategic in their actions. A future
this knowledge and effectively communicate to climate model must incorporate sufficient
decision makers is critical to informing strong resources, separate to project implementation,
debate and influencing successful policy for civil society to play the information,
making. coordination and watchdog role that is
desperately needed.

28 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


TABLE 3: MAIN CLIMATE CHANGE PROGRAMMES AND CAPACITY BUILDING INITIATIVES FUNDED IN NEPAL49
Mechanism Programme/Project Donor Agency Funding Funding Implementing GoN Timeline Detail and Current status
committed or projected $ Agency/Admi Agency
disbursed $ nistrator

ADAPTATION PROGRAMMES

Climate Investment Pilot Project for Climate Various - multi- 225,000 WB/ADB jointly MoE 2009-2012 Proposal tentatively approved. Funding currently
Funds/ Strategic Resilience (PPCR) donor trust fund in the form of TA with project team within MoE.
Climate Fund
..
Strategic Programme for Various - multi- 110 million: ADB MoE ADB/WB Mission in Feb to make final decisions
Climate Resilience (PPCR) donor trust fund 50m grant and on funding and implementation (see above).
60m loan

Global Environment National Adaptation GEF (various - 200,000 UNDP MoE 2009-2012 NAPA approved by cabinet in Sept 2010 and
Facility /Least Programme of Action multi-donor trust submitted to LDCF. 9 priority projects identified
Developed Countries (NAPA) fund) with a cost of $350m budgeted. Currently no
Fund UNDP 50,000 funds committed.
DFID 875,000
Danida50 200,000

Adaptation Fund - Various - multi- CDM levy of MoE nominated by MoE Fiduciary risk assessment submitted and awaiting
donor trust fund 2% on CERs government as the response from Adaptation Fund Board. Hope
plus small National that fund can be used for identified projects under
donor support Implementing Entity NAPA.
(NIE).

In-country Reducing the Climatic DFID 17.3m 26.3m Contracted to MoE (on Piloting due to finish in Jan/Feb 2011 with
donor funds Vulnerability of the Poor (10,730,000) (19.4m) HTSPE as managing Steering implementation beginning in March. Commitment
(Local Adaptation agent. Pilot Committee) for four years.
Programme of Action implementation to 6 EU expected to co-fund. Implementation expected
(LAPA) EU NGOs. to continue under a managing agent.

In-country National Forestry SDC 42.4m Ministry of 2010-2020 The new National Forestry Programme will
donor funds Programme, component Finish 6.8m FOrests and contribute to better livelihoods of the poor,
on climate change DFID 64m Soil vulnerable and disadvantaged people, particularly
Conservation women.

In-country Livelihoods Forestry DFID 37m Ministry of 2001-2011 Enhance the assets of rural communities
donor funds Programme (22.8m) Forests and through more equitable, efficient and sustainable
Soil use of forests and natural resources.
Conservation

49Adapted and sourced from Matrix of Climate Change Activities in Nepal funded by UN Agencies provided by UNDP and Matrix of Climate Change Activities in Nepal provided by DFID as well as the Nepal
Climate Change and Development Portal, www.climatenepal.org.np Where possible this has been cross-checked with agency project information. This is not an exhaustive, up-to-date list but hopes to provide
a snap shot of the current funding situation.

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50UNDP, DFID, Danida supplemented funding in country

29
30
In-country Strengthening Capacities FAO/UNDP 722,555 Ministry of 2008-2010 Pilot project implemented by Ministry of Agriculture
donor funds for Disaster Preparedness Agriculture and to address agricultural vulnerability to climate
and Climate Risk and 2009-2011 change impacts of farmers
Management in the Cooperatives
Agriculture Sector

CAPACITY BUILDING to GoN


GEF Trust Fund Climate Change Enabling GEF - multi- 410,000 UNEP MoE 1999 Preparation of initial National Communication for
Activities/National Capacity donor trust fund UNFCCC. Unclear whether this support is
Self-Assessment51 ongoing or not.

ADB/Technical Strengthening Capacity for ADB 1.275m52 ADB MoE 2008 Support to government in the form of TA to
Assistant Special Managing Climate Change onwards strengthen capacity to manage climate change
Fund and the Environment and the environment through long-term vision
and planning.

