5. Zambia

5.1 Climate Change Situation

Zambia is highly vulnerable to the impacts of climate change, which pose a major threat to the sustainable development aspirations of the country, as outlined in the Vision 2030 and national development plans. The 2020 University of Notre Dame Global Adaptation Initiative index ranked Zambia as the 41^st country most vulnerable to the impacts of climate change out of 182 countries.^[133] Climate change and variability, and the ensuing events such as droughts, floods and extreme temperatures, have led to adverse effects on key sectors including energy, agriculture, water and forestry. These effects have negatively impacted food and water security, water quality and the energy and livelihoods of the people, especially in rural communities. Since 1960, the mean annual precipitation countrywide has been decreasing by 1.9mm per month per decade, most notably in the summer months, and the growing season for crops has been shortening.^[134] Contrastingly, Zambia’s average annual temperature has increased by 1.3°C since 1960, an average rate of 0.29°C per decade. Over the same period, more than nine million Zambians have been affected by seven major droughts and 20 major floods

These extreme weather events have exacerbated the poverty of over 60% of the population, particularly in rural areas that are dependent on rain-fed agriculture for their livelihood. The rural poor have experienced crop failures and death of livestock, which have caused them to turn to other natural resources such as forestry for survival. The health sector is not spared as there is expansion of disease vector habitats for malaria and bilharzia and increased incidences of cholera, typhoid and dysentery, putting pressure on the health care system. Existing and planned infrastructure projects are also at risk due to more frequent and severe floods.

In addition, the droughts have caused energy crises due to low surface water levels in water bodies. In some years, these water levels have reduced power supply levels to below demand, necessitating load management and stalling progress in reducing energy poverty. Zambia’s energy mix is highly dependent on hydropower, accounting for 80%, followed by coal and heavy fuel oil, accounting for 11% and 4%, respectively.¹³⁵Additionally, solar and diesel power sources account for 3% and 2.7%, respectively. The energy system is thus vulnerable to climate shocks, evidenced by the 2015 and 2018 droughts, which culminated in load management and power rationing by the national utility company, ZESCO.

As a result of the energy crises many micro, small and medium-scale enterprises find it hard to cope and, in some cases, shut down operations altogether. The population has turned to charcoal for cooking solutions, thereby driving the deforestation rate to over 170,000 hectares per year. This deforestation is constraining the attainment of SDGs 7 and 13 in Zambia. As climate patterns change, the natural resource-driven sectors are under threat and potentially putting the economic development gains scored in past decades at risk.

The impacts of climate change over the last 30 years, such as floods and droughts, are estimated to have cost the Zambian economy US$13.8 Billion in GDP losses.^[136] With extreme weather events projected to increase in intensity and frequency, the impact could rise to 0.9% of GDP over the next decade.^[137]

GHG Emission Trends

According to the Third National Communication to the UNFCCC, Zambia is a net carbon sink. The total GHG emissions by source were estimated at 120,507.7 Gg CO₂ eq and 106,967.1 Gg CO₂ eq in 2010 and 2005, respectively. The total GHG removals were, however, 137,322.9 Gg CO₂ eq and -138,259 Gg CO₂ eq in 2010 and 2005, respectively. However, in 2010, the net sink status was reduced by 70% to -16,815.2 Gigagrams (Gg) carbon dioxide (CO₂) equivalent from the -57,124.0 Gg of CO₂ equivalent estimated in 1994138 (TNC, 2020).^[139]

In terms of sector contribution to GHG emissions, in 2010, the AFOLU sector contributed 95.75% of the total emissions with 2.6% from energy, 1.4% industrial processes and product use and 0.25% from the waste sector. Over half (55.2%) of the emissions in the AFOLU sector were attributed to wood removals for commercial timber and fuelwood and about 21.3% of the emissions were from forestland conversions into cropland. Land conversions to settlements contributed 8.28% of the emissions, biomass burning 8.6% while enteric fermentation emission contribution stood at 1.9% (Fig 5.1).

