Impact of Climate Change on the Poor: Strengthening Country Capacity to Build Resiliency Through A Climate Action Program (CAP)

This paper is targeted to governments of developing countries, international/bilateral  aid agencies,  and multilateral banks . Governments need to build institutional capacity to formulate and implement with the help of all stakeholders climate action programs to build resiliency and help poor people adapt to  the adverse impacts of climate change .

Multilateral banks need to focus their assistance on supporting governments to build this capacity and provide financing for projects to help implement changes focused on the poor to build resiliency.

Mark Carney, the new UN Climate Envoy made this statement recently-"Climate change affects the least well off in our society the most, but if we get it wrong, the transition [to net zero] will also affect those very same people."

This is a first draft of the paper. It will be elaborated and refined further after comments and addition of data. It has four sections:

1.     Background to the Issue

2.     Developing an Action Program to Build Resiliency

3.     Building Government Capacity to Meet This Challenge

4.     Mobilizing Resources for Climate Action

The broad framework guiding this paper is:

• Reduce Sources: Bringing emissions to zero.
• Support Sinks: Uplifting nature’s carbon cycle.
• Improve Society: Fostering equality for all.
• Reallocate capital to focus on the poor to build resiliency

1. Background

1.1 Climate change is a global phenomenon  that  does not respect national boundaries. Impacts are visible everywhere from coral reef bleaching off the coast of Australia to melting ice shelves in Antarctica and receding Himalayan glaciers to increased desertification in the Sahel, all of which pose a serious crisis to human lives and livelihoods.

1.2 Climate effect is most pronounced in developing countries where poor people are affected badly lacking the capacity to cope. Tangible and intangible impacts are affecting living standards and economic growth, increasing income inequality, and generating strife and conflicts over access to scarce resources such as arable land and water. The most visible manifestation  of these impacts is international migration  from the developing world to richer countries (West Africa, Afghanistan, Middle East, Myanmar and Central America).

1.3 The poor living in cramped slums in cities and villages which lack basic  infrastructure are the worst affected by the increasing occurrence of serious climatic events resulting from steadily rising temperatures. Water shortage from severe droughts, heavy rainfall from cyclones, prolonged high temperature spells cause adverse health impacts from new viruses, pathogens and bacterial infections. Morbidity and mortality rates are much higher than the wealthier sections of the community.  The ability of the poor to earn a decent living and contribute to society is severely compromised as agriculture ,  small industries, and services such as tourism which provide most of the employment to the poor are adversely impacted.

1.4 The Climate change market is beset with market failures. The invisible hand does not generate adequate solutions to address the needs of poor farmers, service providers, and small businesses. Demand for solutions is weak as often climate change deniers are obstructing interventions whether new regulations, performance standards or community actions because they don’t want to bear the cost of creating the public good. .

1.5 So far the demand for climate action is weak among the poor because of lack of knowledge and understanding of the how steadily increasing temperatures of  both land masses and oceans are causing severe tail risk  climate events leading to economic distress from crop failures, pandemics, severe droughts and business failures. Policy interventions such as carbon taxes are not understood nor the need for mitigation.  There is a need to mount educational programs to raise knowledge about climate change and its impacts and what remedial adaptation actions they can take.

1.6 Demand side action needs to be complemented by supply side measures to help the poor adapt better and build resiliency to adverse climate impacts.  These actions need to be broad covering all  economic sectors and involve a combination of policy and regulatory changes , technology and capital resources. There are plenty of existing supply side solutions which if adopted widely can help mitigate adverse impacts and build resiliency. However, Adoption requires “Accelerators” which create the conditions for moving existing solutions forward [1].  The seven Accelerators for climate solutions are:

1.     Setting clear goals, identifying priority areas for investment, setting performance metrics  and implementing  a robust monitoring and evaluation system to assess progress and take corrective measures.

2.     Reshaping behaviors and culture.

3.     Empowering people in an inclusive way to give them voice and build commitment to climate change actions which might affect them adversely in the short term.

4.     Altering overall policies, regulations and incentives so that economic and sector plans give priority to climate impacts.

5.     Reallocating capital to priority problems and vulnerable groups caused by climate change within sectors and between sectors.

