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UNITED REPUBLIC OF TANZANIA COUNTRY CLIMATE AND DEVELOPMENT REPORT Table of Contents Acknowledgmentsvi Abbreviations and Acronyms viii 1. Development and Climate Challenges and Opportunities 1 1.1. Climate change impacts people and assets 3 Climate models predict increased temperatures and more variable precipitation 4 Climate change exposes people to heat stress and health risks, and could trigger internal migration5 Climate change will impact agriculture, livestock, and fisheries 7 Climate change could also impact ecosystem services and natural asset-based economic activity, including tourism 9 Disruptions to transport and power are projected to increase over time 10 Climate change could dampen potential for growth in major cities 11 1.2. Without climate action, Tanzania could more than double its GHG emissions 11 2. Policy and Institutional Context for Climate Action 15 2.1. Tanzania has a multisectoral institutional structure for addressing climate change 15 2.2. Effective climate change action requires stronger governance arrangements 16 Tanzania needs stronger institutional coordination and governance frameworks for climate change action 16 Mainstreaming climate across government plans, policies, and investments will make climate action more effective 17 Increasing stakeholder engagement and communication with citizens will broaden support for climate action 18 Strengthening institutional quality will improve government effectiveness 18 2.3. A more resilient financial sector is key for effective climate action 19 3. Climate Actions for Inclusive, Resilient, and Low-Carbon Growth 23 3.1. Integrating climate considerations into development efforts to build human capital and social protection is a no-regrets measure 23 ii  |  Country Climate and Development Report: United Republic of Tanzania Well-financed, climate-responsive social protection will help households buffer shocks and develop resilient livelihoods 23 Universal access to WASH and health services will reduce health and labor risks  25 Education services must position youth to face climate change challenges and seize opportunities 26 Optimizing land and water use and management will boost agriculture and rural 3.2.  productivity, increase climate resilience, and reduce GHG emissions 27 Efficient land use can promote climate-smart rural economies and carbon sequestration 27 Expanding irrigation will require approaches tailored to different hydrological realities  28 Secure land access, via an effective and functioning national cadaster, can engender climate action  29 Conservation and improved natural habitat management can create economic opportunity  30 Targeted support and disincentives can improve forest management and reduce forest degradation  31 The country should produce biomass-based energy sustainably while it transitions to clean cooking  31 Improved farming methods and inputs can help boost agriculture productivity and resilience 33 Prioritizing resilient and low-carbon infrastructure systems will enable climate-positive 3.3.  growth in existing and emerging sectors and urban areas 36 It is possible to build resilience in key transport networks while also maintaining a low-carbon transport footprint 36 Increasing the share of renewable energy can help Tanzania meet demand while also reducing emissions 37 The global decarbonization agenda offers Tanzania the chance to unlock ETM-related  opportunities40 Investing in climate-informed infrastructure systems will create livable, productive, and resilient cities 42 Resilient urban infrastructure investment plans should be aligned with impact type and scope  43 Enabling the use of nonmotorized and public transportation systems can help reduce GHG emissions  44 Managing urban waste will help lower methane emissions  45 Expanding resilient digital infrastructure will support climate-positive growth 45 Increasing its ambition in the transport, energy, and urban sectors can help Tanzania achieve its GHG emissions target 45 Country Climate and Development Report: United Republic of Tanzania  |  iii 4. Impact of climate action and inaction on Tanzania’s growth 49 4.1. Climate change will have aggregate economic implications in Tanzania 50 4.2. Three impact channels account for most of the climate impacts 51 4.3. Tanzania will have to manage the costs of climate action 51 4.4. Climate change shocks and action will impact poverty 52 5. Prioritizing and financing climate action 55 5.1. Structural transformation alone is not enough for climate-resilient, low-carbon growth 55 5.2. The government needs to mobilize financing for climate action 55 Current spending and financing for climate action fall short of what is needed  59 Financing needs for select climate investments will contribute to better development 59 Tanzania needs to mobilize climate finance from multiple sources 61 Tanzania could improve use of public policy and spending for climate action  61 There are opportunities to blend different sources of climate finance 66 The PPP agenda and innovative bonds could finance climate action in the transport sector 67 5.3. A resilient, inclusive, and low-carbon growth path for Tanzania 68 References71 List of Tables Table 3.1: Climate-smart mining diagnostic summary table 42 Table 5.1: Priority climate actions for Tanzania with synergies with development 56 Table 5.2: Adaptation budget and climate spending, 2014–22 ($, millions) 59 Table 5.3: Estimated costs and investment needs for selected actions ($, millions)  60 Table 5.4: Prioritization of proposed actions emerging from agriculture public expenditure review 62 Table 5.5: Summary of policy recommendations for green finance markets 63 List of Figures Figure 1.1: Key natural hazard statistics, 1980–2020  4 Figure 1.2: Projected climate variables for Tanzania across a range of shared socioeconomic pathways (SSPs) and representative concentration pathways (RCPs), 1995–2014  4 Figure 1.3: Poverty incidence and coping capacity index 6 Figure 1.4: Effect of heat stress on formal workers’ productivity under a dry/hot climate future, 2021–50  6 Figure 1.5: Impacts of different climate change scenarios on crop production (percentage change from baseline) 8 Figure 1.6: Total livestock production shock by 2050  9 Figure 1.7: Annual indirect and direct cost of disruptions to transport  10 Figure 1.8: Annual generation from Tanzania’s hydropower plants, 2010–22  11 iv  |  Country Climate and Development Report: United Republic of Tanzania Figure 1.9: GHG emissions by sector, 2000–22, and BAU projection to 2050 12 Figure 3.1: Share of population exposed to different risks and