Climate change financing in Cambodia

By Heng Pheakdey

​Climate finance is the financing channeled by national, regional and international entities for climate change mitigation and adaptation projects and programs. Climate finance is critical to tackling climate change because large scale investments are required to significantly reduce emissions and to allow
countries to adapt to the adverse climate change effects. In accordance with the principle of common but differentiated responsibility and respective capabilities set out in the Tokyo Protocol, developed countries (Annex II Parties) are to provide financial resources to assist developing countries in implementing the objectives of the UNFCCC.

Due to its strong exposure to floods and droughts and the lack of adaptive capacity which caused by a combination of low-levels of income; skill and infrastructure, Cambodia, along with the Philippines, is the most vulnerable country to climate change in Southeast Asia. As one of the poorest countries in
the world, Cambodia needs sustained financial resources to deal with the impact of climate change. The large majority of climate expenditure has so far been provided by donors. According to the Ministry of Environment, Cambodia has mobilized US$ 200 million of climate funding for the last few years but little is known about the detail of the fund. With regard to effectiveness, information is scarce on the impact of the completed projects and on the progress of the ongoing climate change projects. This research aims to contribute to addressing this issue by reviewing Cambodia’s climate change finance to estimate how much fund Cambodia has actually received, from which sources and whether the intended beneficiaries are really benefitting from climate change projects. Being the first comprehensive research of its kind in Cambodia, this research has the following objectives:

(1) Identify and document the range of bilateral and multilateral funds that are currently available to and being accessed by Cambodia
(2) Analyze the progress and challenges of climate change finance policy and implementation
(3) Make recommendations on the steps required to increase the ability of Cambodia to effectively and sustainably manage and utilize climate change funding and thus better respond to climate change.

This research employs a mix-method approach, combining qualitative and quantitative data collected from desk research, key informant interviews, and case studies. A comprehensive literature review and desk research was conducted to study the global climate change financing schemes, the range of
fund that Cambodia has accessed to, and the status of climate change projects in the country. Based on the set criteria, 95 climate change relevant projects were selected for analysis from four different data sources to increase the accuracy of the calculation. A total of 27 key informants including representatives from local, international NGOs, government ministries, donors and 32 project beneficiaries were interviewed to verify and complement the result of the desk research. Two
case studies of donor-funded climate change projects were selected for further analysis. The entire research lasted for three months from July 01, 2013 to October 01, 2013.

Since 2003, Cambodia has mobilized US$ 655.6 million in climate fund, 64% of which is grant while the remaining 36% is concessional loan. This funding comes from 95 domestic climate relevant projects, of which 43 projects have been completed, 45 projects are ongoing and seven are in the pipeline. Out of
the US$ 655.6 million that Cambodia has mobilized so far, US$ 338.8 million is estimated to have been disbursed and the remaining US$ 316.8 million is available for next seven years (2014-2020). Cambodia receives climate change financing through two main sources: bilateral and multilateral channel. The former has contributed US$ 317.7 million, accounting for 48% while the latter has contributed US$ 337.8 million, accounting for 52% of the total fund. Seventy-one percent of the total financing is concentrated in three major sectors: agriculture, water and irrigation (41%), transport and infrastructure (16%) and disaster management (14%). The researcher classified climate projects into four categories: mitigation, adaptation, mitigation and adaptation project (for project which has both elements), policy, research and capacity building and found that the majority of the financing (70%) is allocated for adaptation projects. Dissecting the projects by province by assuming that provinces covered by the same project receive proportionally equal amount of fund of that project, the researcher has found that Pursat has received the largest share of the fund, totaling at US$ 67.29 million. Other major receivers of fund include Battambang, Kampong Chhnang and Siem Reap with an estimated funding of US$ 49.77 million, US$ 35.90 million, US$ 32.8 million respectively.

Cambodia has been relatively been successfully in mobilizing climate fund. A total of US$ 655.6 million has been mobilized since 2003; almost half of this amount is still available for use until 2020. While the understanding about the effectiveness of climate finance interventions remains limited, donors have generally expressed satisfaction with the use of climate fund so far. Progress has also been made at the policy level. The national Climate Change Strategic Plan has been completed and is waiting for government’s endorsement. Cambodia is also one of the first few countries in the world to complete the Climate Public Expenditure and Institutional Review to analyze the climate change related
expenditure, and to assess the extent to which this expenditure is guided by existing policy and institutional responsibilities. The ministerial action plans and Climate Change Financing Framework are currently being developed. New and promising approaches are also emerging to effectively use the climate fund.

While headway has been made, there are challenges that need to be addressed. Some donors and NGOs suggest that although the money has been used  successfully, it could have been used more effectively. The following challenges are identified to be the barriers for the effective management of climate change fund.
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􀁸 The absence of a single, well-defined, robust, and uniform reporting and monitoring framework, and the lack of data are the barriers in tracking how the money is delivered, channeled and managed
􀁸 Limited ownership due to the lack of government’s participation in the implementation, monitoring and evaluation process
􀁸 Limited stakeholder engagement, particularly, the vulnerable communities
􀁸 Despite some progress, awareness of climate change remains low among the general population and so is the capacity of the government and NGOs to address climate change challenges
􀁸 Low coordination among the government’s ministries, among donors, between the government and donor and between government and implementing NGOs. This has led to sub-optimal results.

With hundreds of million of dollar of climate financing, Cambodia faces a growing pressure to demonstrate that climate finance is well spent. The ability to prove effective governance of the fund will help government to secure more allocation over longer term. This research suggests that the following actions should be taken into consideration in order to improve the effectiveness of
climate fund in Cambodia.

For government
- Link climate finance with Cambodia’s development plans; not create stand-alone projects
- Develop a harmonized reporting, recording and tracking system for climate change financing flow
- Improve transparency and accountability to all stakeholders
- Create an effective coordination process to manage the complex interactions between multiple actors and channels
- Strengthen and promote financing through sub-national channel.

For donors
- Promote country ownership by helping to build Cambodia’s capacity to exercise leadership over its climate change policies and strategies and activities
Reduce the fragmentation of climate change assistance by harmonizing their systems
- Promote pool funding mechanism
- Continue to raise awareness and strengthen the capacity of government and civil society
- Improve transparency and information sharing

For implementing agencies
- Document lessons learned and share best practices of climate change projects
- Pay special attention to the poor and the vulnerable in designing and implementing the project to ensure that they really benefit from the project
- Involve local community in climate change projects to empower local people, create a sense of belonging and allow them to better understand and adapt to the consequences of climate change.
- Strengthen coordination and communication to eliminate duplicate work and to identify areas or issues that need more attention

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