Climate Finance and Its Role towards the Transition to Low-Carbon, Climate-Resilient Development in Ethiopia

Achieving and sustaining stability for economic growth remain the greatest and most immediate development challenge for Ethiopia. For natural resource-based economies especially maintaining stability and growth depends fundamentally upon climate change adaptation and mitigation. The close links between climate and Ethiopia’s economy are reflected by the strong relationship between GDP growth rate and rainfall variability. A study by the World Bank projects that unless steps to build resilience are effective, climate change will reduce Ethiopia’s GDP growth by between 0.5 and 2.5% each year. Along with the challenges posed by climate change, a number of development opportunities are emerging in response to climate change which includes access to international climate finance. The international response to climate change in the form of external development finance plays a key role to support developing countries in their transition to a low-carbon, climate-resilient and sustainable development pathway. Therefore, this study was conducted to assess the flow and the overall contribution of climate finance to sustainable development in Ethiopia. Specifically, focused on outlining how climate finance is currently reconciled in the existing Ethiopian climate change governance and its contribution to sustainable development. In order to achieve these objectives, data were collected from different sources. The Rio Marker methodology applied to review climate financial flow over the 5 year period. The result reveals that, climate change is central to development agendas despite its recent emergence in the mainstream, with various initiatives under way to combat or reduce its impacts in Ethiopia. In addition, the amount of climate finance from the developed countries to Ethiopia shows some fluctuation for the past five years. In general, the overall flow of climate finance mostly targeted climate adaptation actions which spur and enable the transition towards climate-resilient growth and sustainable development.