household vulnerability  24 Figure 3.2: Scope and reach of the PSSN program 24 Figure 3.3: Optimizing economic value and carbon storage from land use in Tanzania under different scenarios  28 Figure 3.4: Temperature change and drought risk in Tanzanian protected and conserved areas  30 Figure 3.5: Incentives and disincentives that drive regeneration and restoration 32 Figure 3.6: Tanzania’s capacity and energy mix, 2023–44 38 Figure 3.7: Forecasts for different commodity production levels under two scenarios 40 Figure 3.8: Tanzania’s projected GHG emissions paths to 2050  46 Figure 4.1: Deviation in real GDP from baseline due to climate change impacts, by damage channel and scenario, 2050  50 Figure 4.2: Poverty rate by 2050  53 Figure 4.3: Vulnerable population profile in 2050  53 List of Boxes Box 1.1: Economic growth scenarios, climate futures, and impact channels used in this report 5 Box 3.1: Opportunities for reducing methane emissions in the livestock sector 35 Box 4.1: Macroeconomic modeling and scenarios: estimating the economic impacts of climate change 49 Country Climate and Development Report: United Republic of Tanzania  |  v Acknowledgments The United Republic of Tanzania (URT) Country Climate and Development Report (CCDR) was prepared by a multisectoral World Bank Group team led by Diji Chandrasekharan Behr (Lead Environmental Economist, East and Southern Africa Environment Department) and William Battaile (Lead Economist, East and Southern Africa, Macroeconomics, Trade and Investment Department). CCDR World Bank Group team members included colleagues from the following sectors: • Agriculture: Ernest Ruzindaza Emma Isinika Modamba, Samuel Killewo (consultant), and Kauthar Said Salum • Climate Change Group: David Groves, Jichong Wu, Mitik Zegeye, Sandhya Srinivasan • Digital: Paul Seaden, Paul Ndungutse, and Justina Kajange • Education: Innocent Najjumba Mulindwa, Eliot Faron Goer, and Henry Michael Kulaya • Energy: Rhonda Jordan Antoine, Carla de Nobrega, Clémence Dryvers, and Jingyi Wu • Governance: Donna Andrews, Benjamin Ndazi Mtesigwa, Paul Welton, and Vida Ndilanha Nkya, Raymond Joseph Mbishi, MaryIrene Singili • Environment, Natural Resource and Blue Economy: Emanuela Migliaccio, Enos Esikuri, Mirko Ivo Serkovic, and Irving McLiberty • Extractives (Mining): Martin Lokanc, Nina Inamahoro, Lois Hooge, and Michael Stine • Finance, Competitiveness and Innovation: Rachel Mok, Mansi Panchamia, Randa Akeel • Health: Mariam Ally, Jessica Leete, and Werner Flannery • International Finance Corporation (IFC): Ugo Amoretti and Jiro Makimoto • Land: Victoria Stanley • Macro, Trade and Investment: Ragchaasuren Galindev, Mei Mei Aileen Lam, Xu Dong, Hayaan Diriye Abdi Nur, Ahya Ihsan, and Emmanuel Mugunasi • Multilateral Investment Guarantee Agency (MIGA): Jessica Wade • Poverty: Pedro Olinto, Revocatus Paul, and Ben Brunckhorst • Social Protection: Tumainiel Emmanuel Ngowi and Claudia Zambra Taibo • Social Sustainability and Inclusion: Nicholas Meitiaki Soikan • Transport: Fang Xu, Nana Soetantri, Samuel Blackwell Heroy, Neil Stephen Lopez, Raymund Paolo Abad, Ivan Henderson V. Gue, Krister Ian Daniel Roquel, Gladness Mukemfura Rwejumura, Philemon Ernest Mchihiyo, Eric Maingi Mulinge, Agatha Irinei Haule, Baher El-Hifnawi, Yonas Eliesikia Mchomvu, and Adam Stone Diehl • Urban and Disaster Risk Management: David Mason, Yohannes Kesete, and John Morton • Water: Ruth Kennedy-Walker and Dominick de Waal vi  |  Country Climate and Development Report: United Republic of Tanzania The following consultants and teams of external experts from consulting firms contributed to the background papers and inputs for the CCDR: Brent Boehlert, Ken Strzepek, and Diego Castillo (Industrial Economics, Inc (IEc)); Peter Hawthorne and Saleh Mamun (Natural Capital Insights), Edmundo Molina, James Syme and Hermilo Cortés González (SiSEPUEDE), Miguel Rescalvo and Matias Ryberg (Neyen); Engie Impact; Anna Spenceley, Clemence Dryvers, Anthony Kubursy, Professor Rwekaza Mukandala, Dr Edmond Alavaisha, Rodrick Henry, and Peter Msumali Rogers. Lucy Southwood edited the report. The following managers, program leaders and advisors provided technical guidance to the team: Paul Martin, Noreen Beg, Almud Weitz, Alwaleed Fareed Alatabani, Catalina Marulanda, Ernest Massiah, Francis Ghesquiere, Frauke Jungbluth, Manuel Vargas, Maria Gonzalez de Asis, Muna Salih Meky, Robert Chase, Yadviga Semikolenova, Makiko Watanabe, Aghassi Mkrtchyan, Aneesa Arur, Sofia Guerrero Gamez, Nana Soetantri, Julia Bucknall, and Sofia Guerrero Gamez. The team thanks Achim Daniel Schmillen, Akiko Kishiue, Giovanni Ruta, and Kevin Carey who served as peer reviewers, and all the corporate reviewers from the five verticals of the World Bank -- Digital, Infrastructure, People, Planet, and Prosperity, for their constructive comments that improved the report. We are also grateful to all the different government ministries, departments, and agencies in the URT, and representatives from academia, civil society, the private sector, and development partners for their feedback and inputs. The URT CCDR was prepared under the guidance and leadership of Nathan Belete (Country Director, Malawi, Zambia, and Zimbabwe), Mary Porter Peschka (Director, IFC), and Moritz Nebe (Acting Director, MIGA), Iain Shuker (Regional Director, Planet, Eastern and Southern Africa), Preeti Arora (former Operations Manager, Malawi, Zambia and Zimbabwe), Wendy Hughes (Regional Director, Infrastructure, Eastern and Southern Africa), Hassan Zaman (Regional Director, Prosperity, Eastern and Southern Africa), Daniel Dulitzky (Regional Director, People, Eastern and Southern Africa). Additional funding for the analytical work that underpins the CCDR was provided by the following programs administered by the World Bank: NBS Invest project using funding from the Least Developed Countries Fund of the Global Environment Facility, Tanzania Transport Corridors for Growth Trust Fund, Energy Sector Management Assistance Program and Swedish International Development Cooperation Agency. Country Climate and Development Report: United Republic of Tanzania  |  vii Abbreviations and Acronyms ASP aspirational (scenario) ASPS adaptive social protection system BAU business-as-usual (scenario) CCDR Country Climate and Development Report CGE Computable General Equilibrium CNG compressed natural gas CO2e carbon dioxide equivalent CSA climate-smart agriculture ETM energy transition mineral EV electric vehicle FDI foreign direct investment FPCM fat and protein-corrected milk GCF Green Climate Fund GCM Global Circulation Model GDP gross domestic product GEF Global Environment Facility GHG greenhouse