EASTERN AND SOUTHERN AFRICA RWANDA Technical Appendix World Bank Group September 2022 Country Climate and Development Report: Rwanda - Technical Appendix  |   a © 2022 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of The World Bank Group with external contributions. “The World Bank Group” refers to the legally separate organizations of the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). 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Because The World Bank Group encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given and all further permissions that may be required for such use (as noted herein) are acquired. The World Bank Group does not warrant that the content contained in this work will not infringe on the rights of third parties, and accepts no responsibility or liability in this regard. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Technical Appendix COUNTRY CLIMATE AND DEVELOPMENT REPORT Table of Contents Annex 1: Rwanda in the Context of Its Peers 1 Annex 2: Extreme Frequency in Precipitation for Rwanda 2 Annex 3: Adaptation and Mitigation Measures per Sector 4 3.1. Adaptation and Mitigation Measures Included in Rwanda’s Updated NDC 4 3.2. Mitigation Measures: Energy Sector 5 3.3. Mitigation Measures: Waste and Industrial Processes 6 Annex 4: Policy Framework to Support the Implementation of Climate Commitments 8 4.1. Cross-Sectoral Policies 8 4.2. Agriculture, Forestry and Land Use 9 4.3. Water Management 10 4.4. Urbanization, Transport, and Energy 10 4.5. Disaster Risk Management 12 4.6. Health 13 Annex 5: Climate Change Institutional Assessment 14 5.1. Pillar 1: Organization 14 5.2. Pillar 2: Planning 15 5.3. Pillar 3: Public Finance 18 5.4. Pillar 4: Subnational Governments and State-Owned Enterprises 21 5.5. Pillar 5: Accountability 22 Annex 6: Economic and Poverty Modeling 24 6.1. MANAGE Model 24 6.2. Microsimulation Methodology 27 6.3. Baseline Scenario 29 6.4. Climate Change Scenarios and Damage Functions 29 6.5. Incorporation of Climate Actions Through the Policy Scenarios 40 ii   |  Country Climate and Development Report: Rwanda - Technical Appendix Annex 7: Detailed CGE Simulation Results 45 7.1. Simulations Showing Effects of Climate Change 45 7.2. Simulations Using Different Sources of Financing for NDC Actions 49 7.3. Simulations Contrasting Climate Actions with no Climate Actions 53 Annex 8: Recommendations Towards Implementing Selected Priorities 58 List of Tables Extreme Frequency in Precipitation for Rwanda for one, five, 10, 20, 50 and 100–year Table 1:  Return Periods (50th and 66th Percentiles) 2 Table 2: Emission Reductions Under Alternative GHG Pathway in 2050: Energy Use 6 Table 3: Emission Reductions Under Alternative GHG Pathway in 2050: Waste and IPPU 6 Table 4: Rwanda’s Green Growth and Climate Resilient Strategy 8 Table 5: Sectors in the 2017 Rwanda Social Accounting Matrix 25 Table 6: Microsimulation Component Implementation 28 Table 7: Estimated Monthly Coefficients of Yield Response to Precipitation 32 Table 8: Estimated Years of Life Lost, by Disease 34 Table 9: Expected Share of Capital Stock Damaged Annually, by Type of Capital, RCP and Era 36 Table 10: Expected Share of Capital Damaged in Extreme Events, by Type of Capital, RCP and Era 37 Table 11: Heat-related Labor Impact Coefficients 39 Table 12: Adaptation Spending and Adjustments to Climate Damages 41 Table 13: Mitigation Spending and Adjustments to Climate Damage 42 Table 14: Financing Sources and Their Implications 43 Table 15: Financing Sources in the Mixed Financing Scenario, Unconditional and Conditional NDCs 44 Table 16: Barriers and Recommendations for Private Sector Involvement in Agriculture 58 Table 17: Barriers and Recommendations for Private Sector Involvement in Forestry 59 Table 18: Barriers and Recommendations for Private Sector Involvement in Land 59 Table 19: Barriers and Recommendations for Private Sector Involvement in Water 60 Table 20: Barriers and Recommendations for Private Sector Involvement in Grid Energy 60 Table 21: Barriers and Recommendations for Private Sector Involvement in Off-grid Energy 61 Country Climate and Development Report: Rwanda - Technical Appendix  |   iii Table 22: Barriers and Recommendations for Private Sector Involvement in Clean Cooking 61 Table 23: Barriers and Recommendations for Private Sector Involvement in Transport 61 Table 24: Barriers and Recommendations for Private Sector Involvement in Housing 62 Table 25: Barriers and Recommendations for Private Sector Involvement in Waste 63 Table 26: Policy-related Cross-cutting Barriers and Potential Recommendations 63 Table 27: Institutional-related Cross-cutting Barriers and Potential Recommendations 64 Table 28: Market-related Cross-cutting Barriers and Potential Recommendations 64 List of Figures Figure 1: Benchmarking Rwanda with Top-performing low-income Countries 1 Figure 2: Mitigation Potential: Energy use 5 Figure 3: Mitigation Potential in 2050: Waste and IPPU 7 Figure 4: GHG Emission Projections 2015–2050: Waste and IPPU 7 Figure 5: Sector Performance Regarding Environmental and Climate Change Indicators 17 Figure 6: Subnational Government Reporting on Environmental and Climate Change Indicators 17 Figure 7: Microsimulation Flow Chart 27 Figure 8: Annual Temperature Differences from the Baseline, by RCP, 2020–2050 30 Figure 9: Percentage Deviations of Rainfall from the Historical Reference Period, by Month and RCP 30 Figure 10: Crop Yield Damage Function Methodology 31 Figure 11: Changes in Crop Yields due to Decline in Precipitation with an Increase in Temperature 33 Figure 12: Changes in Crop Yields due to an Increase in Precipitation with a Decline in Temperature 33 Figure 13: Human Health Damage Function Methodology 34 Figure 14: Health-induced Productivity Losses and Temperature, by RCP, 2020–2099 35 Figure 15: Flooding Damage Function Methodology 35 Figure 16: Predicted Flood Damages as a Function of Exceedance Probability, 2070–2100 36 Figure 17: Tourism Demand Damage Function Methodology 37 Figure 18: Tourism Demand and Temperature Change, by RCP, 2020–2099 38 Figure 19: Heat Damage Function Methodology 39 Figure 20: Stylized Heat-induced Productivity Losses, by Worker Location and Level of Education 39 Figure 21: GDP at Market Prices, by RCP, 2020–2050 45 Figure 22: Sectoral and Total Employment, by RCP, 2022–2050 45 Figure 23: GDP at Factor Cost and Sectoral Value Added, by RCP, 2022–2050 45 Figure 24: Sectoral Production, by RCP, 2022–2050 46 Figure 25: Sectoral Capital Stock, by RCP, 2022–2050 46 Figure 26: Employment by Skill Level and Location, by RCP, 2022–2050 46 Figure 27: Private Consumption and Investment, by RCP, 2022–2050 47 Figure 28: Exports, Imports, and the Trade Balance, by RCP, 2022–2050 47 Figure 29: Fiscal and Debt, by RCP, 2022–2050 48 Figure 30: GDP at Market Prices, Unconditional NDCs, by Financing Source, 2022–2050 49 iv   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 31: Sectoral Employment, Unconditional NDCs, by Financing Source, 2022–2050 49 Figure 32: Sectoral Value Added, Unconditional NDCs, by Financing Source, 2022–2050 50 Figure 33: Sectoral Production, Unconditional NDCs, by Financing Source, 2022–2050 50 Figure 34: Sectoral Capital Stock, Unconditional NDCs, by Financing Source, 2022–2050 50 Employment by Skill Level and Location, Unconditional NDCs, by Financing Source, Figure 35:  2022–2050 51 Private Consumption and Investment, Unconditional NDCs, by Financing Source, Figure 36:  2022–2050 51 Figure 37: Trade Flows, Unconditional NDCs, by Financing Source, 2022–2050 52 Figure 38: Fiscal and Debt, Unconditional NDCs, by Financing Source, 2022–2050 52 Figure 39: GDP at Market Prices, by Level of Climate Action, RCP4.5, 2022–2050 53 Figure 40: Sectoral Employment, by Level of Climate Action, RCP4.5, 2022–2050 54 Figure 41: Sectoral Value Added, by Level of Climate A, RCP4.5, 2022–2050 54 Figure 42: Sectoral Capital Stock, by Level of Climate Action, RCP4.5, 2022–2050 55 Figure 43: Employment by Location, by Level of Climate Action, RCP4.5, 2022–2050 56 Figure 44: Private Consumption and Investment, by Level of Climate Action, RCP4.5, 2022–2050 56 Figure 45: Trade Flows, by Level of Climate Action, RCP4.5, 2022–2050 57 Figure 46: Fiscal and Debt, by Level of Climate Action, RCP4.5, 2022–2050 57 Country Climate and Development Report: Rwanda - Technical Appendix  |   v Annexes Annex 1: Rwanda in the Context of Its Peers Figure 1: Benchmarking Rwanda with Top-performing low-income Countries A: Inclusion B: Resilience *Poverty Human Headcount $1.90 capital index poverty line *Natural disaster *Homicide rate *Gini index Food risk to assets security *Refugees index Rural access and index IDPs index Personal *Natural disaster Access to *Urban slum rights risk to wellbeing electricity population index 20% 40% 20% 40% 60% 80% 100% 60% 80% LGBT global Universal health 100% acceptance index coverage *Population exposure Secondary *Population Property rights from disasters school exposure for women enrollment from epidemics *Population Women, Financial exposure inclusion, Business, and the from dry bottom 40% Law index rainfall shocks Female labor force part rate C: Sustainability D: Efficiency Renewable *Change in internal GHG emissions freshwater Logistics Agricultural per capita resources performance land per capita *Forest loss, index productivity Renewable short term energy (2001-2019) Digital Agricultural value consumption penetration added per worker index *Solid waste *Forest loss, long generation term (1900-2005) 0% Population Productivity of per capita 80% 10 20% 40% 60% using the water use internet 20% 40 Wastewater *Land % 60% 80% 100 treatment degradation % capacity Efficiency of *Tenure carbon use Water quality, Biodiversity nutrients, salts, & habitat security chemicals index *Change (SDG 6.3.2) *PM2.5% *Mortality in energy pop exposed Control of rate intensity *Mortality rate above corruption attributable Governance attributable to WHO to air effectiveness unsafe WASH (25ug/m) pollution services Source: World Bank Group (2021b). Note: Longer “petals” in the flower charts indicate that Rwanda is closer to the top-performing country for that indicator. The methodology and data used in this benchmarking are described in Balseca et al. (2022). Country Climate and Development Report: Rwanda - Technical Appendix  |   1 Annex 2: Extreme Frequency in Precipitation for Rwanda Table 1: Extreme Frequency in Precipitation for Rwanda for one, five, 10, 20, 50 and 100–year Return Periods (50th and 66th Percentiles) Province 50th percentile 66th percentile Return periods RCP4.5 RCP8.5 RCP4.5 RCP8.5 2010- 2020- 2010- 2020- 2010- 2020- 2010- 2020- 2039 2049 2039 2049 2039 2049 2039 2049 East 0.9 0.87 0.89 0.83 0.95 0.9 0.93 0.87 1-year event Kigali City 0.9 0.86 0.88 0.82 0.95 0.9 0.93 0.87 North 0.89 0.85 0.88 0.82 0.95 0.9 0.93 0.87 South 0.91 0.88 0.89 0.83 0.96 0.93 0.94 0.87 West 0.9 0.87 0.88 0.83 0.96 0.92 0.94 0.87 East 4.3 3.93 4.07 3.61 4.65 4.36 4.53 4.04 5-year event Kigali City 4.27 3.9 4.05 3.61 4.64 4.34 4.51 4.06 North 4.22 3.86 3.99 3.62 4.68 4.36 4.57 4.13 South 4.36 4.05 4.11 3.65 4.74 4.56 4.68 4.06 West 4.3 3.98 4.06 3.64 4.72 4.49 4.65 4.1 East 8.44 7.56 7.86 6.82 9.27 8.65 8.97 7.89 10-year event Kigali City 8.37 7.51 7.8 6.82 9.23 8.61 8.93 7.94 North 8.24 7.45 7.68 6.87 9.27 8.62 9.1 8.15 South 8.58 7.87 7.95 6.92 9.45 9.06 9.35 7.92 West 8.43 7.71 7.85 6.91 9.39 8.9 9.31 8.03 East 16.58 14.55 15.18 12.88 18.48 17.2 17.76 15.41 20-year event Kigali City 16.41 14.44 15.05 12.89 18.4 17.1 17.68 15.57 North 16.12 14.35 14.78 12.99 18.43 17.03 18.11 16.11 South 16.85 15.3 15.39 13.1 18.85 18.06 18.7 15.46 West 16.53 14.95 15.16 13.08 18.7 17.67 18.61 15.78 East 40.48 34.56 36.21 29.88 45.94 42.59 43.7 37.19 50-year event Kigali City 40.01 34.26 35.85 29.92 45.71 42.27 43.49 37.67 North 39.26 34.13 35.14 30.2 45.75 41.85 45.04 39.23 South 41.27 36.8 36.86 30.47 47.06 44.89 46.65 37.22 West 40.4 35.83 36.22 30.41 46.59 43.68 46.49 38.18 2   |  Country Climate and Development Report: Rwanda - Technical Appendix East 79.49 66.55 69.96 56.5 91.54 84.51 86.44 72.36 100-year event Kigali City 78.49 65.91 69.23 56.6 91.07 83.8 85.98 73.43 North 77.06 65.68 67.63 57.15 91.16 82.68 89.53 76.83 South 81.38 71.42 71.39 57.76 94.05 89.15 93.11 72.32 West 79.53 69.38 70 57.62 93.02 86.53 92.78 74.46 Source: World Bank Group (2021b). Note: The climate projections shown here were built from the daily output of a large number (~30) of global climate and Earth system models coordinated through, and collected by, the Coupled Climate Model Intercomparison Project, Phase 5 (CMIP5). The time interval of 1986–2015 was chosen as the “present day” reference period. In this calculation, the uncertainty is condensed into the simple statistic of comparing the return periods from the 50th percentile across the different climate models (~28-30 models) with those from the 66th percentile. Half and two thirds of the model distribution World Bank Group (2021b). Country Climate and Development Report: Rwanda - Technical Appendix  |   3 Annex 3: Adaptation and Mitigation Measures per Sector 3.1. Adaptation and Mitigation Measures Included in Rwanda’s Updated NDC Adaptation Mitigation Agriculture, Forestry, and Land Use Unconditional Unconditional ƒƒ Strengthen crop management practices ƒƒ Efficient cook stoves ƒƒ Promote afforestation/reforestation of designated areas ƒƒ Solar pumping for irrigation ƒƒ Inclusive land administration that regulates and provides ƒƒ Soil and water conservation (crop rotation) guidance for land tenure security. ƒƒ Improved livestock husbandry Conditional ƒƒ Improved manure management ƒƒ Water conservation practices, wetlands restoration, water ƒƒ Improved fertilizers storage and efficient water use ƒƒ Soil and water conservation (terracing and multi-cropping) ƒƒ Develop climate resilient crops, promote climate resilient ƒƒ Conservation tillage livestock ƒƒ Improved livestock species and population ƒƒ Develop climate resilient post-harvest and value addition facilities and technologies Conditional ƒƒ Develop sustainable land use management practices ƒƒ Solar mini-grids to be installed in off-grid rural areas ƒƒ Expand irrigation and improve water management ƒƒ Off-grid and rooftop solar electrification ƒƒ Expand crop and livestock insurance ƒƒ Promotion of on-farm biogas for energy ƒƒ Development of agroforestry and sustainable agriculture ƒƒ Improve forest management for degraded forest resources ƒƒ Integrated approach to planning and monitoring for sustainable land use management ƒƒ Harmonized and integrated spatial data management system for sustainable land use Urbanization, Transport, and Energy Unconditional Unconditional ƒƒ Sustainable, climate-resilient roads and bridges: improved ƒƒ Grid-connected hydropower generation transport infrastructure and services ƒƒ Solar street lighting Conditional ƒƒ Increase vehicle emissions performance of vehicle fleet. ƒƒ High density buildings and informal settlement upgrading ƒƒ Efficient lighting in buildings ƒƒ Storm water management ƒƒ Landfill gas utilization ƒƒ Waste-to-energy (WtE) plants ƒƒ Waste-water treatment plants (WWTP) Conditional ƒƒ Public transport infrastructure, including BRT project, bus lanes, non- motorized transport lanes, and modal shift projects. ƒƒ Electric Vehicles: phased adoption of electric buses, passenger vehicles (cars) and motorcycles ƒƒ Installation of solar thermal water heaters within urban residential buildings Manufacturing, Trade, and Sustainable Growth Unconditional Unconditional ƒƒ Climate-compatible mining ƒƒ Energy efficiency measures in: agro-processing, brick manufacturing industry, and cement production ƒƒ Climate compatible mining ƒƒ Increased pozzolana use in cement 4   |  Country Climate and Development Report: Rwanda - Technical Appendix 3.2. Mitigation Measures: Energy Sector According to the alternative GHG pathway, Rwanda’s energy emissions can be reduced by 52% when compared to the NDC pathway + FOLU scenario. The NDC + FOLU pathway includes a wide range of interventions covering grid- and off-grid electricity generation, transport, and low-carbon industrial and household energy use. Under the alternative GHG pathway, measures in the transport sector are expected to account for around 40% of the additional effort, reflecting the important contribution from electric vehicles (EVs), other low-carbon technology options, (such as internal combustion engine [ICE] fuel economy improvements) and the modal shift already being assumed under the NDC pathway + FOLU. Much of the additional mitigation is associated with increased use of domestic biogas energy and further decarbonizing the electricity grid, especially the phasing out of peat use, combined with increasing shares from renewables and lake methane.1 As a result of these measures, total emissions in 2050 under the alternative GHG scenario could fall from 8.9 to 4.2 MtCO2e. However, a wide range of challenges face achieving such a deep cut in emissions; most arise from the significant uptake of EVs that require an ambitious scale of charging infrastructure, alongside the generation delivery needed to meet additional grid demand and incremental vehicle costs. Figure 2: Mitigation Potential: Energy use 2050 2015–2050 MtCO2e MtCO2e 10 12 NDC pathway + FOLU Biogas 10 Alternative GHG pathway 8 8.9 Solar energy 8.9 Energy efficiency -52% Grid renewables 8 6 Modal shift Electric vehicles 6 4 Fuel economy/AVRP 4.2 4.2 4 2 2 0 0 NDC pathway + FOLU Alternative GHG pathway 2015 2020 2025 2030 2035 2040 2045 2050 Source: REG (2021a) and World Bank staff analysis (2022). Note: The uneven emissions projection shown under the NDC pathway + FOLU is mainly due to data provided by REG, which shows a reduction in fossil-fuel power plant output in the years 2034–2036. 1 The treatment of emissions from lake methane, in terms of GHG accounting, has an impact upon the mitigation which can be accounted for in Rwanda’s targets. For the current analysis, a natural gas emissions factor is applied in the absence of alternative and internationally recognized guidelines provided by the IPCC. Country Climate and Development Report: Rwanda - Technical Appendix  |   5 Table 2: Emission Reductions Under Alternative GHG Pathway in 2050: Energy Use Alternative GHG pathway (MtCO2e) Share of total mitigation (%) Mitigation options: Fuel economy 0.04 1% Electric vehicles 1.64 35% Modal shift 0.17 4% Low carbon grid electricity 1.42 30% Energy efficiency in industry 0.32 7% Solar energy 0.09 2% Domestic biogas 1.02 21% Total mitigation 4.70 100% NDC pathway + FOLU emissions 8.86 - Alternative GHG pathway emissions 4.16 - Reduction against NDC pathway + FOLU 52% - Source: World Bank staff analysis (2022). 3.3. Mitigation Measures: Waste and Industrial Processes According to the alternative GHG pathway, Rwanda’s emissions from its waste and industrial processes sectors can be reduced by 48% compared to the NDC pathway + FOLU scenario by 2050. Under the NDC pathway + FOLU scenario, emissions from the waste and IPPU sectors are forecast to increase to approximately 2.6 MtCO2e by 2050. Under the alternative GHG scenario, emissions of 1.4 MtCO2e in 2050 is plausible. The emissions reduction of 0.1 MtCO2e is expected from achieving the additional substitution of clinker in cement production by 2050, with a very small emissions reduction potential from substituting ozone-depleting substances (ODS). In the waste sector, additional efforts in relation to sustainable waste practices—namely wastewater treatment, landfill gas utilization, composting and waste-to-energy (WtE) mitigation measures—are seen to be much more significant drivers of emission reduction outcomes; they also have important co-benefits—such as, improved sanitation, revenue generation and green employment potential. While these mitigation measures are aligned with government policy priorities and goals, key challenges are expected under this more ambitious scenario, due to the lack of funding for large waste infrastructure projects, and other barriers, such as low technical capacity and expertise. Table 3: Emission Reductions Under Alternative GHG Pathway in 2050: Waste and IPPU Alternative GHG pathway (MtCO2e) Share of total mitigation (%) Mitigation options: Landfill gas utilization 0.21 17% Waste-to-energy (WtE) 0.21 16% Aerobic composting 0.31 25% Wastewater treatment 0.42 33% Clinker reduction 0.10 8% ODS substitution 0.01 1% Total mitigation 1.27 100% NDC pathway + FOLU emissions 2.63 - Alternative GHG pathway emissions 1.36 - Reduction against NDC pathway + FOLU 48% - Source: World Bank staff analysis (2022). 6   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 3: Mitigation Potential in 2050: Waste and IPPU MtCO2e 3 ODS Substitution Clinker reduction 2.6 Waste-water treatment 2 -48% Aerobic composting Waste-to-energy LFG utilization 1.4 1 0 NDC pathway + FOLU Alternative GHG pathway Source: World Bank staff analysis (2022). Figure 4: GHG Emission Projections 2015–2050: Waste and IPPU Waste IPPU MtCO2e MtCO2e 3.0 0.8 NDC pathway + FOLU NDC pathway + FOLU Alternative GHG pathway Alternative GHG pathway 2.5 0.6 2.0 0.6 2.0 0.5 1.5 0.4 1.0 0.9 0.2 0.5 0.0 0.0 2015 2020 2025 2030 2035 2040 2045 2050 2015 2020 2025 2030 2035 2040 2045 2050 Source: World Bank staff analysis (2022). Country Climate and Development Report: Rwanda - Technical Appendix  |   7 Annex 4: Policy Framework to Support the Implementation of Climate Commitments 4.1. Cross-Sectoral Policies The Green Growth and Climate Resilience Strategy (GGCRS) adopted in 2011 sets out the country’s actions and priorities on climate change relating to both mitigation and adaptation until 2050 and how these will be mainstreamed within economic planning. The GGCRS seeks to achieve the following strategic objectives: 1) energy security and a low carbon energy supply that supports the development of green industry and services; 2) sustainable land use and water resource management that results in food security, appropriate urban development and preservation of biodiversity and ecosystem services; and 3) social protection and disaster risk reduction that reduces vulnerability to climate change impacts. To support these objectives the GGCRS includes 14 Programs of Action (PoA) (Table 4). Table 4: Rwanda’s Green Growth and Climate Resilient Strategy Program of Action Mitigation Adaptation 1. Sustainable intensification of small-scale farming   2. Agricultural diversity for local and export markets  3. Integrated Water Resource Management and Planning   4. Sustainable Land Use Management and Planning   5. Low carbon mix of power generation for national grid  6. Sustainable small-scale energy installations in rural areas  7. Green industry and private sector investment  8. Climate compatible mining  9. Efficient resilient transport systems   10. Low carbon urban settlements  11. Ecotourism, Conservation and PES Promotion   12. Sustainable forestry, agroforestry and biomass energy   13. Disaster Management and Disease Prevention  14. Climate data and projections  Source: GoR (2021a). The National Environment and Climate Change Policy (NECCP) adopted in 2019 provides the guiding framework for environmental management and climate change. The NECCP seeks to achieve a climate resilient nation with a clean and healthy environment that supports a high quality of life for its society and establishes the following policy objectives: 1) Greening economic transformation; 2) enhancing functional natural ecosystems and managing biosafety; 3) strengthening meteorological and early warning services; 4) promoting climate change adaptation, mitigation and response; 5) improving environmental well-being for Rwandans; 6) strengthening environmental and climate change governance; and 7) promoting green foreign and domestic direct investment and other capital inflows. Strategies proposed to strengthen adaptation planning and implementation (Policy objective 4) include: mainstreaming green, ecological and climate 8   |  Country Climate and Development Report: Rwanda - Technical Appendix resilient practices and interventions in all development sectors and districts (including plans, budgets and functions), integrate weather and climate information into infrastructure planning and development, promote water storage and improve stormwater management, promote ecosystem-based approaches to climate change adaptation in local development agendas, and promote afforestation and reforestation in degraded and residential areas. The National Land Use and Development Master Plan (NLUDMP) 2020-2050 seeks to assess the current land users’ status and issues and ensure harmonization of land allocation while promoting the conservation of natural resources and promotion of their sustainable use. Agriculture has the highest (47.2%) land use coverage envisaged for 2050, followed by areas for conservation (37.7%) and built-up areas (15.1%). 