Life at the Sharp End of Climate Change

It’s not for lack of effort. Kiribati has ambitious mitigation targets for renewable energy and energy efficiency all over the country, from its schools to its hospitals to its ice plants. It is trialling coconut-oil based bio-fuel. It has set up the Kiribati Solar Energy Company to provide solar lighting on rural islands. But the truth is, nothing Kiribati does is going to make any difference to rising sea levels. In 2014 it emitted 63,000 tons of carbon dioxide. That’s 0.0002% of global emissions: one part in 500,000.

Despite this inherent injustice, or perhaps because of it, Kiribati was among the first truly vulnerable nations to campaign globally about its plight, and former President Tong remains among the most famed and affecting speakers on climate change. The country embarked upon a major initiative to reduce its vulnerability to climate change, climate variability and sea level rises back in 2003, financed through grants from the World Bank, the Australian and Japanese governments, the Global Environment Facility and several other groups, plus a contribution from Kiribati’s own government.

Called the Kiribati Adaptation Programme (KAP), it is nearing a milestone. In February 2018 the third and final installment, KAP III, will reach formal close, its job done.

One day in late August, Euromoney joins a World Bank and government team on a boat from South Tarawa to the far less developed north for an inspection of water projects. Improving water supply management is one of several prongs to the KAP fork, among them sea walls and other coastal management protection such as mangrove replantation, population settlement planning, and the strengthening of laws around the environment.

The timeframe involved in KAP – 15 years from formal start to completion – is the sort of thing that makes outsiders tear their hair out about the glacial pace of development and multilateral involvement. It took two years to complete the preparation phase. But visiting a project like this gives a different perspective on the challenges involved with development finance around climate change.

There is, first, remoteness: Kiribati is a sod to get to at the best of times, with four international flights per week, between them serving only Fiji and Nauru. Even then, that airport only serves the island of Tarawa, and the road only covers the southern part: the nation’s 33 atolls are spread over 3.5 million square kilometres, which is bigger than India’s land mass. The Line Islands in the country’s east are about as far from Tarawa as the US East Coast is from the West. Kiribati’s vast eastern reach into the Pacific is the reason the International Date Line takes that crazy diversion near the Equator; prior to that, half the country was a day ahead of the other.

Even reaching North Tarawa, as we are doing today, requires a boat crossing and then a wade in to the shore because there is no quay.  When we depart at low tide, that wade is half a mile. Coming in, we pass a barge that a contractor for the World Bank, a walrus-moustached Australian in a bright yellow Jackeroo workshirt who gets from site to site on a motorbike, is using to try to get supplies and machinery to the water projects there, with mixed success, he explains. One of the water gallery digs has hit unexpected rock and he needs a more significant digger to get through it, but while he’s established that there is one on the island somewhere, it is, he has been told, “somewhere else,” and will be difficult to move up here if he finds it.

“Logistics is very difficult,” says Manikaoti Timeon, the programme manager of KAP III for the government. “We need a lead time of two to three months to get the materials ordered from overseas. Then the disbursement of the islands is a challenge. Once we get the material to South Tarawa we have to ship it to the outer islands.”

Once there, transport is on dirt tracks on one of a couple of trucks that have made it this far, and here we encounter one of the friendlier challenges development faces: endless talking.

During the day we end up hosted by the mayor and then on two separate occasions in communal village meeting structures called maneaba, the basis of village life and administration, within which people sit cross-legged on the floor in a strict hierarchical arrangement to discuss the issues of the community. Kap III has brought water to thousands up here, and there are a lot of speeches of gratitude and respect. We are garlanded with flower crowns and roasted breadfruit and precious imported biscuits and corned beef, but it’s hard to get a whole lot done. But it absolutely cannot be side-stepped or rushed: the need to understand local communities and get them onside cannot be underestimated.