gas GSSS green, social, sustainable and sustainability-linked GW gigawatt IBRD International Development Association ICT information and communication technology IDA International Development Association IEc Industrial Economics, Inc IFC International Finance Corporation JNHPP Julius Nyerere Hydro Power Plant kCO2e kilograms of carbon dioxide equivalent kWh kilowatt hour LMIC lower-middle-income country LTS Long-Term Strategy for Low Carbon and Climate Resilience MANAGE-WB World Bank’s Mitigation, Adaptation and New Technologies Applied General Equilibrium model MIGA Multilateral Investment Guarantee Agency MRV monitoring, reporting, and verification viii  |  Country Climate and Development Report: United Republic of Tanzania MSME micro, small and medium-sized enterprises MtCO2e million tonnes of carbon dioxide equivalent MW megawatts MWh megawatt hour NCCRS National Climate Change Response Strategy 2021–26 NDC nationally determined contribution NSDI national spatial data infrastructure NMT nonmotorized transportation NPP net primary productivity PO-RALG President’s Office Regional Administration and Local Government PPP public-private partnership PSSN Productive Social Safety Nets (program) PV photovoltaic RCP representative concentration pathway REDD+ Reducing emissions from deforestation and forest degradation in developing countries, with additional forest-related activities that protect the climate, namely sustainable management of forests and the conservation and enhancement of forest carbon stocks SME small and medium-sized enterprise SSP shared socioeconomic pathway tCO2e tonnes of CO2e TMA Tanzania Meteorological Agency TVET technical, vocational education, and training UMIC upper-middle-income country UNFCC United Nations Framework Convention on Climate Change URT United Republic of Tanzania VPO Vice President’s Office VRE variable renewable energy WASH water, sanitation, and hygiene All dollar amounts ($) are US dollars Country Climate and Development Report: United Republic of Tanzania  |  ix 1 © World Bank Development and Climate Challenges and Opportunities 1. Development and Climate Challenges and Opportunities Impressive economic growth in the United Republic of Tanzania since 2000 propelled it into lower- middle-income country (LMIC)1 status in 2020. The country’s gross domestic product (GDP) is composed of near-equal shares of agriculture, industry (including construction), and services. More recently, the services sector remained the main driving force behind Tanzania’s overall economic growth, expanding by 7.3 percent in 2023, supported by growing economic activities in the financial and insurance, tourism, transportation, and accommodation subsectors (World Bank 2024b). Agriculture has been growing at a relatively steady 3 to 4 percent since 2018, while growth in industry has been at a more modest 2.5–4.3 percent between 2020 and 2023, compared to 8.3 percent between 2015 and 2020 (World Bank 2024c). At its current growth rate, Tanzania’s population of 62 million people is expected to double in 23 years (NBS Tanzania 2020b; World Bank 2024b), with the urban population reaching 49 percent by 2040 (UN-DESA 2018). But Tanzania’s economy remains vulnerable to risks, including climate risks. This exposure stems from its reliance on agriculture, which provides nearly 24 percent of its GDP, 20 percent of exports, and 90–95 percent of its food security, and made up 65.5 percent of total employment (Minister of Agriculture 2023, World Bank 202c). Growth over the last decade has been propelled largely by public investment and domestic markets, rather than private investment and export growth. This is unviable in the long term, as evidenced by the drop in foreign direct investment (FDI) from 5.6 to 2.1 percent of GDP between 2010 and 2023. Gains in labor productivity have also been set backs, and exports fell from 20.9 percent of GDP in 2012 to 14.3 percent in 2021. Growth has been driven by sectors that employ relatively few low-income (or poor) workers. Between 2014 and 2021, wage employment as share total jobs remained stagnant, at around 14 percent. The share of people working in agriculture fell from 76 to 67 percent between 2006 and 2014, to 65.5 percent in 2022, while wage employment is at 14.4 percent in 2022 (World Bank 2023d). The largely informal nature of labor and microenterprises limits their contribution to growth, especially for women-led enterprises. Investments in human capital have been limited, and Tanzania faces stubbornly high levels of poverty. Tanzanians are exposed to frequent income shocks, and more than half the households in the lowest wealth quintile have slipped down from a higher quintile. Due to rapid population growth, the number of poor rose by 1.3 million between 2012 and 2018. In 2020, a child born in Tanzania was projected to be only 39 percent as productive at working age compared to projections for children with access to complete education and full health. This lags the Sub-Saharan African average and is significantly below the LMIC average (50 percent). Its low (39 percent) score on the Human Capital Index is due to low levels of education and limited access to educational and employment opportunities. The large rural-urban disparities in incomes, job opportunities, electricity access, and basic services— such as maternity care, water, sanitation, and hygiene (WASH)—further compound the development challenge. WASH access and services are critically low in rural areas (home to 60 percent of the population) where 30 million people use unimproved sanitation facilities (buckets or pit latrines without washable slabs) and 4 million default to open defecation, compared to 2.4 and 0.2 million in urban areas, respectively. Low access to safely managed sanitation (25 percent) and basic sanitation (31 percent), have been correlated with high levels of stunting and can compound disease spread (Rakotomanana et al. 2020; World Bank 2017). Poor access to WASH is estimated to cost $1.4 billion per year in time and productivity losses, health costs, and premature deaths. While the country has made considerable progress in the health sector, more than halving the disease burden between 2000 and 2019, and increasing life expectancy to 66 years (World Bank 2023d), there is need to continue improvements in maternal and neonatal mortality, reducing stunting, managing fertility, and adapting to the rising burden of non-communicable diseases (World Bank 2024a). 