4.2. Agriculture, Forestry and Land Use Climate and sectoral policies in the agricultural and forestry and land use sectors provide a framework for the implementation of adaptation and mitigation commitments in the NDC. NDC adaptation commitments in the agriculture sector include developing climate resilient crops, promoting climate resilient livestock, postharvest and value addition facilities and technologies, strengthening crop management practices, developing sustainable land management practices, expanding irrigation and improving water management and expanding crop insurance. In the land use and forestry sector, NDC adaptation commitments include expanding agroforestry and sustainable agriculture, afforestation/reforestation of designated areas, improving forest management and planning and implementation of measures to improve land management. The NDC mitigation commitments established for the AFOLU sector include measures for soil and water conservation (crop rotation, terracing, multi-cropping), improved fertilizers and conservation tillage, as well as measures for improved livestock management (improved husbandry, manure management, and species and population). The GGCRS provides a framework for the implementation of these commitments through programs focused on sustainable intensification and diversification of agriculture.2 The NLUDMP states that the agricultural sector will have a high focus on climate resilience and recognizes that climate change will increase pressures on forests (GoR 2020b). Climate-resilient options in agriculture include improved terraces, agroforestry, improved seeds, drainage, and irrigation on the hillside and marshlands. The NLUDMP aims to ensure maintenance and enhancement of the current forest cover through improved forest management, promotion of green energy, reforestation programs, sustainable charcoal production techniques, improved cookstoves, and agroforestry programs. It also introduces specific measures to reduce the risk to expected climate impacts including the integration of disaster risk reduction within the agriculture and environment sectors and the development and implementation of a National Adaptation Plan into NLUDMP to increase the adaptive capacity of natural systems and rural communities living in area exposed to climate change. Rwanda’s Strategic Plan for Agriculture Transformation phase 4 (PSTA-4) (2018-2024) is designed to transform the agricultural sector and ensure food and nutrition security in a sustainable and resilient manner. PSTA-4 recognizes the increasing impact of climate change on agricultural performance and seeks to enhance climate-smart production and build resilience through on-farm measures, including through practices to reduce climate risks such as of mixing crop varieties and complementing terracing with comprehensive climate -smart soil and integrated watershed management (GoR 2018d). The plan also introduces better weather and climate information and early warning, and integrated risk mitigation and disaster management elements. 2 Through the following programs: P1. Sustainable Intensification of Agriculture; P2. Agricultural Diversity in Local and Export Markets; P4. Integrated Approach to Sustainable Land Use Planning and Management; P11. Ecotourism, Conservation and PES Promotion, and P12. Sustainable Forestry, Agroforestry and Biomass Energy. Country Climate and Development Report: Rwanda - Technical Appendix  |   9 Key environment and forestry policies have been revised in the last few years to reflect the sector’s importance for climate resilience and its contributions towards implementation of development strategies. The Environment and Natural Resources Sector Strategic Plan (ENR-SSP) was revised in 2021 to reflect the sector’s contributions towards implementation of the NST-1 and is aligned with the GGCRS, NECCP, revised NLUDMP and updated NDC (GoR 2020a). The ENR-SSP establishes climate change as one of the 10 priority challenges in the ENR sector to address in the 2018–2024 period and includes among its specific objectives to safeguard environmental resources including through strengthened NDC implementation and environment and climate change mainstreaming, as well as enhancing the reliability of weather and climate information and services. The plan envisages the establishment of a National Adaptation Planning (NAP) process to scale up implementation of adaptation commitments in the NDC. Rwanda’s Forestry Policy was revised in February 2018 to establish the forestry sector one of the key pillars for sustainable development and climate resilience and emphasizes ensuring the maintenance of a 30% forest coverage (GoR 2018e). 4.3. Water Management Climate commitments in the water sector are aligned with the government’s objectives of ensuring sustainable water resources development, use, and management in the country. Adaptation NDC commitments in the water sector include enhancing national water security through water conservation practices, wetlands restoration, water storage and efficient water use; developing water resource models, water quality testing, and improved hydro-related information systems; and developing and implementing a catchment management plan for all Level 1 catchments. These commitments are supported by the GGCRS, which establishes a program of action for integrated water resource management (IWRM) and planning (PoA 13). In addition, Rwanda National Water Resources Master Plan (2015–2040), establishes the need for monitoring of rainfall resource and general climate data in each of the nine catchments to interpret extreme events (flooding, drought) and gradual shifts of resources availability (GoR 2015c). The National Policy for Water Resources Management (GoR 2011b) provides a legal and institutional framework for water resources conservation and management. The policy recognizes climate change as one of the challenges for sustainable management and development of water resources in Rwanda and includes four strategic actions to support climate change resilience focused on establishing meteorological services and Early Warning Systems, preparing water and climate impact risk assessments, and improving water observation, information management, and monitoring. 4.4. Urbanization, Transport, and Energy3 The GGCR and the revised NLUDMP 2020–2050 provide a framework for the implementation of adaptation commitments in the NDC related to urbanization and transport. The NDC establishes as adaptation commitments; promoting high density buildings and upgrading informal settlements; improving storm water management; and improving transport infrastructure and services. This includes the development of environmental and engineering guidelines for climate resilient road infrastructure and reducing the length of roads vulnerable to flood and landslides. GGCR Program 9 seeks to increase investment in climate resilient transport infrastructure, particularly roads; while Program 10 (Low carbon urban settlements) includes measures to adopt energy and water efficiency standards into building codes, establish an integrated multi- mode urban transport system, employ low carbon urban planning, and fully utilize urban waste as a high-value resource stream. The strategy aims to achieve high density, walkable cities, but does not mention e-mobility, as this was not a realistic possibility in 2011. However, the updated GGCRS draft contains a greater focus on urbanization. The revised NLUDMP seeks that at all urban development processes incorporate climate risk and that investments in urban areas consider resilient, reliable and sustainable infrastructure to enable cities to adapt to climate change and function efficiently at the local level. Measures to reduce the risk to 3 More detail on the policy framework relevant to urbanization can be found in the study Urbanization and Climate Change developed as part of the CCDR. 10   |  Country Climate and Development Report: Rwanda - Technical Appendix expected climate impacts in urban areas include integrating climate change and disaster risk reduction within crucial development sectors such as infrastructure and transport, as well as into district and local development plans and ensuring the coherent mapping and delimitation of risk areas at the national and local levels to assign land uses in line with the risks that may occur in those areas. Rwanda’s National Urbanization Policy (2015) includes sustainability and resilience as one of its core guiding principles. The Economic Growth pillar (one of four), elaborates a focus on green growth, giving it the four sub-themes of the control of environmental and social impact; resource efficiency; clean production; and green infrastructure. Climate change does not receive a strong focus, and climate change risks are not explicitly listed. However, under the Conviviality pillar, a focus on disaster risk management, disaster resiliency and urban safety includes a focus on flood risk reduction, and states that the following measures will be taken, namely: i) water retention areas and upstream land-use adaptations, ii) enhancement of the ecological quality of rivers and floodplains, and iii) controlling building activities and permissible technologies (GoR 2015a). Rwanda’s National Housing Policy (GoR 2015d) comprehensively addresses the connection between building and climate change at a high level. Under the pillar titled “Resource-Efficient Planning, Green Technology and Professionalism” the policy contains a sub-section on “Resiliency, Disaster Risk Mitigation and Adaptation” that shows how the policy integrates principles of resilience throughout. The policy reiterates the Green Growth Strategy’s statement that Rwanda will issue low energy standards for buildings. Following up on this, Rwanda’s Building Code (2019) has addressed resilient and green building principles and is well aligned with the National Housing Policy. However, the Building Code can be strengthened by integrating revised hazard maps and the availability of probabilistic assessments to inform updates related to structural performance requirements for expected hazard levels. The City of Kigali and the secondary cities have new master plans that incorporate climate change and environmental concerns, but challenges remain for implementation. The City of Kigali 2050 Master Plan was launched in 2020 (GoR 2020d). It contains a Green City pillar, which addresses in its zoning a wide range of environmental and resource management challenges, including green growth and climate change. Under both the “green growth and climate change” and “disaster risks and resiliency” subthemes, the document has considered flood risk and the risk of landslides in its zoning. The implementation plan mentions the need for a separate “Climate Change Management Plan” for the city of Kigali, but also calls for separate plans on themes that are conceivably relevant to climate adaptation; for example, an “integrated water resource management (IWRM) plan,” a “stormwater management plan”, an “integrated slope management plan, for disaster risks management of slopes”, and a “natural [hazard-linked] disaster risk map, early warning system and disaster response plans.” The City of Kigali is preparing a resilience roadmap which may address some of these planning needs; it will be important that these plans are aligned with each other and with Rwanda’s Environment Policy and NDC. The master plans for Rwanda’s six secondary cities, which have not yet been released, have also integrated green and environmental concerns. This was consistent with the National Roadmap for Green Secondary City Development (GoR and GGGI 2015), which considers both adaptation and mitigation concerns, as well as broader environmental concerns. The key challenges will now be the urban planning capacity in the One-Stop Centers, the fiscal capacity at central and local government level, and the legal and regulatory framework to implement the plans as written. The Updated National Transport Policy and Strategy 2021 seeks to promote green and resilient transport and improve the long-term reliability of transport systems. NDC commitments in the transport sector include improved transport infrastructure and services (adaptation) and introducing measures to increase emissions performance of the national vehicle fleet, including tax incentives and scrappage of older vehicles, and inspection (mitigation). The updated Transport Policy (GoR 2021c) includes climate resilience as one of its guiding principles and directs the design and implementation of roads that enhance safety and the resilience of the infrastructure network. However, environmental and engineering guidelines need to be developed for Country Climate and Development Report: Rwanda - Technical Appendix  |   11 climate resilient road infrastructure. The policy also directs the development of infrastructure to facilitate electric mobility and incentives to facilitate investments. Implementation strategies for electric mobility include developing technical standards for e-vehicles, providing incentives for early adopters, developing sound business models for charging infrastructure and vehicles, electric mobility demonstration projects, and developing the required infrastructure to facilitate electric mobility. Existing policies within the Rwanda energy sector target increased contribution of renewable energy to the national electricity generation system in line with the NDC commitments. The Energy Policy (GoR 2015b) seeks to progressively reduce the carbon intensity of the electricity grid through increased investment in and use of renewable energy resources, promote cleaner fuels and technologies for heating and cooking, and align energy strategies to the green growth strategies and integrated infrastructure solutions, especially in secondary cities. The policy also aims to promote energy efficiency through a combination of approaches including incentives, new codes and standards, subsidies for installation of solar water heaters, as well as pursuing bulk procurement strategies (e.g., importation of LED and CFL lamps). The National Cooling Strategy (NCS) identifies priority interventions to address Rwanda’s growing demand for space conditioning and refrigeration while keeping with the country’s green growth pathway (GoR 2019f). Policy objectives and NDC commitments on reducing the number of households depending on firewood as a source of energy for cooking4 are supported by the Biomass Energy Strategy (2019–2030), which seeks to halve the number of households using traditional cooking technologies to achieve a sustainable balance between supply and demand of biomass through promotion of energy efficient technologies. Preparation and revisions of Rwanda’s electricity sector expansion plan needs to be aligned better with the NDC. Rwanda has put in place arrangements to systematize least-cost generation and transmission expansion planning and least-cost (competitive) implementation of planned projects, based on periodically updated demand forecasts and these have been validated by the sector regulator (RURA). Renewables already constitute over 50% of the generation capacity in Rwanda and feature prominently in the target of 60% of renewable energy by 2030 established in Rwanda’s Sustainable Energy for All Action Agenda to ensure compliance with global trends towards decarbonization of the energy sector (GoR 2018). While there is currently no systematic incorporation of the NDC mitigation targets and proposed priority interventions in the preparation of and revisions to the LCPDP, the World Bank is currently supporting technical assistance to align the least cost planning exercise with the NDC. Interlinkages between energy, transport and urbanization need to be strengthened in the energy policy framework to increase climate resilience of urban areas. An updated Energy Policy is expected for 2022. The revised Energy Policy will need to highlight linkages between urbanization, transport and energy and should be involved early in the urban planning processes, including reviewing and providing inputs on master plans from an energy efficiency and resource optimization perspective. 4.5. Disaster Risk Management Rwanda has a National Disaster Risk Management Policy (GoR 2012) and a National Disaster Risk Management Plan (GoR 2013). Climate change receives adequate mention in the Plan from 2013, although specific disasters such as flooding and drought are not explicitly linked to it. More recently the Ministry of Emergency Management (MINEMA) published National Contingency Plans for flooding & landslides, and for drought, created in 2018. Both acknowledge the role of climate change in exacerbating each risk. The GoR identified several gaps in the Policy from 2012 such as the need to fully elaborate on all necessary pillars of disaster risk reduction and management (DRRM), improve clarity in the roles and responsibilities between institutions in the implementation and provide clear frameworks for community-based disaster risk 4 The NST1 seeks to decrease the number of households depending on firewood as a source of energy for cooking from 79.9% (2016/17) to 42% by 2024. This would be achieved by promoting the use of alternative fuels such as cooking gas and biogas. 12   |  Country Climate and Development Report: Rwanda - Technical Appendix reduction and management (GoR 2021a). To address these gaps, the government is updating the National DRRM policy. The update also aims to reflect current challenges, as well as to align policy measures with the national strategic orientations and wider global and regional commitments (e.g., Sustainable Development Goals, Sendai Framework for Disaster Risk Reduction and the Paris Agreement on Climate Change). Rwanda also has published the National Risk Atlas of Rwanda (MIDIMAR, 2015) with the Global Facility for Disaster Reduction and Recovery. This included detailed national drought and landslide hazard and vulnerability maps, and detailed flood risk mapping for many of the main river systems. 4.6. Health The Health Sector Policy aims to ensure universal accessibility of equitable and affordable quality health services for all Rwandans. It sets out four general objectives focused on key health programs, health support systems, health service delivery and governance, including priority health interventions for meeting these objectives (GoR 2015e). While the Health Sector Policy does not mention climate change or include any considerations on improving resilience to climate change impacts on health, the Fourth Health Sector Strategic Plan (HSSP) (2018-20124) elaborates how the health sector will contribute to the SDGs, including on climate change. The HSSP IV states that the health sector will promote environmental health and mitigate adverse effects of climate change on the population. It also aims to mainstream cross-cutting areas established in the NST, including on environment and climate change. To do so, the health sector will contribute to sensitization to reduce the air pollution in households, promote access to water, sanitation and hygiene, and continue to build the capacity of health workers in disaster prevention, detection, response and recovery to reduce the risk of outbreaks and diseases (GoR 2018f). Country Climate and Development Report: Rwanda - Technical Appendix  |   13 Annex 5: Climate Change Institutional Assessment 5.1. Pillar 1: Organization 5.1.1. Regulatory Framework Adaptation to climate change emerges as the primary concern in Rwanda’s Nationally Determined Contributions (NDCs) which were revised in 2020. The NDCs are informed by government policies including the National Strategy for Transformation (NST) for the period 2018-2024 and the National Environment and Climate Change Policy (NECCP) issued in 2019. The principles for mainstreaming climate change considerations into development planning underpin the Green Growth and Climate Resilience Strategy (GGCRS), which was originally drafted in 2011 and revised in 2021 to align with the NDCs. It is unclear as to whether the decarbonization and adaptation targets embodied in the NDCs, and associated policy documents could be legally enforced. The development of implementation guidelines by the central agencies responsible for climate policy formulation and implementation plans by the associated sectors and implementing agencies could facilitate translating these targets into action. 