Socio-Economic Assessment of Value for Climate Services Case Study, Uganda and Kenya

Abstract

The study re-affirmed that the economy of IGAD region as very vulnerable to climate change.  The vulnerability of population to climate change is exacerbated by the structural issues that reinforces poverty, inequality and deprivation in the society, making the poor most impacted. Climate variability, ranging from unpredictable, intense and at times extreme weather events such as droughts, floods and landslides, are on the rise, and a likely trend for years ahead, threatening ecosystems and livelihoods at alarming rates.  The region is experiencing increasing frequency and intensity of droughts and floods, putting the livelihoods of many at risks and also testing the legitimacy of national governments as custodian of social services for their citizens. Repeated failed weather inform of prolonged droughts are becoming a regional new normal, a trend that is worrying for poverty alleviation efforts of achieving the national social economic transformation such as ongoing 2030 Sustainable Development Agenda, working towards African Union (AU) agenda 2063, and could reverse the past gains across member states in elimination of hunger and poverty.

Kenya and Uganda targeted in this assessment, lose annually on average of US$56.96 million and US$ 113.86 million respectively to natural disasters related damages resulting from droughts, mudslides, and floods among others.  In the coming century (2100), Kenya is projected to lose about 7.2% of its GDP (US$ 18.8 billion), while Uganda 6.3% of GDP (US$ 9.5 billions) annually to climate disasters. However, the provision of climate services inform of early warning and decision advisory in production system would significantly reduce the levels of these losses across all sectors.  For examples:

Economically,  improvements of climate services has been linked to: 1) Agricultural sector (avoidance of crop losses from unsuitable weather; timing of crop protection, planning and harvesting; increased farm production and scales; more efficient scheduling of the use of agricultural machinery, minimization of drought relief costs. In air transport (aviation),  reduced fuel consumption through route planning, improved scheduling of flight arrival and departures; minimization of airline costs from aircraft diversions; minimization of search and rescue costs; reduction of accidents and emission; saving in passenger times, materials and working times (airport maintenance).

In marine transport (reduction of accidents and environmental damages, fuel savings, more efficient rescue operations).  In oil prospecting (avoidance of unnecessary shutdown of offshore oil and gas operations; more efficient planning of energy production and diversity). In energy sector (Prediction of power demands, power failure reduction, savings in material and working times (maintenance), energy savings). In construction sector (potential to eliminate serious construction problems a priori (risk control system). In flood/humanitarian protection (savings in human lives and property, more efficient rescue operations.

Socially: protection of life and property through avoidance of loss of life and property from natural disasters.  In research, improved information and data to the scientific community.  Leisure: Contribution to the day-to-day safety, comfort, enjoyment and general convenience of citizens, including recreation, travel/ commuting and other direct and indirect forms of societal benefits.

Environmentally: In terms of air quality monitoring and warnings; Reducing adverse health impacts; saving human lives in possible environmental accidents (evacuations); minimization of release of toxic substances and other pollutants; management of local environmental quality.

The World Bank estimates that upgrading climate services e.g. hydromet development could reduce the levels of disaster losses by about 10% for low-income countries, such as Uganda; a 20% reduction in lower middle income (e.g. Kenya), 50% in upper middle income, and 100% in high income (OECD) countries.

Across all the models applied in these estimations i.e. the ‘Benefit Transfers’ and ‘Avoided loss’ methods, the provision of climate services have all yielded positive results in both short and long term in climate change adaptation and mitigation efforts across these economies.

In a short and medium run, Uganda is capable of avoiding an estimated US$11.39 million per year to economic losses from natural disasters by strengthening early warning systems through climate services. This is about 0.028% of its GDP losses avoided per year to climate disasters. These gains are even higher, where the systems are upgraded to European standards (100%), saving the country almost US$113.86 million per year to avoid economic loss.

