Key sectors that will take lion’s share in Rwanda's climate financing

The government on November 5 released the National Climate and Nature Finance Strategy indicating a financing gap of Rwf6.5 billion. The strategy will be implemented from 2024 to 2030. According to the Ministry of Finance and Economic Planning (MINECOFIN), there is a need to unlock innovative climate and nature -focused financing mechanisms and scale-up private sector investments. The overall cost of implementing the Nationally Determined Contributions (NDCs) which are climate pledges by government of Rwanda is estimated at $11 billion. According to the climate action plan implementation framework, financing has been secured to cover most implementation costs for the 2020–25 period, with the total secured finance amounting to $4.5 billion. However, looking ahead, the overall financing gap is estimated at $6.5 billion up to 2030. The country's climate action plan comprises 557 specific projects. Below are sectors that are set to take the lion's share of the funds. Agriculture Agriculture takes 55 % of total funding in order to be able to adapt to climate change. Blended finance can be a useful mechanism to accelerate the adoption of climate-resilient technologies in agriculture by combining concessional loans or grants with private-sector investment according to the strategy. This approach provides farmers and agricultural enterprises with access to affordable financing options, mitigates financial risks through instruments such as guarantees or insurance products, and supports technical assistance and capacity-building programs to educate farmers about the benefits and proper use of these technologies. ALSO READ: Adapting African agriculture to climate change Furthermore, blended finance stimulates market development for climate-resilient technologies by incentivising private sector investment in research, development, and commercialization Examples of incentives can be explored for Climate-smart agriculture including nutrient trading systems, climate insurance products, crop diversification credits, long-term land leases with favourable terms for climate-smart agriculture, and support in achieving green certifications. The sector requires $235 million for continuous crop rotation of up to 600,000 hectares leading to prevention of soil erosion, $30 million for adoption of more efficient manure management systems, and $924 million for the installation of 165,000 hectare -land protection terracing structures in sloped arable areas to present soil erosion. It needs $279 million for promotion of better livestock feed, $77 million for increased use of organic waste in soil fertilisers, $173 million for multi-cropping of coffee and bananas of up to 40,000 hectares leading to prevention of soil erosion as well as $153 million for the replacement of 10% domestic cows with improved cow species; expansion of fish farming, poultry and other small livestock. Rwanda’s adaptation efforts in the agricultural sector prioritise interventions that aim to increase the use of climate resilient crop varieties, insure crops and livestock and promote erosion control. It shows $24 million is needed for the development of climate resilient crops and promote climate resilient livestock, $200 million for development of climate resilient post-harvest and value addition facilities and technologies, $346 million for development of sustainable land use management practices and $109 million for expanding irrigation and improving water management. At least $285 million is needed for solar pumping for irrigation Transport Transport takes 19 % of funding needed to reduce greenhouse gas emissions. Over $1 billion is needed to convert 20 per cent of personal motor vehicles to electric vehicles, $150 million to convert 20 per cent of buses into electric vehicles by 2030. There is a need for subsidies for electric vehicles, parking levies for high-emission vehicles, subsidised training on operating e-transports, and fuel tax adjustments that remain conscious of the impact on the poor. Introducing electric buses, passenger vehicles and motorcycles to help in cutting transport fuel imports and harmful greenhouse gas emissions requires $900 million. Infrastructure and energy Rwanda is implementing adaptation measures regarding infrastructure to strengthen the resilience and minimise vulnerability to the impacts of climate change. This includes strategies and actions to ensure that infrastructure systems, such as roads, buildings, and energy networks, are designed, constructed, and maintained to withstand and adapt to changing climate conditions. At least $400 million is dedicated to high density buildings and informal settlement upgrading and $600 million for building climate resilient roads and bridges to improve transport infrastructure and service. Vehicle emissions standards require $190 million, while $28 million is for solar street lighting and $600 million for off-grid and rooftop solar electrification. Development of 56.75 MW large hydro capacity projects and 75 MW regional projects by 2030 needs $328 million investment. Electricity generation takes 10 per cent of needed funding to mitigate climate change. The strategy says tax incentives are needed for low-carbon energy in terms of carbon taxes, tax credits for renewable energy investments, feed-in-tariffs for renewable energy, power purchase agreements for renewable energy, tax rebates for high-efficiency appliances and equipment. Installation of solar thermal water heaters within urban residential buildings supported by use of loans and grants to subsidise purchase costs, as part of the National Green Building Code minimum compliance system requires $52 million. Water security for climate resilience Rwanda’s adaptation efforts in the water resources management sector prioritise interventions that aim to promote water availability, quality, and management. These include development of national water security through water conservation practices, wetlands restoration, water storage and efficient water use with $164 million investment. Development of water resource models, water quality testing, and improved hydro-related information systems needs $10 million. It requires $400 million for storm water management as well as $360 million for the development and implementation of a management plan for all level 1 catchments. Investment in wastewater treatment and reuse technology, reducing methane emissions from wastewater requires $1.5 million. Reducing deforestation Dissemination of modern efficient cook stoves to 80% of the rural population and 50% of the urban population by 2030, achieving a more sustainable balance between supply and demand of biomass, and reducing firewood and fossil energy consumption for cooking needs $380 million.

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Key sectors that will take lion’s share in Rwanda's climate financing