5.1.2. Functional Mandates The Executive branch and the Ministry of Environment both demonstrate leadership in climate change strategy and policy. The central government engages in environmental policy formulation and implementation through enacting laws and regulations, monitoring and evaluation of programs and projects, raising awareness through public relations campaigns, providing training to government agencies, and advising decentralized institutions. Local governments are responsible for policy implementation, application of laws and regulations relating to the environment, and oversee the protection of the environment within their jurisdiction. It is unclear the extent to which the Executive branch interacts regularly regarding climate policy and action with government agencies such the Rwanda Environment Management Authority (REMA), the Cleaner Production and Climate Innovation Center (CPCIC), and Rwanda Green Fund, FONERWA. It is also unclear how regularly and effectively the committees responsible for environmental conservation and protection that were established at the provincial, city, district, town, municipality, sector, and cell levels coordinate and collaborate. 5.1.3. Government Coordination The Ministry of Environment maintains a coordinating role across government agencies regarding climate policy and action. It provides oversight over REMA, FONERWA, Rwanda Water and Forestry Authority (RWFA), Rwanda Land Management and Use Authority (RLMUA), and Meteo Rwanda. The treatment of the environment and climate change as a crosscutting issue in earlier iterations of national development policy (e.g., the Economic Development and Poverty Reduction Strategy of 2008), which necessitates coordination across different government agencies, has led to a neglect over time of environment and climate change considerations in programs and projects, compared to development areas which fell under the purview of specific ministries and agencies and thus could receive funding in budget lines allocated for these agencies. It is unclear whether adequate incentives and budgetary mechanisms are in place for ministries and agencies to coordinate with each other to pursue outcomes whose achievement requires action across the government. 5.1.4. Technical Capacity REMA and the Bureau of Standards are charged with developing standards and guidelines for the use, protection, and conservation of renewable resources, enforcing these standards, and providing technical advice in implementation. Considering REMA’s broad mandate, it is unclear if the agency has the capacity 14   |  Country Climate and Development Report: Rwanda - Technical Appendix required to perform its mandate effectively, including updating regulations as necessary, providing guidance, and monitoring compliance. The original GGCRS issued in 2011 proposed the establishment and operationalization of some institutional arrangements for the provision of technical advice to government agencies, including: (1) the Technical Coordinating Committee (TCC), whose objective was to facilitate the incorporation of the GGCRS into Vision 2020, EDPRS, and sector policies; (2) FONERWA, and (3) the Centre for Climate Knowledge for Development (CCKD). The absence of publicly available information regarding the activities undertaken by these institutional arrangements makes it difficult to gauge whether they have delivered the intended purpose. An organizational and functional review of these institutional arrangements, as well as the planning, staff, implementation, and monitoring and evaluation (M&E) capacity of the key agencies involved in the implementation of climate policy (i.e., the Ministry of Environment, REMA, and FONERWA), would help to delineate whether the current institutional arrangements are conducive to the effective implementation of the NDCs. 5.2. Pillar 2: Planning 5.2.1. Risk and Vulnerability There is a legal requirement for the authority in charge of climate change to prepare vulnerability assessments, although its update frequency is not established. The Law on the Environment (No 48/2018) in Article 24: Climate change assessment and reporting, requires that “the authority in charge of climate change in collaboration with administrative entities and national and international non-governmental organizations must develop, regularly update, publish and make available […] national climate change vulnerability assessment and programs containing measures for adaptation to impacts of climate change in different sectors likely to be affected.” The Ministerial Order No 005/2021 of 08/04/2021 for determining the Procedures for Preparation of National Report on Climate Change (Official Gazette n° 13 of 12/04/2021) further details the content of vulnerability assessment and adaptation options. However, it does not specify the frequency with which the report will be prepared. The latest vulnerability assessment prepared by REMA was conducted in 2018. It takes a detailed look at climate change vulnerability in the country’s 30 districts focusing on households using various indicators of household vulnerability. This report updates REMA’s national level vulnerability assessment, first prepared in 2015, using a broad range of indicators of vulnerability that were selected during the preparation of the first assessment. No report was published since the 2018 report. Additionally, the Ministry of Disaster Management and Refugee Affairs published the National Risk Atlas of Rwanda in 2015. The atlas consists of a risk assessment of five hazards that currently or may potentially affect Rwanda, as well as the exposure and vulnerability of the country to these hazards, and some estimates of potential economic cost. In 2020, Road Transport Development Agency (RTDA) developed a preliminary vulnerability assessment report on Climate Resilient Road Transport Infrastructure, which identified threats and mapped specific road sections exposed to climate risks, notably erosion, landslide, and floods (RTDA, 2020). REMA has implemented several projects aiming at reducing climate vulnerability, including “Establishing Early Warning and Disaster Preparedness Systems and Support for Integrated Watershed Management in Flood Prone Areas,” and “Building Resilience of Communities Living in Degraded Wetlands, Forests and Savannas of Rwanda through an Ecosystem-based Adaptation Approach.” It is unclear if the findings of these assessments inform national, sectoral, and district development strategies. Furthermore, physical transition risk and the risk of not undergoing low-carbon transition are not included in the above-mentioned assessments. Finally, although the assessment reports are available through search engines, they cannot be found on the Ministry of Environment or REMA’s website. It is also unclear whether there is a requirement regarding the frequency with which risk and vulnerability assessments and the National Report on Climate Change should be prepared. Country Climate and Development Report: Rwanda - Technical Appendix  |   15 5.2.2. Development Planning GoR has achieved important progress in incorporating climate change actions into development planning instruments. The planning system of Rwanda consists of four main instruments. At the highest level, Vision 2050 establishes a long-term vision for the country. The National Strategy for Transformation identifies the strategic priorities for a seven-year period. Its implementation is supported by the sector and district medium-term strategies and annual plans. Sectors and districts are required to mainstream climate issues in their action plan and budget submission to MINECOFIN. For example, the 2021/2022 Fiscal Year First Planning and Budget Call Circulars requires that sector agencies and districts mainstream climate change in their action plans with clear and measurable indicators and targets, based on which they will request financing from MINECOFIN. REMA has developed a “Checklist for Environment and Climate Change Mainstreaming” to help sectors and districts integrate climate change actions established in NST, NDC, and GGCRS in their action plans. The checklist extracts the programs, outputs, and indicators established in these three high-level documents and assigns them to the responsible agencies with targets and deliverables. This checklist encompasses actions and indicators for agriculture, water resources management, forestry, mining, urbanization, infrastructure, environment and natural resources, disaster management, health, and education. With the support of MINECOFIN and MINALOC, REMA works with sector ministries and district governments to include these indicators and activities in their respective action plans. REMA’s assessment reports indicate that there is still room for improvement regarding the integration of climate change actions and indicators in sectors and district development plans. Of the key environmental and climate change performance indicators identified by REMA and MINECOFIN, on average 32% of indicators did not register reported progress in FY2019/2020 by sectoral ministries, and 73% of indicators did not register progress by district governments. The unreported percentages are similar in previous years, which indicated that the unreported indicators may not have been incorporated in sector and district development plans. Another instrument that helps to integrate climate change actions into development planning is vulnerability assessments. Vulnerability assessments have become an emerging tool for countries to conduct adaptation planning. Rwanda’s Law on the Environment (No 48/2018) establishes the requirement for development, regular updating, and publishing of “national climate change vulnerability assessment and programs containing measures for adaptation to impacts of climate change in different sectors likely to be affected.” Requirements on the content of the vulnerability assessment are further laid out in the Ministerial Order No 005/2021 of 08/04/2021.5 However, it does not specify the frequency with which the report will be prepared.6 The latest vulnerability assessment prepared by REMA was conducted in 2018, which has informed several investment projects aiming to reduce climate vulnerability. The 2018 assessment takes a detailed look at climate change vulnerability in the country’s 30 districts focusing on households using various indicators of household vulnerability. It has informed the design of several investment projects, including Establishing Early Warning and Disaster Preparedness Systems and Support for Integrated Watershed Management in Flood Prone Areas, and Building resilience of communities living in degraded wetlands, forests, and savannas of Rwanda through an ecosystem-based adaptation approach. REMA has also conducted consultations with sectors and districts and asked them to take into consideration the findings of the assessment, although the outcome of this process is unclear. 5 Ministerial Order No 005/2021 of 08/04/2021 for determining the Procedures for Preparation of National Report on Climate Change (Official Gazette n° 13 of 12/04/2021) 6 REMA officials indicated in an interview that the assessment would be updated every five years, although this is likely an informal commitment, as the World Bank team is not able to identify this requirement in any regulation. 16   |  Country Climate and Development Report: Rwanda - Technical Appendix REMA prepares an annual assessment report that analyzes the progress of the sectors and districts regarding their environmental and climate actions, although the data collection process can be improved. The assessment is based on a list of agreed key performance indicators (KPIs) (32 indicators in total in FY 2019/2020) between REMA and MINECOFIN. REMA examines the performance of each sector ministries and district governments and provides recommendations accordingly. As shown in Figure 5 and Figure 6, overall data availability is greater at the sector ministries level than district government levels. Currently, the collection of data appears to be a manual process. The KPIs are not registered in a system that allows consolidated and automatic reporting by sector ministries and district governments. Figure 5: Sector Performance Regarding Environmental and Climate Change Indicators Comparisons over the years 70.00% 61.60% 57.80% 60.00% 52.50% 50.00% 40.00% 32.50% 32.30% 32% 30.00% 20.00% 8.70% 6.70% 7% 10.00% 0.00% 2017/18 2018/19 2019/20 On Track 57.80% 52.50% 61.60% On watch 8.70% 6.70% 7% Off Track 1% 8.50% 0% Not reported 32.50% 32.30% 32% On Track On watch Off Track Not reported Linear (On Track) Source: REMA, Assessment Report for the Implementation of Environment and Climate Change activities by Sector Ministries and Districts Fiscal year 2019-2020. Figure 6: Subnational Government Reporting on Environmental and Climate Change Indicators 90.00% 80.50% 80.00% 74% 74% 70% 70.00% 64% 60.00% % of implementation 50.00% 40.00% 30.00% 25.70% 22% 24% 23.40% 19.07% 20.00% 10.00% 0.00% Southern Province Northern Province Western Province Eastern Province City of Kigali On Track On watch Off Track Not reported Source: REMA, Assessment Report for the Implementation of Environment and Climate Change activities by Sector Ministries and Districts Fiscal year 2019-2020. Country Climate and Development Report: Rwanda - Technical Appendix  |   17 5.2.3. Monitoring, Reporting and Verification The Ministerial Order No 005/2021 of 08/04/2021 for determining the Procedures for Preparation of National Report on Climate Change provides a basis for the establishment of a Greenhouse Gas (GHG) inventory. It requests the authority in charge of climate change (the Ministry of Environment) to collect data for reporting on the GHG inventory, mitigation, adaptation, and projections, and requests institutions in relevant sectors, private companies, and Non-Governmental Organizations (NGOs) to share relevant data requested by the authority. However, it does not specify which type of data is to be collected by whom, in which format, and at what frequency. REMA established a desk for climate change data under the REMA unit of Climate Change and International Obligations. The desk is responsible for GHG inventorying and reporting within the three-year National Communications and Biennial Update Report (BUR) obligations per the requirement of the United Nations Framework Convention on Climate Change (UNFCCC.) In November 2017, the Climate Change Data Desk in REMA initiated a national GHG inventory data management system to store, process and archive GHG data from different sectors. The NDC Measurement, Reporting, and Verification (MRV) framework, developed with support from the World Bank, has not been made operational yet due to various constraints. There is a lack of proper coordination between the Ministry of Environment and REMA to implement the agreed roadmap. Also, there is a need to develop or strengthen the inter-agency arrangements for reporting on the indicators. It is unclear if the ministries and agencies have been sensitized regarding the requirements of the MRV framework and are equipped with staff and tools to perform MRV tasks. Guidance material defining the variables for each indicator and the methodology for calculation, frequency with which it will be measured, source of data, and data collection channel or mechanism, would help to facilitate the adoption of the MRV framework by ministries and agencies. 5.3. Pillar 3: Public Finance 5.3.1. Public Financial Management The laws and regulations governing public financial management (PFM) (i.e., the Organic Law on State Finances and Property adopted in 2003 and the Financial Regulations issued in 2007) do not address climate change issues. The Manual of Public Financial Management Policies and Procedures (updated in 2019) points to environmental considerations as a guiding principle for the management of government assets and requires agencies to consider environmental issues together with social and economic factors in making service delivery decisions. Environmental considerations are mentioned as being particularly relevant for the disposal phase of a government asset and as a characteristic of a “heritage asset,” i.e., an asset that has value because of its contribution to the society, knowledge, or culture. Despite the paucity of climate change considerations in the legal framework for PFM, the Planning and Budgeting Call Circular for the 2021/2022 fiscal year required for the first time the lead institutions for relevant sectors and districts to mainstream environment and climate change priorities and associated indicators into their Action Plans. The Circular introduced a ‘’Checklist for Environment and Climate Change Mainstreaming’ requiring all budget agencies to submit an annex reflecting environment and climate change priorities in their budget submissions. This information is expected to constitute the analytical basis for the establishment of a climate budget tagging framework, which is expected to facilitate reporting on progress on the NDCs and promote external co-financing for climate programs. The performance-based budgeting framework and the workbook introduced in the 2021 Finance Law also references climate changes issues. While within the context of the budget process climate change risks are mentioned (Rwanda’s fiscal risk statement for FY2021/22 considers climate change risks under “Natural disasters,” noting that the country 18   |  Country Climate and Development Report: Rwanda - Technical Appendix is prone to storms, landslides, and floods, and 55% of total land area is at risk of soil erosion), it is unclear if in practice such risks are considered and mitigated for in medium-term fiscal risk assessment and fiscal risk management exercises. The primary mechanism for the government to disclose information regarding climate change budget spending and funds would be through the budget execution reports published by MINECOFIN on its website. However, apart from the “Checklist for Environment and Climate Change Mainstreaming,” the absence of a clear framework and guidelines for institutions to publish information regarding climate spending suggests that the level of legislative scrutiny of budget allocations dedicated to addressing climate change issues, as well as and the treatment of climate change in the Audit and Evaluation Report is also inadequate. The government conducted a public expenditure review on the issues of the environment and climate change in 2013. It is unclear if another review has been conducted since that review. Analyses regarding the transparency and accountability of climate finance in Rwanda have been conducted by civil society organizations (CSOs), such as an analysis conducted by Transparency International in 2018. The report examined the institutional architecture for climate finance and the main development partners contributing to FONERWA. The main issues identified in the report include: (1) limited awareness and capacity of the private sector and CSOs to access the financial resources available for green projects; (2) inadequate geographic distribution of funds partly due to weaknesses in the climate change vulnerability index; and (3) unclear and overly complex MRV system and insufficient reporting capacities at the local level for climate finance. Assessments conducted in 2019 and 2020 under the Poverty-Environment Action for Sustainable Development Goals (SDGs) found significant progress had been made in mainstreaming environment and climate change considerations in budget expenditures for fiscal years 2017/18 and 2018/19. It was noted, however, that the process had slowed down due to the transition from the EDPRS to the NST and sector and district plans not having been fully developed. 5.3.2. Public Investment and Asset Management There is no evidence of a legal or regulatory requirement for the government to address climate change policy objectives in the public investment management (PIM) cycle or infrastructure governance. Rwanda’s public investment policy requires that all public sector infrastructure projects are reviewed by MINECOFIN. When submitting an infrastructure project for consideration for approval and inclusion in the budget, the implementing agencies are required to provide an Environmental Impact Assessment (EIA) report as an annex to the Feasibility Study. Guidelines for the preparation and assessment of Feasibility Study reports currently exist. These guidelines indicate that, when appropriate, an EIA procedure must be carried out to identify, describe, and assess the direct and indirect effects of the project on human beings and the environment. Project proposal submissions are required to demonstrate to what extent the project contributes to environmental protection, resource efficiency, and climate change targets in line with the “polluter pays principle,” which stipulates that the polluter should bear the expenses of preventing and controlling pollution to ensure that the environment is in an acceptable state. While climate risks and vulnerabilities are mentioned in the guidelines, there is no convincing evidence that in practice, these risks are considered and mitigated along the entire project lifecycle (i.e., from identification, design, and appraisal through implementation, operation, and disposal.) There is no evidence that the concept of shadow price of carbon is deployed in the economic analysis and appraisal of public investment projects. Public asset management is governed by law No: 40/2010 dated 2010, which created the Rwanda Housing Agency (RHA) to manage all government assets. Before RHA was created, public asset management was handled by the Ministry of Infrastructure. RHA is required to organize records of government assets into a national database, carry out repairs and maintenance works on government buildings, and supervise the disposal of state assets by user institutions. While environmental concerns are considered in the disposal phase of an asset, it is unclear to what extent the asset management framework promotes climate resilience outcomes through regular maintenance during the operation phase of the asset. Country Climate and Development Report: Rwanda - Technical Appendix  |   19 It is unclear to what extent climate policy objectives have been mainstreamed across core infrastructure governance and management processes. The most advanced treatment of climate change considerations is in the energy and natural resources (ENR) sector, for which the government has a policy framework for climate-resilient energy infrastructure investment. The implementation progress of the policy is not clear. The Rwanda Energy Policy issued in 2015 stipulates that achieving environmental sustainability policy objectives entails: (a) elaborating clear planning criteria that influence the prioritization of new energy investments toward environmentally friendly and climate resilient energy infrastructure, (b) promoting technological innovation and transfer, (c) developing stronger national technology standards for energy products and services, and (d) outlining clear environmental guidelines to be used for major energy investments and programs. The policy also provides alignment with East African Community climate change policy regarding climate technology transfer and adoption. In 2011, the Ministry of Environment developed the ‘’Guidelines for Mainstreaming Climate Change Adaptation and Mitigation in the Environment and Natural Resources Sector’’ to help conduct impact and vulnerability assessments in the energy and natural resources (ENR) sector; identify opportunities and entry points for the integration of climate change mitigation and adaptation measures into the ENR sector; and identify, analyze, and integrate options for climate change mitigation and adaptation in the ENR policy formulation, financing, implementation, and evaluation processes at the national, local and community levels. 