Fig 5.1 Zambia GHG emissions by sector-2010, and trends of GHG emissions and removals

Source: Third National Communication to the UNFCCC (2020)¹⁴¹

5.2 National policy and regulatory context

5.2.1 Global context

Zambia is a party to the UNFCCC, having signed and ratified the Convention on 11^th June 1992 and 28^th May 1993, respectively. It is also a party to the Kyoto Protocol, which it signed on 5^th August 1998 and ratified on 7^th July 2006. Additionally, it signed and ratified the Paris Agreement on 20th September 2016 and 9^th December 2016, respectively. As part of its commitment to the UNFCCC, Zambia has submitted three National Communications (NCs): the initial one in 2004, the second in 2014 and the third in 2020 while the initial Biennial Update Report (BUR) was submitted in 2020. The NCs and BURs enable the country to report on GHG inventories and the corresponding measures for effective climate actions to reduce GHG emissions. Zambia’s GHG ambitions were submitted through an initial NDC in 2015 and an updated NDC in 2021.

Zambia is also a party to the 2030 Agenda for Sustainable Development with the accompanying SDGs, which include dedicated goals on climate action (SDG 13) and protecting, restoring and promoting sustainable use of terrestrial ecosystems (SDG 15).

In 2015, Zambia also adopted the 2015-2030 Sendai Framework for Disaster Risk Reduction, which recognizes that the state has the primary role to reduce disaster risk but that responsibility should be shared with other stakeholders, including the private sector and civil society organisations.

5.2.2 National context

Zambia has a National Policy on Climate Change (NPCC) 2016 to address climate change. The policy seeks to provide a framework for coordinating climate change programmes in order to ensure climate resilient and low carbon development pathways for sustainable development towards the attainment of Vision 2030.^[141]

Over the years, the country has developed other national policy instruments to address the climate change challenge (Table 5-1).

Additionally, Zambia has commenced the preparation of a green growth strategy.^[142] Its execution is envisaged to contribute to efficient use of natural and other resources, reduction in GHG emissions, and to enhance coping with climate change and drive economic growth sustainably. It is expected that the preparation of the green growth strategy will be concluded by the end of the first half of 2023.

In addition to the Vision 2030 and the climate-change-related policies outlined in Table 5.1, country has several sectoral policies to support the implementation of climate change adaptation and mitigation actions, including the National Policy on Environment of 2007, the National Forestry Policy of 2014, the National Energy Policy of 2019, the Second National Agriculture Policy of 2016, the Second National Biodiversity Strategy and Action Plan and the Technology Needs Assessment of 2013. However, the climate actions outlined in the NDC and the NPCC are currently not sufficiently mainstreamed into sectoral policies. Achieving the NDC-targeted reduction in GHG emissions requires ensuring that the climate actions in the NDC are mainstreamed into the sectoral policies.

Table 5.1 Policy instruments to address the climate change challenge

Source: Adapted from the NPCC 2016

The implementation of the climate change strategies and policies is complemented by sectoral legal frameworks outlined in Table 5-2.

Table 5.2 Sectoral legal frameworks

Source: Adapted from the NPCC 2016

In 2019, the government commenced the process of developing standalone legislation on climate change to anchor the long-term institutional arrangements outlined in the NPCC as well as of domesticating international protocols such as the UNFCCC, the Kyoto Protocol and the Paris Agreement. It is envisaged that the climate change legislation will be enacted by the first quarter of 2023. ^[143]

5.2.3 Climate change institutional coordination structures

The institutional coordination structures on climate change in Zambia are at three levels: The Council of Ministers, the Steering Committee and the Technical Committee (see Fig. 5.2).

Fig 5.2 Climate change institutional coordination structures

Source: Authors' construct (2022)

Climate change coordination at sub-national level

At the sub-national level, the planning and development coordination structures provided for under the National Planning and Budgeting Act Number 1 of 2020, the Provincial Development Coordinating Committees (PDCCs) and the District Development Coordinating Committees (DDCCs), coordinate the implementation of climate change activities. The Chairpersons to the PDCCs and DDCCs are the respective Provincial Ministers and District Commissioners while the Secretariats are the Ministry responsible for development planning at provincial level and the Directorate of Planning in a local authority in each district, respectively. Each DDCC reports to the PDCC in the respective province.

We note that there is a deep capacity gap at the sub-national level for undertaking climate action.

The Ministry of Green Economy and Environment

The Ministry for Green Economy and Environment (MGEE) is the Secretariat to the Council of Ministers on Climate Change through the office of the Minister. Additionally, the Ministry chairs the Steering Committee of Permanent Secretaries and, through the department responsible for green economy and climate change, is the Secretariat to the Steering Committee.

Additionally, the Ministry, through the Meteorological Department, is the country’s primary provider of meteorological services and is charged with monitoring, predicting, analysing and providing weather and climate-change-related data and information, as well as providing advice and assessments for related policy formulation.