Richard Croad, the principal of Gillrich Consulting and a long-term consultant for the World Bank, has been involved in KAP since the start, integral to some of the engineering design from sea walls to rooftop rainwater collection techniques; half-joking, he says he is also the bad cop, the man who has to keep projects running to time.

Asked what he has learned along the way, he says: “We learned the lesson that community engagement and awareness, and the complexities of getting land consent agreements and the like, is very complicated. It’s time-consuming, you have to put in a lot of resources, a lot of time, and you’ve got to bring competent people on board to manage that effectively.”

Every part of what he says refers to some deeper challenge that can take years to resolve. “Competent people” only become competent when given proper training, by groups like the World Bank and its contractors on the ground, and they are hard to find in a country with modest education. And negotiating land access is complicated by the fact that the government typically leases land from private owners, with the land itself customarily owned, which means held by particular families who each own and run specific strips of the island, planting pandanus and fruit trees upon them to form a small economy. Ownership or leases can be changed between people informally and in some cases even orally, leaving no records and creating a problem of people claiming they own things that they don’t. “We have faced that problem in the project,” says Timeon. “On this project we took one or two years to resolve all the land issues before we could proceed.”

The leases, typically 99 years at a time, place an enormous financial burden on the government, impeding its ability to fund projects like this, or to fund anything much; consequently the KAP III model is to have the projects owned directly by the villages.

“So you see a lot of talk, a lot of negotiation, a lot of maneaba meetings, sitting cross-legged,” says Croad. “But unless you get that absolutely right then it will fail because the communities then don’t own the scheme or they don’t feel accountable or responsible for what is built to maintain it.”

And building the thing is only the start, because if it’s not used or maintained once completed, the World Bank and donors might as well not have bothered. Kiribati is littered with projects that started with good intentions but no longer operate, either because they broke, they ran out of money or they just weren’t administered properly.

During our trip, we visit an almost completed water gallery system, just waiting to be connected for distribution to taps in the villages: a proud moment. Again we have been greeted with big smiles from local leaders and some speeches are made. But a question comes from one. “They are concerned about how long they are going to look after it,” comes the translation.

“Well, the answer is, forever,” says Croad. “It’s theirs forever.”

He tells them: “The real test is, will it still be working when I’m in a box in the ground? Will your grandchildren be using it?”

In this case, the long-term running of the water system will mean local villages establishing committees to be responsible for maintaining it, and in many cases charging a modest levy to the people who use it so there is a fund for that maintenance. This is a key understanding that needs to be translated to villages: that even if something is given for free, it will take money to run, and that must come from local tax of one form or another. Negotiations in dirt-poor villages about finding money to pay for clean water, rather than sticking with an alternative which might be an hour of access to something borderline toxic every second day, can be delicate.

Communities also have to set their own social guidelines and rules for the use of the water. One village we visit has done this, with a large sign above the pump with six rules in the local language, all of them decided by the community. At the top of the list is: “don’t use this water to make Kava,” the local booze.

Another issue for multilateral and donor developers is that island atolls just can’t help behaving like island atolls. That is, they change shape.

One of the country’s main causeways is being rebuilt by Japanese funding, and many sea walls are being built or repaired, spurred by last year’s devastating king tide; however previous attempts to make sea walls have not always been successful.

“You’re playing off two things,” says Croad. “Do I defend, because I’ve got a rather important road right behind it? Or do I move the road?” There is such scant room in South Tarawa, where it would often be simple to throw a stone from the lagoon on one side of the country to the ocean on the other, and where there are sections where the single-carriageway road is the width of the country, that there is no possibility to put the road anywhere else. Hence they must fight nature, resisting the natural urge of tides to take material from one side and deposit it somewhere else, which is not ideal if you built a house or some other infrastructure upon the first bit.