5.3.3. Public Procurement There is no evidence that legal or regulatory requirements are in place for the government to address climate change considerations in public procurement processes beyond intentions stated in policy documents. For example, the NECCP features a policy statement regarding promoting green technologies and procurement and considers green procurement a high priority. The policy statement calls for limiting the procurement of materials with environmental impact to expand markets for green products while promoting the development of environmentally friendly technologies and environmental awareness among suppliers and others involved in the supply chain. The policy also highlights the government’s commitment for sectors of the economy to put in place mechanisms to develop and promote green technologies in all sectors of economic development, and facilitate appropriate climate change mitigation and adaptation technologies, as well as revise legal instruments (including the public procurement guidelines) to promote green technologies and reflect green components in national and district procurement processes. It is unclear if the Rwanda Procurement Authority (RPPA) is developing any climate change related rules in its procurement process or revising its guidelines accordingly. 5.3.4. Climate Finance There is no evidence of a comprehensive climate finance strategy in place to operationalize the National Strategy for Climate Change and Low Carbon Development in the GGCRS. The primary mechanism through which Rwanda accesses, programs, disburses, and monitors international and national extra-budgetary climate and environment finance is FONERWA, which was established with the objective to mobilize and channel domestic and international financing to public and private environment and climate change projects. Other legal responsibilities of FONERWA include supporting public organs, associations, and individuals regarding the protection and conservation of the environment, conducting research, and being an advocate of action to address climate change. FONERWA’s Operational Manual issued in 2015 outlines its procedures regarding project screening, monitoring and evaluation, procurement, and financial management, as well as its governance structure, capacity building plan, and value-for-money strategy. The semi-annual High- level Dialogue on Green Growth Report issued in 2018 called for the establishment of a standard to be set across different sectors for environment and climate change budget allocation, including developing and implementing an environment and climate change budget statement. It also stated the need to create new pathways for private sector engagement and develop incentives that encourage investment in green growth initiatives including removing the barriers to green investments at policy, regulatory, technical, and financing 20   |  Country Climate and Development Report: Rwanda - Technical Appendix levels. It is unclear if the government or FONERWA have taken these recommendations onboard. It is also unclear if the government has plans to craft a comprehensive climate finance strategy including tools such as budget allocations, carbon and other taxation, green bonds, or auctions and emissions trading systems. 5.4. Pillar 4: Subnational Governments and State-Owned Enterprises 5.4.1. Functional Assignment, Coordination and Capacity  There is ambiguity regarding functional assignments among different levels of government. In Rwanda, districts oversee the provision of most public services. Districts are responsible for the overall coordination of planning, financing, and implementation of services, while the actual delivery happens mostly at the sector level. The cell and village levels are responsible for data collection and community mobilization. However, there are ambiguities regarding functional assignments in each sector. According to the revised National Decentralization Policy of 2021, all sectors still have a long way to go to define how they intend to decentralize some components of their respective functions. This has an impact on functions related to decarbonization and adaptation. The government intends to take stock of decentralized functions across all sectors and clearly define functions to be devolved, delegated, or deconcentrated. The Ministry of Environment, REMA, and MINALOC all play a role in the coordination of climate-related issues between the central and subnational level. Districts have environmental officers who support climate change issues. There are also environment facilitators working in district offices who are currently employed for specific projects, and they are contracted by REMA. Both environment facilitators and district environmental officers’ benefit from capacity building facilitated by REMA and FONERWA, including on the importance of climate compatible development and how to conduct EIAs before taking on large infrastructure or agricultural development projects. The revised National Decentralization Policy is expected to improve capacity of district councils to better cope with climate change impacts and take effective adaptation measures. While implementing the policy, the GoR will consider climate change issues in District Development Plans. The policy aims to improve institutional arrangements to better coordinate and manage delivery of services at decentralized levels. Increased staffing and capacity at the district, sector, and cell levels can support climate mitigation and adaptation efforts implemented across the 26 districts, including the ability of local governments to provide social protection and health services during disasters. 5.4.2. Strategic and Land Use Planning Subnational governments are required to mainstream climate considerations in their planning processes and Imihigo, which are annual performance contracts that district mayors’ signs with the President of the Republic. The NECCP suggests “mainstream green, ecological and climate resilient practices and interventions in all development sectors and districts, including their plans, budgets, functions and actions” and “include environment dimensions in Imihigo.” According to the “Guidelines for Mainstreaming Climate Change Adaptation and Mitigation in the Environment and Natural Resources Sector (2011)”, REMA has developed a guidance manual for integrating climate change aspects into District Development Plans. However, this information is not available publicly. 5.4.3. Subnational Climate Finance Local taxes consist of property tax, rental income tax, and trading licenses. Although there may be room for “green charges” for property tax, currently these taxes are not climate related. For all three taxes, base and rate are determined by national legislation. There is currently no tagging of climate expenditure at subnational level. No climate public expenditure review has been done at the subnational level. There is no specific requirement for identifying climate-related information in the budget and audited financial Country Climate and Development Report: Rwanda - Technical Appendix  |   21 statements of subnational entities. Subnational investment projects are required to conduct an EIA per the national PIM regulations. The EIA guidelines are in general silent on climate and disaster risks. The Project Screening Criteria in Appendix 2 mentions that that a project should not cause adverse impact on climate and hydrological cycle. Very few EIA reports in Rwanda include climate and disaster risks and the analysis is not conducted in depth. It is unclear if subnational governments consider climate and disaster risks in their investment projects and if they have the capacity to conduct assessments. 5.4.4. State-Owned Enterprises Some state-owned enterprises (SOEs) are likely to be impacted more by climate change than others and could play a stronger role in climate change policy and action. SOEs operate in the sectors of water and electricity utilities, construction, information communications and technology, aviation, mining, insurance, agriculture, and finance. In Rwanda, SOEs are expected to have a multiyear strategic plan and a risk management policy, though they are not required to identify climate-specific risks. REMA’s mainstreaming guidelines for various sectors do not explicitly mention SOEs. The Rwanda Fiscal Risk Statements of FY 2020 and 2021 do not mention any climate-related risks in the public corporation section. Few SOEs are proactive in identifying climate-related risks and developing plans accordingly. It is worth noting that the Energy Development Corporation Limited (EDCL) is currently conducting a study (up to March 2022) on the potential of renewable resources. It is unclear the extent to which SOEs have awareness regarding their vulnerability to and impact on climate change and whether they have the capacity to incorporate climate change considerations in their investment planning, operations, and reporting practices. 5.5. Pillar 5: Accountability 5.5.1. Access to Climate Information Some climate change-related documentation is available on some government websites, but publicly available information on climate change in Rwanda remains largely incomplete, outdated, not easily accessible, and not provided in a user-friendly format. REMA is the primary government organization which conducts research on the status of the environment in Rwanda and regularly publishes findings and reports. REMA is tasked with monitoring  and assessing  development programs to ensure compliance with the laws on environment during their preparation and implementation, but it is unclear if it makes all these assessments publicly available. Climate information often comes from sources outside the government. A major challenge is the limited availability of and access to environmental statistics by both the government and the public. The primary source of climate change-related information appears to be regional analyses conducted by the Intergovernmental Panel on Climate Change. It is unclear to what extent these international models can be or have been reliably downscaled to the national level. 5.5.2. Stakeholder Engagement Stakeholder engagement fora which bring together the civil society, the private sector, and the government exist. However, it is difficult to assess who gets to participate and the extent to which stakeholder inputs are considered during target setting and program and project design, as reports detailing such processes and their outcomes are not publicly available. The Ministry of Environment hosted a High-Level Policy Dialogue on Rwanda’s updated GGCRS in 2021. A similar consultative process was followed leading up to the development of the NECCP in 2019, which brought together actors at national and district levels, development partners, the private sector, and CSOs. The 2018 GGCRS Evaluation Report recommended the issuance of a Prime Minister’s Order to formalize the GGCRS coordination framework by either giving a legal mandate to a Technical Coordination Committee or by institutionalizing the forum of focal persons set up by the Ministry of Environment to follow  up on the implementation of action plans in their respective sectors. The Ministry also initiated a semiannual High-Level Dialogue composed of sector leaders, development partners and civil society for monitoring the implementation of the strategy. The 22   |  Country Climate and Development Report: Rwanda - Technical Appendix institutional arrangements for the implementation of the GGCRS were redesigned in 2021 to ensure a more effective flow of information and knowledge, and transparent deployment of financial resources. The roles and responsibilities of the GGCRS governance structure were modified to emphasize mainstreaming climate resilience into development planning.  Mechanisms to enhance private sector and  civil  society involvement in the implementation of the GGCRS implementation were enhanced based on the protocols established through the updated NDC process and expanded to include a broader range of sector and district stakeholders through the Sectoral Working Group and the Joint Action Development Forum, which was introduced to facilitate the participation of citizens in governance and service provision processes in the context of the decentralization agenda. 5.5.3. Independent Expert Advice While there is no systematic independent expert advice mechanism in place for climate policy and action, the government has had access to independent expertise and technical assistance in the formulation and implementation of its climate policies on an ad hoc basis through support and financing from its development partners. 5.5.4. Legislative body In Rwanda’s parliament, the Committee on Land, Agriculture, Livestock, and Environment is responsible for issues relating to climate change. It is unclear if the law provides for parliamentary oversight of executive actions (and inactions) on climate and subsequently act in the form of statements, censures, press releases, or petitions) on climate change issues. It is also unclear if the executive is required to table policies, progress reports, program evaluations relating to climate goals in the parliament. 5.5.5. Audit The Office of the Auditor General of Rwanda is the supreme audit institution. There are no climate-informed audits publicly available. It is unclear if the Auditor General has plans to engage in this area and whether it would have the capacity to conduct or contract out such audits in the future. It is also unclear if the government intends to conduct and publicly disclose reviews regarding the expenditure and implementation performance of climate-related programs and projects. 5.5.6. Judicial review The legal authority of courts to review executive and legislative action on climate change is unclear, as most policies do not constitute binding legal requirements. The National Environment Policy issued in 2003 foresaw the establishment of an Environmental Tribunal as an instrument for conflict resolution and an essential element of Rwanda’s framework for the sustainable management of natural resources. The Tribunal has not yet been established. In 2010, Rwanda joined a group of African nations including Burundi, Kenya, Tanzania, and Uganda to adopt the East African Network for Environmental Compliance and Enforcement charter, committing to cooperate and collaborate in the implementation and enforcement of environmental legislation. The Network has a website on which various practical resource documents are available, such as a database of materials on training for officials involved in environmental compliance. Beyond these initiatives there is no publicly available information regarding recent court cases dealing with environmental matters. Country Climate and Development Report: Rwanda - Technical Appendix  |   23 Annex 6: Economic and Poverty Modeling 6.1. MANAGE Model The Rwanda CCDR employs a version of the Mitigation, Adaptation and New Technologies Applied General Equilibrium (MANAGE) model. It is a single-country recursive dynamic computable general equilibrium (CGE) model designed to focus on energy, emissions, and climate change that explicitly models the year-by-year effects of a particular policy or shock on the economy. In addition to the standard features of a single country CGE model, the MANAGE model includes a detailed energy specification that allows for capital/ labor/energy substitution in production, intra-fuel energy substitution across all demand agents, and a multi- output, multi-input production structure. The specificities of the MANAGE model are described in detail in Van der Mensbrughe (2017). 6.1.1. Customization of the Model for Rwanda The MANAGE model for Rwanda was first extended for the analysis of the economic effects of the COVID-19 pandemic and infrastructure investment in the Rwanda Economic Update (World Bank 2021a and 2021b). The model was further extended to incorporate Rwanda-specific climate damage functions to introduce the impact of climate change on the economy. These damage functions are estimated by a bio-physical model tailored to Rwanda and cover the impact on agricultural yield by aggregate crops, labor productivity due to heat, human health and labor productivity, capital stock due to flooding, and tourism demand (IEc 2022). The effects on other agricultural sectors such as livestock, forestry, and fishery are captured via damage functions calibrated to the estimations for Rwanda by Roson and Sartori (2016). Temperature and precipitation data are run through the damage functions for various climate scenarios. Adaptation functions are linked to the damage functions. Adaptation investment reduces damages with the possibility of introducing various levels of efficiency. The model is calibrated to Rwanda’s social accounting matrix (SAM) for the year 2019. Rwanda’s SAM includes transaction flows for 84 sectors, 84 commodities, and 3 types of factors of production: labor, land, and capital (Table 5). There are 8 labor categories distinguished by education level (primary, secondary, or tertiary education, or none) and rural-urban divide, supporting the analysis of differences across unskilled, semi-skilled, and skilled labor. Production activities in MANAGE model are profit maximizers under constant returns to scale technologies. They use labor, capital, land, and intermediate inputs to produce commodities and services for domestic and international markets. Production is modelled using a nested constant-elasticity-of-substitution (CES) structure, designed to capture the substitutions and complementarity across the different inputs—notably capital and labor, but also with a focus on energy as energy policies are one of the key objectives of the model. The model allows a detailed analysis of energy supply and demand by incorporating five sources of electricity generation (coal, gas/methane, hydro, oil, and solar). The electricity generation mix is endogenously determined based on the relative cost of each generation activity. Alternatively, the model allows targeting a specific energy generation mix through adjusting the investment in each type of generation (e.g., increasing investment in renewables to follow a renewable energy target). The model is set up to include emissions generated by input use (both intermediate and factor demand—for example livestock or land), by output (for example the case of cement, or methane emissions from landfills), and final consumption. The model can track the evolution of the energy mix capturing the emissions associated with alternative power sector growth scenarios. 24   |  Country Climate and Development Report: Rwanda - Technical Appendix Table 5: Sectors in the 2017 Rwanda Social Accounting Matrix Activities and commodities Maize Fish and seafood processing Construction Rural nonfarm - quintile 3 Sorghum and millet Dairy Wholesale and retail trade Rural nonfarm - quintile 4 Rice Fruit and vegetable processing Transport nec Rural nonfarm - quintile 5 Wheat and barley Fats and oils Water transport Urban - quintile 1 Other cereals Maize milling Air transport Urban - quintile 2 Pulses Sorghum and millet milling Warehousing and support Urban - quintile 3 Rice milling activities Urban - quintile 4 Groundnuts Wheat and barley milling Communication Urban - quintile 5 Other oilseeds Other grain milling Accommodation Other Cassava Sugar refining Restaurants and food services Transaction costs Irish potatoes Coffee processing Information and communication Enterprises Sweet potatoes Tea processing Finance and insurance Government Other roots Other foods Real estate activities Taxes - activity Leafy vegetables Animal feed Business services Taxes - direct Other vegetables Beverages Public administration Taxes - export Sugarcane Tobacco processing Education Taxes - factor Tobacco Cotton yarn Health and social work Taxes - import Cotton and fibers Textiles Other services Taxes - sales Nuts Clothing Factors Savings-investment Bananas and plantains Leather and footwear Labor - rural uneducated Change in stocks Other fruits Wood products Labor - rural primary Rest of world Leaf tea Paper products and publishing Labor - rural secondary Coffee Petroleum products Labor - rural tertiary Cocoa Fertilizers and herbicides Labor - urban uneducated Cut flowers Other chemicals Labor - urban primary Rubber Non-metal minerals Labor - urban secondary Other crops Metals and metal products Labor - urban tertiary Cattle Machinery and other equipment Land - agricultural crops Raw milk Electrical equipment Capital - crops Poultry Vehicles and transport equipment Capital - livestock Eggs Other manufacturing Capital - mining Small ruminants Electricity Transmission and Capital - other Other livestock Distribution Households Forestry Electricity - Coal Rural farm - quintile 1 Aquaculture Electricity - Gas Rural farm - quintile 2 Capture fisheries Electricity - Hydro Rural farm - quintile 3 Coal and lignite Electricity - Oil Rural farm - quintile 4 Crude oil Electricity - Solar Rural farm - quintile 5 Natural gas Gas manufacture, distribution Rural nonfarm - quintile 1 Other mining Water supply and sewage Rural nonfarm - quintile 2 Meat processing There are 15 household categories distinguished by income/consumption quintile for each of the urban, rural farm, and rural non-farm sectors. Other institutions include enterprises, the government, and the rest of the world. There are several tax/subsidy accounts, including import tariffs, indirect taxes as well as direct income taxes. Country Climate and Development Report: Rwanda - Technical Appendix  |   25 The model also contains a simplified debt module expanding further the fiscal analysis to capture effects on government domestic and foreign debt, borrowing on the domestic and international markets, and debt service obligations. The model is run for 32 periods, from 2019 through 2050. Macro fiscal closures are such that the government budget balance is endogenous. We assume fixed tax rates calibrated to reach a targeted tax revenue-to-GDP ratio in the baseline. Government consumption and investment are fixed in real terms as a share of base year GDP and calibrated in the baseline to reflect past performance and projections. Any surplus is used to pay off debt, and any deficit is funded by debt. The most December 2021 DSA is used to calibrate domestic and external debt as a share of base year GDP (IMF and World Bank 2022). The drivers of growth in this model follow the neo-classical growth framework. The level of GDP depends on three factors: the supply of workers, investment, and productivity. The level of investment in the economy is determined through a savings-driven closure with exogenous propensity to save for households and firms. We assume exogenous foreign savings in foreign currency calibrated to match historical data and projections. The nominal exchange rate is fixed. The real exchange rate adjusts to maintain the current account balance- to-GDP ratio. Investment is distinguished between public and private, and between infrastructure and other investments. Infrastructure investment is distinguished from other types of investments in the model as it can have positive externalities. All markets in the model are perfectly competitive implying that prices are equal to marginal costs in the equilibrium. Thus, firms compete in the factor markets to hire labor, capital, and land. Labor supply is a function of real wages for each category of labor. With a low elasticity of labor supply, wages adjust to equalize supply and demand. A perfect intersectoral mobility of labor is assumed. Sensitivity analysis is carried out by reducing the degree of labor mobility across activities. Capital supply is determined because of capital accumulation process where shrinking activities release capital which is added to “new” capital stock. New capital is fully mobile across sectors. A similar analysis is conducted by introducing imperfect intersectoral mobility for capital and limited crop substitution for land. 6.1.2. Climate change in the CGE model Climate change is likely to have direct and indirect effects on the Rwandan economy. Direct effects accrue from the damages to productivity and the supply of labor, land, and capital. Factor supply shocks and productivity losses affect output. With lower output, prices tend to increase. While less productive factors have a lower remuneration, the destruction of capital and land tends to push rental rates upwards. Agricultural yield losses are further exacerbated by these effects. Indirect effects take place through seven channels. 