6.     Educating people to generate demand for climate actions from governments.

7.     Adopting already available improved technologies, processes and evidence based best practices to improve resource use and management.

1.7 A holistic Climate Action Program (CAP) needs to be implemented with all stakeholders playing a role at all  spatial levels from the nation to the community. Because of climate market failures, as  can be seen even in advanced countries, governments must take the lead in developing and implementing the CAP by building a high level institution to plan and implement the CAP. However, developing country governments lack capacity for this. International assistance should be provided towards this effort.

1.8 “Climate solutions are interconnected as a system, and we need all of them. The notion of “silver bullets” has persistent appeal—“what’s the one big thing we can do?”—but they simply don’t exist for complex problems such as the climate crisis. A whole system of solutions is required.[2] Some of the most powerful climate solutions receive comparably little attention, reminding us to widen our lens.” In September 2019, Swedish climate activist Greta Thunberg testified before the U.S. Congress. “You must unite behind the science,” she urged. “You must take action. You must do the impossible. Because giving up can never ever be an option."

1.9 The CAP should be designed to be  consistent with the Paris Accord and the UN’s Sustainable Development Goals (SDGs) , 12 of  the total of 17 deal with climate change. The Paris Accord  binds countries to make best efforts to develop  and implement plans for limiting temperature increases to well below 2 degrees Celsius. In reality, without a net zero emissions  situation being reached,  temperature are likely to increase until the middle of this century. A broad based program of reducing fossil fuel use coupled with a broad array of actions in all sectors to improve resource use is essential. The poor and underprivileged sections of communities would need to be given priority in resource allocations That should be one of the central aspects of the CAP.

2. Developing and Implementing a Climate action Plan ( CAP) to Build Resiliency

    2.1 “Footholds of agency exist at every level, for all individuals and institutions to participate in advancing climate solutions. The climate crisis requires systemic, structural change across our global society and economy. The reality of intervening in a complex system is that no one can do it all, and we all have an opening to show up as problem-solvers and change-agents and contribute in significant ways—even when we feel small. The range of climate solutions illuminates diverse intervention points across individual, community, organizational, regional, national, and global scales. Accelerators expand that array of action opportunities even more and increase their effectiveness. It will take a whole ecosystem of activities and actors to create the transformation that’s required”.[3]

2.2  CAP has to be developed by the government in consultation with all stakeholders   and implemented with the participation of all stakeholders. (More in Part III below).  CAP calls for innovation and disciplined action with a priority focus on the poor and under privileged. It should aim to address their needs first in terms of resource allocation and help build resiliency for the target groups and the communities they live in. CAP is an overlay on sector development plans to refocus their priorities and actions to  take into account climate change impacts , reallocate resources to address  the impacts of climate change on the sector with the goal of  achieving  net zero emission by a target date. This target date would vary from sector to sector and regionally with the complexity of the problems in the  sector and region. Building resiliency of the poor through policies and investments would be at the forefront of CAP. The Accelerators mentioned above would be the main instruments in achieving this goal.

2.3  Large corporations do not necessarily have the incentives to make investments which create public goods that they cannot monetize. Innovations and change often come from small inventors and social change agents who can introduce innovations requiring behavioral change and community participation.  These can have significant impact on consumer behavior and efficiency.   Climate action initiatives in four sectors are briefly discussed below. The full paper will elaborate on accelerators actions as well as new initiatives using advances in technology and include other sectors.

Energy

2.4   Initially reducing and subsequently eliminating fossil fuel consumption is the most  important action towards the net zero goal which requires large investments and varied technological knowhow.  But equally important are actions to reduce resource use whose production requires large amounts of energy such as water, steel, cement, chemicals  and fertilizer. Eliminating subsidies to fossil fuels and appropriate pricing of goods such as water and energy are strong signals to consumers to adopt efficiency and use inputs economically. A comprehensive set of market pricing measures in all sectors can ensure that resources will be used efficiently and obsolete methods and technology would be scrapped.  These policy actions have to be taken at the highest levels of national governments and implemented in all sectors.