There is widespread expectation that vulnerable countries must do their bit to ensure local communities change their own behaviour in order to fight climate change, and they do try, through NGOs like KiriCAN. But they are fighting widespread doubt that climate change exists at all. Tetiria says this is particularly acute in a highly religious Christian community, where it is commonplace to hear the view that whatever happens is god’s plan, and therefore not to be resisted; and that god would not give them these islands and then take them again unless as punishment for something they had done. The finest buildings here are the churches, smartly painted and towering, and the last thing to be swallowed by the rising seas if the time comes will be their well-constructed roofs.

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Everywhere on Kiribati is evidence of aid: schools built by Australia, the rebuilding of a tide-wrecked causeway by Japan. It is hard to see where the private sector will fit in in a climate role. “All the major projects are now being funded by big donors like the World Bank and the Asian Development Bank,” says Timeon. “The private sector here is not as developed as in other countries.” There is some hope that foreign investors could get involved in desalination on commercial terms, but it seems very distant today. “If you’re a BOOT operator, what assurance are you going to have that you’re going to get the income necessary to cover your capital investment?” says Croad.

The country itself has no money; few in this part of the world do. “Many Pacific Island countries face significant fiscal challenges,” says the Stockholm Environment Institute in a study of climate finance in the Pacific released in April this year. “Several have high and potentially unsustainable debt levels.” They tend to have high volatility in government revenue, expenditure and aid flows.

Kiribati is not short of friends. It has a history of bilateral donors that have included Australia, Japan, New Zealand, Taiwan, the US, the UAE and even Papua New Guinea. But from 2016, Kiribati set a priority of seeking multilateral sources of climate finance. It has long-standing relationships with the World Bank and Asian Development Bank, both of which have given grants (large loans aren’t really practical as the tiny economy’s capacity to repay is so limited), and has since set about gaining access to the Green Climate Fund, Adaptation Fund and Climate Investment Fund.

But this has not been easy. “Kiribati continues to face difficulties in accessing multilateral sources of climate financing,” says Kiribati’s Minister of Finance and Economic Development, Teuea Toatu. “Compared to bilateral funds, which are much easier to access, multilateral finances come with common challenges,” chiefly stringent access requirements and complex procedures “which stretch our already thin capacity within government.”

This is a message that comes through consistently in small countries, and a visit to one illustrates the problem clearly. Most of Kiribati’s ministries sit in a line of breezeblock structures in varying stages of dilapidation, with much more use of pen and paper and endless stamped receipts than of computers. It is clear that the manpower need in order to get through the necessarily arduous due diligence of a Green Climate Fund request is beyond them and needs to be hired in, expensively.

“Kiribati’s experience with multilateral funds has been difficult,” says Toatu. In 2015 Kiribati’s cabinet approved three priorities for engagement with the Green Climate Fund. But the accredited agencies the government approached were not able to turn these priorities into proposals for the GCF. “A key lesson learned,” says Toatu, “is that Kiribati needs to take leadership on the GCF, as there were many development partners suggesting priorities.”

Having realized this, Toatu’s ministry is setting up a climate finance unit, “to focus on increasing access to multilateral sources of climate financing,” It will have four staff members, he says, “and will begin the process of institutionalizing climate finance for Kiribati.”

It is an illustratively circular outcome that in December 2016, Kiribati did finally manage to get a proposal approved by the Green Climate Fund, worth US$585,935 – but that is a readiness grant, to assist Kiribati in engaging with the GCF in the first place. So the first grant the country has received from these bilateral mechanisms is not to help it build a sea wall or shift more to solar, but to develop the ability to deal with these multilaterals at all.

Kiribati has in mind not only the Green Climate Fund, but the Adaptation Fund, Climate Investment Fund, Global Environment Facility and any other multilateral fund it can find. “Once we have developed our strategic framework and country programme, we will convene a roundtable meeting,” Toatu says, where they will invite accredited entities in the region, development partners and so on “to present our priorities for these funds, and to seek support in working with us to turn our priorities into proposals for these funds.”

All of this, then, is just to get to the start line: years of development and spending will have taken place just to learn how to ask for money in the correct fashion.