1 The World Bank assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high income. The classifications are updated each year on July 1 and are based on the gross national income per capita of the previous year. Gross national income measures are expressed in US dollars and determined using conversion factors derived according to the Atlas method. Country Climate and Development Report: United Republic of Tanzania  |  1 The productivity of Tanzania’s largely rainfed agriculture remains low, and per capita renewable natural capital wealth has been declining. Acute food insecurity is prevalent (56.4 percent in 2019), with 84 and 64 percent of rural and urban populations, respectively, vulnerable to food insecurity. Tanzania’s natural capital per capita decreased by 51 percent from 1995 to 2018, driven by a diminution of the per capita value of fisheries, pastureland, protected areas, cropland, and forests by 74 percent, 67 percent, 56 percent, 54 percent, and 43 percent respectively (World Bank 2021). Tanzania has one of the world’s highest deforestation rates, and suffers from accelerated land resource degradation, and increasing levels of air, water, and soil contamination.2 While it has abundant green and blue water resources, these are getting stressed. For example, in the Pangani and Wami Ruvi Basins, urban population growth and irrigation compete for water resources. Dar es Salaam and Dodoma—the country’s economic and political centers— face water shortages and rationing, due to significant gaps between supply and demand, especially during times of drought. This is an unquantified cost to households, businesses, and industry. Projected population growth and expected urbanization could increase pressure on natural assets through unmanaged fisheries, unsustainable fuelwood and charcoal consumption, and agricultural expansion. Failure to meet growing demands in a sustainable manner will be costly, as nature is key for the resilience of Tanzania’s economy, inclusive jobs, and food and water security. Structural challenges plaguing cities across Africa also impact cities in Tanzania. With rapidly expanding populations, Tanzania’s urban areas are crucial for national economic growth and poverty reduction. The country’s urban population is expected to grow from just over 34 percent in 2018 to 49 percent by 2040 (UN-DESA 2018). In 2012, four Tanzanian cities produced more than half of the country’s GDP; by 2030, they are expected to represent almost 60 percent (Worrall et al. 2017). Urban areas also account for most of the country’s physical, financial, human, academic, and technological capital. But there is limited investment in their tradable sectors, insufficient formal and well-planned settlements, and limited connectivity between housing, jobs, and services due expansion patterns. The resulting higher costs force households to trade off livability with proximity (Lall, Venables and Avner 2017; World Bank 2023f). Secondary cities, often a destination for rural migrants, also face infrastructure deficits, inadequate planning and service delivery, and recurrent impacts from floods and droughts. Tanzania’s energy mix is skewed toward biofuels and waste while its electricity generation comes primarily from natural gas and hydropower.3 In 2021, 77.3 percent of the energy mix came from biofuels and waste, 13.9 percent from oil, 5.9 percent from natural gas, and 1.9 percent from coal. Although only a modest share, coal supply increased by 655 percent between 2000 and 2022, and bituminous coal production by 1,136 percent.4 Its electricity generation mix includes natural gas (64 percent), hydropower (30.6 percent), heavy fuel oil (4.7 percent), and biomass (0.6 percent); its total installed capacity is 1,602.32 megawatts (MW); and the National Grid System comprises hydro and thermal generation units with a total capacity of 1,565.72 MW (base year 2019), made up for 36.64 percent hydro, 57.02 percent natural gas, 5.67 percent liquid fuel, and 0.67 percent biomass (URT 2020). Its power grid now reaches nearly 100 percent of the country’s villages, and electricity access has increased from 14 percent in 2011 to 46 percent in 2022.5 But more than half the population remains in the dark, and those who do have an electricity connection experience poor service reliability and quality. Transport and digital connectivity in Tanzania could be improved. The transport network is inadequately integrated, both domestically and regionally. Its airport and railway facilities require investment, with the 2 Tanzania’s air quality is considered moderately unsafe, with the most recent (2019) data indicating an annual mean concentration of fine particulate matter of 25 µg/m3, exceeding the World Health Organization’s recommended maximum of 10 µg/m3 https://databank. worldbank.org/source/world-development-indicators#). For water, 2022 data show that, in rural areas, 14 million people (35%) drink water from unimproved sources or have no service, compared to only 10.8 million in urban areas (https://data.unicef.org/country/tza/). 3 https://www.iea.org/countries/tanzania (viewed November 2024) 4 https://www.iea.org/countries/tanzania/coal (viewed November 2024). 5 https://www.iea.org/countries/tanzania (viewed November 2024) 2  |  Country Climate and Development Report: United Republic of Tanzania latter suffering from obsolescent infrastructure and outdated standards. Dar es Salaam port is becoming less competitive globally, with inefficiencies resulting in increased freight charges. Recurrent flood threats and inadequate maintenance funding for the transportation sector pose substantial economic consequences. Rural road networks, connecting large parts of the population to services and markets, often become inaccessible during the rainy seasons. While coverage of essential services has improved, low quality of care remains a challenge.” Tanzania’s digital potential is also under-realized, and growth in the information and communication technology (ICT) sector has not substantially permeated other economic spheres. The government’s forthcoming national development vision, Vision 2050, is an opportunity to define how the country will meet its development objectives in the face of global risks, including climate change. Aiming to propel Tanzania into upper-middle-income country (UMIC) status, discussions around Vision 2050 have focused on fostering stability, attracting investment, ensuring equitable growth, and benefiting all Tanzanians, including the role of private sector, use of technology, and raising human capital. As the government considers future growth paths, it will be important to account for climate change and integrate climate and development objectives to mitigate risks and unlock opportunities from green value chains, energy transition minerals (ETMs), and so on. The remainder of this chapter explores the potential impacts of and opportunities from climate change on future growth and development. 