Rwanda Launches a Fund to Support Green Projects

Courtesy of IGIHE

Recently Rwanda launched a fund to support environment protection and mitigate against the effects of climate change.

The government believes this is one way to sustain Green Growth which is part of the Economic Development and Poverty Reduction Strategy 2(EDPRS2).

Emmanuel Nkurunziza, the Director General, Rwanda Natural Resources Authority (RNRA) provided some background to Agnes Bateta. Below are excerpts.

When was the fund launched?

Fonds National de l’Environnement (FONERWA) was established under the Organic Law on Environment in 2005 and it started operations in 2012 with support to management from DfID. The fund received its first donation of £22.5 million from DfID’s Climate Investment Facility on the 27th of June 2013, but was not officially launched until 9th October 2014.

Why was this fund launched and why is it regarded as the biggest in Africa?

The Fund was launched to recognize the significant achievements made in the brief period of 18 months in operation. Additionally, the launch marked the transition phase the project is undergoing. The Fund has hitherto operated as a project managed by consultants and is currently transferring management to the national team.

FONERWA is regarded as the largest demand-based national climate fund in Africa due to the scale of investment from the government as well as Rwanda’s development partners, (£22.5 million from DfID (the UK); euro 6.7million from KfW (Germany) and $5 million over five years from UNDP.

The government has also earmarked £1.7million of domestic resources to kick-start the Fund, signalling its commitment to predictable, sustained financing.

How many projects are involved?

So far 18 projects have been approved that address key national priorities, promote green growth and build the capacity of Rwandans to address the climate change impact. The Fund supports projects proposed by public, private sector organisations and NGOs.

How much has the Fund collected so far?

The fund has mobilized Rwf59 billion francs (about $85 million) from both domestic and external sources.

How does it support Green Growth?

Rwanda already has in place a comprehensive Green Growth and Climate Resilience Strategy which was approved by Cabinet in 2011.

In order to make the strategy effectively operational, FONERWA was identified as a sustainable financing mechanism to deliver on the national strategic goal of transitioning to green economy.

The Fund is financing projects that qualify to implement Green Growth goals. This has made it possible for districts to integrate the strategy into their development plans which paves the way for implementation of Green Growth projects. FONERWA is the national funding mechanism for channelling extra-budgetary finances into Green Growth initiatives in support of the national development agenda.

What more is Rwanda doing to promote Green Growth?

Rwanda has been widely recognized for successful implementation of unique initiatives.

These are commonly called “home grown” solutions and they include climate proof green and Smart Villages which are increasingly adopted by districts as part of the grouped settlement programme that among other things helps in achieving space optimization.

The EDPRS II, the medium term development strategy for Rwanda has a green economy priority that among other things plans to pilot a “Green City”. This forms part of the transformation through urbanization that is critical to how Rwanda plans to develop.

Which organisations support the fund?

The Fund is supported by key development partners including DfID, UNDP and KfW as well as funding from government sources that were identified in the law establishing the Fund.

Support is also provided by the Climate Development Knowledge Network (CDKN) project, a global climate organization which is supporting climate compatible development in Rwanda with Technical Assistance to FONERWA’s Fund Management Team.

What are the challenges in sustaining Green Growth?

The financial support received so far reflects international donor confidence in Rwanda’s commitment to Green Growth. However, although the fund has attracted investment and the government intends to raise domestic capital for the Fund through environment and natural resources related fines.

Fees and taxes, considerable additional resources will be required from Rwanda’s development partners in future to finance the transformational national priorities set out in the Green Growth and Climate Resilience Strategy.

A key challenge is ensuring that projects are scalable and sustainable and developing the capacity of FONERWA. This will build confidence in the Fund’s ability to effectively deliver future finance to the interventions that will make the most difference and reduce uncertainty in future flows to the fund.

We want to raise more finance, target it effectively, and focus on continuous improvement by learning about what works and why.

Although spending on low carbon and climate resilient activities is increasing, it is dwarfed by continued investment in business as usual.

Shifting investments to low carbon and climate resilient developments can only be achieved with an enabling fiscal and regulatory environment due to the associated high start-up costs of green investments. This is crucial to harnessing direct private investment into low carbon and climate resilient options and it is in line with Rwanda’s government resolve to put the private sector at the centre of development.

What do the projects supported by the Fund cover?

The Fund supports projects through four thematic financing windows: Conservation and sustainable natural resource management; research and development; technology transfer and implementation; environment and climate change mainstreaming; and environmental impact assessment monitoring and enforcement. At least 20% of the fund is earmarked for the private sector and at least 10% for Rwanda’s local districts.

What about disbursement?

FONERWA is a ‘basket fund’ in which diverse sources of finance are pooled. It is the primary vehicle through which Rwanda’s climate and environment finance is channelled, disbursed and monitored.

The Fund is an instrument to access international climate finance and streamline existing but previously fragmented domestic revenue streams.

Funds will be distributed to Government, private sector, civil society and communities to implement a range of projects. At least 20% of FONERWA funds will be kept aside for the private sector, and 10% for the local districts.

Through these mechanisms and the fact that the Fund is demand-driven, projects and programmes that effectively deliver on Green Growth objectives will increasingly attract funding in order for Rwanda’s economic growth to transition to green economy.

How will it support Rwanda’s economic development?

The costs of adapting to climate change in Rwanda are estimated to be between $50 million to $300 million a year for Rwanda by 2030.

With support from the UK’s (International Climate Fund (ICF) through DfID, UNDP and the Federal German government’s International Climate Initiative (ICI) through KfW, Rwanda can now start to finance climate change and environmental interventions that support the country’s national development agenda. Line ministries, government agencies and districts, civil society, academic organisations, and the private sector can all access the Fund to promote national sustainable development.

How would you predict Climate change of Rwanda?

There is very little detailed information on how the climate in Equatorial Africa will change. However, existing projections suggest Rwanda will have a warmer climate (with a projected temperature increase of 2.5C by the 2050s) with more intense and variable rainfall during the rainy seasons.

Rwanda already experiences floods and droughts and is also vulnerable to landslides. These events are likely to increase which could have significant impacts on crop yields and rural livelihoods since many Rwandan’s rely on rain-fed subsistence farming.

Climate change also has implications for our energy supply due to Rwanda’s dependence on hydro-electric power as well as for Rwanda’s rich biodiversity. If no drastic steps are taken to address climate change and change the course of economic development, livelihoods and the national economy are at stake with even more serious implications for the future generations of Rwandans.

By Agnes Bateta, East Africa Business News

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