By Hon. Dr. Kariuki Muigua, OGW, PhD, C.Arb, FCIArb (Leading Environmental Law Scholar, Sustainable Development Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), The African Arbitrator of the Year 2022, Kenya’s ADR Practitioner of the Year 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021 and Author of the Kenya’s First ESG Book: Embracing Environmental Social and Governance (ESG) tenets for Sustainable Development” (Glenwood, Nairobi, July 2023) and and Kenya’s First Two Climate Change Law Book: Combating Climate Change for Sustainability (Glenwood, Nairobi, October 2023) and Achieving Climate Justice for Development (Glenwood, Nairobi, October 2023)*
Climate finance has been defined as local and global financing of public and private investment that seeks to support mitigation of and adaptation to climate change. It has also been described as finance for activities aimed at mitigating or adapting to the impacts of climate change. The United Nations Framework Convention on Climate Change defines climate finance as local, national or transnational financing drawn from public, private and alternative sources of financing that seeks to support mitigation and adaptation actions that will address climate change.
From the foregoing definitions, climate finance represents the flow of funds to all activities, programmes or projects intended to help address climate change through both mitigation and adaptation across the world. The landscape of climate finance can be considered from several dimensions among them being the source of finance which could be public, private or hybrid; the type of finance or instrument used to provide it which could be development aid, equity or debt; where finance flows from and to such as domestic flows and international flows; the sector and purpose of the activity or asset that receives finance including whether actions are directly or indirectly related to mitigation, adaptation or compensation for damages and whether finance is incremental.
Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases, reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts. It has been correctly observed that climate finance is needed for mitigation, because large-scale investments are required to significantly reduce emissions. Climate finance is equally important for adaptation, since significant financial resources are needed to adapt to the adverse effects and reduce the impacts of a changing climate. Climate finance is thus crucial in combating climate change since the adaptation and mitigation processes crucial in enhancing national, regional and global response to climate change require funding.
Climate finance is very essential for developing countries. It has been asserted that efforts to address climate change can cost billions of dollars, often making them out of reach for developing countries, which have contributed far fewer greenhouse gas emissions than developed countries. Climate change has had uneven and unequal burdens across the globe with nations and communities that contribute the least to climate change suffering the most from its consequences. However, many developing countries and small island nations lack the financial resources to prepare for and cope with the impacts of climate change including deeper droughts, more intense storms, greater heat extremes, bigger wildfires, and rising sea levels and to transition to clean energy.
Consequently, such countries have had to bear heavy burden due to the adverse effects of climate change as evidenced by cases of severe droughts, extreme floods resulting in deaths and damage of infrastructure, displacement of people among others. As a result, climate finance is seen as a vital tool in enhancing the capacity of developing countries to respond to climate change. It has been stated that huge financial resources are needed to support countries in promoting climate change mitigation and adaptation and financing has a critical role to play in this quest.
Climate finance is vital in fostering Climate Justice since it recognizes the inequalities between countries with developing countries being the most vulnerable to the effects of climate change and thus requiring financial resources to aid their mitigation and adaptation programmes. The concept of Climate Justice recognizes the inequalities brought about by climate change with developing nations in places such as Africa, Asia, the Caribbean Islands and the Pacific Islands which due to an unfortunate mixture of economic and geographic vulnerability, continue to shoulder the brunt of the burdens of climate change despite their relative innocence in causing it.
Climate Justice focuses on how climate change impacts people differently, unevenly and disproportionately and seeks to address the resultant injustices in fair and equitable ways. Climate finance fosters Climate Justice by ensuring that vulnerable countries and communities have access to financial resources required to address the injustices brought by climate change and foster mitigation and adaptation measures. The role of climate finance in climate change mitigation and adaptation is recognized in various legal instruments.
The United Nations Framework Convention on Climate Change enshrines the role of financing in enhancing the global response to the threat of climate change. It requires developing countries take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and knowhow to other parties, particularly developing country parties, to enable them to implement the provisions of the Convention. Further, the Paris Agreement encourages developed countries to continue to take the lead in mobilizing climate finance from a wide variety of sources, instruments and channels, noting the significant role of public funds, through a variety of actions, including supporting country-driven strategies, and taking into account the needs and priorities of developing country parties.
Further, the Agreement provides that such mobilization of climate finance should represent a progression beyond previous efforts. The Paris Agreement thus calls for capacity building to enhance the ability of developing countries including those vulnerable to the adverse effects of climate change, such as small island developing states to take effective climate change action through measures such as access to climate finance. These instruments thus acknowledge the fundamental role of climate finance in fostering climate change mitigation and adaptation especially in developing countries.
At the regional level, the East African Community Climate Change Policy recognizes the importance of financial resources in implementing climate change mitigation and adaptation measures. It acknowledges challenges facing climate financing in East Africa and seeks to mobilize sustainable funding from development partners, including multilateral agencies, bilateral partners and intergovernmental agencies and the private sector in order to enhance climate change mitigation and adaption in the region. It also stipulates the importance of capacity building in climate finance in order to enhance the climate resilience of the East African region.
In Kenya, the Climate Change Act also envisages the role of climate finance in enhancing climate change resilience and low carbon development for the Sustainable Development of Kenya. The Act defines climate finance as monies available for or mobilized by government or non-government entities to finance climate change mitigation and adaptation actions and interventions. It mandates the Climate Change Directorate to optimize the country’s opportunities to mobilize climate finance. The Act also establishes the Climate Change Fund whose purposes include to finance climate change actions and enhance achievement of low carbon climate resilient development.
The Climate Change Act envisages use of the Climate Change Fund to finance, through grants and loans the implantation of climate change adaptation and mitigation actions. The idea of climate finance is thus well captured in Kenya. From the foregoing, it is evident that climate finance is a pertinent idea in fostering global response to climate change through mitigation and adaptation actions. The concept of climate change faces several promises and pitfalls.
*This is an extract from the Book: Achieving Climate Justice for Development (Glenwood Publishers, Nairobi, October 2023) by Hon. Dr. Kariuki Muigua, OGW, PhD, Senior Advocate of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of National Environment Tribunal (NET) Emeritus (2017 to 2022) and Member of Permanent Court of Arbitration nominated by Republic of Kenya. Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2022. Dr. Muigua is a 2023 recipient of President of the Republic of Kenya Order of Grand Warrior (OGW) Award for his service to the Nation as a Distinguished Expert, Academic and Scholar in Dispute Resolution and recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2022 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya and the Top Arbitrator in Kenya in 2023.
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