Unlocking Climate Finance and Investments in Jordan

In November 2022, Egypt will host the United Nations Framework Convention on Climate Change Conference of Parties (COP 27). One of the most important messages to convey is the need for developed countries to fulfill their commitment made in the 2015 Paris Agreement to provide USD 100 billion in climate finance and investments to developing countries impacted by climate change, despite their small contribution to global emissions. The Paris Agreement calls for parties with greater financial resources to provide financial assistance to those with fewer and more vulnerable resources. Because large-scale investments are required to significantly reduce emissions or adapt to the adverse effects of climate change, climate finance is required for mitigation and adaptation.

climate finance in jordan

While almost all Arab States submitted their Nationally Determined Contribution (NDC) by their Paris Agreement, only 11 provided cost estimates of their financial needs to implement their initial or updated NDCs. According to the UN ESCWA, Arab States received a total of USD 34.5 billion in climate finance over the period 2010 to 2020. This amount is equivalent to less than 6 percent of the financing needs of the Arab region for the coming decade as per the NDCs financing.

Jordan was among the first to publish its updated NDC, which included commitments to reduce GHG emissions and improve climate resilience through 2030. Jordan’s macroeconomic GHG emission reduction target has been increased from 14% to 31%, based on a USD 7.5 billion action cost that includes only mitigation; adaptation-related investment projects will need additional financing, primarily in the energy, solid waste, wastewater, transportation, industry, agriculture, and forestry sectors.

Jordan, for its part, has emphasized support for climate change actions as an integral part of its growth in its Economic Modernization Vision 2033. A climate change regulation was previously enacted in 2019 to serve as an overarching, multisectoral legal instrument that establishes general principles and institutions for climate-related actions. This demonstrates Jordan’s supportive organizational capacity for climate governance and investment, allowing it to gain more traction and attention from development partners, investors, the private sector, and donors. While Jordan has a well-developed upstream enabling policy and institutional framework, as well as relevant plans, major issues are preventing Jordan from unlocking climate finance and investment, both of which are critical for securing the necessary financing to implement the plans.

First, a lack of well-prepared and investment-ready bankable projects limits increased investment in climate projects. The capacity of government institutions to structure a project and the quality of project documentation continue to stymie the development of projects capable of obtaining the necessary financing. This pipeline is undefined and requires a proper problem statement. It must also be developed with climate-responsive and sustainable economic growth in mind.

Second, there is limited knowledge of available international and national climate finance sources derived from public, private, and alternative sources of financing to support climate change mitigation and adaptation actions. Their conditions and eligibility criteria are also important considering the wide range of financing institutions and instruments that can be mobilized.

Third, there is a lack of initiative and entrepreneurial spirit from Jordanian start-ups and businesses to create innovative high-tech climate solutions. Transforming Jordan’s ecosystem into a regional and global source of inspiration for the development of low-carbon technologies is crucial, however, massive funding is needed to achieve this goal.

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Going forward, the first step would be to develop an investment-ready pipeline of climate projects. To improve the identified climate change project financing opportunities, information about each project should be gathered directly from relevant sectors to ensure that the project’s quality is high enough to have the best chance of success. The nature and scope of the problem or opportunity that the proposed project will address must be described. It should also transparently and explicitly demonstrate the project’s climate context, whether it is related to GHG mitigation or adaptation to climate change. Furthermore, it should evaluate and present financing options for project structuring under PPPs and blended use of financial resources, including climate finance.

Furthermore, identifying and mapping available financing sources will help mobilize and scale up climate finance from a wide range of public and private, bilateral and multilateral, including alternative sources, and will advise on any available synergies between the available financing instruments and windows. This approach will help to understand who finances what and how well finance aligns with policy objectives. It also identifies investment barriers, potential incentive mechanisms, and a baseline for tracking progress in mobilizing resources.

Thirdly, Jordan should work to establish a climate innovation and technology fund that will serve as a hub for ClimaTech (similar to Cyber and FinTech) startups and innovative technologies while also attracting major global climate investors. This would help to expand the role played by the private sector in raising climate change awareness and launching innovative and sustainable climate action solutions. This could be accomplished by presenting ideas in various fields, such as clean energy systems, climate-smart agriculture, sustainable mobility and transportation, environmentally efficient water infrastructures, and initiatives promoting a circular economy. This would positively affect economic growth, raise national income by exporting products and services, and attract global investors to invest in Jordanian startups.

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Jordan has a great opportunity to attract Foreign Direct Investment (FDI) supporting climate change and sustainable development and that can be a substantial source of external financing. Therefore, it should develop a clear program for mobilizing climate investment and finance, including a pipeline of projects, an analysis of funding sources, and a mapping of pipeline propositions to potential investors/funders for adaptation, as well as an innovation portfolio to ensure that Jordan attracts the needed financing which would contribute to meeting climate commitments.

About Iyad Dahiyat

Iyad Dahiyat is the former Secretary-General of the Water Authority of Jordan (WAJ) and the Ministry of Water and Irrigation in Jordan during the period between 2016 - 2019 with more than 20 years of experience in water resources development and management, climate change adaptation and mitigation, and infrastructure governance and financing. He managed more than 50 projects to improve basic services and enhance utility operational efficiencies in the water sector for a total value exceeding 1 billion USD. He also managed the two flag-ship PPP projects in the water sector (Disi Water System Conveyance BOT and As-Samra BOT WWTP).
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