1. Production linkages: Activities are linked through forward and backward production linkages. 2. Factor substitution effect: Firms compete on the factor markets to hire labor, capital, and land. As factors suffer supply and productivity shocks, activities adapt by substituting them, considering their relative prices, and the activity’s production cost structure. 3. Price effect: The output supply gap tends to increase prices, which in turn affects purchasing power. Consumers substitute goods and services for which prices have increased with products that have a relatively lower price. The ease with which products are substitutable depends on price and income elasticity of demand. 4. Income effect: An important share of households and firm income accrues from factor remuneration. Declining labor and capital income, combined with increasing prices, tend to reduce consumption and savings. 26   |  Country Climate and Development Report: Rwanda - Technical Appendix 5. Crowding-out effect: The government revenue from direct and indirect taxes declines. With expenditure maintained at the baseline level, deficit increases. Government debt increases consequently both from external and domestic resources. 6. Investment effect: Investment is financed via domestic and external savings. Domestic private savings are declining on average. The government deficit is increasing. With foreign savings fixed as a share of GDP, total savings decline resulting in lower investment. This in turn exacerbates the capital stock reduction because of flood destruction. 7. Trade channel: The trade channel is such that supply, and price effects result in lower exports. Imports decline due to lower demand (intermediate, final, and investment). 6.2. Microsimulation Methodology The microsimulation model is based on the Global Income Distribution Dynamic model (GIDD), adapted to the climate change MANAGE CGE. It begins with a baseline of the household welfare distribution and characteristics taken from the 2016/17 Rwanda Integrated Household Living Conditions Survey (EICV5), which includes nationally and regionally representative data on individuals and households, including labor and non-labor incomes, employment status, education, demographics, and a full consumption module. This survey is the basis for official poverty and inequality estimates. Individual and household welfare is then projected based on UN demographic projections (i.e., population by age group and sex), an assumption for the evolution of educational attainment and macroeconomic outcomes from the CGE. Individuals enter and exit the workforce or switch between sectors depending on their ‘fit’ and relative average wages in each sector, and changes in relative food and non-food prices affect the purchasing power of household consumption. Figure 7 provides an overview of how the microsimulation is implemented while Table 6 includes key component details. Figure 7: Microsimulation Flow Chart UN population projections by age Reweighting Education projection Aggregate income/cons INCOME/CONS growth EMPLOYMENT Sectoral labor reallocation (by sectors/skills) (multinomial logit) New labor income (Mincerian equation) EARNINGS (by sectors/skills) Wage changes PRICES Income/cons adjusted by (by categories) purchasing power NEW DISTRIBUTION OF INCOMES/CONSUMPTION Country Climate and Development Report: Rwanda - Technical Appendix  |   27 Table 6: Microsimulation Component Implementation Mean Household Consumption Growth Sectoral Switching ƒƒ From CGE ƒƒ Take sectors in decreasing order by CGE average wage rate and reallocate Demographic Reweighting ƒƒ Growing sectors ƒƒ Reweight age/sex cohorts using UN population projections yy Workers apply in new average sectoral wage higher than ƒƒ Assume new cohorts keep schooling rates of youngest current sector ones baseline cohort yy Workers with highest probabilities from multinominal logit are hired Sectoral Wages yy Impute new wage from Mincer equation ƒƒ Scalar adjustment for all workers in sector based on wages from CGE model ƒƒ Shrinking sectors yy Workers with lowest probabilities from multinominal logit Non-labor Income exit the sector ƒƒ Held constant in real terms yy Labor income goes to 0 Relative Prices ƒƒ Household consumption adjusted for food and non-food prices from CGE applied to baseline consumption basket In every year of the simulations, the real growth in aggregate household consumption, employment growth and average wages in each sector, are consistent between the CGE and the microsimulations. Some assumptions or choices in model implementation merit discussion. Skills for new cohorts are exogenous in the CGE model and fixed at the same level as the youngest cohort at baseline. This means improvements in skills are not modelled. This may underestimate the impacts on growth of investments to improve skills, although the differences between scenarios may be less affected. Choosing which workers move in and out of the workforce, or between sectors, is modelled based on their ‘fit’ for each sector and the average wages in each sector.7 A multinomial logit is estimated to predict the likelihood (‘fit’) of a worker being in a particular sector based on her characteristics (age, and its square, years of schooling and its square, sex, and household size). When deciding which workers switch sectors, workers are ranked according to their ‘fit’ for the new sector (based on the multinomial logit) and those with the best ‘fit’ are hired.8 The sectoral ‘fit’ is being modelled on worker profiles in each sector in the initial year, which may or may not be adequate for later years. Workers exiting a shrinking sector are selected based on the least good fit for that sector. For growing sectors, the model assumes workers from another sector (or outside the workforce) that most resemble current workers in the sector will be hired to fill new vacancies. To ensure enough observations in each sector, four aggregate sectors were considered (agriculture, industry, commerce, and services). Therefore, new jobs being created in a sector may require a different worker profile than existing workers in the sector.9 Both the CGE and the microsimulation do not distinguish between unemployed people and those out of the work force. In the microsimulation those not working are part of the pool considered for new jobs with current workers in other sectors, and those with the best fit for growing sectors are hired. 7 Later versions of the model can compare worker-specific current wages to counterfactual worker-specific wages. 8 There is currently no minimum fit imposed; this could be added in the future but is potentially not consistent with the lack of labour frictions in the CGE—potentially some new jobs go unfilled for a lack of qualified candidates. 9 In addition, the current model does not include switching costs for either employees or employers. This could be built into subsequent versions of the model with workers only switching sector if the wage in the new sector is greater than their current wage by some minimum amount (otherwise it is not worth the hassle); employers only hiring new people if their fit (probability from multinomial logit) is greater than that of current workers by some minimum level (otherwise it is not worth dismissing existing workers and training new people). 28   |  Country Climate and Development Report: Rwanda - Technical Appendix 6.3. Baseline Scenario The baseline scenario serves as a reference against which the effects of climate change and the GoR’s NDC actions are measured. The scenario assumes no climate variability or damages and no actions from Rwanda’s 2020 NDC. It is calibrated to medium- and long-term GDP growth rates in the latest DSA for Rwanda. Technical progress specific to sectors and production factors are calibrated to replicate the GDP growth. For each type of labor, the maximum stock of labor available in each period grows exogenously based on UN population projections by age cohort and cohort-specific labor force participation rates. The fiscal variables such as government consumption, investment, tax revenue, domestic and external debt are calibrated to the DSA. Foreign saving is exogenous and fixed as a share of GDP while household and enterprises propensity to save shifts to meet private investment-to-GDP ratio. The electricity generation mix is calibrated to Carbon Counts (2022). Five sources of electricity generation, coal, gas/methane, hydro, oil, and solar are considered. Electricity generation and the associated energy mix is obtained through sector specific technological progress and investment shifts. Despite efforts made to ensure that the baseline scenario reflects as much as possible the structure of the Rwandan economy, the quality and availability of data remain important limitations of the model. For example, the input-output table underpinning the technical coefficients of our SAM is based on 2017 baseline, which might not fully reflect the current technology of production in post-COVID-19 era. 6.4. Climate Change Scenarios and Damage Functions Climate change enters MANAGE model by changing (usually reducing but sometimes increasing) total factor productivity, labor productivity, the stock of capital, or tourism demand. Adjustments to labor productivity vary by type of labor, while adjustments to total factor productivity and capital stock vary by productive activity. The damage functions were calibrated using annual and monthly precipitation and temperature data from the World Bank’s Climate Change Knowledge Portal. This CCDR contributes by developing damage functions that are tailored to Rwanda’s specific biological, physical, and climatic circumstances rather than using functions that are generic to all countries. Industrial Economics constructed the damage functions (IEc 2022). 6.4.1. Climate Change Scenarios Six alternative climate change scenarios are modeled, corresponding to rainfall and temperatures expected to prevail under RCPs 2.6, 4.5, and 8.5, along with wet, hot, and dry scenarios under RCP8.5. Monthly climate change projections for Rwanda through 2100 were provided by the World Bank’s Climate Change Knowledge Portal (CCKP). The projections include 29 General Circulation Models (GCMs) from the CMIP5 ensemble, at a common 1x1 degree resolution. Each GCM has runs available for one or more of the following Representative Concentration Pathways (RCPs): 2.6, 4.5, 6.0, and/or 8.5. Industrial Economics (IEc) bias corrected the raw GCM outputs using an observed 1980 to 1999 baseline dataset, which was ½ x ½ degree resolution, from Princeton University’s Terrestrial Hydrology Group (Sheffield, Goteli, and Wood 2006). The RCP 2.6, 4.5, and 8.5 scenarios presented in Chapter 3 aggregate the results from the 29 GCMs. The RCP8.5 wet, hot, and dry scenarios come from specific GCMs: GFDL-ESM2M (wet), GFDL-CM3 (hot), and MIROC-ESM-CHEM (dry). Values of precipitation and rainfall often change dramatically from one year to the next in the climate models. Aggregation tends to dampen climate variability in the three ensemble average scenarios. This variability is preserved in the other three scenarios. See Figure 8 for deviations in temperature and Figure 9 for deviations in precipitation from the historical reference period. Monthly precipitation can vary considerably Country Climate and Development Report: Rwanda - Technical Appendix  |   29 occasionally reaching levels higher by 100% up to 600% compared to historical averages. Some deviations are too large for the CGE model to find a solution especially when we have a disaggregated crop sector. We therefore impose an upper bound of 70% to allow the CGE model to converge without entirely missing monthly precipitation extremes. Even after averaging across GCMs and imposing bounds on extreme values, climate volatility can result in large year-to-year swings in GDP and other economic variables relative to their values in the baseline. In Chapter 3 of main report illustrated how this annual variation within each climate scenario can often exceed the variation across climate scenarios. Figure 8: Annual Temperature Differences from the Baseline, by RCP, 2020–2050 3.5 3.0 Difference in °C from baseline 2.5 RCP2.6 RCP4.5 2.0 RCP8.5 1.5 Wet Hot 1.0 Dry 0.5 0.0 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 Source: IEc and World Bank Group staff estimates using data from the World Bank Climate Change Knowledge Portal. Figure 9: Percentage Deviations of Rainfall from the Historical Reference Period, by Month and RCP 1.2 January 1.5 February 1.0 March 1.0 0.8 0.8 1.0 0.6 0.6 0.5 0.4 0.4 0.2 0.2 0.0 0.0 0.0 -0.2 -0.2 -0.5 -0.4 -0.4 -0.6 -1.0 -0.6 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 1.2 April 1.5 May 5.0 June 1.0 4.0 0.8 1.0 3.0 0.6 0.5 2.0 0.4 0.2 1.0 0.0 0.0 0.0 -0.2 -0.5 -0.4 -1.0 -0.6 -1.0 -2.0 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 16.0 July 8.0 August 2.0 September 14.0 7.0 30   12.0 |  Country Climate and Development 1.5 6.0 Report: Rwanda - Technical Appendix 10.0 5.0 1.0 8.0 4.0 0.5 2.0 0.4 0.2 1.0 0.0 0.0 0.0 -0.2 -0.5 -0.4 -1.0 -0.6 -1.0 -2.0 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 Figure 9: Contd... 16.0 July 8.0 August 2.0 September 14.0 7.0 12.0 6.0 1.5 10.0 5.0 1.0 8.0 4.0 6.0 3.0 0.5 4.0 2.0 2.0 1.0 0.0 0.0 0.0 -0.5 -2.0 -1.0 -4.0 -2.0 -1.0 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 October 0.8 November 1.4 December 0.6 1.2 0.6 0.4 1.0 0.4 0.8 0.2 0.6 0.0 0.2 0.4 0.2 -0.2 0.0 0.0 -0.4 -0.2 -0.2 -0.4 -0.6 -0.4 -0.6 -0.8 -0.8 -0.6 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 RCP2.6 RCP4.5 RCP8.5 Dry Wet Hot Source: IEc and World Bank Group staff estimates using data from the World Bank Climate Change Knowledge Portal. 6.4.2. Crop yields Agricultural crop production in Rwanda is primarily rain-fed rather than irrigated and therefore is sensitive to changes in precipitation and temperature. The effects of rainfall and temperature on crop yields are nonlinear, vary from crop to crop, are location-specific, and depend critically on the timing of climatic conditions during a plant’s life cycle. The methodology for estimating crop yield functions is illustrated in Figure 10. Figure 10: Crop Yield Damage Function Methodology Inputs & Steps: Damage function: Assumptions: Inputs By crop, by grid cell: • Independent variable: • Crop production spatial 1. Estimate crop production in ∆Ptmonthly distribution each grid cell • Dependent variable: • Monthly: precipitation, 2. Calculate crop water need % damage to Yielda,t min/max temperature, and ET c (inputs: Kc, PET) • 8 crops (grouped) PET 3. Calculate effective rainfall • Monthly crop factors (Kc) Pe (input: precip, ETc) • Annual crop yield response 4. Estimate yield response to factors (Ky) water use (inputs: Ky, ETc, and Pe) Assumptions • Group crops and select 5. Aggregate grid cells and representative crop regress Source: IEc (2022) Source: IEc (2022) Country Climate and Development Report: Rwanda - Technical Appendix  |   31 The damage function is expressed as dmgYta == damage damage to yield of crop a in year t. The function is constructed to include both precipitation and temperature effects. ( , ) a m ≥ ωa → 0 a ω a − Txm ϕ a < Tx < ω a → a m ω a −ϕ a with : temp effect • dmgYta = damage to yield of crop a in year t Pt ,m • Txm a = max (γ m a ∗ tmaxt ,m ) − δ a ∆Pt ,m = −1 baseline Pm • δ a = crop bias correction factor t = year; m = month • γma = crop flowering month indicator a = crops ϕ • a = crop upper optimum T β = monthly coefficients • ω a = crop maximum threshold T Source: IEc (2022). Figure 11 and Figure 12 below illustrate changes in crop yields for each of the ten crops in Table 7 that would result from precipitation and temperature changes under wetter and drier models of RCP8.5 (the GFDL- ESM2M and MIROC-ESM-CHEM models, respectively). Several points are worth noting: • Effects vary considerably by crop. • Increases in precipitation and temperature have opposite effects for many crops and the net effect is often positive (i.e., the direct effect of expected precipitation and climate is increased yields, although this effect may be offset by damages to labor productivity and capital through other damage channels). • Rwanda faces the biggest risks from drier conditions. One should note that the damages are modeled as functions of maximum temperatures. Changes in mean temperature were excluded from these functions due to low correlations with yield impacts and generally stable temperatures in Rwanda. Ten representative crops selected, with an eye towards relevance for household income, economic output, and importance for foreign trade in Rwanda. The responsiveness of crop yield to precipitation was estimated by month for each of the ten crops. Estimated coefficients are presented in Table 7. Table 7: Estimated Monthly Coefficients of Yield Response to Precipitation Crop a βjan βfeb βmar βapr βmay βjun βjul βaug βsep βoct βnov βdec Banana 10.0 10.8 13.3 16.4 16.3 4.0 1.1 7.8 14.3 18.8 9.1 13.6 Sweet potato 4.4 11.7 3.9 1.0 6.4 15.9 18.5 12.0 16.4 Cassava -1.4 5.1 13.2 25.8 22.1 3.6 8.4 Potato 15.4 15.6 9.9 6.2 6.4 6.8 10.8 17.1 Bean 19.4 7.2 17.7 23.7 25.0 Maize -9.7 26.0 40.7 14.6 Sorghum -5.5 11.1 20.8 9.2 Rice 21.5 21.3 21.0 17.9 6.8 Coffee 8 9.2 9.8 12.8 6.4 2 0.4 4.4 8.8 7.8 10.4 8.3 Tea 13.9 14.8 11.9 13.4 9.9 5.2 1.8 11 13.8 12.4 5.3 15.3 Source: IEc (2022). 32   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 11: Changes in Crop Yields due to Decline in Precipitation with an Increase in Temperature Banana Bean (dry) Cassava Coffee Maize 40 20 0 -20 -40 -60 Yieldimpact [%] Potato Rice Sorghum Sweet potato Tea 40 20 0 -20 -40 -60 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 Precipitation Temperature Net impact Source: IEc (2022). Note: Based on the dry/high-impact scenario which is based on the second driest projection of 28 global circulation models (GCM: MIROC-ESM-CHEM), selected based on 2040–2059 period in the RCP8.5 ensemble. Figure 12: Changes in Crop Yields due to an Increase in Precipitation with a Decline in Temperature Banana Bean (dry) Cassava Coffee Maize 60 40 20 0 -20 Yieldimpact [%] -40 Potato Rice Sorghum Sweet potato Tea 60 40 20 0 -20 -40 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 2020-39 2040-59 2060-79 2080-99 Precipitation Temperature Net impact Source: IEc (2022). Note: Based on the dry/high-impact scenario which is based on the second driest projection of 28 global circulation models (GCM: MIROC-ESM-CHEM), selected based on 2040–2059 period in the RCP8.5 ensemble. Country Climate and Development Report: Rwanda - Technical Appendix  |   33 6.4.3. Human Health and Labor Productivity Climate change is expected to indirectly reduce labor productivity through increased incidence of illnesses that can keep people from working. Malaria, dengue fever, diarrhea, and cardiovascular and respiratory diseases are the climate-sensitive diseases that appear most likely to affect labor supply in Rwanda. The approach to developing the damage function it uses estimates of years of lives lost (YLLs) from these diseases in Rwanda and projections of how the incidence of these diseases is likely to increase with increases in average temperatures. Steps followed to develop the damage function are summarized in Figure 13 and estimates of the incidence of the four climate-sensitive diseases are presented in Table 8. Damage to labor productivity to all sectors is in year t represented by dmgL t, while Tt indicates the difference between the mean annual temperature in year t and Tbaseline the mean annual temperature from the analysis’s baseline. Damages are adjusted by the historical difference between Rwandan and global temperatures. The resulting relationship between the health-related reduction in labor productivity and temperate change is presented for the RCP4.5 and RCP8.5 ensembles in Figure 14 below. Figure 13: Human Health Damage Function Methodology Inputs & Steps: Damage function: Assumptions: Inputs 1. Estimate Africa - wide labor • Independent variable: • Annual temperature productivity impacts by sector ∆Ttannual • Years of life lost (YLL) by from temperature 2. Compare baseline productivity •Dependent variable disease and YLL in Rwanda relative to (2 functions): Africa • % damage to productivity 3. Scale Africa - wide productivity Labt shocks to Rwanda 4. Adjust Rwanda T change vs globe T change Source: IEc (2022). Table 8: Estimated Years of Life Lost, by Disease Disease Based on current incidence in Rwanda Increased increase from a one-degree change in global temperature Malaria 2,548 2 Dengue 0.2 0.0001 Diarrhea 2,596 4 Respiratory and cardiovascular 5,217 29 Total 10,362 35 Source: IEc (2022). 34   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 14: Health-induced Productivity Losses and Temperature, by RCP, 2020–2099 0.0 -0.5 Percentage change in labor productivity 2020–2039 2020–2039 -1.0 2040–2059 2060–2079 2040–2059 2080–2099 -1.5 RCP 8.5 -2.0 2060–2079 RCP 4.5 -2.5 -3.0 2080–2099 -3.