2.5   In the energy sector, advances in solar power and wind power generation has brought the cost of electricity close to fossil fuel powered plants.   Developing countries such as India have increased solar power generation five fold in the past five years and have the potential to do much more. Countries in the Middle East and North Africa such as Libya offer vast potential for solar power generation and energy trade with Europe through undersea power cables. Such projects could replace fossil fuel based generation in a significant way.  Advances in battery technology and energy storage using molten salts should enable self reliant distributed power networks based on renewable energy to provide reliable power on a 24/7 basis off grid. Advanced power control system development is allowing cost competitive off grid power supply to US defense bases. The same systems are now available to hospitals and other facilities and could supply power to small cities at a competitive price. The advent of small, highly safe ceramic encapsulated energy generating  nuclear reactors offer enormous opportunities for generating carbon free power at a long term  fixed price reducing risk. And Green Hydrogen based on biomass offers carbon free energy through large and small fuel cells based on advances in electrolyzer technology.. These technologies are rapidly becoming common place and have the potential to revolutionize conventional power systems.

Agriculture.  

2.6 This is an area with enormous significance because it employs the largest number of poor people in developing countries;  Almost 70% of the labor force in India of which a very high  percentage (up to 80%) are women are employed in agriculture. Moreover , the percentage of women coming from disadvantaged strata of society is 90% and disruptions in agricultural production can hurt the poorest. Agriculture has enormous implication for climate change and offers the  potential of significant GHG reduction. It also offers potential as a carbon sink depending on what crops are grown and the use of land for forests which can be utilized later for economic purposes.  However, wrong decisions on cropping patterns can inflict serious damage to the environment at a huge human cost.

2.5  The textile industry is a high water usage industry starting with cotton growing and ending with finished textiles. Cotton can be highly profitable and this has led countries like Uzbekistan to engage in mono cropping leading to serious environmental degradation. The Aral Sea is now a shadow of itself.   The National Geographic photo of a boat stranded in a desert which was once the Aral Sea is memorable, vividly demonstrating the impact of wrong policies. In India, cotton cultivation employs over 50 million workers and a huge number in upstream value chains leading to the finished garments. Cotton is grown in land half of which is irrigated. Yet the areas under cotton are experiencing the highest water stress levels according to the World Resources Institute (WRI). According to the WRI, India is on the brink of a water crisis which is visible in large cities such as Chennai where water is provided to household in tankers under strictly rationed programs. Even New Delhi has serious water shortages and limited water availability in the poorer areas. The water shortage has led to bankruptcy of cotton farmers who have used high priced  genetically modified seeds which require high levels of water and fertilizer. Many highly indebted farmers have committed suicide unable to repay bank loans.

2.6  Improvement in the sustainability of cotton farming requires significant changes in farmer behavior through continuous education. Soil and water resiliency have to be strengthened. Water budgeting to help farmers understand water availability and use is essential. Farmers only understand the value of water when the well goes dry. Demand side measures are important to reduce water use and allocation. Supply side measures such as recycling waste water can increase water availability. The Institute for Sustainable Communities in India suggests a three pronged approach:

(1) Robust education and extension programs ; (2) Better market linkages including certification of products as sustainably produced to provide incentives to practice sustainable farming; and (3) the convergence of water andagricultural policies to ensure sustainable farming for communities.

2.7  The MAIS Program (Modulo Agroclimático Inteligente e Sustentável) is helping family agricultural operations adapt to climate change in the Jacuípe Basin, Brazil’s semi-arid region. It is one of the first ever climate smart agricultural programs to mainstream climate disruptive technologies among farmers in Brazil. The Program helps farmers implement best practices in animal nutrition, farm management, food and water security, and restoration of degraded pastureland soil to help them prepare for times of intense drought and ensure food security in the region.

Key facts

·       The program has been developed by engaging 650+ farmers over a 12-year period

·       Each US dollar invested in the program has generated about USD 7 in the Jacuipe Basin.

·       The Program has increased farmers’ dairy production by 63% and increased their income by 204%.

·       The Program has also resulted in a 30% improvement in pastureland, a 50% decrease in the water footprint of the area’s farms and a 30% reduction in production oscillations.

·       Over 3 tonnes of CO2 is estimated to be offset for each hectare of restored pastureland.