Kenya, a lower middle income country is able to avoid losses equally estimated at US$ 11.392 million per year from the provision of climate services. This is about 0.01% of the GDP saved per year. In the same way, the gains are higher if the systems are developed to European Standards, saving the country almost US$ 56.96 million per year in avoiding disaster losses.

Results of Benefit Transfer showed that smallholder farmers alone in Uganda, the provision of climate services could generate approximately US$ 143.92 million per year in revenue gains through their payments to climate services in form of ‘willingness to pay’. This approximates to about 0.35% of GDP in revenue gains at current GDP of (US$ 40.53 billion) for Uganda. The amount is just enough to service almost 0.6% (US$ 143.7 million) of the country’s current, public debts burden estimated at US$ 23.95 billion (2022 est.).

Kenya, investment in climate services is estimated to generate about US$ 281.6 million annually in revenue gains from smallholder farmers alone; when other sectors are not included. This approximates to about 0.26% of the country’s GDP at current prices (US$ 110.35 billion) in revenue gains per year from smallholder farmers. The revenue is equally good enough to service almost 0.36% (US$ 279.5 million) of the country’s public debts burden, currently standing at US$ 77.65 billion (2022 est.).

These results are remarkable, especially at a time where greater efforts are needed from developing countries to mobilize domestic revenue, particularly to finance their development, to rebuild better and stronger economies while recovering from the socio-economic impacts of the COVID-19 pandemic, and global crises like Russia-Ukraine war, couple with already rising macroeconomic fiscal imbalances, declining fiscal space to access international finance and donor fatigue in supporting development finance.

We are confident that for every (1) unit of US$ invested at IGAD level, yields in returns approximately US$ 5.0 in Uganda and US$ 9.0 in Kenya, annually The return is about X5 in Uganda and X9 times in Kenya compared to the costs of investments i.e. making the Benefit Cost Ratio (BCR) of 1:5 and 1:9 respectively. These benefits would be higher where more people and sectors are served due to non-rivalry and non-exclusivity nature of the services, and climate services are improved to effective and efficient levels.  In a long run (2100), the benefits of climate services are even greater where the Paris Accord targets are achieved, i.e. the global temperature rise are restrained to a 2⁰ C (RCP4.5) scenario, saving Uganda almost US$ 4.82 billion per year and Kenya an estimated US$ 23.9 billion per year of GDP losses avoided to climate change impacts in the next Century ahead, i.e. year 2100.

From available data, for now, both countries are losing in terms and within US$ millions annually to climate related disasters but at increasing rates. However, by 2040, Kenya is predicted to reach beyond US$ billion mark; while Uganda by 2050, where more than a US$ billion will be lost to climate related natural disasters yearly. Therefore, the year 2040 for Kenya; and 2050 for Uganda will mark the thresholds where losses will jump from US$ millions to US$ billions to disaster damages, unless other actions such as climate services are strengthened and Paris Accord target are attained.

In light of this context and above findings, the consultant recommends that investing and ensuring access climate services to all citizens be a human right issue, and shouldn’t be treated as an expense but rather an investment capable of life safety and unlocking the well-being of millions of vulnerable people out of poverty towards 2030 Sustainable Development Agenda; and African Union Agenda 2063. Climate services should be rated a high priority in the countries’ budgeting processes at both local, sub-regional and national level; now that climate change has turned to be a global new normal, challenging nearly all adaptation measures. There is a need for stakeholders to upscale their resource mobilization efforts while exploring other climate finance avenues with both public and private sources at play to improve the generation, dissemination and support policy / decision making environment for accurate and real time access to climate information to the end-users.

Finally but most importantly, Climate Services just like any other transformative actions in climate adaptation programmes are more effective and welfare enhancing where member countries scale up efforts to address structural issues that reinforce poverty, inequalities and vulnerability of the smallholders and urban poor population by ensuring strong governance and functional pro-poor institutions.

Keywords: Climate Services, Willingness to Pay, Benefit Transfer, Avoided Losses, Climate Change

DOI: 10.7176/JESD/14-6-06

Publication date:March 31^st 2023