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Temperature change (°C) Source: IEc (2022). 6.4.4. Flood Damages to Capital Extreme rainfall can cause flooding that destroys parts of the capital stock used in economic production. The share destroyed depends not only on amount of rainfall but also on the location of capital relative to flood plains and other topographical features and on the type of capital, which in the model is divided into the agricultural capital stock and built-up, non-agricultural capital (e.g., roads and other infrastructure). As illustrated Figure 15, the damage function was developed by identifying floodplain boundaries, calculating the share of capital stock within each river basin that is exposed to flooding, estimating the expected percentage of the capital stock in each basin that would be damaged by flooding events (which generally increases over time), and then aggregating across all basins to estimate percentage. Figure 15: Flooding Damage Function Methodology Inputs & Steps: Damage function: Assumptions: By watershed, by capital k: Inputs 1. Identify floodplain boundaries • Independent variable: from river order and discharge • Watersheds and river network 2. Spatially distribute capital k to • Capital spatial distribution • Dependent variable: floodplains • GDP spatial distribution % damage to Ktype, t 3. Estimate expected % damages to • Capital - output ratio capital from design flood events • Change in return interval of 4. Calculate damages by watershed flooding events by RCP and for baseline and climate change era 5. Aggregate by watershed and determine expected damages by Assumptions RCP and era • Floodplain width • % damage to infrastructure curve Source: IEc (2022). Country Climate and Development Report: Rwanda - Technical Appendix  |   35 The damage function is expressed as the share of the country’s capital (agricultural and non-agricultural) that is exposed each year to flooding, based on rainfall projections in a given RCP ensemble. The calculation of damages employs an S-shaped damage curve for flood events that start from 0% damage for the “0-year” event, up to a maximum damage reached during a 200-year event. From there, damages grow linearly to an upper cap for the 1000-year event. For built-up capital, damages reach 60% of the value of infrastructure for a 200-year event and grow to up to 70% for the 1000-year event. For the less susceptible agricultural capital, the 200-year event causes 50% damage, which increases to 60% for the 1000-year event. Figure 16 illustrates how climate change is expected to shift the S-shaped curve mapping severity of flooding events with their expected frequency of occurring in a given year. Figure 16: Predicted Flood Damages as a Function of Exceedance Probability, 2070–2100 70 Built-up capital 70 Agricultural capital 60 60 Percentage of capital damaged Percentage of capital damaged Climate change increases the 50 proability that a severe flood will occur 50 40 40 30 30 20 20 10 10 0 0 0 0.05 0.1 0.15 0.2 0 0.05 0.1 0.15 0.2 Exceedance Probability Exceedance Probability Baseline RCP4.5 RCP8.5 Source: IEc (2022); Data for HydroBasin no. 1122098930 (Kigali). Estimated damage shares are presented in Table 9. The share of Rwanda’s capital stock expected to be destroyed by flooding each year rises gradually during the period analyzed with the CGE model. In the CGE model’s RCP4.5 scenario, for example, 0.19% of built-up capital is destroyed annually in early years of the simulations, rising to 0.25% in 2050. Expected flood damages become pronounced in the final decades of the century under RCP8.5. Table 9: Expected Share of Capital Stock Damaged Annually, by Type of Capital, RCP and Era Type RCP Baseline 2010–2039 2020–2049 2036–2065 2071–2100 Agriculture RCP4.5 0.19% 0.23% 0.26% 0.31% 0.37% RCP8.5 0.25% 0.28% 0.36% 0.74% Built-up RCP4.5 0.15% 0.19% 0.21% 0.25% 0.30% RCP8.5 0.20% 0.23% 0.30% 0.62% Source: IEc (2022). 36   |  Country Climate and Development Report: Rwanda - Technical Appendix Section 4.4.4 of this annex also presents results from a scenario where flooding occurs as a single, high-impact event during the forecast period rather than, as just described, as events that occur each year. Table 10 shows the expected shares of capital damaged by single flooding events occurring with 50- and 100-year return periods under RCP4.5 and RCP8.5, drawing on the same exceedance probability functions plotted in above Figure 16. The values in the table indicate the percentage damages to capital for the one-time event during an era. There are no differences within an era (i.e., the one-time event in 2037 would be the same as one in 2064, for the 2036–2065 era). Table 10: Expected Share of Capital Damaged in Extreme Events, by Type of Capital, RCP and Era Event Type RCP Return Baseline 2010–2039 2020–2049 2036–2065 2071–2100 interval 50-year Agriculture RCP4.5 50 2.6% 3.3% 3.9% 4.7% 5.9% RCP8.5 50 2.6% 3.7% 4.3% 5.9% 13.7% Built-up RCP4.5 50 1.1% 1.4% 1.7% 2.1% 2.5% RCP8.5 50 1.1% 1.6% 1.9% 2.6% 6.1% 100-year Agriculture RCP4.5 100 6.2% 7.9% 9.3% 11.6% 15.0% RCP8.5 100 6.2% 8.9% 10.6% 14.9% 38.1% Built-up RCP4.5 100 5.9% 7.5% 8.8% 11.2% 14.2% RCP8.5 100 5.9% 8.5% 10.2% 14.5% 37.2% Source: IEc (2022). 6.4.5. Tourism Demand Climate change is expected to increase demand for tourism exports from cooler countries and reduce it for warmer countries. The damage function is developed by estimating changes in global tourism demand arising from changes in temperature, following analysis in Hamilton, Maddison, and Tol (2005); determining the share of tourism demand exposed to temperature effects (to focus on Rwanda’s nature-based tourism rather than its business travel offerings); and fitting a function to Rwandan tourist arrivals based on temperature impacts (summarized in Figure 17). Figure 17: Tourism Demand Damage Function Methodology Inputs & Steps: Damage function: Assumptions: • Independent variable Inputs 1.Estimate changes in tourist ∆Ttannual • Annual mean temperature arrivals (input: temp) • Annual tourist arrivals by 2.Determine the share of tourism • Dependent variable: purpose of travel demand exposed to % damage to tourism demand • Per capita income temperature impacts Tourt 3.Estimate change in demand from change in quantity of tourist Source: IEc (2022). Country Climate and Development Report: Rwanda - Technical Appendix  |   37 The damage to tourism export demand, dmgDtTOUR , is: dmgDtTOUR = − 6.0476 ∗ ∆Tt − 0.7879 ∗ ( ∆Tt )2 , ∆Tt = Tt − Tbaseline where dmgDtTOUR represents the percentage of impact to tourism demand in year t, Tt the difference between the mean annual temperature in year t, and Tbaseline the mean annual temperature from historical data. Figure 18 plots the relationship between the expected reduction in tourism demand and the change in temperature as it evolves over time under the RCP4.5 and 8.5 ensembles. Figure 18: Tourism Demand and Temperature Change, by RCP, 2020–2099 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 0 -5 Percentage change in tourism demand 2020–2039 2020–2039 -10 2040–2059 -15 2060–2079 2040–2059 2080–2099 -20 RCP 8.5 -25 2060–2079 RCP 4.5 -30 -35 -40 2080–2099 -45 -50 Temperature change (°C) Source: IEc (2022). 6.4.6. Extreme Heat and Labor Productivity Extreme heat can directly reduce workers’ productivity (in addition to reducing it indirectly through increased disease incidence). The effect varies with the type of labor, with those working outdoors, working indoors without air conditioning, or undertaking physically intense work suffering the most. The methodology followed to develop the damage function for Rwanda is summarized in Figure 19. The functional form for the damage includes coefficients for the activity’s location and the worker’s level of education and depends on the deviation of expected extreme temperatures from historical averages. Values of estimated coefficients are in Table 11. ( dmgLlt,e = min 0, β1 l ,e ∗ ∆Tt − β2 l ,e ∗ ( ∆Tt )2 ) where ∆Tt = (T t max +T t min ) − (T max baseline +T min baseline ) 2 2 38   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 19: Heat Damage Function Methodology Inputs & Steps: Damage function: Assumptions: Inputs By sector, for rural/urban and • Independent variable: education level: • Daily tmin and tmax ∆Ttannual • Relative humidity 1.Calculate wet bulb globe temp (WBGT) (inputs: temp + • Dependent variable: • Employed population by sector, % damage to labor productivity by rural/urban, by education humidity ) level 2.Estimate daily work intensity Labe,l,t (%) by sector (input: WBGT) • e : uneducated, primary, 3.Estimate hours worked for secondary, tertiary Assumptions: rur/urb and education • l: rural/urban • Sectoral typical hours worked per week 4.Aggregate sectors to weighted annual work intensity Source: IEc (2022). Table 11: Heat-related Labor Impact Coefficients Location l Education e β1 β2 Urban Uneducated/primary 5.86 -0.79 Secondary 8.13 -0.94 Tertiary 9.16 -1.01 Rural Uneducated/primary 2.64 -0.63 Secondary 5.29 -0.78 Tertiary 6.08 -0.83 Source: IEc (2022). Mean temperatures in Rwanda are generally within a mild range not high enough to impact labor productivity, even in an RCP8.5 ensemble mean projections (which may not be the case for particular GCMs). Figure 20 provides a stylized projection of the relationship between productivity loss and temperature changes for each of the six worker types in Table 11. Productivity losses become non-zero for the most vulnerable workers (rural workers with less than a secondary school education) when the temperature change exceeds 4.0°C and become non-zero for the least vulnerable workers (urban with tertiary education) at a temperature change of 9.0°C. Figure 20: Stylized Heat-induced Productivity Losses, by Worker Location and Level of Education Urban workers Rural workers Percentage change in labor productivity Percentage change in labor productivity 0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 0 0 -5 -5 -10 -10 -15 -15 -20 -20 -25 -25 -30 -30 -35 -35 No education -40 -40 -45 Secondary -45 -50 Temperature change (°C) Tertiary -50 Temperature change (°C) Source: IEc (2022). Country Climate and Development Report: Rwanda - Technical Appendix  |   39 6.5. Incorporation of Climate Actions Through the Policy Scenarios Chapter 3 uses a collection of policy scenarios that model the adaptation and mitigation measures presented in Rwanda’s 2020 updated NDC (GoR 2020a) and listed above in Annex 6 to: (i) evaluate the contributions that climate actions are likely to make in meeting the country’s development objectives in the presence of climate change and (ii) to identify potential challenges in implementing climate actions. The NDC actions enter the CGE model by increasing investment spending in the economy, offsetting the damages to productivity and factors of production caused by climate change, and (in the case of energy measures) inducing changes in the economy’s energy mix. The policy scenarios are run with only the RCP4.5 climate impacts to simplify the presentation. All macroeconomic and poverty modeling results are presented as deviations from the baseline scenario. 6.5.1. Structure of Policy Scenarios Chapter 3 first models the implementation of actions designed to meet Rwanda’s unconditional adaptation and mitigation commitments, i.e., actions that the GoR planned to undertake through 2030 based on “the continued use of existing and planned national and international financial sources” (GoR 2020a). To highlight implementation trade-offs, simulations are run for different scenarios associated with alternative financing sources: FDI, ODA, government borrowing, tax increases, and spending offsets, plus a scenario that finances investments with a mix of all five sources. Chapter 3 then adds a scenario that includes the NDC actions intended to meet Rwanda’s conditional as well as unconditional climate commitments, i.e., including commitments that the GoR is prepared to make if additional financing is made available. This scenario assumes that the additional funds come from a mix of financing sources. All policy scenarios include both adaptation and mitigation NDC actions to streamline the presentation and because the distinction between the two is blurred: the 2020 NDC identifies mitigation co-benefits for each adaptation action and adaptation co-benefits for each mitigation action. One must acknowledge that the projects presented in the 2020 NDC represent a subset of climate actions currently under consideration and therefore the simulations do not capture the full effects of GoR’s plans for addressing climate change. The NDC actions represent the foundation for other plans (see Section 1.1), however, and they have been fully costed, enabling them to be more easily incorporated into the MANAGE model and ensuring that the scenarios provide a good picture of the impact of climate actions. Because the NDC projects are the outcome of a thorough cost-benefit analysis and consultations, this allows the —more specifically on trade-offs the Chapter 3 to focus on identifying potential implementation challenges­ country faces in financing climate investments. 6.5.2. Treatment of Investment Spending on NDC Actions As virtually all measures presented in the 2020 NDC are presented as public investment projects, one important dimension of the policy scenarios is an increase in investment spending. The scenarios allow the spending to be undertaken by either the private sector (when the project is financed by FDI, e.g., as a public- private partnership) or by the government (when the project is financed by ODA, government borrowing, tax increases, or spending cuts) or both. As indicated in Section 6.1.1 above and described in Burns et al. 2020 and World Bank 2021b, this spending is treated as an investment in infrastructure, which is distinguished from private investment in that infrastructure investment generates externalities that improve the productivity of the economy’s capital stock rather than, as with private investment, adding directly to the capital stock itself. NDC spending is exogenous, and the amounts are taken from GoR 202a and summarized below in Table 12 and Table 13. Spending is allocated to the economic sector corresponding to the project. Spending is evenly divided across years 2022 through 2030, inclusive. 40   |  Country Climate and Development Report: Rwanda - Technical Appendix By construction, all spending on NDC actions appears in the policy scenarios rather than in the baseline scenario. This separation is necessary for the simulations to identify the economic impact of NDC actions. The assumption that the fiscal framework underlying the baseline scenario omits spending on projects presented in the 2020 NDC is not unrealistic, given that the pandemic struck just as the NDC was finalized, consuming fiscal space that might otherwise have been allocated to these projects. In addition, there is no evidence to suggest that the authorities expected the investments presented in the 2020 NDC to replace other projects in the existing public investment program. That is to say, for example, that the climate-smart agriculture projects described in the 2020 NDC would be additional to other investment projects that the Ministry of Agriculture planned to undertake or that spending on the dissemination of efficient cook stoves would be additional to MININFRA’s other projects. As Chapter 3 of the CCDR makes clear, mobilizing the financial resources to implement all NDC projects without reducing spending on other projects would impose significant costs on the economy. It will be essential for Rwanda to adjust the public investment program as it makes climate investments by mainstreaming climate concerns into existing projects, replacing some planned projects with ones that have a stronger climate impact (perhaps especially with renewable versus non-renewable energy projects), and finding ways to achieve greater efficiencies in public spending. The World Bank’s recently completed Public Expenditure Review (World Bank 2022) offers recommendations for improving the overall public investment management process while the Climate Change Institutional Assessment summarized in Chapter 2 and Annex 5 above recommend climate-specific improvements. 6.5.3. Adaptation All adaptation spending reduces climate damages in the model. Table 12 indicates the damage channels that are adjusted corresponding to the type of adaptation project in GoR 2020a, e.g., the damage to agriculture total factor productivity (TFP) in the case of measures aimed at improving crop yields and the damage to non-agricultural capital stock in the case of improved urban stormwater management. Table 12: Adaptation Spending and Adjustments to Climate Damages Measures Reduce damage to: Unconditional Conditional Climate-smart agriculture, agroforestry (Millions of U.S. dollars) -  Climate-resilient crops and practices ag TFP 113.5 113.5 -  Irrigation ag TFP and capital stock 765.2 1,496.3 -  Weather insurance ag capital stock 18.2 91.4 -  Reforestation ag capital stock 234.1 234.1 Integrated water systems management, spatial planning, capital stock (ag + non-ag) 344.5 308.8 disaster risk management Urban planning, stormwater management, roads, mining non-ag capital stock 729.6 729.6 infrastructure Disease management human health/labor 85.0 100.0 productivity Source: Summarized from GoR 2020a. Adaptation investment aims at reducing vulnerability to expected future negative effects of climate change and variability. Such investments make capital stock more resilient to shocks (roads do not wash out, for example), reduce shocks to productivity (the health sector is better equipped to handle outbreaks), or increase productivity (irrigation increases crop yields). Each damage function is linked to adaptation investment. One third of the unconditional adaptation investment increases capital stock. The remaining increases resilience to shocks by reducing damages of climate change. Adaptation investment is introduced on top of the RCP4.5 Country Climate and Development Report: Rwanda - Technical Appendix  |   41 climate scenario. Using this scenario, we calculate the total and average GDP and investment losses over the period 2022–2050. We compare this loss to the anticipated adaptation cost in the NDCs to check if there is a big gap. We then assume that unconditional adaptation is likely to reduce damages by 85% by 2050. If we consider less efficiency in adaptation spending, that is if damages are for example reduced to only 50% or lower, the macro and fiscal costs of adaptation will be higher than the benefits. We will run sensitivity analysis with lower efficiency of adaptation investment in reducing damages and determine the minimum effectiveness level below which damages are not reduced without further increasing investment. The efficacy of adaptation is critical especially if sources of investment finance already have important welfare implications with a risk of worsening the macro and fiscal framework. 6.5.4. Mitigation Spending on projects in GoR 2020a aimed at reducing Rwanda’s GHG emissions are also treated as infrastructure investment, similar to the adaptation projects, in that the value of spending is apportioned to the economic sector targeted by the specific measure and divided evenly across 2022–2030 (Table 13). The measures aimed at reducing emissions from land use, agriculture, and forestry provide important adaptation co-benefits in addition to reducing emissions. As with adaptation measures described above, the relevant climate damage functions are attenuated because of spending on these measures. As Rwanda’s contribution to global GHG emissions are essentially to nil (less than 0.00% in 2020), it is safe to assume that Rwanda’s NDCs will have no effect on the precipitation and temperature values in the climate scenarios.10 Table 13: Mitigation Spending and Adjustments to Climate Damage Sector Unconditional Conditional Adaptation co-benefits: reduces damages to: (Millions of US dollars) Energy total 1,069.8 1,586.2 Electricity generation 349.7 202.3 Manufacturing industry 26.0 0.0 Transport 181.8 909.2 Buildings 243.7 416.3 Agriculture 268.6 58.4 IPPU total 4.0 0.0 AFOLU/Agriculture total 566.4 2,078.6 Fertilizer use, composting 0.0 719.0 ag TFP Manure 30.0 0.0 ag TFP Livestock 301.5 135.5 ag TFP Soil and water conservation 234.8 1,224.2 ag TFP and ag capital stock Waste total 372.0 0.0 Solid waste 194.0 0.0 Wastewater 178.0 0.0 Source: Summarized from GoR 2020a. 10 Data from Our World in Data https://ourworldindata.org/co2/country/rwanda 42   |  Country Climate and Development Report: Rwanda - Technical Appendix 6.5.5. Financing of NDCs How Rwanda finances its climate actions is a central issue for stakeholders. The model allows spending on NDCs to vary by implementing sector (government or private sector), the source of savings (domestic or foreign), and the type of fiscal instrument (taxation, spending cuts, borrowing, and grants). Table 14 briefly summarizes implications arising from the use of each instrument. Table 14: Financing Sources and Their Implications Financing instrument Comments Implementing Source of savings sector for investment Tax increase Direct and indirect taxes increase to meet the financing needs Government Domestic of the government. Taxes reduce household consumption and domestic savings are available for productive investment. Indirect taxes raise production costs, which in turn affect competitiveness and demand. Spending cuts Spending cuts are implemented via a reduction in government consumption. This reduces output of government-related services sectors in the national accounts, such as public administration, education, and health. Cuts to government provision of health and education reduce human capital formation and long-term GDP growth. Debt Domestic borrowing Government borrowing from the domestic market competes with firms for investment financing, driving up domestic interest rates. External borrowing Rwanda is assumed to be too small to influence global interest Foreign rates, but Rwanda’s risk premium increase with the size of its external debt stock. ODA Government-executed projects are financed by external grants through the government budget. These are treated as project financing and do not affect the fiscal balance. Increased inflows of capital transfers contribute to exchange rate appreciation. FDI FDI-financed projects are treated as if they were PPPs, i.e., guided Private by the government’s investment program but not executed by the government or appearing on its balance sheet. Increased capital inflows in the balance of payments offset increased current account deficits. Because each means of mobilizing financing imposes economic costs, the policy scenarios diversify the sources of financing used for spending on NDCs. Table 15 shows how financing is allocated in the two NDC scenarios. Country Climate and Development Report: Rwanda - Technical Appendix  |   43 Table 15: Financing Sources in the Mixed Financing Scenario, Unconditional and Conditional NDCs   New ODA Spending New tax New govt borrowing New FDI for private Total cuts/offsets increases (i.e., increased deficit) investment Share of total financing in mixed 10.6% 10.6% 10.6% 21.3% 46.8%  100% scenario Unconditional NDC scenario Change from baseline flow (share 0.35% 0.35% 0.35% 0.7% 1.6% 3.3% of GDP) Average annual cost (US$ million) 49 49 49 98 216 462 Total cost (US$ million) 440 440 440 885 1,945 4,155 Conditional plus unconditional NDC scenario Change from baseline (share of GDP) 0.9% 0.9% 0.9% 1.9% 4.2% 8.9% Average annual cost (US$ million) 130 130 130 261 574 1,227 Total cost (US$ million) 1,170 1,170 1,170 2,352 5,167 11,041 Source: World Bank Group staff estimates using GoR 2020a. 44   |  Country Climate and Development Report: Rwanda - Technical Appendix Annex 7: Detailed CGE Simulation Results 7.1. Simulations Showing Effects of Climate Change Figures 21–29 show differences in the values of major economic results under climate change scenarios from their values under a baseline reference scenario that assumes no climate change and no climate actions. With the exception of Figure 23 that estimates GDP, values are averaged over five-year periods to highlight trends over time instead of year-to-year volatility. Figure 21: GDP at Market Prices, by RCP, 2020–2050 4.0 GDP at market prices Percent deviation from baseline 2.0 RCP 2.6 0.0 RCP 4.5 -2.0 RCP 8.5 Wet -4.0 Hot Dry -6.0 -8.0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Figure 22: Sectoral and Total Employment, by RCP, 2022–2050 Total employment Sectoral employment 0.05 4.0 Percent deviation from baseline Percent deviation from baseline 0.0 3.0 -0.05 RCP 2.6 2.0 -0.10 1.0 RCP 4.5 -0.15 0.0 RCP 8.5 -1.0 -0.20 -0.25 Wet -2.0 -0.30 -3.0 Hot -0.35 -4.0 Dry -0.40 -5.