Building a Climate Resilient ADB ADB NPC Integration of climate risk and resilience into
Development Plan development policies and planning: 2011 2013
National Development Plan

Climate data digitization ADB 400,000 DHM 9 months Digitization and quality control for meteorological
and downscaling of climate data and development of statistical climate
change projections downscaling

In-country donor Supporting national climate Danida 137,576 MoE Emphasis on preparing Nepal for global
funds change capacity building (DKK 748,000) negotiations

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


In-country donor Supporting national climate DFID $500,000 MoE Emphasis on preparing Nepal for global
funds change capacity building negotiations

In-country donor Improved capability of the Finland 680,000 DHM 2010-2012 Improve capacity to respond to increased risks
funds Government of Nepal to of natural disasters related to weather and climate
respond to the increased
risks related to the weather-
related natural disasters
caused by climate change

In-country donor Strengthening Capacity for Danida 400,000 DHM 2009-2011


funds Flood Reduction and
Adaptation to Climate
Change

51United Nations Environment Programme, Global Environment Facility, Climate Change Expedited Financing (Interim), Measures For Capacity Building In Priority Areas (Part II), Nepal Project Document and
gefonline.org
52http://www.adb.org/Projects/project.asp?id=40545
MITIGATION AND CARBON MARKETS
Forestry Carbon Reducing Emissions from Various - multi- 3.2m World Bank MoFSC REDD cell established and Nepal is working
Partnership Facility Deforestation in Developing donor trust fund towards the preparation of the readiness plan.
Countries (REDD)

Climate Investment Scaling Up Renewable Various - multi- 40m ADB MoE The project proposal approved by the SREP
Funds Energy Programme donor trust fund Expert grouop and decided to finance.
(SREP)

GEF Trust Fund Kathmandu Sustainable 2.8m ADB MPPW 2010-2014


Urban Transport (SUT)
Project

Alternative Energy DANIDA 30m AEPC 2007-2012 Energy Sector Assistance Programme building
Promotion Centre Norwegian 22m capacity for AEPC to function as national resource
(AEPC)/Energy Sector Embassy centres for alternative energy promotion
Assistance Programme
(ESAP)

Renewable Energy Project EU 21m 2004-2012 Creating renewable energy infrastructure in 21


districts

Biogas Project World Bank 7m 2006-2015 To reduce global emissions of carbon dioxide,
two biogas operations are being supported. This
project aims to increase access to modern energy
sources in the rural and peri-urban areas of Nepal

Biogas Plants Germany 31m KFW 1997-2011 Use of underground 'digesters' that utilize bacteria
to generate methane gas from cattle dung.

Nepal Swiss Community Swiss Dev. 44.5m MoFSC 2008-2011 Linking community forest user groups to carbon
Forestry Project Cooperation (CHF 4.2m) markets and strategy development and
(SDC) preparation for REDD

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


31
3
CONCLUSIONS

CLIMATE FINANCE MARKED BY FRAGMENTATION coordination body has been established under
AND UNPREDICTABILITY: the leadership of the Prime Minister and a
multi-stakeholder committee to coordinate
Similar to the financing of development in initiatives at the programme level is also
Nepal, the financing for climate change functioning. These are significant
adaptation has been fragmented and achievements. Much expectation was placed
disconnected. Funding has been unpredictable on NAPA to galvanize efforts and build a
and piecemeal, impacting on the possibility of strategic and harmonised platform for action
long-term national planning and commitment and finance. The momentum built in the early
and delivery of resources and support to days of NAPA managed to progress efforts to
vulnerable communities. Given the conflict and improve donor coordination with achievements
political uncertainty that has followed, the aid such as the signing of the donor compact
effectiveness agenda has struggled to make between Ministry of Environment and a number
much progress. Although a donor compact of donors; and alignment behind NAPA and
achieved some success in improving donor the Ministry of Environment with additional
coordination it commits but does not bind donors pooled funding from donors in-country. NAPA
to a set of principles and does not indicate has been credited by many with being a
financial commitments or modalities. Attention consultative and inclusive process that has
is being paid to developing a national financing gone a long way to narrow the gap in current
model and governance framework but progress knowledge and identified needs.
is slow and getting traction is challenging whilst
gaps in expectation between government and ...BUT RESOURCES AND CAPACITY ARE LACKING:
donors remain extremely wide.
MoE is severely constrained by a lack of
STRUCTURES ARE BEING PUT IN PLACE AND POLICY human resources and has been largely
AND PLANNING PROGRESS MADE: dependent on technical assistance inputs funded
by donors, in the form of consultants. The
The Ministry of Environment has been made Ministry questions to what degree this has
the focal point for climate change efforts. A actually built capacity and institutionalised
specific Climate Change Management Division learning but whilst the systems and technical
is being established. A high-level policy and capacity are not sufficiently present within the