1.1. Climate change impacts people and assets Most of Tanzania has a tropical savanna climate, with warm temperatures and clearly defined wet and dry seasons. Historically, annual rainfall varies across the country, with drier central parts to wetter southwestern highlands. Mean annual rainfall totals are lowest (under 600 millimeters) in the east and center, while the areas around Lake Victoria range from 1,200 to 1,600 millimeters, coastal areas receive over 1,000 millimeters, and the south and west more than 800. Parts of central western Tanzania receive even lower rainfall levels. In the northern and easternmost parts of the country (which include Kilimanjaro), rainfall distribution is bimodal, taking place over two rainy seasons; in the rest of the country, it is unimodal, divided into dry and wet periods (IEc 2024a). In 2022, Tanzania ranked 150th out of 191 countries on readiness to cope with climate change.6 It is the 47th most vulnerable country to climate change, based on low agricultural yields and capacity, dependence on agriculture, land conversion rates, levels of access to improved sanitation and reliable drinking water, exposure to increased incidence of disease, quality of roads and transport infrastructure, among other things.7 The most flood-affected country in East Africa, nearly all its urban municipalities are impacted by intense rainfall events during rainy seasons due to a lack of adequate drainage infrastructure and encroachment of built-up areas on riverbanks and wetlands. Between 1985 and 2015, settlement areas exposed to high flood risks grew by approximately 120 percent due to poor planning and inadequate enforcement mechanisms (Rentschler et al. 2022). Floods and droughts affect a large share of the population (figure 1.1). In 2018, floods in Dar es Salaam alone cost $100 million, or 2 percent of GDP (Erman, Obolensky and Hallegatte 2019). Over the past two decades, severe droughts have impacted livestock, wildlife, and the country’s predominantly small-scale and rainfed crops. The culmination of a series of droughts in 2009 resulted in the loss of more than 50 percent of livestock in some parts of northern Tanzania (Goldman and Riosmena 2013). Extensive agriculture and livestock production has continued to expand in response to shocks, at the expense of forests and unsustainable soil and water exploitation, decreasing production systems’ natural resilience to climate shocks and increasing greenhouse gas (GHG) emissions. 6 ND-GAIN Index. 2021. 7 https://gain-new.crc.nd.edu/country/tanzania#vulnerability/sector. Country Climate and Development Report: United Republic of Tanzania  |  3 Figure 1.1: Key natural hazard statistics, 1980–2020 10 million 1 million Number of people affected 100,000 10,000 1,000 100 10 1980 1990 2000 2010 2020 Flood Epidemic Drought Storm Wildfire Earthquake Landslide Source: World Bank Climate Change Knowledge Portal https://climateknowledgeportal.worldbank.org/country/tanzania/vulnerability Climate models predict increased temperatures and more variable precipitation Most climate models predict increases in temperature, with wide-ranging impacts across Tanzania’s varied topography and economy. Looking at a set of Global Circulation Model (GCM) and models that draw on historical weather data, projected temperature changes are relatively uniform across the country under all climate scenarios, peaking at around 1.6°C under a dry/hot future. Temperatures are expected to increase in each decade relative to baseline conditions, with average temperatures peaking by the 2050s (figure 1.2a). Precipitation, on average, is not expected to change significantly, though variability is expected to grow. Climate projections across different climate models reveal that, while GCM ensemble averages for precipitation (the lines in figure 1.2b) do not change significantly relative to baseline precipitation, the projections across the full range of GCMs (the shaded zones in figure 1.2b) vary widely. Under dry/hot conditions, predictions of mean precipitation in 2041–50, relative to 1995–2020, are of drying across most of the country, with some potential wetting in the north. Under selected wet/warm scenarios, wetter conditions are expected across most of the country, with possible increases of more than 20 percent. Precipitation in some models is also expected to increase in each decade across the country, with possible declines in average national precipitation by the 2040s under dry/hot scenarios. Figure 1.2: Projected climate variables for Tanzania across a range of shared socioeconomic pathways (SSPs) and representative concentration pathways (RCPs), 1995–2014 a) Mean surface air temperature b) Precipitation 32 1800 30 1600 28 1400 26 1200 24 1000 22 800 20 600 1960 1980 2000 2020 2040 2060 2080 2100 1960 1980 2000 2020 2040 2060 2080 2100 Hist. Ref. Per., 1950-2014 SSP1-2.6 SSP2-4.5 Hist. Ref. Per., 1950-2014 SSP1-2.6 SSP2-4.5 SSP3-7.0 SSP5-8.5 SSP3-7.0 SSP5-8.5 Source: World Bank Climate Change Knowledge Portal Note: SSPs are a set of scenarios that describe possible future socioeconomic developments and their impact on climate change; RCPs are climate change scenarios to project future GHG concentrations. The shaded areas represent the range of projected temperatures and precipitation levels. 4  |  Country Climate and Development Report: United Republic of Tanzania Box 1.1: Economic growth scenarios, climate futures, and impact channels used in this report Future climate change and economy scenarios can help gauge the range of impacts across sectors, despite the uncertainty of changes in precipitation and temperature for Tanzania. This report uses two economic growth scenarios and subjects each of them to eight climate futures: Economic growth scenarios The business-as-usual (BAU) scenario assumes continuation of the growth rate and structure seen over the past 10–15 years, with average annual real GDP growth continuing near the past 20-year average at 6.25 percent, public investment remaining the dominant driver of growth, and private sector development remaining limited, with continued low growth in agribusiness, manufacturing, and professional services. The aspirational (ASP) scenario assumes the government sustains its recent pivot to private sector- enabling policies, leading to higher and more inclusive economic growth, with average annual real GDP growth increasing to 8.25 percent, private investment driving growth—including through increased FDI—and increased growth in agribusiness, manufacturing, professional services, and