2.8 Water and Urban Sector

             People in  cities in developing countries are being adversely impacted by black swan events in temperature and rainfall which is drastically reducing access to potable water.  For example, in Chennai, India , potable water is so scarce , that water tankers from long distances are supplying water  to residents at very high costs. Industry such as automobile manufacturing is affected, reducing investments and jobs. There are a host of measures which the community and the government can take to address the problem and respond constructively to adapt to droughts and heat waves. Some are technological such as increased water harvesting, more efficient use of water in homes and industry, reduction of non-revenue water by water supply companies and  organizations, and widened access to water sources such as through desalination and recycling of waste water. Policies to promote conservation and more efficient use would be full cost recovery pricing of water including adoption of water metering and progressive tariff structures to protect the poor as well as  market based pricing of water for industrial users. Educating both consumers and local governments is a way to address this challenge.  Chennai is not the only city facing this problem. New Delhi, Bangkok,Manila etc. all face this problem. What is the best approach to addressing this problem in a holistic way?  Perhaps an App can be designed to help educate and train residents/ consumers in various aspects of conserving water and inform them of medium/longer  term forecasts of rainfall and climatic variables specific to their locations to help them adapt to CC on a real time basis.

Industry

2.9 The Industry sector  and construction offers huge potential for carbon reduction. There is a need to rethink industrial strategies and policies. Some companies in developing countries have recognized the importance of  reducing their carbon foot print by adopting energy saving programs. Infosys in India aims to reach net zero in energy use by the year end.  The CAP would include initiatives such as : Raising the awareness of enterprises  of the environmental impact of input use , technologies employed and environmental pollution generated and incentivize producers through tax and subsidies. Enterprises could be recognized for their contributions to climate change and adoption of mitigation and adaptation measures and awarded gold , silver and bronze medals like in the UK which awards the Queen’s medal for excellence and exports. Financial institutions could be educated to play an active role in assessing the climate impact of projects when granting loans. The International Finance Corporation uses the Equator Principles when appraising projects for financing.

2.10 Other sectors also have potential to reduce their carbon foot print. It is important to note that all sectors are interrelated and should not be treated as independent silos.  Water, transport , commerce , services etc.  all are interconnected and actions in one area have impacts on the others. That is why a holistic approach to the CAP is essential.

3.0 How to Implement CAP: Apex Implementing Agency

3.1  An overarching agency is needed at the apex level of government which has the full support of politicians and decision makers to oversee the process of formulating and implementing the CAP for the country, specific regions, sub-regions, cities, and rural communities with decentralized units at lower levels to undertake the work with the collaboration of all stakeholders-individuals, civil society associations, NGOs, think tanks, educational institutions and local and regional governments as well as private industry including industry associations. The CAP should be designed with clearly designed performance metrics reflecting the climate goals sought to be achieved  which should be published on the website of the agency. A monitoring and evaluation system should be established so that results are measured in terms of outputs, outcomes and impacts relative to goals which are specified in the CAP.  Most  developing countries may need assistance in establishing such an agency and training staff. International assistance would likely be available for this purpose.

3.2  The Climate Action Program Agency (CAPA) , a suggested name of the overarching agency,  will work closely with  regional and local governments and other stakeholders to introduce and integrate climate change considerations and Accelerators into the economic development plans prepared by government agencies. For example, industrial strategy should take account of environmental considerations, availability and economic costs of natural resources, negative externalities created by industry including water and air pollution, and the risk and impact of intense weather events on enterprises. The Industry Department would be ultimately responsible for preparing and implementing the plan. The same would apply for infrastructure planning for a region where, for example, CAPA would work with state and municipal water companies to ensure that water supply and sanitation projects adequately take into account climate caused disruptions and problems.

3.3 In some countries which have economic development boards, these institutions could be broadened into a CAPA type agency where climate change is totally integrated into the planning and implementation monitoring process. Sector ministries and agencies including state owned corporations would still have primary responsibility in actual provision of services, but they would work with the apex agency to incorporate climate factors and prioritize the poor in their programs. This alternative approach might be easier for governments to accept as it would not require the creation of a new super institution but it would most likely require changes in laws and regulations. Experience suggests that a lot of fundamental changes to planning and monitoring processes would be required for an inclusive process to be adopted including new technologies by existing  development agencies which often follow conventional approaches.