32 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


civil service currently institutionalising this Local Government Capacity Development
capacity will remain a challenge. The newly Programme are critical. Lessons from LAPA
formed climate division does not yet have the piloting are not yet clear, but if the pilots
resources, capacity or authority it needs. There demonstrate success there will be much to learn
are a number of ongoing pieces of separate about successful community adaptation actions
capacity building initiatives funded by donors. and integrated development planning. With
The most significant of these is a technical funds from DFID and EU for a large programme
assistance project from ADB that should result lined up tensions on the funding modality for
in the institutional and financial framework LAPA need to be overcome to ensure that MoE
for climate change and developing professional remains meaningfully engaged and LAPA
skills. It is hard to see how these various pieces continues to be aligned to NAPA. If present
link up and become part of an overall strategy. conditions mean DFID and EU will channel
Unless its staff and technical capacity are funding for LAPA outside government this
augmented soon the MoE will struggle to needs to be put within a larger discussion about
manage the growing climate change project commitments towards the long-term financing
portfolio. Since the NAPA document was framework. In the meantime other institutional
finalised, action has been taken on several mechanisms could be put in place to ensure
areas of coordination and knowledge MoE and the government remain centrally
management. However securing significant engaged and do not feel alienated.
levels of funding for projects remains unclear.
What looks likely is funding for NAPA projects GLOBAL CONTROVERSY OVER PPCR GOVERNANCE
will come from various different mechanisms, AND FINANCE PLAYS OUT AT THE NATIONAL LEVEL
divided between different donor implementing BUT THERE HAVE BEEN SOME ACHIEVEMENTS IN
agencies. ALIGNMENT:
NAPA RECOGNISES THE NEED TO DELIVER There is palpable disappointment amongst
RESOURCES TO THE LOCAL LEVEL AND LAPA stakeholders in how PPCR has been developed
PRESENTS A POSSIBLE MODEL BUT THERE ARE and concern that the programme will be
BOTTLENECKS TO OVERCOME: implemented with limited national ownership.
However, there have been some successes in
NAPA also leaves many of the more detailed aligning the PPCR with Nepal's NAPA. The
questions of adaptation implementation proposed grant component is likely to be the
unanswered. There are concerns about the first piece of significant funding explicitly for
amount of time it will take to significantly climate change adaptation and national system
operationalise NAPA. Under the coordination strengthening. Stakeholders should continue
of a relatively small and nascent ministry it to use existing forums and networks to engage
will be critical to figure out how to remain with PPCR and push to influence its
strategic and effectively channel funds, through implementation in alignment with NAPA.
a number of larger implementing line ministries
to the district level and down. MoE needs In addition, the loan element is becoming
political backing and authority across increasingly contentious amongst domestic
government. Although there have been constituencies. Considerable additional analysis
improvements in financial management with and discussion is required to clarify the issue
channels of funding to the local level more open and decide on the best course of action in the
than before, there are still many bottlenecks, spirit of the Nepal Governments recently issued
particularly at the district level. Linkages with climate change policy and Nepals position as
the Ministry of Local Development and the a leading LDC affected by climate change.