exports. These are considered with current policies—referred to in this report simply as BAU and ASP scenarios— and implementing key elements of the country’s nationally determined contribution (NDC) commitments (referred to as the BAU and ASP “with climate action” scenarios). All economy scenarios include the same conservative assumptions on new liquefied natural gas production starting in the early 2030s. Climate futures The eight climate futures include: • A cluster of three optimistic (wet/warm) • The average of these three optimistic futures • A cluster of three pessimistic (dry/hot) futures • The average of these three pessimistic futures. These are set of GCMs that are not part of aggressive mitigation or emission pathways and are around the 90th percentile of change in mean precipitation and the 10th percentile of change in mean temperature. Impact channels This report examines the consequences of the different climate futures as they are transmitted to the economy via seven impact channels. These are shocks to: • Labor productivity from heat stress to both indoor and outdoor workers • Labor supply from changes in incidence of disease • Rainfed crop revenues through changes in yield • Livestock revenues through changes in productivity • Crop yields from topsoil erosion • Capital from flooding events • Capital due to climate related damages to roads and bridges. Climate change exposes people to heat stress and health risks, and could trigger internal migration In Tanzania, 27.7 percent of the population and 29.4 percent of the vulnerable population are exposed to at least one climate risk, particularly drought. Most vulnerable households, which have limited coping strategies, are also poor (figure 1.3). Regions with more people exposed to climate-related shocks tend Country Climate and Development Report: United Republic of Tanzania  |  5 to have lower resilience. Tabora, Shinyanga, Mara, and Simiyu, which are all highly exposed to droughts, demonstrate the lowest coping capacities. Figure 1.3: Poverty incidence and coping capacity index a) Poverty incidence b) Coping capacity index Poverty rate (region level) Priority level for intervention Kagera (1 = high, 5 = low) 0.345 to 0.450 Mara Mara Kagera 0.306 to 0.345 Priority-5 Awanza 0.247 to 0.306 Mwanza Priority-4 Simiyu Arusha Simiyu Arusha Geita 0.210 to 0.247 Geita Priority-3 Shinyanga Kilimanjaro Shinyanga Kilimanjaro 0.080 to 0.210 Priority-2 Manyara Kigoma Manyara Missing Kigoma Priority-1 Kaskazini Pemba Tabora Kaskazini Pemba Tabora Tanga Kusini Pemba Tanga Kusini Pemba Singida Kaskazini Unguja Singida Kaskazini Unguja Dodoma Dodoma Mjini Magharibi Mjini Magharibi Katavi Kusini Unguja Katavi Kusini Unguja Dar−es−salaam Dar−es−salaam Pwani Pwani Morogoro Iringa Morogoro Rukwa Iringa Rukwa Mbeya Mbeya Songwe Songwe Njombe Lindi Njombe Lindi Ruvuma Mtwara Ruvuma Mtwara Source: World Bank Tanzania Poverty Team 2024 Climate change could reduce labor productivity by more than 4 percent due to increased heat stress. The impacts of heat stress on labor productivity are relatively high, with the hot climate and increases in workday temperature8 influencing both productivity and workday duration. Heat stress intensifies for the outdoor labor force in agriculture and industry, which both have a large proportion of skilled and unskilled workers performing highly physical activities. Labor productivity under the BAU scenario is projected to be most affected by heat stress, resulting in productivity losses to 4.1 percent for agriculture and 3.4 percent for industry by mid-century (figure 1.4). Agricultural labor is most affected in the milder, drier west of the country, while affected industry labor is concentrated in Dar es Salaam. Under the ASP scenario, it is assumed that labor productivity is higher as a larger segment of the labor force is assumed to work indoors and agricultural mechanization increases from 0.2 to 30 percent between now and 2050. Climate impacts on labor productivity shocks are dampened, but, if left unaddressed, still increase over time. Figure 1.4: Effect of heat stress on formal workers’ productivity under a dry/hot climate future, 2021–50 2021-30 2031-40 2041-50 Change in labor productivity, compared to baseline (%) 0 -1 -2 -3 -4 -5 BAU scenario: Agriculture Industry Services ASP scenario: Agriculture Industry Services Source: World Bank staff, based on data from IEc 2024a 8 This is estimated by calculating wet bulb globe temperatures (which is a measure of heat stress in direct sunlight). 6  |  Country Climate and Development Report: United Republic of Tanzania Climate projections are expected to result in an increased incidence of heat-related diseases, and vector- and waterborne diseases, under a dry/hot future. Nationwide losses in formal labor supply due to climate change impacts on health are projected to be no more than 0.60 percent by 2050.9 But these impacts are greater when accounting for climate risks on nutrition, as climate impacts on agriculture and access to affordable food could create additional health disruptions and heat-related conditions, impact air quality, cause injuries and affect mortality,10 mental health, and well-being, and increase informal labor. Prolonged drought would also impact domestic water availability, increasing the prevalence of diarrhea and forcing households to allocate more time to obtaining water. In Dar es Salaam, poor and vulnerable households—especially female-headed households—are overrepresented in affected groups and disproportionately suffer from waterborne illnesses. While the largest proportion of annual waterborne disease deaths is concentrated in high-population areas like Dar es Salaam, the highest fraction of waterborne disease-related deaths attributable to temperature increases under climate change will be in the central, southwest, and southern regions. The compounding effect of climate change on nonclimatic factors is expected to trigger significant internal climate migration. By 2050, internal migrants are expected to number from almost 10 million under an optimistic climate future to more than 13 million under a pessimistic future—the highest of all countries in the Lake Victoria Basin. Out-migration areas include the eastern coast near Dar es Salaam, where deteriorating water availability and crop yields, combined with sea level rise, storm surges, and declining land availability, are anticipated to push people toward Lake Victoria Basin, most likely to urban centers and areas with economic activities that have low barriers of entry. This will exacerbate the challenges of rapid and unplanned urbanization and create additional pressures on natural assets that are already heavily exploited. Transboundary coordination will be important to mitigate any potential conflicts over resources arising from internal migration. Climate change will impact agriculture, livestock, and fisheries Crop yields are sensitive to shifts in temperature, precipitation, and soil erosion. The impact of climate change on major revenue crops varies by climate future, especially when examining only the impact of average changes in temperature and precipitation. Yield losses peak at 14 percent under a dry/hot future for maize and tropical fruits and increase under a wet/warm future. Due to its largely rainfed nature, agriculture is sensitive to increased variability in temperature and precipitation, creating volatility in yields, but production of all crops is expected to face a negative production shock independently of the climate future, due to soil erosion (figure 1.5). 