It is often less costly to reduce greenhouse gas emissions and increase resilience to climate risks than to incur the negative impacts later. The USAID-funded Climate Economic Analysis for Development, Investment, and Resilience (CEADIR) Activity made this case through financial and economic analysis. It also helped public and private sector partners improve planning and implementation capacity and increase access to financing. The $20+ million global activity was completed in March 2021.
CEADIR’s final report contains summaries and links to seven years of assessments, analyses, tools, and training and technical assistance materials on planning, financing, and implementation of clean energy, sustainable landscapes (natural climate solutions), and climate adaptation.
Commercial banks in many developing countries have been hesitant to expand clean energy lending due to incorrect perceptions of the technology costs, business models, and risks. USAID-funded, partial loan guarantees had not been sufficient to unlock bank lending for clean energy. Training and technical assistance have helped change the perceptions of participating bank management and staff.
CEADIR translated the Clean Energy Lending Toolkit, developed under the USAID-funded Analysis and Investments for Low-Emission Growth Activity, into Spanish and French. It used the toolkit training and diagnostic materials to provide customized assistance to banks in four Central American countries and ten African countries. CEADIR analyses also supported approval of USAID-funded guarantees for up to $10.8 million in clean energy loans for small and medium enterprises.
CEADIR also assessed the market for parametric insurance to reduce the risks of utility-scale renewable energy in Central America.
CEADIR convened a series of workshops to help U.S. suppliers of utility-scale renewable energy, smart grid, and minigrid products and services begin or expand operations in developing countries. Other clean energy work included guidelines to reduce hydrological uncertainty in small-scale hydropower; an energy efficiency and carbon markets assessment for Mexico; workshops on private sector engagement in clean energy in South and Southeast Asia; case studies on financing renewable energy auction power-purchase agreements; policy reforms and auction rules to create a level playing field for utility-scale, battery energy storage systems; and recommendations for preparing a distributed energy resources roadmap.
Even when environmental services are valued at conservative low estimates, sustainable natural resource use and conservation can have a higher economic value than unmanaged development. CEADIR also found that using time frames of 50-100 years and including the social cost of carbon, even at values below the current U.S. Government estimate of $51 per metric ton, made a large difference in the results of economic cost-benefit analyses (CBAs).
CEADIR compared mangrove restoration to earthen dike construction for flood damage reduction on two low-income island communities in Mozambique. The earthen dike was not economically viable due to its higher capital cost and the relatively low cost of repairing flood damage to informal sector houses. Mangrove restoration was economically viable due to the additional benefits of carbon sequestration and increase in near-shore fish and shellfish catches.
A CBA for Papua and West Papua in Indonesia found that mangrove conservation was economically preferable to partial conversion for shrimp ponds that have a useful life of less than 10 years.
CEADIR analyzed nine production systems for establishment or rehabilitation of cacao farms in Ghana, ranging from the low-input business-as-usual (BAU) to higher input and climate-smart approaches for different agro-ecological zones. The low-input BAU system had the lowest net financial and economic returns.
A CBA for the Oromia lowlands of Ethiopia found that deferred-rotation grazing, active restoration of degraded rangeland, and fodder supplementation had long payback periods that would make it difficult for ruminant agropastoralists to adopt these improved practices without financing or subsidies. In addition, the relatively low benefits from increased carbon sequestration would be eventually offset by increased methane production as ruminant populations increased.
CEADIR prepared financial and economic analyses of three types of charcoal production kilns and various typical and improved cookstoves for charcoal and other cooking fuels for urban areas in Malawi and Zambia. These CBAs also assessed prospects for wood or bamboo plantations for charcoal production. Another USAID partner is replicating the approach of these analyses for the Democratic Republic of the Congo.
CEADIR also prepared literature reviews on the economic and environmental impacts of rural road construction and large-scale hydropower and convened workshops on private investment for sustainable landscapes in South and Southeast Asia.
Municipal governments and private companies can collaborate to reduce disaster risks and increase adaptation to climate change. National laws, such as India’s requirement for corporate social responsibility contributions, can help finance the costs.