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 33


PROMOTING SOCIAL EQUALITY IN CLIMATE progressively more active and vocal. They are
ADAPTATION NEEDS TO EXPLICITLY ADDRESS being invited into planning and consultation
RESOURCE DISTRIBUTION AND INSTITUTIONAL spaces and their voices increasingly heard.
STRUCTURES, MOVING FROM ANALYSIS TO There are positions for civil society
representation on the MCCICC and nominated
IMPLEMENTATION:
experts on the climate change council are from
Whilst the differentiated impacts of climate NGOs. More formal, detailed terms of reference
change on social groups and between men and and contractual relationships for members of
women have been relatively well examined and these bodies would add greater legitimacy and
understood, moving from this to developing weight to their presence. The main civil society
effective strategies within programmes presents coordination bodies are disconnected, not best
a greater challenge. There is much heated serving effective dialogue, policy influence and
debate at the international level on distributive information flow. Lack of legal status for the
justice (deciding equitable use of resources key civil society networks and dedicated
between countries) and thematic balance resources for coordination and information
(between mitigation, adaptation, technology sharing limit their potential. As programming
transfer and capacity building) 53 . These develops and opportunities for funding open
considerations also need to filter down to the up, coordination and convergence between
national level to consider appropriate organisations will be important to ensure funds
mechanisms for fair resource distribution flow effectively down to the local level targeting
between and within communities. Existing the most appropriate projects and people.
funding mechanisms are not designed to deliver
resources that prioritise the most vulnerable. BUILDING AN EVIDENCE BASE FOR SUCCESSFUL
NAPA planning incorporated a significant ADAPTATION:
examination of gender and vulnerability
dimensions and has paid attention to this in There a number of civil society organisations
the implementation framework to some extent supporting community adaptation through a
by incorporating the need for gender and social variety of projects. Knowledge management
inclusion analysis at the local level but it is needs to be more centrally prioritised in order
hard to see how this translates into current to build a sound evidence base for scaling up
project profiles and corresponding activities current efforts and sharing learning widely.
when it is absent in objectives, outputs and NAPA has begun to do this through the
outcomes. Gender also seems to be largely establishment of the MCCICC and the Climate
missing in PPCR design. It is too early in Nepal Change Knowledge Management Centre but it
to assess the extent to which gender and social is early days and there are many civil society
equity ambitions on paper translate into action organisations beyond the scope of current NAPA
but unless policies and programmes are more initiatives, working directly or indirectly on
explicit about how activities address the climate adaptation actions with vulnerable
different needs of poor men and women there communities. In particular evidence of effective
is a danger it will not happen in practice. gender transformative activities and challenges
are needed.
CIVIL SOCIETY FORUMS ARE ACTIVE AND
INCREASED FUNDING WITHOUT BETTER
CONSULTATIVE SPACES INCREASING BUT HARMONISATION AND ALIGNMENT INCREASES THE
IMPROVING INFORMATION FLOW AND INFLUENCING BURDEN ON ALREADY WEAK INSTITUTIONS:
POLICY NEEDS STRATEGY AND DEDICATED
RESOURCES: In the absence of a coordinated mechanism
to capture climate change adaptation funding
Civil society forums on climate change are there is a real fear that funds will increase and

53Mller, B. The Time is Right! Devolution of funding decisions to designated national/regional climate change funding entities, November
2009, Oxford Institute for Energy Studies, p. 1

34 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


the number of different modalities and agencies (AEPC), with MoE providing oversight and
involved will continue to proliferate and coordination, are two such options.
fragment. Whilst government juggles the
different modalities, with more funding The challenge to respond effectively to the
expected, MoE will struggle to strategically realities of climate change is clearly formidable.
manage the different strands without better Action at the national level is undoubtedly only
harmonisation and a clear commitment from part of a much greater, more complicated
donors of how they will pool resources and picture. Decisions at the international level
initiatives in support of development of national will have enormous bearing on the progress
systems. This could depend to a large degree that Nepal is able to make. However a
on the governments leadership in identifying sufficiently resourced, sustained and nationally
resources and clear plans for the Climate owned programme of action is needed. A
Change Management Division as well as a programme that can deliver resources and tools
being able to produce a sound proposal for a to enable poor and marginalised communities
national funding entity. It could also depend to adapt, that places women at the forefront of
on the degree to which donors are forthcoming this change and prevents any further slowing
in agreeing to a joint position on their minimum in the gains that have been made in
criteria for channelling funding, and working development. There are concrete steps that
with government on a roadmap to get there. have been made, but progress is fragile. With
Domestic stakeholders must not be left out of the almost simultaneous emergence of NAPA,
these discussions. Wide consultation and PPCR and LAPA coming together with a climate
participation in design will help to promote change policy and proposals for establishment
ownership and engagement, which will be vital of a climate fund, it is essential to pull unlinked
for any transformative action on climate change initiatives together. Donors must coalesce and
adaptation. If MoE is accredited by the strive to find a common, robust and accountable
Adaptation Fund and manages to obtain mechanism that can channel funds to support
funding it may help to further propel these national systems and effective climate change
efforts but this is currently unknown. Interim adaptation to the most vulnerable. If the
options must be considered, whilst MoEs barriers can be overcome there is an opportunity
capacity is strengthened. Channelling funding for these actions to chart a new path for
through another entity following a model such sustainable development in Nepal.
as the Alternative Energy Promotion Centre