Further, the Ministry is the focal point for the UNFCCC and the GEF and the United Nations Convention to Combat Desertification. The Ministry, through the Forestry Department, is responsible for the reducing emissions from deforestation and forest degradation and has the role of conservation, sustainable management of forests and enhancement of forest carbon stocks (REDD+).

The Ministry is the NDA for the GCF and the Adaptation Fund and is the focal point institution for the CIF. Through the facilitation of the Ministry, the Development Bank of Zambia was accredited for direct access to the GCF. Currently, the Ministry of Finance, ZANACO PLC and the National Savings and Credit Bank are the country’s aspiring National Implementing Entities for direct access to the GCF.

With respect to coordination of the GHG management system, the Ministry, through the Zambia Environmental Management Agency is responsible for the GHG management system. The lead institutions responsible for sector inventory preparation are the Department of Energy, which is responsible for reports on energy; the Department of Commerce and Industry, for reporting on industrial processes and product use; the Department of Agriculture for reporting on the agriculture component of AFOLU; the Department of Forestry for reporting on Forestry and Land Use of AFOLU and the Department of Local Government for reporting on waste.

While the climate change institutional coordination structures are seemingly thorough, there is a need to strengthen these structures and anchor them in legislation for stability. Further, the capacity of the institutions represented at various levels in climate change needs to be built for enhanced participation and outcomes on not only climate change but also the NDC in general.

Over the years, Zambia has put in place several climate mitigation and adaptation plans. However, continued mainstreaming of climate change in the national development planning process, particularly in the sectors identified in the NDC, is cardinal for Zambia to fulfil the climate ambitions set out in the NDC.

5.3 NDC gap analysis: Zambia’s climate mitigation and adaptation plans

Zambia is a party to the Paris Agreement, which it signed and ratified on 20 September 2016 and 9 December 2016, respectively. Following Zambia’s ratification of the Paris Agreement, as provided for under the Accord, the country, on 9 December 2016, submitted its first NDC. Zambia’s first NDC included both mitigation and adaptation components based on the country’s national circumstances and in line with the UNFCCC’s decisions 1/CP.19 and 1/CP.20. The first NDC was submitted with a conditional pledge of reducing GHG emissions by 25% (20,000 Gg CO₂e) by 2030 against the base year of 2010 under the business-as-usual scenario with limited international support or by 47% (38,000 Gg CO₂e) with substantial international support.

The mitigation actions under the first NDC were focused on three programmes:

• Sustainable forest management
• Sustainable agriculture and
• Renewable energy and energy efficiency.

Adaptation actions were focused on adapting strategic productive systems, namely, agriculture, wildlife and water; the adaptation of strategic infrastructure and health systems and enhanced capacity building, research, technology transfer and finance for adaptation.

The successful implementation of the first NDC was conditional and subject to the availability of international support in the form of finance, technology and capacity building. The total budget for implementing both the mitigation and adaptation components was estimated at US$50 billion by the year 2030. Out of that sum, US$35 billion was expected to come from external sources while US$15 billion was expected to be mobilised from domestic sources.

In 2021, Zambia submitted the updated NDC to the UNFCCC. Zambia’s updated NDC enhances both the mitigation and adaptation components as compared to the first NDC by broadening the scope of sectors covered by the mitigation component by adding transport, liquid waste and coal (production, transportation and consumption). It also elaborates the adaptation component of the NDC by developing indicators that will enable the country to track progress on building resilience in both the human and physical ecosystems and on adaptation actions. In addition, gender, youth actions and SDGs are considered in the updated NDC. The updated NDC also maintains the emission reduction ambition provided in the first NDC with the target of 25% (20,000 Gg CO₂e) by 2030 against the base year of 2010 under the business-as-usual scenario with limited international support, or, by 47% (38,000 Gg CO₂) with substantial international support.

The updated NDC builds upon Zambia’s first NDC, the National Policy on Climate Change of 2016 and the first Biennial Update Report (BUR 1) and reflects subsequent work as captured in Zambia’s Third National Inventory Report. Additionally, the updated NDC was informed by a more detailed and complete assessment of mitigation and adaptation measures, based on improved information and data, and an extensive stakeholder consultation process.

As was the case for the first NDC, the successful implementation of the updated NDC is conditional and subject to the availability of international support in the form of finance, technology and capacity building. The revision of the total budget for implementing the updated NDC to reflect the enhanced ambition is underway but currently the budget being used is the same budget as for the first NDC with the same contributions from external and domestic sources.