In 2017, USAID/India asked CEADIR to help the United Nations Development Programme develop public-private partnerships (PPPs ) for disaster risk reduction and climate adaptation in four cities. CEADIR and its partner, The Energy and Resources Institute, identified specific opportunities for PPPs addressing local priorities and helped arrange them.
USAID/Madagascar asked CEADIR to increase the capacity of two of its existing activities to assess adaptation and financing opportunities for sustainable rural livelihoods. CEADIR used a training-of-trainers approach that enabled the two activities to implement their own joint regional training workshop. CEADIR also provided additional training for USAID staff and partners on climate finance and climate vulnerability assessment.
CEADIR provided technical assistance at four workshops of the National Adaptation Plan Global Network. It also led workshops on adaptation in fisheries and agriculture in Senegal.
Financing Climate Change Mitigation and Training
Although USAID plans to scale up direct financing of climate change mitigation and adaptation over the next four years, development assistance organizations have limited financial resources relative to the amounts needed to solve the problems. USAID can also play an important role in helping partner countries leverage financing from the private sector and other development assistance organizations.
CEADIR prepared a Climate Finance Assessment to help development assistance organizations, governments, banks, private companies, and communities scale up financing for mitigation and adaptation. These approaches include: 1) improving the enabling environment to increase incentives for private and public investment; 2) capacity development to help plan, design, and finance climate-related investments; and 3) expansion of financial instruments and markets, including approaches to risk reduction. The Climate Finance Assessment identified specific options and examples in each of these categories for clean energy, sustainable landscapes, and climate adaptation.
A green bond is a tradable debt security that finances investments with environmental benefits and monetary returns and complies with the International Capital Market Association’s Green Bond Principles. CEADIR prepared a market assessment for domestic green bond issuances in Peru. A climate bond is a type of green bond that also meets the sector-specific criteria of the Climate Bonds Initiative. CEADIR prepared a roadmap describing the process of developing a climate bond.
Other Training and Communication Events
Between February 2015 and March 2019, CEADIR organized 27 discussion events, under the “Navigating the Climate Economy Series.” Recordings of these events are compiled into a playlist on the Climatelinks YouTube channel.
In 2020, CEADIR and Climatelinks co-organized six webinars on recently completed work. These recordings and presentations are available on the CEADIR-Climatelinks webinar series page.
CEADIR developed new tools and methods in clean energy, sustainable landscapes, and adaptation. It also provided technical assistance to 89 financial institutions around the world, and helped mobilize $17.7 million in clean energy lending. CEADIR additionally provided training to USAID partners on climate adaptation and sustainable livelihoods with biodiversity benefits, and organized or contributed to a total of 64 knowledge-sharing events. The activity trained 2,485 stakeholders (41 percent women) and increased the capacity of 40 organizations to address climate change issues in 32 countries. Lastly, CEADIR produced 78 assessments and provided analysis, design, and implementation support on Low Emissions Development Strategies (LEDS), Nationally Determined Contributions (NDCs), National Adaptation Plans (NAPs), and climate financing.
Dr. Eric Hyman is an Economist in the USAID Economic Growth, Education, and Environment Bureau’s Economic Policy Office. Dr. Hyman was previously Economist and Environmental Officer at the U.S. African Development Foundation and Chief of Program Evaluation at EnterpriseWorks Worldwide/Appropriate Technology International. He has a Ph.D and M.R.P in Environmental Planning from the University of North Carolina at Chapel Hill and a B.A. in Economics and Environmental Science from the University of Virginia.
Christine Chumbler is a communications professional with more than 20 years experience in writing, editing, and publications design. She has expertise in every stage of publication production, from concept and writing to editing, design, and printing. In the mid-1990s, she was a Peace Corps Volunteer in Malawi. This experience led to a career using her writing and editorial skills with international development and foreign policy organizations, many of which worked to directly support USAID’s efforts. She has worked in a freelance capacity full-time since May 2016. Chumbler has a Master’s in journalism from the University of Michigan and a Bachelor’s in environmental studies from the University of California, Santa Cruz.