Home Environment AfDB Report Urges Action on Uganda’s Climate Finance Deficit

AfDB Report Urges Action on Uganda’s Climate Finance Deficit

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Uganda is striving to secure the necessary funds for climate finance over the next decade, estimated at 3-4 billion dollars. However, according to a recent report from the African Development Bank (AfDB), the country is facing difficulties in obtaining this crucial funding.

The AfDB’s Uganda report indicates that only about 25% of the required funds, roughly 785 million dollars, have been mobilized. Peter Engbo Rasmussen, the Principal Country Economist at AfDB’s Uganda office, noted a substantial gap between what Uganda needs for climate adaptation, mitigation, and loss prevention and what it is currently receiving.

Rasmussen made these remarks during the launch of the Country Focus Report 2023, which centers on “Mobilizing Private Sector Financing for Climate and Green Growth.” The report reveals that private-sector contributions to climate financing are even lower, with only 3.4% of the provided 785 million dollars coming from the private sector. Notably, sectors such as agriculture, forestry, cross-sectoral initiatives, and energy systems have received the most climate financing.

To bridge the climate financing gap and meet Uganda’s climate adjustment requirements, an estimated 2.9 billion dollars will be necessary.

The report underscores that a significant portion of Uganda’s climate finance currently relies on international partners as publicly available funds. Rasmussen emphasized the urgent need for increased private sector participation in climate financing.

The report proposes several steps to address the situation, including the identification of attractive projects to attract investors and the utilization of Uganda’s abundant natural resources, both renewable and non-renewable, to finance climate change impacts and promote green growth.

The report also highlights Uganda’s current experience of climate change, including a 1.3-degree temperature increase since the 1960s and anticipated further temperature rises of 1.5-2.0 degrees over the next 50 years. These changes are expected to result in warmer weather conditions, more extreme weather events like heavy rainfall, floods, landslides, and prolonged droughts. The report also acknowledges the additional environmental and economic impacts of a rapidly growing population.

Experts suggest that Uganda can harness its natural resources, including the oil and gas reserves in the Albertine region, to fund climate change initiatives. Uganda is estimated to have 1.4 billion barrels of commercially viable oil reserves, with production slated to begin in 2025. To maximize the benefits of these reserves, the government must plan for their sustainable utilization, as the current production period is limited to 20-25 years.

Apart from oil and gas, the report identifies the potential for Uganda to become a regional producer and exporter of green iron and steel. However, this endeavor would require partnerships with firms due to the extended development timelines for mineral projects. Furthermore, discussions with global developers of green hydrogen, a vital component in green iron and steel production, are suggested.

In response to the report, Denis Mugaga, the Head of the Climate Finance Unit at the Ministry of Finance, acknowledged the decreasing global climate finance, including grants and concessional funding. Uganda faces challenges in financing its climate ambitions, as outlined in its Nationally Determined Contribution (NDC) under the Paris Agreement. Uganda had aimed to raise 21.8 billion dollars for adaptation and mitigation, with 15% coming from national resources and 40% from the private sector.

Mugaga revealed that the government invested approximately 7 trillion shillings in the current fiscal year, but for Uganda to meet its NDC targets, annual investments of 14 million dollars are required. To bridge the gap, Mugaga emphasized the need to increase domestic resources and access financing from organizations such as the UNFCCC’s Global Environment Facility, the Green Climate Fund, the adaptation fund, and multilateral agencies like the World Bank.

The Ministry of Finance is working on climate budget funding within the program-based budgeting system, quantifying adaptation and mitigation actions in all programs under the NDP III.

The report highlights the high long-term costs of climate inaction, which could far exceed the funds required for infrastructure and economic adaptation to rising pressures. The Ministry of Water and Environment estimates that by 2025, the annual cost of inaction could range from 3.1 to 5.9 billion dollars, increasing to 18-27 billion dollars by 2050 due to unmet irrigation and biomass demands.