While Zambia has developed and submitted the updated NDC, the country has not yet prepared the NDC investment plan to act as an entry point for the private sector to “co-own” the NDC with the government.

The implementation of Zambia’s NDC is anchored within the framework outlined under Section 5.2.3 as provided for in the NPCC, coordinated by the MGEE.

5.3.1 National Adaptation Plan

In 2021, Zambia, with US$2.1 million support from the GCF and with the Global Water Partnership as the delivery partner, commenced the formulation of its NAP for long-term adaptation planning and mainstreaming of climate change into the national development planning process. The NAP will provide a climate hazard and vulnerability assessment and set out priority adaptation actions.

Since inception, some of the requirements under the element on “laying the groundwork and addressing gaps” of the NAP process as provided for by the Least Developed Countries Expert Group Guidelines have been accomplished. The activities undertaken include stocktaking of available information on climate change, consensus building among stakeholders on the NAP Roadmap and official launch of the NAP process in April 2021, identification of capacity gaps for the implementation of the NAP including weaknesses and gaps in climate change coordination, mainstreaming of climate change into the Eighth National Development Plan (8NDP) and training of the National Technical Committee on Climate Change provincial and district planners in all the ten provinces on climate-sensitive planning and budgeting.

While mainstreaming of climate change in the 8NDP and some sectoral policies, plans and strategies including the Second National Agriculture Policy and the National Urbanisation Policy has been undertaken, mainstreaming is yet to be made in several climate-sensitive sectoral policies, plans and strategies.

Similarly, mainstreaming of climate change in plans and policies at the sub-national level has commenced but is facing capacity challenges and is yet to be completed. Only the districts in Eastern Province, with support from the World Bank-funded Zambia Integrated Forest Landscape Project, have formulated and mainstreamed climate change in district integrated development plans. The other district integrated development plans across the country are at various stages of formulation and thus require strong collaboration between the MGEE and the Ministry of Local Government and Rural Development to ensure that climate change is sufficiently mainstreamed in all the outstanding district integrated development plans.

While there are strides in mainstreaming climate change at both national and subnational levels, very little has been undertaken by the various stakeholders in the key vulnerable sectors to ensure the integration of climate change within their plans, policies and strategies. This lack of action has been largely attributed to the lack of sector-specific mainstreaming guidelines to guide the various stakeholders in the key climate-sensitive sectors on the step-by-step process to mainstream climate change. In this regard, the process of formulating sector-specific mainstreaming guidelines has started to foster participation of stakeholders in the key vulnerable sectors to ensure the integration of climate change within their plans, policies and strategies at both national and sub-national levels. This should be a continuous process where the MGEE and the Ministry of Local Government and Rural Development, for instance, could collaborate and engage more on mainstreaming climate change in the integrated development plans to finance climate actions at sub-national levels. This mainstreaming could include development of new policies in sectors (agriculture, water, infrastructure and energy) identified as priority, as stipulated in the NDC and 8NDP.

Further, the formulation of the NAP readiness, where provincial planners and district planners are enabled to work on climate risks and vulnerabilities in their localities, could inform integration of the risks and vulnerabilities in the planning and budgetary processes. The NAP process is expected to conclude in 2023 with the delivery of Zambia’s National Long-term Adaptation Plan, which will provide a climate hazard and vulnerability assessment and set out priority adaptation actions.

5.3.2 Sectoral National Adaptation Plans

The sector-specific NAPs can act as vehicles for resource mobilisation for addressing the climate risks that are specific to the sectors. Zambia has made strides, albeit insufficient, to formulate sector-specific NAPs. Thus far, only the Health National Adaptation Plan (HNAP) has been developed. The HNAP identifies climate risks and adaptation measures relevant to the health sector and sets out the road map for the implementation of the HNAP. It also acts as a vehicle for resource mobilisation for addressing the health climate risks.

Additionally, the process of formulating the Agriculture National Adaptation Plan (ANAP) had commenced in 2017 but concluded at only the development of a roadmap for the preparation of the ANAP. Resources are yet to be mobilised to conclude the process. The preparation of the Water National Adaptation Plan (WNAP) is in the pipeline and awaits the development of the NAP. The GCF, which is supporting the preparation of the NAP, has pledged to release US$900,000 for formulating the WNAP when the formulation of the NAP is concluded.