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 35


4
RECOMMENDATIONS

GOVERNMENT OF NEPAL trust, is transparent and robust and aligned


closely with national systems. Look to better
Immediate areas to address regarding the aid effectiveness models where these do exist
organisational structure of Ministry of and draw lessons for climate funding.
Environment and climate change activities
Decide exact mandate of MoE, its role and Put forward immediate interim options for
functions and how it will interlink with other channelling funding through another entity
ministries, agencies and departments on outside of government that MoE can have a
climate change. Communicate this within role in terms of administration and oversight.
government.
In the establishment of an institutional
Map existing resources with current and framework develop clear principles and
project programmes to clearly assess the strategies around promotion of gender and
capacity gap in terms of financial and human social equity, considering how these
resources and what would be need to fill principles can be reflected within the
this. governance structure as well as distribution
of resources, thematic areas and
Fill current vacant positions within MoE. programming. Build these into any
monitoring and evaluation framework.
Furthering Climate Planning and Policy
Develop a long term climate change strategic Build in windows for on-budget (for public
plan to underpin the climate change policy. sector projects) and off-budget (for civil
society projects).
Review current relevant legislation and
consider where this can be strengthened. Ensure these processes incorporate broad
Consider drafting of new legislation to better consultation and progress towards developing
enforce areas of the climate change policy. the institutional framework is communicated
widely to stakeholders.
Development of an institutional structure
and national funding entity Develop detailed terms of reference and clear
Take greater leadership in developing and arrangements for decision making bodies
agreeing a detailed roadmap with milestones and coordination fora under government.
for expediting the establishment of a national Clarify how the MCCICC, Climate Change
climate finance entity that garners sufficient Council, Climate Change Knowledge

36 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


Management Centre and planned Climate financing is in addition to and does not
Change Centre will interact and coordinate. displace any existing ODA commitments.

Oversight and Accountability CIVIL SOCIETY


Revive the Natural Resources and
Environment Committee with dedicated Formalise and improve coordination,
resources, ensuring cross party expertise. broaden coalitions and build evidence
Prioritise joint working to improve knowledge
Conduct information sessions in parliament management and evidence building on
on key climate change issues, programmes adaptation efforts.
and policy.
Agree common policy objectives and prioritise
DONORS joint actions across networks and advocate
on these with policy makers.
Capacity Building Initiatives
Jointly commission an external independent Consider organising a regular forum to bring
review of current capacity building initiatives networks together.
to assess areas of progress and weakness
and make recommendations going forward. Consider legalising networks and putting
dedicated resources behind a national
Re-examine the current fragmented secretariat. Seek funding and support outside
approach to capacity building and work of Nepal.
jointly on pooling assistance, using the
recently approved Climate Change Policy as Reach out to make linkages with
an overarching framework from which to parliamentarians, educational and research
develop a convergent long term strategy for institutions and media organisations.
strengthening climate change capacity within
the MoE and other agencies. Ensure country experiences on finance,
governance, policy and programming is
Support further strengthening of the feeding into and informing international
governments financial and procurement forums.
mechanisms with suitable monitoring to
track improvements. Finance Model and Governance
Push for consultation and participation in
Finance and Coordination decision making with government and donors
Develop one pooled multi-donor trust fund on a national funding entity and governance
as an interim mechanism that can begin to structure. Ensure positions are clear and
foster alignment and harmonisation. As an informed and have buy-in of members.
interim measure agree options with GoN for
channelling this through an entity outside Advocate for dedicated resources in climate
of government. adaptation projects for gathering evidence
and sharing information.
Clearly communicate minimum conditions
for channeling current funding through a Advocate for need for sufficient oversight
national level climate fund. and accountability mechanisms to be built
into the institutional structure and a clear
Ensure experiences and constraints of role and legitimacy for civil society.
institutional practices as they play out at a
national level are fed back to headquarters. Advocate for civil society resource envelop
and clear decision making structure on
Donors should ensure that climate change resource allocations.

