Aid for Trade and Climate Change Financing Mechanisms

Best Practices and Lessons Learned for LDCs and SVEs in Africa

by Vinaye Dey Ancharaz and Riad A. Sultan

Issue Paper 10

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Aid for trade and climate change financing may be addressing similar objectives. If used in a complementary and reinforcing manner, they may help build the economic resilience and supply-side capacity LDCs need to adapt and mitigate climate change and link to the world economy on better terms. Climate change-related projects in agriculture, fisheries, and livestock often have trade-related impacts and vice-versa. Both climate change and trade-related objectives could thus be addressed in a coherent way through the implementation of climate change financing mechanisms and aid for trade. A number of challenges that would need to be addressed, however, include governance issues related to current and future financial instruments: funds’ ‘additionality’, predictability, monitoring, and donors’ conditionality, among others.

This paper explores how climate change financing and aid for trade can address the climate change adaptation needs and specific supply-side constraints of African LDCs and small, vulnerable economies (SVEs) in a complementary and supportive manner.

The paper concludes that to make climate change financing and aid for trade complementary and mutually reinforcing, both African countries and donors need to recognize and specify the trade impacts of National Adaptation Plans of Action (NAPAs) projects and the climate change implications of aid for trade projects. Moreover, the analysis highlights that both NAPAs and Poverty Reduction Strategy Papers (PRSPs) should be closely linked when designed, funded and implemented. A great deal of coherence will thus be required among African governments, private sector actors, members of civil society, and donors.

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