But that’s just the way the GCF works: most of what it has dispersed so far is in this readiness programme, helping countries understand what a good climate project looks like and how to pitch it. It is perhaps a necessary outcome of the shift to country-led climate projects and will resolve itself in due course. But as Kiribati’s politicians step out of their parliament, built on reclaimed land, and look at the steadily higher tides, they can be forgiven for some frustration.

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Kiribati’s experience is far from unique. Mark Brown is the Minister of Finance of the Cook Islands. “In most cases, there is significant pressure on country resources for accessing the [climate change] funds, and this is difficult for a small country such as the Cook Islands who has limited human and financial resources,” he says. SIDS “lack the resources or the technical expertise when applying for climate financing, especially having to compete with other countries that are better resourced.” There are regional organizations and international partnerships for support, he says, but it’s difficult to access the pool of climate funding because these bodies don’t have the capacity either. One hope is a pool of funds set aside for the SIDS. “Advocacy,” says Brown, “is ongoing.”

Partly, it’s a question of method. “The processes to access climate finance are very complex and approval of financing tends to delay progress, with multiple levels of reporting requirements to complete before funding can be accessed,” Brown says. It took the Cook Islands “well over 12 months” to access readiness funds under the GCF, “as procedures and processes are constantly changing. The GCF still has some way before it has clear procedures in place and adequate capacity to process applications.”

“The amount of reporting tends to occupy a majority of the project,” says Brown, “which impacts on implementation to a certain extent.” He says levels of reporting tend to be duplicated with the country’s own national reporting systems, adding to the burden and diminishing the value of implementing projects at all.

At the most recent ADB annual meeting – the 50^th, held in Yokohama in May – Pacific developing member countries raised their concerns about the delayed disbursement of funds from projects that have been approved by the GCF. Brown says these issues are still under review by the GCF board, including the question of how they can fast track the disbursement of funds to avoid delays, which can cause uncertainty, cost escalation and budgeting risks. At the time of writing, a formal agreement was expected between the GCF and the ADB to allow for faster disbursement of funds.

It’s not as if these places are luddites about their own requirements. Often, though it will obviously make no difference to global carbon emissions, they have better targets for mitigation than the west. In the Cook Islands – population, less than 15,000 – the country says it is on track to be 100% renewable energy by 2020, having passed 50% in 2015. It gains funding through a mixture of grant funds, public financing (such as concessional loans from the ADB) and private sector investment from domestic households and businesses. It has coastal protection units, is trying to climate proof its harbours, ports, airports and roads, and is providing educational programmes at all levels of its society.

Brown talks of “a multi-prong approach in providing financial resilience against natural disaster and climate risk.” One of those prongs is insurance coverage under the Pacific Catastrophe Risk Assessment and Financing Initiative for cyclones, a facility established by legal statute in the Cook Islands. It also has a government-funded Disaster and Emergency trust fund, established in 2011 with a current balance of NZ$1.5 million, and a contingent line of credit facility with the ADB which it can draw upon when hit with a disaster. Under this, signed in December 2016, the ADB provides a NZ$13.95 million policy-based loan for three years.

The Cook Islands has even managed to access the Green Climate Fund – firstly through two rounds of Readiness funding, and then an additional US$12 million (from the GCF but through the ADB) towards the installation of battery storage to support renewable energy. It has secured US$5 million from the Adaptation Fund to build resilience in Cook Island communities to climate change.

The Cook Islands faces a curious problem in that, by the end of 2018, it will graduate from Official Development Assistance to developed national status. That’s a feather in the cap, for sure, but it changes the country’s right to access multilateral funding. “It will become increasingly challenging to fund major infrastructure by self-funding,” says Brown. “If we are to achieve our adaptation targets, particularly those related to our infrastructure, we will need to be innovative in attracting climate finance and blending this with concessionary loans and private sector investment.”