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 37


38
FIGURE 3: INTERNATIONAL CLIMATE FUNDING ARCHITECTURE AND LINKS TO MAIN CLIMATE ADAPTATION PROGRAMMES IN NEPAL

Conference of the Parties


Kyoto Protocol
13 countries
UNFCCC/Climate Change Secretariat
Mostly Annex I/II
$ Parties plus some $ Clean Development
other countries Mechanism & other sources

WB Trustee Global Environment Facility (GEF)


CIFs $
WB Trustee
Adaptation Fund Board

Clean Strategic
Technology Climate
Fund Fund
Least Developed Special Climate
GEF Trust Fund Countries Fund Change Fund Adaptation Fund

Funding and governance at global level


FIP SREP PPCR 10 possible GEF implementing agencies, responsible for creating project 'Direct access' No funding
proposals and for managing GEF projects in country. currently but MoE nominated

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


as National Implementing
Agency. Awaiting decision

$225,000 $410,000 $200,000


DFID
Government of Nepal
$875,000
World Bank ADB UNEP UNDP

$50,000= Danida
1.325m. MoE
$200,000 NAPA PIU

PPCR 'Enabling NAPA+


activities'

Nepal level
development development PPCR PIU
grants NAPA
implementation
budget 350m. No
Funding yet PPCR Implementation

Funding and implementation at


tentative budget 110m
loan and grant
EXPLANATORY NOTES (FIGURE 3)

Sources: unfccc.in, gef.org, gefonline.org;


climateinvestmentfunds.org, adpatationfund.org and
climatefundsupdate.org

Conference of the Parties (COP) India, Indonesia, Ireland, Italy, Japan, Republic
The supreme body of the United National of Korea, Luxembourg, Mexico, Netherlands,
Framework Convention on Climate Change New Zealand, Nigeria, Norway, Pakistan,
(UNFCCC) Convention. It currently meets once Portugal, Slovak Republic, Slovenia, South
a year to review the Convention's progress. The Africa, Spain, Sweden, Switzerland, Turkey,
word "conference" is not used here in the sense United Kingdom, and the United States.
of "meeting" but rather of "association," which
explains the seemingly redundant expression Least Developed Countries Fund (LDCF)
"fourth session of the Conference of the Parties." Set up to address the needs of the 48 Least
Developed Countries (LDCs) that are especially
Global Environment Facility (GEF) vulnerable to the adverse impacts of climate
The Parties to the Convention assigned change. Supports a work programme to assist
operation of the financial mechanism to the Least Developed Country Parties (LDCs) carry
Global Environment Facility (GEF) on an on- out, inter alia, the preparation and
going basis, subject to review every four years. implementation of NAPAs To date, the fund
The financial mechanism is accountable to the has 19 donors: Australia, Austria, Canada,
COP, which decides on its climate change Denmark, Finland, France, Germany, Ireland,
policies, programme priorities and eligibility Italy, Japan, Luxembourg, Netherlands, New
criteria for funding, Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, and United Kingdom.
Global Environment Facility Trust Fund Contributions of about $180 million have been
The common funding resource of the Global received for the LDCF; the target in the next
Environment Facility (GEF). Climate Change four years is to reach $500 million, which is
is one of the six focal areas supported. The the amount estimated by the UNFCCC needed
objective of this part of the fund is to help to finance NAPA implementation as well as to
developing countries and economies in move toward a four-year replenishment process.
transition to contribute to the overall objective
of the UNFCCC. The projects support measures Special Climate Change Fund (SCCF)
that minimize climate change damage by To implement long-term adaptation
reducing the risk, or the adverse effects, of measures that increase the resilience of national
climate change. The GEF Trust fund has development sectors to the impacts of climate
received a total of $10.885 billion during four change. The SCCF should serve as a catalyst
replenishments. There are 39 donors that have to leverage additional resources from bilateral
committed funds: Argentina, Australia, Austria, and other multilateral sources. The Parties to
Bangladesh, Belgium, Brazil, Canada, China, the Climate Convention identified adaptation
Cte dIvoire, Czech Republic, Denmark, Egypt, to climate change as the top priority of the
Finland, France, Germany, Greece, SCCF, and that technology transfer and its