5.3.3 Nationally Appropriate Mitigation Actions

In 2014, Zambia formulated its Nationally Appropriate Mitigation Actions (NAMAs) to chart a low emissions development pathway in the agriculture, energy, transport, waste management and forestry sectors. Although the NAMAs are strictly not plans but projects, their implementation would contribute to the overall plan on emission reduction articulated in the NDC and the 8NDP.

The Agriculture NAMA, called Sustainable Agriculture through Integrated Crop and Livestock Farming, has the objective of reducing GHG emissions, as well as of increasing crop and livestock productivity, and includes information on technological, financial and capacity-building needs as well as opportunities for effective actions towards the sustainable development of the agriculture sector.

The objective of the Transport, Waste and Energy NAMAs, called the Green Urban Mobility Solution for Zambian City Integrated Tramway, the Integrated Waste Management and the Small Hydro Projects Development in Zambia, respectively, was to reduce emission reductions and guide the country towards a low carbon pathway while advancing long-term sustainable development benefits.

The purpose of the forestry NAMAs, aiming to Increase efficiency in harvesting, processing and use of charcoal, is to develop a sustainable wood harvesting mechanism for charcoal production and increase efficiency in charcoal production and use of charcoal to reduce forest-related GHG in Zambia and contribute to sustainable forest management. While these NAMAs have huge GHG emission reduction potential and would, thus, contribute significantly to Zambia meeting the GHG emission reduction target outlined in the NDC, very few have been implemented because the country could not raise the requisite financing.

5.3.4 NDC Measuring, Reporting and Verification System

As part of implementation of its NDC, from 2020, Zambia, with support from UNDP, has been establishing an enhanced transparency framework that is central to the design, credibility and operation of the Paris Agreement. The framework guides the country on reporting GHG emissions, progress towards the attainment of the NDC, climate change impacts and adaptation, support including climate finance provided and mobilised and support needed and received. The Measuring, Reporting and Verification (MRV) system will facilitate sharing of information and lessons learnt and allow the assessment of whether set targets have been achieved. It will help create transparency and show the continuity of Zambia’s climate actions, and strengthen trust for climate finance from other investors.^[144]

In terms of design, Zambia’s MRV system has four components: a back-end or database accessible to system administrators, a website accessible to the general public, a portal accessible to end users and supporting documentation including procedures and guidelines as well as user and training manuals, which have already been developed. Through the portal, end users will be able to track adaptation projects on energy, water, health, wildlife, tourism, infrastructure, business and industry, agriculture and forestry and mitigation projects on energy, industrial processes and product use, agriculture, forestry, waste and transport; GHG emissions and on support including finance, capacity building, and technology transfer.

The setting up of the MRV system is a good start but how well it works will largely depend on the technical capacity and the quality of the data in the system. There is, therefore, a need for continuous professional development to thoroughly build the technical capacity of all users of the system including primary data producers. Zambia, as one of the four African countries piloting the United States Agency for International Development (USAID) supported Comprehensive Africa Climate Change Initiative (CACCI), should take advantage of CACCI and generate the requisite data including baselines on a number of parameters that will help track the implementation, monitoring and reporting of the NDC.

5.3.5 NDC implementation gaps

The following are the emerging NDC implementation gaps that also hinder the uptake of climate finance in Zambia:

• Institutional coordination structures: attaining the ambitious targets outlined in Zambia’s NDC will require strong institutional coordination. Currently, even if non-state actors are represented in the Technical Committee, the representation is weak as it does not address the varied categories of non-state actors in the broad segments such as the private sector, civil society and academia. Additionally, there is a case for including the non-state actors in the Steering Committee.
• Technical capacity: to undertake the climate actions in Zambia’s NDC will require technical capacity at various levels, including government line ministries and agencies, the private sector and other non-state actors, to coordinate, streamline and implement the NDC. Further, the government should strengthen its facilitatory role by building the capacity of non-state actors to participate in executing the NDC. For example, the government should point the private sector to the available financing options with respect to climate change and how to access them. While recognising that technical capacity is weak at all levels, it is even weaker at the sub-national level and, therefore, that needs to be prioritised.
• Mainstreaming of climate change actions and the NDC: when climate-sensitive sectors such as agriculture, water, energy and forestry implement the respective sector policies, there should be simultaneous execution of Zambia’s climate change actions and the NDC. For this to be attained, climate change actions, and the NDC in particular, need to be sufficiently mainstreamed in the climate-sensitive sectors. However, while the key economic sectors have to some degree mainstreamed climate change actions and, by extension, the NDC, in many cases the mainstreaming is still not sufficient. The lack of sector-specific climate change mainstreaming guidelines to act as a step-by-step guide for the various players in the respective sectors on how to mainstream climate change actions should also be addressed.
• National and Sectoral Adaptation Plans: Zambia is in the process of formulating a NAP. This is a gap as the NDC is ordinarily supposed to be implemented side by side with a NAP. The NAP is supposed to inform the long-term investments in resilience building, and the NAP formulation process should, therefore, be prioritised. Additionally, key sensitive sectors should formulate the sector-specific adaptation plans to inform adaptation actions and resource mobilisation.
• NDC Investment Plan: Zambia has not yet developed an NDC investment plan to act as an entry point for the private sector to “co-own” the NDC with the government. The formulation of an NDC investment plan with detailed required financial and technical requirements should be prioritised.