Brown says the Cook Islands’ priority is to become accredited as a National Implementing Entity, which means it will be able to have direct access to climate financing protocols without going through intermediaries. Doing that requires a process of accreditation to assess whether they are capable of strong financial management and of safeguarding funded projects and programmes against unforeseen environmental or social harm.

In the Cook Islands’ case, the Ministry of Finance and Economic Management is accredited to the Adaptation Fund, and has submitted an application to the Green Climate Fund. “However, it is important to note that the accreditation process of NIEs is continuing to be complicated and a lengthy process that requires a substantial investment in new systems,” says Brown, “and the recruitment or development of additional capacity which is extremely difficult when you are a micro economy.”

And it’s not just submitting project requests. Getting the money after approval is a notoriously slow process. “There is a difference between approval and disbursement, with a delay because of issues surrounding risk,” said Brown in an earlier interview at the ADB annual meeting in May. “But every month of delay, the cost to us increases in getting the project implemented.”

Euromoney hears the same message from Elbuchel Sadang, the finance minister of Palau, a Pacific island nation to the east of the Philippines suffering from drought, rising sea temperatures, and acidification of both ocean and soil. “Countries can get approval to have climate fund money, but actually getting it is a problem,” he says. “We are a bit worried.”

“Sometimes we want to apply for funding, but the process of where to apply and how to get approval is too cumbersome,” he adds. “For us, it means a lot of expertise we have to hire in. The only way we can do it is to go to the ADB and World Bank and ask them to assist us to gain access to the funds.”

Palau, like Kiribati and the Cooks, received readiness funding from the GCF for preparation, and is now in the process of trying to get individually accredited so it doesn’t have to apply through a go-between anymore. “If we use other institutions, they get all the money and only the project money comes to Palau,” is how Sadang sees it. “If we become an accredited entity, we get access to the whole funding, including the cost of administering the fund.”

The country is trying to do its bit, insisting that any new development in Palau has to include a climate change aspect, and placing controls on tourism in order to make it sustainable. But it is impeded by the fact that Palau is considered a middle income country, “meaning we are not eligible for grants. Everything we do has to be through loans.” This is the outcome the Cook Islands and preparing to face too.

Moreover, there’s some doubt about where climate change ends and other needs start. “One of our issues is that because of sea level rises, we need to move the residents from the coastal areas to the higher ground,” he says. “But in order to relocate them we have to build a house, or give them the money to do it. If they are going to relocate to a new residential area, that requires the development of infrastructure, which is a cost.” So are new houses built up a hill, or the electricity and road infrastructure to support them, a climate finance eligible cost? “And you cannot move people who have already made an investment in their house unless you can replace it with something similar, something that makes it attractive for them to move.”

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What can be done? V20 is an idea for vulnerable countries to speak together, covered in other articles in this series, but it will never be a funding vehicle, nor purely based on the Pacific (its current chair is Ethiopia). “There is an urgent need for a separate mechanism to be developed for SIDS,” Brown says, “particularly those the size of the Cook Islands, Nauru or Tuvalu to focus on how to access climate change funding.”

Brown describes such a financing facility as “to allow development partners to provide loans, grants, engage in co-financing, provision of guarantees or promotion of climate change bonds that can be drawn from over time to support bankable adaptation projects.”

“There is a short window of opportunity where development partners want to commit funds to climate change adaptation and mitigation, but have no working mechanism that can deliver outcomes,” Brown says. The Pacific Islands need to take advantage of that window while it’s open, and before the seas flood in.

But perhaps there is another way of looking at these countries, one that rather changes their status. “I heard somebody use a good expression,” says Jonathan Drew, managing director for the infrastructure and real estate group at HSBC in Hong Kong. “They are not small island nations, they are large ocean nations, and they control a hugely valuable natural resource: fish stocks.

“When you think about them in that context, there is a different way to think about how they can capture the value of what they do, and preserve those resources which are globally important.”