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -0.45 2022-25 2031-35 2041-45 Agriculture Industry Services Figure 23: GDP at Factor Cost and Sectoral Value Added, by RCP, 2022–2050 GDP at factor cost Sectoral value added 0.0 3.0 Percent deviation from baseline Percent deviation from baseline 2.0 -0.5 1.0 RCP 2.6 -1.0 0.0 RCP 4.5 -1.0 -1.5 -2.0 RCP 8.5 -3.0 -2.0 Wet -4.0 -2.5 Hot -5.0 -6.0 -3.0 Dry -7.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Agriculture Industry Services Country Climate and Development Report: Rwanda - Technical Appendix  |   45 Figure 24: Sectoral Production, by RCP, 2022–2050 Sectoral production Percent deviation from baseline 8.0 6.0 4.0 2.0 RCP 2.6 0.0 RCP 4.5 -2.0 RCP 8.5 -4.0 Wet -6.0 Hot -8.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Dry Agriculture Industry Services Figure 25: Sectoral Capital Stock, by RCP, 2022–2050 Total capital stock Sectoral capital stock 0.0 4.0 Percent deviation from baseline Percent deviation from baseline -0.5 2.0 RCP 2.6 -1.0 RCP 4.5 0.0 -1.5 RCP 8.5 -2.0 -2.0 Wet -2.5 Hot -4.0 -3.0 -3.5 Dry -6.0 -4.0 -8.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Agriculture Industry Services Figure 26: Employment by Skill Level and Location, by RCP, 2022–2050 0.2 Employment by skill level Percent deviation from baseline 0.1 0.0 RCP2.6 -0.1 RCP4.5 -0.2 RCP8.5 -0.3 Wet -0.4 Hot -0.5 Dry 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Unskilled Semi-skilled Skilled 0.20 Employment by location 0.05 Total employment Percent deviation from baseline Percent deviation from baseline 0.10 0.00 -0.05 0.00 -0.10 -0.10 -0.15 -0.20 -0.20 -0.30 -0.25 -0.40 -0.30 -0.35 -0.50 -0.40 -0.60 -0.45 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Rural Urban 46   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 27: Private Consumption and Investment, by RCP, 2022–2050 2.0 Private consumption per capita 0.1 Private investment/GDP Percent deviation from baseline Difference from baseline share 1.0 0.0 -0.1 0.0 -0.2 -1.0 -0.3 -2.0 -0.4 -3.0 -0.5 -4.0 -0.6 -5.0 -0.7 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 RCP 2.6 RCP 4.5 RCP 8.5 RCP 2.6 RCP 4.5 RCP 8.5 Wet Hot Dry Wet Hot Dry Figure 27 above presents deviations in per capita consumption from the baseline. The simulation results for deviation of total consumption are nearly identical. Figure 28: Exports, Imports, and the Trade Balance, by RCP, 2022–2050 Trade flows Trade balance/GDP 2.0 0.0 1.0 -0.1 Percent deviation from baseline Difference from baseline share 0.0 -0.2 -1.0 -0.3 -2.0 -0.4 -3.0 -0.5 -4.0 -0.6 -5.0 -0.7 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Exports Imports RCP 2.6 RCP 4.5 RCP 8.5 RCP 2.6 RCP 4.5 RCP 8.5 Wet Hot Dry Wet Hot Dry Country Climate and Development Report: Rwanda - Technical Appendix  |   47 Figure 29: Fiscal and Debt, by RCP, 2022–2050 Tax revenue/GDP Primary spending/GDP 0.5 0.60 Difference from baseline share 0.0 Percent deviation from baseline 0.50 -0.5 -1.0 0.40 -1.5 0.30 -2.0 0.20 -2.5 -3.0 0.10 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 0.00 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 RCP 2.6 RCP 4.5 RCP 8.5 Wet Hot Dry Recurrent Capital Fiscal balance/GDP Government debt/GDP 0.9 0.0 0.8 Difference from baseline share -0.1 0.7 Difference from baseline share -0.2 0.6 RCP 2.6 0.5 -0.3 RCP 4.5 0.4 -0.4 RCP 8.5 0.3 -0.5 Wet 0.2 Hot 0.1 -0.6 Dry 0.0 -0.7 -0.1 -0.8 -0.2 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Domestic debt External debt 48   |  Country Climate and Development Report: Rwanda - Technical Appendix 7.2. Simulations Using Different Sources of Financing for NDC Actions Simulations model the adaptation and mitigation measures in Rwanda’s 2020 NDC and compare differences in values for key economic variables with those in the baseline reference scenario. All simulations assume climate damages associated with RCP4.5. Figure 30: GDP at Market Prices, Unconditional NDCs, by Financing Source, 2022–2050 GDP at market prices 2.0 1.0 Percent deviation from baseline 0.0 Debt -1.0 Tax -2.0 ODA FDI -3.0 Exp. adj. -4.0 Mixed -5.0 RCP 4.5 -6.0 -7.0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Figure 31: Sectoral Employment, Unconditional NDCs, by Financing Source, 2022–2050 Total employment Sectoral employment 0.3 8.0 Percent deviation from baseline Percent deviation from baseline 0.2 6.0 0.1 4.0 0.0 2.0 -0.1 0.0 -0.2 -2.0 -0.3 -4.0 2022-25 2031-35 2041-45 Debt Tax ODA -6.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 FDI Exp. adj. Mixed RCP4.5 Agriculture Industry Services Country Climate and Development Report: Rwanda - Technical Appendix  |   49 Figure 32: Sectoral Value Added, Unconditional NDCs, by Financing Source, 2022–2050 GDP at factor cost Sectoral value added 1.0 8.0 Percent deviation from baseline Percent deviation from baseline 0.5 6.0 0.0 4.0 -0.5 2.0 -1.0 0.0 -1.5 -2.0 -2.0 -4.0 2022-25 2031-35 2041-45 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Debt Tax ODA FDI Exp. adj. Mixed RCP4.5 Agriculture Industry Services Figure 33: Sectoral Production, Unconditional NDCs, by Financing Source, 2022–2050 Sectoral production 6.0 Percent deviation from baseline 5.0 4.0 Debt 3.0 Tax 2.0 1.0 ODA 0.0 FDI -1.0 -2.0 Exp. adj. -3.0 Mixed -4.0 RCP4.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Agriculture Industry Services Figure 34: Sectoral Capital Stock, Unconditional NDCs, by Financing Source, 2022–2050 Total capital stock Sectoral capital 2.5 7.0 Percent deviation from baseline Percent deviation from baseline 2.0 6.0 1.5 5.0 4.0 Debt 1.0 3.0 0.5 2.0 Tax 0.0 1.0 ODA -0.5 0.0 -1.0 -1.0 FDI -1.5 -2.0 -3.0 Exp. adj. -2.0 -4.0 RCP4.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -2.5 2022-25 2031-35 2041-45 Agriculture Industry Services 50   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 35: Employment by Skill Level and Location, Unconditional NDCs, by Financing Source, 2022–2050 Employment by skill level 0.5 Percent deviation from baseline 0.0 Debt Tax -0.5 ODA -1.0 FDI Exp. adj. -1.5 Mixed -2.0 RCP4.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Unskilled Semi-skilled Skilled Employment by location Total employment 0.4 0.3 Percent deviation from baseline Percent deviation from baseline 0.3 0.2 0.2 0.1 0.1 0.0 0.0 -0.1 -0.2 -0.1 -0.3 -0.2 -0.4 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -0.3 2022-25 2031-35 2041-45 Rural Urban Figure 36: Private Consumption and Investment, Unconditional NDCs, by Financing Source, 2022–2050 Private investment (excl NDC)/GDP Consumption per capita 0.5 1.0 Percent deviation from baseline Percent deviation from baseline Debt 0.0 0.0 Tax -1.0 ODA -0.5 -2.0 FDI -1.0 Exp. adj. -3.0 Mixed -4.0 -1.5 RCP 4.5 -5.0 -2.0 -6.0 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Country Climate and Development Report: Rwanda - Technical Appendix  |   51 Figure 37: Trade Flows, Unconditional NDCs, by Financing Source, 2022–2050 Exports/GDP Imports/GDP 2.0 8.0 Difference from baseline share Difference from baseline share 0.0 7.0 6.0 -2.0 5.0 -4.0 4.0 -6.0 3.0 -8.0 2.0 1.0 -10.0 0.0 -12.0 -1.0 -14.0 -2.0 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Trade balance/GDP 1.0 Difference from baseline share 0.0 Debt -1.0 Tax ODA -2.0 FDI -3.0 Exp. adj. -4.0 Mixed -5.0 RCP 4.5 -6.0 2022-25 2031-35 2041-45 Figure 38: Fiscal and Debt, Unconditional NDCs, by Financing Source, 2022–2050 Recurrent spending/GDP Capital spending/GDP 0.5 5.0 0.0 4.5 Difference from baseline share Difference from baseline share -0.5 4.0 -1.0 3.5 3.0 -1.5 2.5 -2.0 2.0 -2.5 1.5 -3.0 1.0 -3.5 0.5 -4.0 0.0 -4.5 -0.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 Primary spending/GDP Fiscal balance/GDP 4.5 0.5 4.0 0.0 Difference from baseline share Difference from baseline share 3.5 -0.5 3.0 -1.0 2.5 -1.5 2.0 -2.0 1.5 -2.5 1.0 -3.0 0.5 -3.5 0.0 -4.0 -0.5 -4.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Domestic and external debt/GDP Toal government debt/GDP 18.0 18.0 16.0 52   16.0 |  Country Climate and Development Report: Rwanda - Technical Appendix line share line share 14.0 14.0 12.0 12.0 10.0 Difference from b Difference from b 2.0 -2.0 1.5 -2.5 1.0 -3.0 0.5 -3.5 0.0 -4.0 -0.5 -4.5 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Figure 38: Contd... Domestic and external debt/GDP Toal government debt/GDP 18.0 18.0 16.0 16.0 Differerence from baseline share Difference from baseline share 14.0 14.0 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 0.0 2.0 -2.0 0.0 -4.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -2.0 -4.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Debt Tax ODA FDI Exp. adj. Mixed Domestic debt External debt RCP 4.5 7.3. Simulations Contrasting Climate Actions with no Climate Actions Simulations contrast scenarios with climate measures to meet unconditional NDC commitments with measures to meet unconditional and conditional commitments and a scenario with no climate actions. All scenarios assume climate change associated with RCP4.5. All results are presented as deviations from the reference baseline that assumes no climate change and no climate action. Figure 39: GDP at Market Prices, by Level of Climate Action, RCP4.5, 2022–2050 2.0 GDP at market prices Percent deviation from baseline 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 -7.0 2020 2025 2030 2035 2040 2045 2050 8.0 GDP at market prices, annual growth rate Difference from baseline rate 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 2021 2026 2031 2036 2041 2046 No NDCs Uncon. NDCs All NDCs Country Climate and Development Report: Rwanda - Technical Appendix  |   53 Figure 40: Sectoral Employment, by Level of Climate Action, RCP4.5, 2022–2050 Total employment Sectoral employment 0.6 6.0 Percent deviation from baseline 5.0 Percent deviation from baseline 0.5 4.0 0.4 3.0 0.3 2.0 No NDCs 1.0 0.2 Uncon. NDCs 0.0 0.1 -1.0 0.0 All NDCs -2.0 -3.0 -0.1 -4.0 -0.2 -5.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -0.3 2022-25 2031-35 2041-45 Agriculture Industry Services Sectoral contributions to percentage deviation of total employment from the baseline No climate actions Unconditional NDCs All NDCs 0.6 1.0 2.5 0.4 0.8 2.0 Contribution to pct deviation Contribution to pct deviation Contribution to pct deviation 0.6 1.5 0.2 0.4 1.0 0.0 0.2 0.5 -0.2 0.0 0.0 -0.2 -0.5 -0.4 -0.4 -1.0 -0.6 -0.6 -1.5 -0.8 -0.8 -2.0 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Services Industry Agriculture Total Figure 41: Sectoral Value Added, by Level of Climate A, RCP4.5, 2022–2050 2.0 GDP at factor cost Sectoral value added 8.0 Percent deviation from baseline Percent deviation from baseline 1.5 6.0 1.0 0.5 4.0 No NDCs 0.0 2.0 Uncon. NDCs -0.5 0.0 All NDCs -1.0 -2.0 -1.5 -4.0 -2.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Agriculture Industry Services No climate actions Unconditional NDCs All NDCs 0.5 0.8 2.5 54   |  Country Climate and Development Report: Rwanda - Technical Appendix 2.0 0.6 eviation eviation eviation 0.0 1.5 0.4 Percent deviat Uncon. NDCs Percent deviat -0.5 0.0 All NDCs -1.0 -2.0 -1.5 -4.0 -2.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2031-35 2041-45 Figure 41: Contd... Agriculture Industry Services Sectoral contributions to percentage deviation of value added from the baseline No climate actions Unconditional NDCs All NDCs 0.5 0.8 2.5 0.6 2.0 Contribution to pct deviation Contribution to pct deviation Contribution to pct deviation 0.0 1.5 0.4 1.0 -0.5 0.2 0.5 0.0 0.0 -1.0 -0.5 -0.2 -1.5 -1.0 -0.4 -1.5 -2.0 -0.6 -2.0 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Services Industry Agriculture Total Figure 42: Sectoral Capital Stock, by Level of Climate Action, RCP4.5, 2022–2050 Total capital stock Sectoral capital stock 5.0 12.0 10.0 Percent deviation from baseline 4.0 Percent deviation from baseline 8.0 3.0 6.0 2.0 No NDCs 4.0 1.0 Uncon. NDCs 2.0 0.0 All NDCs 0.0 -2.0 -1.0 -4.0 -2.0 -6.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 -3.0 2022-25 2031-35 2041-45 Agriculture Industry Services Sectoral contributions to percentage deviation of capital stock from the baseline No climate actions Unconditional NDCs All NDCs 0.5 2.0 5.0 4.5 0.0 Contribution to pct deviation 4.0 Contribution to pct deviation Contribution to pct deviation 1.5 3.5 -0.5 3.0 1.0 2.5 -1.0 2.0 0.5 -1.5 1.5 1.0 0.0 0.5 -2.0 0.0 -2.5 -0.5 -0.5 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Services Industry Agriculture total Country Climate and Development Report: Rwanda - Technical Appendix  |   55 Figure 43: Employment by Location, by Level of Climate Action, RCP4.5, 2022–2050 Total employment Jobs by location 0.25 0.7 Percent deviation from baseline Percent deviation from baseline 0.20 0.6 0.5 0.15 0.4 0.10 0.3 0.05 0.2 No NDCs 0.1 0.0 Uncon.NDCs 0.0 -0.05 All NDCs -0.1 -0.10 -0.2 -0.15 -0.3 -0.20 -0.4 2022-25 2031-35 2041-45 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Rural Urban No climate actions Unconditional NDCs All NDCs 0.1 0.30 0.00 Contribution to pct deviation Contribution to pct deviation 0.08 0.25 Contribution to pct deviation -0.05 0.06 0.20 -0.10 0.04 0.15 -0.15 0.02 0.10 -0.20 0 0.05 -0.25 -0.02 0.00 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 Urban Rural Total Figure 44: Private Consumption and Investment, by Level of Climate Action, RCP4.5, 2022–2050 Private consumption per capita Private investment (non-NDC)/GDP 1.0 0.2 Difference from baseline share Percent deviation from baseline 0.5 0.0 -0.2 0.0 -0.4 -0.5 No NDCs -0.6 Uncon. NDCs -0.8 -1.0 All NDCs -1.0 -1.5 -1.2 -2.0 -1.4 -2.5 -1.6 2022-25 2031-35 2041-45 2022-25 2031-35 2041-45 56   |  Country Climate and Development Report: Rwanda - Technical Appendix Figure 45: Trade Flows, by Level of Climate Action, RCP4.5, 2022–2050 Trade balance/GDP Trade flows/GDP 1.0 5.0 Difference from baseline share Difference from baseline share 0.0 4.0 -1.0 3.0 2.0 -3.0 1.0 0.0 -5.0 -1.0 -2.0 -7.0 -3.0 -4.0 -9.0 -5.0 2022-25 2031-35 2041-45 2026-30 2031-35 2036-40 2041-45 2026-30 2031-35 2036-40 2041-45 2022-25 2046-50 2022-25 2046-50 No NDCs Uncon. NDCs All NDCs Exports Imports Figure 46: Fiscal and Debt, by Level of Climate Action, RCP4.5, 2022–2050 Revenue/GDP Spending/GDP 1.0 6.0 Difference from baseline share Difference from baseline share 0.8 5.0 4.0 0.6 3.0 0.4 2.0 1.0 0.2 0.0 0.0 -1.0 -2.0 -0.2 2022-25 2031-35 2041-45 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Capital Recurrent Public debt 7.0 Difference from baseline share 6.0 5.0 4.0 3.0 No NDCs 2.0 Uncon. NDCs 1.0 All NDCs 0.0 -1.0 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 2022-25 2026-30 2031-35 2036-40 2041-45 2046-50 Domestic debt External debt Country Climate and Development Report: Rwanda - Technical Appendix  |   57 Annex 8: Recommendations Towards Implementing Selected Priorities Table 16: Barriers and Recommendations for Private Sector Involvement in Agriculture Barrier Current state Recommendations Policy related VAT structures, There is a VAT exemption on unprocessed food that Extend VAT incentive on food products to include actors disincentivize benefits farmers, but it doesn’t extend to food producers later in the value chain. formalization in cereal in the value chain (e.g., maize products), this makes food At a minimum provide and input VAT credit for value chains. processed by formal actors more expensive, pushing purchases from VAT exempt sellers reducing the effect Rwandans to purchase from informal markets. The of VAT on formal value chain actors. consequence of this incentivization toward informal processing is that commercial investments in climate resilient inputs and post-harvest activities cannot be financed. Market related Limited access to inputs, Most smallholder farmers have very little access to Support local input providers and identify new potential e.g., improved seeds, sufficient and appropriate inputs to increase yields investors to develop climate-resilient crops and seed irrigation water. and incomes which reduces the overall resilience and varieties through technical assistance, funding, etc. productivity. Invest in soil testing and mapping exercises to promote use of fertilizer blends to respond to specific soil and crop needs. Limited practice As markets for coffee and tea, the two main Rwanda Support farmers and other players working directly of climate-friendly cash crops, involve, more (international) buyers are with farmers to invest in climate-resilient production production methods. increasingly demanding certifications that attest to methods and support them to acquire the relevant climate-friendly production methods (adapted to climate certifications to access more markets for their products, change and pest and diseases) such as Rainforest mainly tea and coffee. Alliance, and 4C to name a few. However, only a handful of Rwandan farmers have these certifications indicating limited practice of climate-friendly production methods. Moreover, occasional heavy rainfalls and subsequent landslides threaten tea production. Limited data on farmer Lack of information on farmers’ credit worthiness and Increase access to digital (and financial) services that profiles limiting targeted other key information limits innovative and financial can store farmer information to be leveraged when climate-resilient investments in agriculture. piloting climate-smart initiatives. This information innovations. can also be used to provide alternative credit scoring mechanisms for farmers to enable easier payment for climate-smart solutions. Limited skills for crop Poor crop management and handling leads to losses Leverage (digital) services available to farmers and management, disease for farmers and agribusinesses involved as they are government platforms to disseminate information on control, and post-harvest unable to secure competitive prices for their produce. plant health, crop management, etc. handling. The disease control challenge is especially noticed in Using a digital systems for disaster risk management for the passion fruit value chain whereby the Passion Fruit improved weather monitoring and surveillance. Woodiness Disease (PWD) is hard for farmers to control. Insufficient storage and Storage and cold chain facilities are unaffordable, which Promote investments in affordable storage solutions. cold chain facilities. affects quality of produce and market access. These can provide long-term gains along the value chain and offer some resilience against any climate shocks that might lead to crop/food storage in the short term. Lack of access to More than 30% of smallholder farmers do not use Support access to finance for smaller productive use irrigation equipment. irrigation. irrigation products. Promote public private partnerships for bigger irrigation projects that can benefit a large number of agribusinesses. 58   |  Country Climate and Development Report: Rwanda - Technical Appendix Barrier Current state Recommendations Low incomes and limited Many farmers are financially excluded from financing Development of agriculture finance and de-risking access to financing. options mainly due to low incomes, levels of education, facilities, including through blended finance, and the and limited proximity to financial services. continued innovation in finance and mobilize equity and blended finance, while supporting farmers to switch Moreover, some high value crops such as passion fruit, to higher value crops such as horticulture crops (chili, avocado, and macadamia have long cash cycles making French beans, macadamia, etc.) to boost incomes and it difficult for farmers (with limited access to finance) to ability to invest in adaptation. invest in them. Table 17: Barriers and Recommendations for Private Sector Involvement in Forestry Barrier Current state Recommendations Market related Unsupervised and illegal cutting Small plots with different owners pose a Regularize ownership of forest land to allow private of forests. challenge for commercial forest management. investments.11 Ownership and tenure of forest land and forest Sector or district level densification can foster products is ambiguous. reforestation and small-scale commercial forestry opportunities that could be certified for carbon credits. Scattered forested land and A diverse range of woody species are lacking and Policy support for growing more tree species that are unclear land tenure complicates there are significant opportunities to enhance valuable and compatible with the climate. Promote forest management. fruit tree production in dry areas. species that contribute to more carbon sequestration and that can produce good construction material such as Cross Laminated Timber (CLT). Limited technical capacity in Monitoring, reporting, and verification (MRV) Provide grants through local investment vehicles for MRV the sector technical capabilities are limited, and investors efforts in the medium to long-term. hire foreign expertise at high cost. Promote Rwanda as a proof of concept for new High MRV costs for emission- Local MRV technical capabilities are limited. verification technologies. reduction projects. Table 18: Barriers and Recommendations for Private Sector Involvement in Land Barrier Current state Recommendations Market related Lack of communication Most private investors in areas not adjacent to Mainstreaming climate resilience concepts among about private investment agriculture such as industrial parks, mining, and housing the private sector. opportunities in development do not integrate climate resilience as a There is an opportunity to increase investments conservation. potential mitigating factor for their businesses, leading to through innovative new PPPs. more land degradation. Invest in more land aggregation and irrigation Climate communication is also not mainstreamed in schemes12 that could provide proof-of-concepts for private sector associations to encourage investments in land conservation. conservation. No requirements attached There has been progress with incorporating climate Increasing climate considerations and objectives in to financing to require objectives in some financing schemes such as result- financing for large development projects. investors to invest in land based financing. However, most funding allocated conservation as they for large development projects are based on simple develop their projects. commercial returns and do not drive incentives to invest in ecosystem services. 