5.4 Mapping climate financing flows in Zambia

Zambia’s NDC states the amount of domestic resources required to achieve the NDC ambition. However, there has been no specific budgetary allocation from the national budget to finance the NDC. Nevertheless, the NDC indicates the need for international financial support. Government should enhance stakeholder engagement with the private sector and cooperating and development partners to mobilise resources for implementing the NDC. More importantly, the government, working with various stakeholders, should develop a pipeline of projects for presentation to various financiers. In this regard, developing capacity on producing project concept notes and proposals should be a priority.

Zambia’s estimated cost of implementing measures to reduce the emissions to reach the NDC targets by 2030 is US$50 billion. The resources for implementation of the climate-change-related interventions are expected to be met through domestic resources, various climate funds and support commitments under the Paris Agreement and private sector investment. For 2020-2022, the Zambian government has allocated between 0.6% and 1% of the national budget to environmental protection, with specific interventions around climate change adaptation and mitigation. This sum represents a total of 206% of 2021 GDP at constant prices.^[145]

In addition, the government has provided several incentives through the national budgets in support of climate change interventions, which are estimated to be US$5.5 million between 2020 and 2022.^[146] However, the allocations under environmental protection do not include resources allocated to sectors that have contributed to climate change and mitigation such as agriculture and energy. For instance, in the 2020 budget, US$33.4 million was allocated to environmental protection while US$5.3 million was allocated to agricultural extension services for adoption of climate-smart agricultural practices. This demonstrates the challenges in tracing climate-related financing as the country has no central repository for all such financing.^[147]

Despite the foregoing, attempts have been made to estimate the level of climate financing in the country from various sources. For 2016 to 2018, it is estimated that US$139.7 million was disbursed through the national budget. The funds disbursed were from external sources of budgetary support to the government. The private sector also contributed to climate financing, with an estimated US$2.1 billion during the same period, particularly with investments in the energy sector.^[148]

5.4.1 Financing sources and its uses

The flow of climate finance in Zambia has grown exponentially from less than US$20 million per annum in 2010 to more than US$50 million per annum in 2021, with a corresponding increase in the portfolio of climate investments in the country. This rise has been attributed to the institutional strengthening such as the establishment of the MGEE, which has consolidated all environmental sustainability functions and enhanced coordination including climate finance in the country, and the shifting of the NDA office from the Ministry of Finance and National Planning.

Further, there has been an improvement in the skills required for generating bankable projects for mobilisation of climate financing. However, a lot still needs to be undertaken to reach an optimal level of climate finance and enhance the execution of mitigation and resilience-building actions to the adverse impacts of climate change. The main sources of climate financing include:

• External funding by bilateral and multilateral institutions, development banks (e.g., World Bank); and
• Private and open capital markets (carbon trading).

Interviews with stakeholders indicated that most of the climate finance has been channelled to the energy, agriculture, forestry and water sectors. It was also observed that the allocation and channelling of climate finance to the highlighted sectors was consistent with the prioritised sectors in Zambia’s national policy documents such as the 8NDP, the NDC and the NPCC. Most of the funds have been targeted at social sectors of the economy as the majority of the population is vulnerable to the effects of climate change

The following highlight the sectors where climate financing is targeted in Zambia:

• Agriculture and food security;
• Water development, sanitation and environmental protection;
• Energy sector;
• Natural resources;
• Transport sector; and,
• Tourism sector.

Further, stakeholders observed that the private sector held the best opportunities for Zambia to mobilise climate finance. It was also indicated that institutional investors such as pension funds had potential to invest in green infrastructure projects. However, stakeholders emphasised the need for enhanced engagement of the private sector through capacity building and awareness raising meetings on climate finance. There is also a need to build the business case, particularly for adaptation, to ensure that the private sector participates in climate finance. Further, stakeholders stated that there was a huge potential to mobilise climate finance from bilateral partners, particularly the governments of the USA, the UK, Germany and the EU.