9 Estimated impact on labor supply is based on additional deaths relative to the baseline and absenteeism from work due to people falling sick or tending to an ill child or family member. 10 Between 2000 and 2022, 44 extreme flood, drought, landslide, and storm events resulted in 461 deaths and affected 9.33 million people (https://public.emdat.be/data, as cited in World Bank 2023e). Country Climate and Development Report: United Republic of Tanzania  |  7 Figure 1.5: Impacts of different climate change scenarios on crop production (percentage change from baseline) a) Production shock for selected crops to 2050 (dry/hot future) 0.15 0.1 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25 -0.3 2044 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2037 2032 2033 2034 2035 2036 2038 2039 2040 2041 2042 2043 2045 2046 2047 2048 2049 2050 Year Banana Cassava Groundnut Maize Millet Potato Sesame Sugarcane Sweet Potato Vegetables b) Production shock for selected crops to 2050 (wet/warm future) 0.25 0.2 0.15 0.1 0.05 0 -0.05 -0.1 -0.15 2044 2021 2037 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2038 2039 2040 2041 2042 2043 2045 2046 2047 2048 2049 2050 Year Banana Cassava Groundnut Maize Millet Potato Sesame Sugarcane Sweet Potato Vegetables c. Aggregate crop production shock due to climate impact (including impact on soil erosion) under different economy scenarios and climate futures BAU scenario ASP scenario 0% -1% -2% 2021 2025 2030 2035 2040 2045 2050 2021 2025 2030 2035 2040 2045 2050 Dry/hot mean Wet/warm mean Individual dry GCMs Individual wet GCMs Source: IEc 2024a. 8  |  Country Climate and Development Report: United Republic of Tanzania Projections for the livestock sector indicate a greater loss in production under a dry/hot future. Tanzania has Africa’s second-largest cattle population. But productivity is low, with small carcass weights, low reproduction rates, and low milk and egg production. From 2041 to 2050, total livestock production shocks are expected to result in losses of 8 and 3 percent under the mean dry/hot and wet/warm futures, respectively (figure 1.6). Figure 1.6: Total livestock production shock by 2050 0% -5% -10% 2021 2025 2030 2035 2040 2045 2050 Dry/hot mean Wet/warm mean Individual dry/hot GCMs Individual wet/warm GCMs Source: IEc 2024a. Climate change has implications for nearshore fishers, inland fisheries, and seaweed producers in Zanzibar. Rising sea surface temperatures are associated with a decrease in small pelagic fish catches in villages along the Tanzanian coast (Kapapa et al. 2022). Found in the Zanzibar archipelago and along the Tanzanian coast, wild-caught fish are the largest source of Tanzania’s fish supply (FAO 2024) and mainly consumed domestically. Seaweed production, which is dominated by female workers, is also vulnerable to disease and rot as temperatures increase, and windy conditions make production challenging. Climate change impacts on aquaculture and inland fisheries are also of great concern, as the subsector’s represents 86.5 percent of total catch and employs 83 percent of people involved in fish harvesting (FAO 2024). In the Lake Victoria Basin, 71–78 percent of the 233 native freshwater fish species are vulnerable to climate change (Sayer, Máiz-Tomé and Darwall 2018; Migliaccio 2024). Greater resilience in the fisheries sector is imperative to meet the expected doubling of demand by 2030 (Peart et al. 2021) and avoid creating upward pressure on prices. Climate change could also impact ecosystem services and natural asset-based economic activity, including tourism Climate change futures will change suitable habitats for most forest types, fragmenting remaining forests and diminishing their ecosystem services (Elikana et al. 2020). Montane forests are expected to lose 47–64 percent of their suitable habitat extent by 2085 under the RCP 4.5 and RCP 8.5 scenarios,11 respectively, while microhabitat forests could lose more than 70 percent of their habitat. Lowland forests could lose more than 10 percent by 2085 under the RCP 8.5 scenario, and woodland vegetation—the country’s most extensive forest type—could lose close to 5 percent of its suitable habitat. Only mangrove forests are expected to increase, by 40 percent under both RCP scenarios. Forest habitats extend across nearly half 11 RCP 4.5 assumes GHG emissions stabilize by mid-century and fall sharply thereafter; RCP 8.5 assumes continued increase in GHG emissions until the end of the 21st century. Country Climate and Development Report: United Republic of Tanzania  |  9 of Tanzania, and loss of projected magnitude could result in a loss of carbon sinks. Temperature changes (assessed at regional level) present a negative contribution to the wider region’s net primary productivity (NPP)12 trend, with effects concentrated in Tanzania, while some positive contributions of solar radiation to NPP changes have been observed in northeastern and western Tanzania (Xu et al. 2024). But these effects are either countered or compounded by the impacts of human activity on NPP. There is limited knowledge of the impact of climate change on terrestrial wildlife, a significant asset for ecotourism in Tanzania. The degradation of the forest habitat is expected to impact wildlife migratory patterns. Habitats such as transboundary Selous-Niassa, Udzungwa-Ruaha, and Muhezi-Swagaswaga, are important wildlife corridors and migratory routes for key species, including elephants, cheetahs, and crocodiles (Elikana et al 2020), and changes in the region’s forests are expected to cause shifts in the spatial distribution of wildlife habitats. Changes in the hydrological cycle and water availability will also impact habitats and, in turn, wildlife and migration. Glacial retreat on