Financing the Green Transition in Yemen
Yemen has become one of the countries highly vulnerable to drought, floods, disease outbreaks, and sea level rise. With Yemen entering into an armed conflict between the government and Houthi militias nine years ago, that makes Yemen also one of the least prepared to respond to these effects.
According to a recent study published by the government-sponsored Yemeni Association for Family Welfare, Yemen is suffering from major effects of climate change, which will have negative consequences on all aspects of the country’s economy and its poor resources. The study considered the current situation in Yemen as a warning to the rest of the world about what might happen if the effects of climate change are not addressed with responsive and efficient measures.
Yemen is also ranked the second most-vulnerable country to natural hazards and the harmful effects of climate change. Therefore, the possibility of the population being exposed to earthquakes, tsunamis, coastal flooding, rivers, hurricanes, droughts, and sea level rise has become alarming.
Therefore, climate change will exert added pressures on already precarious populations and push still other groups to unprecedented levels of vulnerability and deprivation. Efforts to adapt to a changing climate will also exact a steep price, exposing existing governance shortfalls and deepening deficits. As climate change escalates burdens on state capacity, it will become even more urgent for the country to take proactive measures, including developing its climate governance to protect its vulnerable populations and maintain economic and social stability.
In response to these and other effects of climate change, Yemen has been the locus of numerous projects seeking both adaptation to, or mitigation of climate change with support from the major multilateral financing facilities. These efforts at “green transition” are the subject of review to help the general public understand the processes and trends underway in the country. While bilateral development cooperation and other public and private investments also could be described as “green finance,” the present inquiry tracks the international public funds dedicated to Yemen’s green transition since 2010.
Grounded in a preliminary study in 2022 Going Green: Monitoring the Green Transition in the Arab Region, in cooperation with its partners in the Arab Non-Governmental Organizations Network for Development (ANND), Housing and Land Rights Network (HLRN) has worked to develop reliable tools and easily accessible information and data on work related to climate change in “green transition” policies in Arab countries in 2022. This effort is in response to the ongoing need for improved knowledge and public information about consequences climate change and the efforts to face them.
Research Methodology
To develop a tool for better public understanding of the “green transition” in our countries, the first basic challenge is collecting all relevant information scattered in several sources, and culling it into a unified, easily accessible format. Only then can this information be collated and presented, making it easier for everyone to monitor climate action in a single source.
This review was made possible by collecting all data on relevant projects in a unified research tool, by reviewing all websites that document all major multilateral financing mechanisms related to confronting climate change. HLRN carried out this most-basic step by producing a unified matrix with shared categories and specific elements, enabling search using different data. This common format enables the analysis within countries, as well as a basis for comparative analysis across countries.
Climate finance partners
The method and objective of the matrix is to include all projects recorded as funded since 2010 through the multilateral process, particularly the mechanisms developed through the UNFCCC process. It would not be possible to monitor all private-sector or bilateral projects that claim to be “green.” This review covers projects supported by the multilateral green finance institutions and mechanisms of:
- Adaptation Fund- AF
- Climate Investment Fund (CIF)
- European Bank for Reconstruction and Development (EBRD)
- Green Climate Fund (GCF)
- Global Environment Facility (GEF)
- Middle East/North Africa Transition Fund (MENA)
- World Bank (WB).
Since 2010, five of the seven main MENA bodies involved in climate finance have provided funding for several projects of varying sizes in Yemen. The two funds that refrained from contributing to the major transformation in Yemen during that period were the Middle East and North Africa Transition Fund and the European Bank for Reconstruction and Development.
Mitigation versus adaptation?
The majority of foreign-funded green transformation initiatives in Yemen aim to reduce greenhouse gas emissions, within the general trend in the Middle East and North Africa region. However, we find that adaptation strategies constitute approximately 57.9% of these projects. The total value (of the thirteen projects) concerned with adaptation in Yemen is just over one billion US dollars, but the value of the nine mitigation initiatives is approximately six billion US dollars. Five of the projects reviewed were intended to impact both adaptation and mitigation actions, all of which assist financial institutions.
Also, four of the 20 initiatives announced as being concerned with the green transition and completed since 2010 cannot be categorically classified as mitigation or adaptation projects. The importance of these projects in “green transition” policies can also be examined further.
Distribution across Development Fields
These projects are distributed across the majority of development sectors, six of which are in the agriculture sector, three in the energy sector, and four in the water and sanitation sector. The implementation of the four initiatives was also supervised, which aimed to protect the environment. Three initiatives related to urban and environmental infrastructure, in addition to another initiative for solid waste management. Only one project has been undertaken in each of the following sectors: industry, mining and quarrying, transportation, and agriculture.
Yemen does not have any projects concerned with improving the housing sector. The Adaptation Fund supported only one project, focusing on the water, sanitation, and agriculture sectors.