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL 39


associated capacity building activities as National Implementing Agencies: the Centre
another essential area for funding. 14 funders: de Suivi Ecologique from Senegal, the Planning
Canada, Denmark, Finland, Germany, Ireland, Institute of Jamaica and the Agencia Nacional
Italy, Netherlands, Norway, Portugal, Spain, de Investigacion e Innovacion of Uruguay. The
Sweden, Switzerland, United Kingdom and following multilaterals are also accredited as
United States. As of May 31, 2010, the total implementing agencies: UNDP, the World Bank,
amount deposited is USD eq. 110.48 million, ADB, the International Fund for Agricultural
97m disbursed. Development (IFAD), UNEP and the World
Food Programme (WFP). It has so far approved
Adaptation Fund (AF) and Adaptation two projects in Senegal and Honduras,
Fund Board (AFB) amounting to approximately $14.3m and
The Adaptation Fund is supervised and endorsed six more.
managed by the Adaptation Fund Board (AFB).
Upon invitation, the GEF provides secretariat Climate Investment Funds (CIFs)
services to the AFB and the World Bank serves Two funds to help developing countries pilot
as trustee of the Adaptation Fund on an interim low-emissions and climate-resilient
basis. The Adaptation Fund finances concrete development. 45 developing countries are
adaptation projects and programmes in piloting projects. The CIFs are channeled
developing countries that are Parties to the through the African Development Bank, Asian
Kyoto Protocol. It is financed with a share of Development Bank, European Bank for
proceeds from the Clean Development Reconstruction and Development, Inter-
Mechanism (CDM) project activities and funds American Development Bank, and World Bank
from other sources. The share of proceeds Group. The funds are disbursed as grants,
amounts to 2% of certified emission reductions highly concessional loans, and/or risk mitigation
(CERs) issued for a CDM project activity. As instruments. There are 13 countries providing
of November 2010, the total amount pledged funding: Australia, Canada, Denmark, France,
to the Adaptation Fund, including CERs, is Germany, Japan, Netherlands, Norway, Spain,
USD 216.15 million and the total amount Sweden, Switzerland, UK, US. $6.1b pledged.
deposited, including CERs, is USD 202.11 The CIFS are divided into two funds: the Clean
million. The Adaptation Fund received 10 Technology Fund ($4.5b) and the Strategic
funding proposals up to September 2010, with Climate Fund ($1.9b). The Strategic Climate
a total requested funding amount of USD 60.9 Fund supports three programmes, one of which
million. The Adaptation Fund allows direct is the Pilot Programme on Climate Resilience
access to the fund by parties, as opposed to (PPCR), currently under development in
through a multilateral institution, as is the Nepal.
model of other funds. It has accredited three

40 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


FIGURE 4: PROPOSED COUNTRY LEVEL OUTLINE FOR NATIONAL INSTITUTIONAL STRUCTURE

KEY ISSUES UNFCCC COP


Relationship between Board and
COP; board is accountable to, PROPOSED
under the guidance of, and under Green Climate Fund Board: INTERNATIONAL
the authority of the COP? 24 members, equal no developed and Secretariat
WB as trustee for how long? developing, regional groupings, ARCHITECTURE
Fund mobilisation to get to SIDs and LDCs
$100bn.
A fund of funds or co-existing
fund? And will WB invoke the Trustee (WB interim) Other existing funds
Sunset clause on the CIFs? Green Climate Fund:
under UNFCC
Disbursement direct access? 30bn 2010-2012, 100bn / yr. by 2020
and outside
Loans, grants, guarantees etc?

