Kenya’s cash-strapped, ambitious climate change goals

By News Agency , Agency
Published at 10:00 AM Jul 06 2024
Photo: Agencies

FIVE failed rainy seasons resulted in a drought, the worst in 40 years, affecting at least 4. 5 million people who require food assistance. Then came months of heavy rain, which led to riverine and flash flooding that impacted more than 306,520 (61,304 families) between March 1 and June 18, 2024, with an estimated 315 people killed, 188 injured, and 38 missing, while more than 293,200 people (about 58,641 families) were displaced, according to ReliefWeb and Kenya’s National Disaster Operations Centre (NDOC).

These climate crises mean there are significant financial challenges that stand between the East African nation and its climate change goals.

When the government pledged to adhere to the Paris Agreement in 2016, agreeing to reduce its greenhouse gas emissions by 32 percent between 2020 and 2030, it was estimated that USD 40 billion of new investments were needed to facilitate attainment of that goal.

Since then, as the climate crisis continues to escalate, so has the financial need, requiring dedicated financial support.

Now, according to Kenya’s Updated Nationally Determined Contributions, the country needs USD 65 billion to implement Kenya’s mitigation and adaptation requirements from 2020 to 2030. NDCs are at the heart of the Paris Agreement as commitments the country makes to reduce its greenhouse gas emissions.

“One of the three financial challenges Kenya is facing is competing priorities, as we are spending more on climate mitigation—reducing greenhouse gas emissions—and very little on climate adaptation—adjusting to the current and future effects of climate change,” says Samuel Gikama, a marine scientist and independent climate researcher.

“This is a developing country with many pressing problems. We must put available resources in areas with the highest impact and that, for us, is adaptation, as it has been shown to have immediate positive results for local communities.”

Gikama says Kenya’s climate funding management is opaque.

“(Kenya’s) Climate Change Fund has existed for five years now but the Fund does not seem to be operational,” Gikama says. He explains that tracking Kenya’s access to climate finance is difficult.

“Whatever the country raises in climate financing from public and private sources and specifically how the funds are spent, is difficult to track. Climate budgeting remains fragmented. But the government raises about USD 1.5 billion per year.”

The fund was established under Section 25 of the Climate Change Act 2016 as a financing mechanism to prioritize climate change actions and interventions.

Kenya’s vulnerability to climate change is becoming increasingly clear.

Climate-related disasters such as the 2022–2023 prolonged drought and the recent deadly floods in 2024 have created an economic liability of approximately 2 to 2.8 percent of its gross domestic product (GDP) annually. This is in addition to several other vulnerabilities, such as the economic fallout from the COVID-19 pandemic, frequent locust invasions, and other crop pests and diseases.

The most recent analysis of climate financing is in the 2021 Kenya Climate Finance Landscape. The Nationally Determined Contributions indicate annual expenditure should be USD 4.39 billion, including agriculture at USD 0.63 billion, water at USD 0.97 billion, renewable energy at USD 1.69 billion and other sectors at USD 1.11 billion.

Kenya’s total climate and nature public expenditure is around USD 1.53 billion per year. Recent estimates indicate that the country has achieved one-third of the total finance required for investments related to climate change adaptation. As such, there is a yearly resource gap of about USD 3.5 billion and according to experts such as Gikama, the country will be hard-pressed to meet its ambitious climate change goals.

Kamau Ndung’u, a Nairobi-based auditor, tells IPS that debt-ridden Kenya will need to keep the climate crisis in mind while allocating resources.

“Budget estimates for the financial year 2023-2024 indicate that our expenditure on debt servicing and repayment and pensions will increase from 44 percent to 49 percent. The rest of the budget, 51 percent, will run all other government programmes across the country. The national government has over the years allocated itself a bigger share of financial resources at the expense of the county levels.”

Gikama agrees, saying that, amidst limited resources, there is a need to refocus the climate action agenda.

“Kenya’s GDP relies on sectors that are very climate-sensitive, including agriculture and tourism. Yet critical areas such as agriculture, forestry and water remain underfunded. Climate change has had a very severe impact on agriculture and water resources. In the absence of adequate financing, local communities are unable to cope with changing weather patterns, especially farmers. Nearly 98 percent of our agriculture is rain-fed.”

Atieno Oloo, a financial expert at the Ministry of Finance, says the country invests in climate action with public and private capital.

“The government is matching scarce resources with needs. The Treasury is currently working on distributing USD 56.9 million to 45 counties through the Financing Locally Led Climate Action programme.”

The money is a grant from the World Bank and its partners. Overall, the most recent estimates show that the government invested USD 2.4 billion in climate action. Public investment, which includes financing from both domestic and international providers, accounted for 59.4 percent of this, with the private sector providing the remaining funds.

“Available estimates show that more than half, 55 percent, of the government’s climate-related expenditure comes from international partners, while 45 percent is domestic public financing. Kenya and all other developing, struggling countries should receive climate financing through the Loss and Damage Fund,” Gikama says.

Combined, African countries account for less than three percent of global greenhouse gas emissions. Kenya accounts for less than one percent of global emissions. Developing countries first signalled the need for a loss and damage fund as far back as 1991.

The fund would provide financial assistance from those most responsible for the climate crisis to deal with the loss and damage caused by climate change. It has taken 32 years of mounting pressure and 27 COP Summits to finally deliver a Loss and Damage Fund at COP 28, UAE.

“Kenya and all other affected countries must focus on this fund and demand accountability. It is unacceptable that about 79 percent of international public climate finance came to us as a debt and more than half of it, 55 percent, was spent on climate mitigation. The rest, 45 percent, was spent on climate adaptation. The adaptation sector takes a back seat despite all evidence showing that it would be our highest return on investment area,” he emphasizes.

Government estimates show private finance accounts for about 41 percent of the country’s total climate finance. Of this, Kenyan companies mobilized 34.4 percent and the remaining 65.6 percent came from overseas private companies’ investments in Kenyan-based projects.

While Kenya’s finance needs span over energy, water, agriculture and forestry, estimates show that foreign private sectors predominantly (99.7 percent) invest in renewable energy projects. Philanthropic organizations remain the only international private actors investing in other climate sectors and, more so, projects related to adaptation in sectors such as water.

The Loss and Damage Fund is a rescue and rehabilitation package for poor and vulnerable developing nations severely affected by climate change. The fund currently holds about USD 700 million.

The USD 100 billion fund, agreed before the Paris Agreement, aimed at assisting developing countries in both mitigating greenhouse gas emissions and adapting to the adverse impacts of climate change, has consistently fallen behind its targets. The goal was to mobilize USD100 billion per year by 2020 from a variety of sources, including public and private, bilateral and multilateral, and alternative sources of finance. According to OECD in 2021, total climate finance provided and mobilized by developed countries for developing countries amounted to USD 89.6 billion.

Developing countries need at least USD 400 billion per year to address climate-related challenges, and the financial need will only grow as the climate crisis escalates.

The climate finance path for countries such as Kenya seems narrow and winding.

 By Joyce Chimbi, Nairobi