While the Global Environment Facility managed one modest project in Yemen, it was awarded less than 17 million US dollars in grants, all of which require joint financing from a group of local and international sources. The World Bank is considered one of the most prominent financial institutions financing the green transformation in Yemen, as it was Funding was provided for 11 different projects. There are three projects related to agriculture, two related to energy, two related to water and sanitation, two related to natural resources, and two others related to municipal and environmental infrastructure.
On the other hand, there are many unanswered questions regarding the Climate Investment Fund, because it supports three projects financed by borrowers without providing any information about the projects or the financing process. It also appears that there is no activity in Yemen, by the European Bank for the Middle East and North Africa region, and the Transition Fund for the Middle East and North Africa region, and the Fund’s website does not contain any information related to initiatives related to the country of Yemen.
One project supported by the World Bank provides short-term employment and access to selected basic services for the most vulnerable. This project appears to serve humanitarian and/or development objectives, but its relevance to climate change is unclear
Follow the money trail
A total of about US$1,060.16 billion has been invested, over time from various sources and at different stages. Yemen was the beneficiary of the largest amounts of funding ever, with total grants amounting to 860.16 million US dollars, and the smaller amount of $200 is in the form of a loans. It appears that no project is supported by local (public) sources or from the shares of private investors.
Public and private sectors
Of the total 20 initiatives evaluated, 13 were projects implemented for the public sector. The value of these projects is expected to reach 1,058.71 billion US dollars, while the total grants amount to approximately 835.6 million US dollars. In contrast, the six projects with a total value of just over US$4.11 million are intended to be implemented for the benefit of the private sector.
It appears that all funding organizations give priority to funding public sector initiatives, in addition to those in the private sector, especially when it comes to agriculture. However, it cannot be said with certainty that there is any financing mechanism specializes in a particular area of development; Instead, project financing is diversified into various fields.
Indebtedness
During the review period for green financing projects, the World Bank also financed six green transformation initiatives in Yemen, with the aim of reducing the impacts of climate change. They were distributed across a variety of industries, including financial institutions, public investment assistance, the energy and natural resources sectors, and climate responsive investment. While two other World Bank projects were listed as “green.” In fact, at least two of these appear to be linked to the challenges of recovering from the COVID pandemic, rather than climate change adaptation or mitigation measures. This comes from sovereign borrowing, which amounts to $200 million.
Concluding remarks
Looking at this comprehensive picture of Yemen`s green transition through the lens of contemporary climate finance, we can note that activity is fairly low, as compared to other countries, including those in the MENA region. Public engagement and access to information about these important initiatives is still needed, but some challenges remain. For example, project information is provided by each financing mechanism individually and, even often, in a separate currency. Improving coordination, standardizing and centralizing data formatting, typologies and presentations can make it easier for everyone to access relevant information across differing financing methods.
The strategy used to address catastrophic climate impacts also shows some balance between adaptation and mitigation efforts. But the low score compared to some neighboring countries indicates an underestimation of the importance of mitigation; While the majority aims to adapt to what will be faced. But both are equally urgent measures.
There are other distinct trends that deserve further investigation and scrutiny. For example, implementation reports and evaluations of project – most of which are still in the implementation phase – should contain information about beneficiaries in both the public and private sectors. Thus, responses to these inquiries also reveal the degree to which climate finance may affect national assets subject to state oversight, or even accelerate the privatization of essential public goods and services. Another important public concern that needs further research – especially in neighboring countries – is the size of the public debt and the extent to which it can be repaid.
An increasing priority also remains the financing required to recover the various costs, losses and damages incurred due to the effects of climate change. This is the subject of the new Loss and Damage Fund, established at the most-recent conference of State parties to UNFCCC No. 28 (2023), and this task is distinct from either mitigation or adaptation.
The state-to-state discourse currently dominates the discourse on loss and damage, a more people-friendly strategy centered on people as the main focus is still needed to address the common challenges of the climate catastrophe we all face.
Certain contradictions arise also due to the relative lack of participation of Arab countries in financing green transformation initiatives, especially regarding the distinction between international policies and local practice, and between domestic performance and extraterritorial behavior. On the positive side, by 2030, the Arab Coordination Group (ACG) has committed to providing $50 billion in South-South green financing. And as of June 2024, ACG has fulfilled $17 of that pledge.
To mitigate or adapt to the effects of climate change, civil society must participate in all national, regional and international activities toward the green transition. As common components of the state, public institutions, including government, and civil society are inextricably linked to issues that affect us all, as highlighted through climate action and the green transition. Civil society must consciously be part of state-led initiatives and mechanisms, and vice versa. To ensure that commitments made by the public and private sectors, as well as external parties, are shared and beneficial to all segments of the country’s population, civic participation is indispensable to achieving progress and implementing those promises.
Download the entire Yemen Green-financing Matrix
See also:
Image on frontpage: Map of Yemen from presentation by Muhammad al-Yatari (International Youth Council - Yemen) in HLRN Land Forum VIII, 12 June 2024. Photo on this page: With no action, global experts project that climate change kill over 121,000 in Yemen by 2060. Source: Reuters.
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