Broad themes (adaptation versus mitigation)

Over the years, Zambia’s climate actions have become more orientated towards climate change adaptation, with adaptation interventions accounting for 67% during the period 2016 -2018, as illustrated in Fig 5.3. In the updated NDC 2021, adaptation actions are focused on sectors such as agriculture, wildlife and water including infrastructure, health systems and capacity building, research, technology transfer and finance for adaptation.^[149] For instance, in the agriculture sector, climate-smart agriculture practices are being scaled up nationwide.

During the period under review, there were conceptual differences between an expenditure that aims to help institutions, systems and communities adapt to the realities of a changing climate and expenditure that seeks to reduce the change in the climate itself by mitigating the impacts of human activity, see Table 5-3 on the classification of expenditure with respect to adaptation and mitigation. This shift can be explained by the need to implement actions aimed at coping with climatic changes that cannot be avoided as a result of natural causes. This need is consistent with that in other developing countries that focus more on adaptation instead of mitigation, unlike in developed countries where the focus is more on mitigation.^[150]

Fig 5.3 Composition of climate-change-related activities in Zambia 2016-2018

Source: Authors’ construction based on data from the Ministry of Finance (2022)

Table 5.3 Classification of expenditure, 2016 - 2018

* Based on Bank of Zambia exchange rate (2016: US$1 = ZMW10.29, 2017: US$1 = ZMW9.51, 2018: US$1 =ZMW 10.45)

Source: Ernst & Young Advisory Services (Pvt) Ltd (constructed using MOFNP data)

It is worth noting that, currently, Zambia does not have a comprehensive integrated system for tracking expenditure with respect to adaptation and mitigation, hence the gaps in the years: 2019, 2020, 2021 and 2022. To this end, efforts are underway to operationalise the MRV system fully, which will ensure comprehensive and integrated tracking and reporting on climate financing and expenditure.

5.5 Stakeholder mapping, alignment and practical realities

Stakeholder mapping^[151] was undertaken by all key stakeholders linked to climate finance including institutions that have been recipients of climate finance such as the government line ministries, regulators of financial institutions, financial institutions, the private sector and the academia involved in climate finance. The following approaches were employed to engage stakeholders:

• Physical and virtual key informant interviews to obtain in-depth information about climate finance from professionals from the mapped stakeholder institutions and
• A breakfast meeting: all the key informants interviewed were invited to a breakfast meeting the purpose of which was to ensure clarification of inputs, brainstorming and agreement on the different submissions made by stakeholders

5.5.1 National perspectives on climate finance needs

Stakeholders were of the view that the areas or sectors with the most pressing climate needs are the energy, the agriculture, forestry, water and climate information services (weather observation sites need upgrading and are few and far between). These were the same sectors prioritised in the 8NDP under the pillar on environmental sustainability, the NPCC and the NDC and are, therefore, aligned to Zambia’s national climate priorities.

5.5.2 National and international stakeholders engaged in climate finance

All stakeholders interviewed indicated that the key players engaged in climate finance in Zambia are multilateral institutions such as the World Bank, the AfDB, the CIF, the GCF and the GEF. On the other hand, the bilateral partners involved in climate finance are the German government through the German Agency for International Cooperation (GIZ), the Government of the United Kingdom through the Foreign, Commonwealth and Development Office (FCDO), the European Union and the government of the United States of America through USAID. The stakeholders’ submissions were consistent with secondary data analysis on the multilateral and bilateral partners involved in climate finance.

On the domestic front, the stakeholders stated that climate finance is mostly drawn from the government budget while there was very little involvement of the private sector. For the private sector, particularly the domestic financial system, stakeholders stressed that there was little climate financing being generated from there and that the climate financing had a business bias with a focus on the energy, commercial agriculture and construction sectors. It was observed that the financial regulators, namely the Central Bank, the Pensions and Insurance Authority and the Securities and Exchange Commission, are further ahead in the knowledge and appreciation of climate finance than the regulated private sector institutions, although the private sector was slowly increasing its participation. The few domestic financial intermediaries participating in climate finance utilise loans, especially concessional loans, and blended finance as financial intermediation tools and take out insurance to de-risk projects. Further, it was indicated that there was wide scope for financial intermediaries to mobilise resources from various sources for implementing clean energy investments in Zambia. Worth noting is that the Zambian government, working with various stakeholders including cooperating and development partners, has prepared a pipeline of bankable projects to attract private stakeholders and development finance institutions to participate in climate financing. Furthermore, there are some projects that are at concept note and feasibility stages. To enhance the preparation of a pipeline of projects, stakeholders emphasised the need for strengthened coordination by the MGEE