$
$
OUTLINE NATIONAL
GoN ARCHITECTURE
Climate Fund
Board

National Implementing Donor pooled fund


Entity (MoE or other) $
Committee Committee Committee
gender, and social equity

Climate Trust Fund (Nepal)


$ Windows for CS, public sector and
Climate Change Centre thematic areas National-level planning, system
$ strengthening and implementation
$

Natural Resources and Environment


Parliamentary Committee
Regional and district units Regional and district units Regional and district units
(government and other) (government and other) (government and other)

Civil society District and community-level adaptation


forums and programmes
networks
Cross cutting principles and goals monitored at each level on

MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


41
EXPLANATORY NOTES (FIGURE 4)

Climate Trust Fund Policy and Strategy


Options to establish a new semi-autonomous Oversees implementation of climate
body, a body directly under GoN/MoE or open programmes
a window under existing Fund, such as the Monitoring, reporting
Environment Protection Fund.
Separate windows for CS, public sector and
Climate Change Centre
thematic areas. Clearly earmarked funds and
Research and technical guidance.
criteria for decisions over allocation of resources.
Responsible for regularly publishing and
disseminating information about funded
Climate Fund Board
programmes and climate research.
New provisions and fiduciary standards
formulated to govern it.
Donor pooled fund
Climate Change policy as guidance.
Short-term minimum requirement for donors
Members of government, private sector, cross-
to set up a donor trust fund to pool funding.
parliament, civil society and technical experts.
MDBs continue to channel money through
Gender balance on the board. Regional
government for Climate Fund.
representation.
Interim as projects phase out and to capture
Donors observer status.
small levels of in-county funding, possible TA
Responsible for drawing up criteria and etc.
guidance to select national implementing entity
Donors nominate lead donor to channel fund
and sub-national entity(ies)
such as under Nordic Plus Agreement.
Responsible for high-level finance, policy and
strategic guidance
Watchdog Body/Parliamentary Committee
Establish separate committees on finance,
Separate funding stream for funding watchdog
programmes, as appropriate. MCCICC folded
body. Existing parliamentary committee to be
into a committee or continues to operate as is.
reviewed and properly resources. Examine
Climate Change Council folded into the Board
possibility of funding separate watchdog body
but appointments reconsidered according to
to provide independent scrutiny in coordination
clear criteria and guidelines
with parliamentary committee. Committee of
civil society, academia and parliament members.
National Implementing Entity
Under authority of Fund Board Adaptation programmes - other
Possibly MoE with sufficient human resources government agencies, civil society, private
and legitimacy, a new body or other existing sector
institution Funding to government agencies. Specific
Acts as focal point and main coordination body. window or % for civil society and public private
Implementation of national Climate Change partnership initiatives.

42 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


REFERENCES

ADB Technical Assistance Report, Federal Democratic Republic of Nepal: Strengthening Capacity
for Managing Climate Change and the Environment, Nov 2008

World Bank/ ADB/ IFC, Aide Memoire, Nepal: Pilot Program for Climate Resilience (PPCR) World
Bank/ ADB/ IFC Joint Mission, 15-21 November 2010, 23 Novmeber 2010

Bird, Brown and Schalatek;, Design Challenges for the Green Climate Fund, Climate Finance
Policy Brief No.4, Heinrich Bll Stiftung and ODI, January 2011

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44 MINDING THE MONEY: GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE IN NEPAL


MINDING THE MONEY
GOVERNANCE OF CLIMATE CHANGE ADAPTATION FINANCE
IN NEPAL
This research is linked to an Oxfam global policy brief and series of country
researches on the governances of climate change funding in developing countries.
The research is designed to inform Oxfam's advocacy on how climate change
adaptation funding should be managed in developing countries so that it fulfills
the goals and needs of the marginalized and most vulnerable communities, with
a particular focus for smallholder women farmers. Country researches have also
been conducted in Bangladesh, the Philippines, Cambodia, Vietnam and Ethiopia.
Country briefs are also intended to feed into policy dialogue and advocacy at the
national and regional level.

Country Programme Office, Nepal


Jawalakhel-20, Lalitpur
GPO Box 2500, Kathmandu
Tel: +977-1-5530574/ 5542881
Fax: +977-1-5523197
E-mail: oxnepal@oxfam.org.uk

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