3.4     Creating a new apex agency or transforming and broadening the scope of an existing agency such as an economic development board (a common institution in many developing countries) requires significant institution building efforts including bringing in new technologies, information and data processing capabilities, and expertise in policy and project formulation as well as in results based management. Staff would have to be trained in conducting surveys using for example remote sensing technologies, processing large data sets and interpreting results. Monitoring, Evaluation Research and Learning (MERL) is a rapidly growing field with the use of big data and artificial intelligence for better planning interventions in development and humanitarian programs. Some MERL practitioners have recently begun to use big data and, increasingly, data science and other methodologies to incorporate big data into various stages in the identification, design, management, monitoring, evaluation, reporting, and dissemination of their development and humanitarian programs.

3.5 Singapore, a small island state with one of the highest per capita incomes and strong institutions including advanced technological capabilities has taken advanced measures to safeguard the island from climate events. Its response to the global pandemic is exemplary indicative of its capacity to implement quickly,  mitigating measures which even the USA has been unable to mount.  It will take a long time and plenty of resources and political will for developing countries to match the capacity which Singapore has today. It provides an  example of the ingredients needed to combat climate change successfully.

3.6  The next section offers some proposals for assisting countries in mobilizing resources to  establish CAPA  and implement the CAP.

4.0     Financing of the CAP and Implementing Agency

4.1. There are numerous sources of finance available to assist governments to set up a Climate Action Planning Agency with the broad mandate described above. Multilateral banks such as the World Bank, ADB, IDB provide grant funding from trust funds for institution building and training. So does the UN program on climate change. Bilateral aid agencies such as  Japan’s JAICA, UK’s DFID, USAID , European aid and Swedish  aid , Danish aid etc. are all sources of grant funds and low cost finance.

4.2  Multilateral bank and UN funding is available on a grant or low cost basis for projects to combat climate change. For example, a project for the rehabilitation and replanting of mangrove forests in Cuba’s coastal regions to help protect the lives of people living in coastal areas from extreme hurricanes is being financed by the UN. The UN has made a grant to Indonesia to preserve rain forests which act as a carbon sink. The cutting and burning of forests to extend cultivation has created a major health hazard to people in Malaysia and Singapore from drifting smoke. A blue print for helping countries keep carbon in fragile land-based carbon sinks (permafrost and peat land) has been announced by the Food and Agriculture Organization (FAO) which provides funding for these projects.

4.3  The multilateral banks are heavily involved in providing both knowledge and funding for a variety of agricultural, urban, water supply, renewable power projects where the main goal is poverty reduction and providing  goods and services to the poor.  Some funding is blended finance, a combination of grants and soft loans; some involve guarantees to help developing countries raise funding from international capital markets through novel financial instruments such as green bonds. The World Bank Group’s partial risk and partial credit guarantees allow financially weak countries to mobilize private capital on favorable terms or extend the maturities of loans to long periods to match the useful life of investments.

4.4  The private sector is now waking up to join in combatting climate change , recognizing their own stake in successful outcomes. The IFC, a member of the WBG is applying the Equator Principles in financing investments by the private sector. Private firms are factoring in climate risks in their investment and normal business operations. Rating agencies such as Fitch and S&P are looking at a firm’s exposure to climate risks in rating their debt instruments. So are insurance companies which are directly exposed . Here are some quotations from Mark Carney , appointed special advisor on climate finance to UK prime minister Boris Johnson; Carney, outgoing governor of the Bank of England and incoming UN special envoy on climate action made the following remarks at the City of London on August 27, 2020 addressing banks and investors.

“Every private finance decision must take into account climate change and how to decarbonise the world economy to net zero”. Setting out strategies to mobilize private finance ahead of the UN climate talks in Glasgow, or Cop26, Carney said such investments “could become the greatest commercial opportunity of our time”.

“The objective for the private finance work for Cop26 is simple,” he said, “to make sure that every private finance decision takes climate change into account.”

“Achieving net zero emissions will require a whole economy transition – every company, every bank, every insurer and investor will have to adjust their business models,” he added.

“This could turn an existential risk into the greatest commercial opportunity of our time. Carney said that achieving a whole economy transition wasn’t “about funding only deep green activities or blacklisting dark brown ones”. “We need fifty shades of green to catalyze and support all companies toward net zero,” he said.

[1] Based on the Drawdown Project

[2] Quoted from Drawdown Project

[3] Quoted from Drawdown Project