5.5.3 Strategies for addressing the climate financing constraints (both bottom-up and top-down approaches)

Stakeholders observed that the main barriers to climate finance in Zambia include inadequate capacity to develop bankable projects and nascent and weak institutional capacity for undertaking climate investments. The latter barrier is partly because there is only one NDA to the GCF, which was only accredited in 2021 and has not yet effectively participated in climate finance mobilisation from the GCF, added to which there is also real and perceived corruption, which prevents players from participating in this space. Additionally, there is no clear understanding, particularly by the private sector, of the available climate finance opportunities and there is inadequate information on the available climate finance opportunities. Financial regulators, the Bank of Zambia, the Pensions and Insurance Authority and the Securities and Exchange Commission, were further ahead in their knowledge and appreciation of climate finance than the regulated private sector institutions, although the private sector was slowly increasing its participation.

According to stakeholders, the barriers to accessing climate finance play out in the form of poorly written and poorly structured project concepts and proposals that are not bankable, most prospective financiers withhold their investments due to the identified bottlenecks; delayed funding, which can lead to project failure; bureaucracy; delayed project implementation; uninformed stakeholders, particularly the private sector, on the available opportunities on climate finance and institutions working in silos instead of in an integrated multi-sectoral manner to mobilise climate finance.

In terms of strategies for addressing the barriers, the stakeholders indicated that the creation of the MGEE was a great step in addressing the governance of climate change interventions including climate finance. Additionally, the government is finalising the development of the Climate Change Bill, a review of the NPCC and the development of the Green Growth Strategy to provide a supportive and enabling environment for mobilisation of climate finance. In this regard, the stakeholders stated that the Green Growth Strategy would be used as a vehicle for mobilisation of resources for implementation of green growth actions. The government was also strengthening the institutional and technical capacity through the creation of the MGEE, which had consolidated all environmental sustainability functions, and the dedication of funds towards the building of capacity. Further, the government, through the MGEE and the NDA, was communicating information to the various stakeholders on available climate finance opportunities.

The stakeholders stated that the private sector was addressing the identified barriers to climate finance by participating in the climate change coordination structures, particularly the Technical Committee on Climate Change, where opportunities on climate finance are made available to them. This participation, stakeholders indicated, was also true for the civil society organisations. It was stated that there was broader stakeholder collaboration to address the barriers through the Technical Committee and Steering Committee on Climate Change. Stakeholders further observed that the various interventions to address barriers to climate finance had, over time, paid off as there were improved climate finance flows. For example, the establishment of the NDA had facilitated the mobilisation of over US$80 million from the GCF. Additionally, through institutional strengthening and capacity development, Zambia has managed to acquire more than US$200 million from the World Bank, the AfDB and the CIF.

However, despite the stated strides in addressing climate finance barriers and improvement in climate finance flows, the barriers have not yet been fully addressed. There is a need for a continuous and systematic approach to addressing the barriers through all the relevant institutions. Institutional and capacity strengthening, awareness-raising and education should be prioritised.

5.6 Summary

Zambia is pursuing a green growth agenda. However, to attain the NDC mitigation and adaptation targets including the 8NDP as well as to put Zambia on a low carbon and climate-resilient trajectory, the country needs to mobilise the requisite resources for implementing the articulated actions. Zambia, therefore, needs to build the technical, institutional and technological capacity to implement the climate change actions effectively.

Climate finance has been largely mobilised from external sources. In addition, the participation of the private sector remains minimal and skewed towards clean energy investment. It is therefore important to mobilise climate finance domestically, and, even more so at sub-national levels, to complement external sources by triggering green investments in sectors vulnerable to climate shocks. The role of climate finance to inform integration of the climate risks and vulnerabilities in the planning and budgetary processes, particularly at sub-national level, cannot be overemphasised.

Stakeholders observed that the main barriers to climate finance in Zambia include inadequate capacity to develop bankable projects and nascent and weak institutional capacity for undertaking climate investments. There is also little understanding of the available climate finance opportunities, particularly in the private sector.