11 Actors such as Sawmill East Africa Limited (SEAL) have already invested in commercial forestry. It is important to note that while multiple other concessions have been granted in the past challenges have arisen around compliance with sustainable practices. Given the small size and high population density of Rwanda, forestry opportunities will not be as large as neighboring countries with bigger sized and smaller population densities, but evidence shows that when managed well they can be impactful. 12 Irrigation schemes with adequate water managed facilitate water application in amounts that plant needs, hence avoiding runoffs that could lead to land degradation. Source: United States Department of Agriculture, Conservation Practices that Save: Irrigation Water Management, accessed June 2022. Country Climate and Development Report: Rwanda - Technical Appendix  |   59 Table 19: Barriers and Recommendations for Private Sector Involvement in Water Barrier Current state Recommendations Policy related Lack of tax incentives for the water, Clean water providers pay VAT on water sales with Create legislation to provide tax incentives in the sanitation & hygiene (WASH) sector. tax burden transferred to rural areas. sector to reduce the burden on rural areas and increase investments, for example by lowering/ eliminating the payment of VAT for clean water purchased in rural areas. Expensive regulation on the Stringent regulations require testing that is often While testing is necessary to ensure water quality, operation of water systems. costly for smaller water businesses. it might be worth exploring how the cost of testing could be lowered, perhaps revisiting regulations and requiring different types of tests to facilitate access by smaller businesses. Market related Lack of demonstrated co-benefits Watershed and catchments protection is largely Evaluate the potential for payment of watershed and engagement strategies to perceived as a government responsibility and protection by local industrial users of watersheds mobilize private sector actors. private sector actors have not internalized or mechanisms to engage them to support potential benefits. rehabilitation of natural water ecosystems. Low purchasing powers that limit While growth in urban centers is evident, Support clean drinking water businesses to scale scale to rural areas where there’s penetration of point-of-use drinking water is innovative products to underserved areas. more potential for impact complicated by low incomes in rural areas. High capital required to operate While there are projects in the pipeline, there is Encourage PPPs on wastewater treatment that viable waste-water treatment a lack of infrastructure such as sewage systems could mirror the recent ‘Build Operate and Transfer’ businesses. and little demand on the market for wastewater arrangement between the GoR and a Dubai- byproducts, such as compost, limit the viability of based enterprise to operate and maintain water this investment. production facilities to deliver 40,000 m3/day. Lack of financing for infrastructure Current funding available is mainly provided by Support increased investments through creating particularly for small clean water the government to rehabilitate infrastructure, with funding windows for the sector. businesses. little support from private water operators. Create an investment plan to show opportunities for No investment plan exists to show gaps and the private sector. opportunities in the sector. Table 20: Barriers and Recommendations for Private Sector Involvement in Grid Energy Barrier Current state Recommendations Institutionally related Limited sector-specific knowledge For instance, hydropower developers have cited Funding key studies such as feasibility studies leading to high early-stage costs in limited hydrological studies for Rwandan rivers, in priority areas to facilitate private sector project development. leading to high upfront costs and delays in project investment without the burden of conducting development. these key studies Outdated environmental impact Qualifying for international funding usually Aligning national regulations on EIA reporting with assessment standards lead to double requires meeting international standards that international regulations such as IFC to avoid efforts to meet international standards. are different from national standards, making it duplicative efforts for developers. costly and time-consuming. Market related High CAPEX and development costs, High CAPEX discourages private sector Increasing upfront finance for commercially with power generation costs close to investments, especially given that there is limited viable energy providers. This can be in the form of US$4 million/MW. local financing available to contribute to funding. blended finance, equity, multilateral finance, etc. Providing grants/soft loans tagged for MRV efforts to tap into carbon finance. 60   |  Country Climate and Development Report: Rwanda - Technical Appendix Table 21: Barriers and Recommendations for Private Sector Involvement in Off-grid Energy Barrier Current state Recommendations Policy related Recent policy revisions reduced the off- The revision is a major blow to the off- Involving private clean energy actors in policy discussions grid energy providers' total addressable grid energy providers as they can only to ensure both sides are considered in the revisions. market. serve 10.1% of the market as opposed to the initial 48%. Amendment of current electrification targets through bilateral discussions. Challenges on selling to the grid. Off-grid users are unable to sell non- Evaluating policies that could facilitate selling to the grid used energy back to the grid. could create gains for private investors. Market-related Low ability to pay for power among The market of those who can pay Further promotion of productive use models for off grid/ addressable household market. for solar home systems has become mini-grid systems where the system can support income saturated, particularly in areas still for a household or community. designated for off-grid. Table 22: Barriers and Recommendations for Private Sector Involvement in Clean Cooking Barrier Current state Recommendations Policy related Lack of clarity on Currently Rwanda encourages truly clean net zero technologies, LPG, and Create a clear policy on priority prioritized cooking improved cookstoves but regulations and communications do not clearly solutions to scale replacement of options. lay out a plan for which solutions should be used, and where it should be unsustainable charcoal/firewood for located. cooking. Remaining unfavorable The government of Rwanda has been forward leaning in extending Comprehensive tax policy removing import duties on policy incentives to renewable energy and e-mobility companies such as duty for all renewable energy/ energy appliances and preferential income taxes. cleaner energy providers to cover companies. infrastructure such as off-grid and But a few import duties remain for infrastructure such as improved/clean clean cooking solutions. cooking solutions which leads to high upfront cost for providers. Market-related Behavioral change Where clean cooking has been adopted it is not universal, “stove and fuel Support in marketing clean cooking limiting utilization of stacking”13 is a frequent occurrence even after clean energy has been as an aspirational and cultural thing clean energy solutions. shown to be more economical than dirty charcoal (e.g., a belief that you for Rwandans to adopt. should cook beans over charcoal). Table 23: Barriers and Recommendations for Private Sector Involvement in Transport Barrier Current state Recommendations Policy related Slow roll out of regulations to update The government already has targets of Enforcement of better emissions standards and fuel standards and regulate vehicle phasing out internal combustion engines in fast tracking the phase out for vehicles not meeting age and emissions. favor of electric vehicles: 30% of cars, 20% of quality and emission standards. buses and 25% of mini and micro buses as EVs by 2030. However, implementation of phase out of old vehicles has been slow. 13 A practice of using multiple stove and fuel cooking combinations within the same household, often with different methods used for different foods. Country Climate and Development Report: Rwanda - Technical Appendix  |   61 Barrier Current state Recommendations Institutionally related Limited technical capabilities to The National Transport Policy has plans for Investing into training of mechanics, technicians, roll out infrastructure and trained continued capacity building in the transport and drivers of EVs—both private sector actors and mechanics for potential new EVs – sector but there is no particular focus on other actors in the e-mobility space to rapidly expand the country does not have a trained e-mobility. training to provide a skilled workforce that will be workforce to operate EV infrastructure. needed in the near-term to run EVs, especially the workforce to service EVs on the market. Limited view of the energy stack While REG publishes an overall view into its Develop a comprehensive index into the carbon creates challenges for operators to sources, more detailed data on the types of emissions of Rwandan energy, with detailed measure and certify carbon reduction. power in the stack overall and at particular understanding of GHGs related to grid energy times of the day is needed to properly accessed during various times of day and seasons. calculate and certify benefits of EVs. Market related Building infrastructure for transition The costs of e-buses are three to four times Raising financing from equity investors and leveraging and attracting large flow of deals in the the cost of normal buses and there is a limited blended finance to build the infrastructure required e-mobility sector particularly for larger charging infrastructure. and scale access to EVs—grants/blended finance vehicles. could help establish the infrastructure that can Although there are planned fiscal and non- incentivize equity investment. fiscal incentives for e-mobility that will be gradually rolled out, there are no incentives or Disincentivizing the purchase and import of new other solutions for the high upfront costs that fossil fuel buses into Rwanda. will be needed to build and scale the industry. Providing incentives and, potentially, subsidies for The long asset life of buses in particular services in certain areas of the country, if needed. makes it harder to switch to electricity once the asset has been purchased. Improving the power network. Creating consumer-oriented financing Current fiscal incentives are mostly supply Supporting commercial banks and development for acquisition of personal vehicles. oriented whereas demand-side incentives are banks to establish lines of credit for customer non-fiscal. acquisition of EVs. Table 24: Barriers and Recommendations for Private Sector Involvement in Housing Barrier Current state Recommendations Policy related High taxation on materials in Although companies in affordable housing have a Considering tax reforms for intermediate inputs the housing sector. preferential corporate income tax of 15%, the taxation on tagged for affordable housing. intermediate inputs still renders overall cost of housing expensive. Lack of PPP frameworks in There are limited PPP structures in the housing sector Considering the adoption of innovative finance the sector. to encourage collaboration in affordable housing mechanisms such as PPPs for land, infrastructure, development. and housing development. Market related Lack of adapted cost Truly affordable housing projects currently require Financial innovation, e.g., around leasing longer- structures and financing for substantial subsidy. term mortgages, etc. end-users. Product and process innovation in building to reduce building costs. Exploration of monetizing carbon reductions or climate resilience to subsidize cost. 62   |  Country Climate and Development Report: Rwanda - Technical Appendix Barrier Current state Recommendations Lack of sufficient long- Although the Rwanda Mortgage Refinancing Company Promoting Rwanda Mortgage Refinancing Company term finance to refinance purchases mortgages to allow banks to provide low and raising additional funding for mortgage mortgages through interest rates, banks still secure most of their lending refinancing as well as blended finance aimed at commercial banks. money through short-term deposits. climate resilient affordable housing finance. Expensive construction inputs The high cost of input materials such as cement and Investing in the local construction value chain were imported materials limits the appetite of developers to doing so would decrease the costs of inputs in undertake affordable housing. Rwanda. Table 25: Barriers and Recommendations for Private Sector Involvement in Waste Barrier Current state Recommendations Policy related Lack of extended producer responsibility REMA is working on a project to implement Create a private-public working sector group to implementation to stimulate a market for this framework, but little progress has socialize the Extended Producer Responsibility recycled products. been achieved. framework and to encourage manufactures to create collection systems for products. Lack of an integrated waste management Different ministries have different Developing an integrated waste management plan and fragmented governance complicates mandates related to waste management plan in the long-term to manage the sector and decision making and implementation. and work in silos, making coordination include the energy sector to ensure ability to difficult. pursue waste to energy when feasible. Institutionally related Limited institutional push for waste separation Low motivation to regulate separation at Setting up guidelines and regulations for waste and poor management of landfills. the household level leads to high cost. separation to be implemented at household level. Market related Lack of waste separation infrastructure and The lack of infrastructure to sort and clean Working with the private sector to invest in waste lack of accountability mechanisms for waste recycled waste limits potential for waste collection and treatment infrastructure through collectors. to energy. PPPs and enforcement. Limited public and private sector funding. Allocated funding in 2019/20 was 2.16% Raising funding through special purpose vehicles of Kigali city’s budget including the such as FONERWA managed facilities. management of Nduba landfill. Innovation around circular economy business models. Very low access to waste collection services Access to waste collection is highly unequal Working with private collectors and districts for people living in informal settlements. across socio-economic classes. to extend collection to informal areas through subsidies/low tariffs. Table 26: Policy-related Cross-cutting Barriers and Potential Recommendations Barrier Current state What is being done Recommendations Pending incorporation An agreement was reached on the REMA has furnished letters for Rapidly passing laws to adopt of Article 6 on carbon fundamental norms related to Article 6 businesses noting the intention to and implement Article 6 and clear markets in national during COP 26. It is still not yet clear in adopt Article 6 and a willingness to public communication during a regulations. national regulations particularly on who make needed adjustments to support transition phase. owns mitigation outcomes. private trade. Unfavorable taxation Businesses that sell carbon credits in NA Fast-track incentives to remove on carbon credit Rwanda are taxed VAT on their carbon taxes on carbon credit invoices sales. sales. Reducing the competitiveness of given potential competition carbon mitigated in Rwanda compared between carbon credit sellers to other countries. abroad. Country Climate and Development Report: Rwanda - Technical Appendix  |   63 Table 27: Institutional-related Cross-cutting Barriers and Potential Recommendations Barrier Current state What is being done Recommendations Limited capacity of There are few specific products Some banks are beginning to Supporting FONERWA’s and BRD’s local commercial dedicated to climate businesses, learn about the climate space. efforts in introducing more financial banks to accurately e.g., products that forward finance FONERWA also provides financial products on the market and tailoring assess the risk of carbon credits. BRD and FONERWA and technical support to climate such products to specific commercial climate businesses have successfully accessed projects aligned with Rwanda’s green contexts. and access blended finance, relaxed credit economy agenda. Examples include: blended finance restrictions, and reduced prices, i) an innovation performance-based Supporting commercial banks capacity limits banking these opportunities remain few and grant for proof-of-concept business building initiatives related to climate products in the specific. However, blended finance with a 25% match funding and finance to increase investment in space market. for adaptation focused businesses ii) a credit line, in partnership with and the creation of adequate financial and projects are largely absent from RDB, that provides debt at below instruments for green businesses. the financial ecosystem. market rates of 11.45%. Developing blended finance facilities focused on adaptation. Table 28: Market-related Cross-cutting Barriers and Potential Recommendations Barrier Current state What is being done Recommendations Lack of established There is limited coordination on how REMA is developing carbon market Continue coordination to align carbon market regulations to regulate private companies that rely regulations with partners’ support. the efforts that use subsidy negatively affects the on voluntary carbon market. Some programs (e.g., RBF) and market development companies distribute cookstoves MININFRA is developing a ministerial carbon finance to leverage and utilization of carbon for free using the voluntary carbon guideline to regulate the market private investment in market finance. financing. The nascent clean cooking entry of low-tier stoves which may be development and delivery of the market can collapse with large-scale distributed for free. desired results and impact. free distribution as the private sector The World Bank has committed can’t compete with free stoves and carbon finance to purchase carbon consumers choices will be taken away. credits generated from the BRD’s Clean Cooking Results Based Financing (RBF) Fund, The carbon revenue will reflow to the RBF fund to make it potentially a revolving fund by generating and selling more carbon credits. Long lead time between The cost of carbon certification is REMA and FONERWA are looking Continue efforts to support carbon certification and high, particularly for smaller and local into supporting local businesses businesses in crediting, with revenues. businesses. Because carbon must be with certification, which will local and lower cost service mitigated after certification, credits hopefully reduce costs. providers. only materialize 18 months or more after certification creating a real Financial product innovation cashflow burden. to bridge the gap – through forward purchase agreements. Most businesses in Rwanda SMEs make over 90% of Rwanda’s The Green Investment Facility by Supporting FONERWA’s and do not possess adequately businesses, small cashflows limit their BRD and FONERWA will provide BRD’s efforts to support skilled personnel to ability to invest and retain adequate incubation and acceleration services technical capacity building of drive efficient business technical and business skills. BDS including demand-driven business climate businesses. operations, with a knock-on providers have been ineffective at development services. effect on the businesses’ filling the gap, thus businesses lack Aggressive “investment ability to scale. key operational skills needed both to promotion” to attract access finance and to grow. sophisticated climate businesses to Rwanda. 64   |  Country Climate and Development Report: Rwanda - Technical Appendix Barrier Current state What is being done Recommendations Many businesses are in Local commercial banks, which are The Kigali International Financing Working with RFL to actively the climate space, and the main source of capital for most Center, through Rwanda Finance identify and attract equity most start-ups and local local businesses, only provide access Ltd., is working to attract long- investors to Rwanda. enterprises lack access to to short-term financing at high interest term investors that could provide long-term finance needed rates, limiting the kind of projects they alternative capital such as equity Support and prepare Rwandan to invest in scale. Equity can invest in. There is also very little financing to help business in the businesses to approach and is almost entirely absent equity available in the market and few region and has announced a specific appeal to global climate from the market and innovative financial service providers focus on climate finance. A few new investors. climate finance (e.g., pre- offering products beyond standard funds, e.g., the Rwanda Innovation Seek blended finance to purchasing carbon rights) loans. fund and Qatar’s Virunga Africa develop locally appropriate and is unattainable for local Fund will also bring equity to larger managed climate equity fund. businesses. local businesses. Country Climate and Development Report: Rwanda - Technical Appendix  |   65