Mount Kilimanjaro has already resulted in changes in land cover (from montane forest to heathland) and species composition (Kilungu et al. 2017). Disruptions to transport and power are projected to increase over time Climate change impacts are expected to damage the usability of key transportation links, disrupting access of labor to markets, trade, and freight. The costs of such disruptions will increase over time, due to the direct costs of rehabilitating damaged links and indirect costs in terms of impacts on trade and freight. Vulnerability is highest in the extreme northwest (Lake Victoria), the greater Dar-es-Salaam area, and the southern region containing the Lukuledi River Basin. Losses are expected to be concentrated in heavy tail events that are less frequent than 1 in 10 years.13 Estimated annual damages for all the country’s transport infrastructure amount to $108–109 million. Under BAU, these are expected to rise to $117 million by 2030 and $198–233 million by 2050, with the greater damages under the RCP 8.5 scenario. Under ASP, annual costs are expected to first rise to $112 million by 2030, then shrink before rising again to $129–155 million by 2050 (World Bank Tanzania Transport Team 2024). Figure 1.7 shows that by 2050, the difference between ASP under the RCP 4.5 scenario and BAU under the RCP 8.5 scenario surpasses $100 million a year. Figure 1.7: Annual indirect and direct cost of disruptions to transport Direct and indirect damages ($, millions) 220 200 180 160 140 120 100 80 2025 2030 2035 2040 2045 2050 BAU growth, RCP 8.5 ASP growth, RCP 8.5 BAU growth, RCP 4.5 ASP growth, RCP 4.5 Source: World Bank Tanzania Transport Team. 2024. Note: The sudden drop at 2030 under the ASP scenario is due to the completion of resilience adaptations. 12 NPP refers to the energy stored in vegetation for a unit area and unit time. It is helpful for studying ecosystem health, carbon cycling, and the potential food availability for herbivores within an ecosystem. 13 For example, more losses will be incurred in a 1-in-10-year flood event than in five repeated 1-in-2-year events. Expected losses in the more infrequent events will also increase over time, so that a once comparatively bearable 1-in-10-year event becomes more costly with increasingly severe climate events and increasing trade. The cost of a 1-in-10-year event is projected to increase from a $596 million baseline to $802–919 million by 2030 and $4.8–6.4 billion by 2050 under BAU, depending on the climate scenario. 10  |  Country Climate and Development Report: United Republic of Tanzania As an important part of the country’s current and future power generation mix, Tanzania’s hydropower plants could be vulnerable in the long-term to hydrological changes, including those resulting from climate change. This would compound the challenges Tanzania is already experiencing from frequent electricity outages due to poor maintenance regimes and aging infrastructure. Across six hydropower plants, the dry year power generation (2011) was 16 percent lower than average (figure 1.8). In the short term, the new Julius Nyerere Hydro Power Plant (JNHPP), a mega development project that is partially operational, will shift the balance from gas-fired to hydropower plants. The JNHPP will add over 2 gigawatts (GW) to the country’s power system, more than doubling its installed capacity. Examination of historical average water inflow via the Rufiji River—the main water source for the JNHPP—indicates that inflow decreases by 0.13 percent per year, suggesting no significant climate change risk for JNHPP. Hydropower also offers varying levels of flexibility, with the ability to shift loads between seasons. Figure 1.8: Annual generation from Tanzania’s hydropower plants, 2010–22 1400 25th Percentile dry year 1200 1000 Yearly generation (GWh) 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Kidatu Mtera Kihansi NPF NYM Hale* Source: Engie Impact 2023. Note: Data for Hale plant were not available. Climate change could dampen potential for growth in major cities Tanzania’s major cities are vulnerable to floods, undermining their potential role as affordable and competitive growth centers for an expanding population. Low-lying cities, such as Dar es Salaam and Zanzibar City, are most vulnerable to flooding. Aggravating the situation is that so many residents live in unplanned, informal settlements. In Dar es Salaam, 80 percent of residents live in such areas (Hambati 2013), while in other cities, over 70 percent of the land is occupied by unplanned neighborhoods (Lupala, Namangaya and Mborgoro 2013), which also tend to expand faster than planned settlements (Huang et al. 2018). Approximately 463 square kilometers of Tanzania’s built-up urban area is at high risk of fluvial or pluvial flooding or sea level rise (World Bank 2022c) Under all climate futures, the number of affected people in Dar es Salaam and Zanzibar City increases over time and with flood intensity. Estimated probable maximum loss between 2020 and 2050 and 2075 also increases, by 5.7 and 14.3 times, respectively, in Dar es Salaam, and 1.3 and 1.5 times, respectively, in Zanzibar City. 1.2. Without climate action, Tanzania could more than double its GHG emissions While Tanzania contributed only 0.31 percent of global emissions in 2019, it remains an important player in the global decarbonization agenda. The 46th-largest global emitter in 2019, Tanzania emitted 155 million tonnes of carbon dioxide equivalent (MtCO2e), which is approximately 1.5 kilotonnes of CO2e Country Climate and Development Report: United Republic of Tanzania  |  11 per million dollars of GDP and 2.67 tonnes of CO2e (tCO2e) per capita. Estimates for annual emissions from Tanzania’s forests range from 44 MtCO2e from a net change in forest area14 to nearly 80 MtCO2e, based on the Emissions Database for Global Atmospheric Research and a land use emissions dataset, which estimate emissions from deforestation (figure 1.9).The transport sector emits 6.78 MtCO2e every year, making it the third-largest GHG-contributing sector, after agriculture and land-use change and forestry.15 From 2010 to 2020, emissions from the waste sector increased from 4.78 to 6.38 MtCO2e.16 Ignoring this GHG emissions trend could lead to a nearly 130 percent increase in net emissions between 2020 and 2050 under the BAU scenario. Tanzania can contribute to the global decarbonization agenda in two ways. It can reduce its GHG emissions, as set out in its NDC, and supply necessary inputs—such as ETMs—for the global low-carbon transition. Tanzania’s NDC commits to reduce GHG emissions by 30–35 percent across the economy, relative to a BAU scenario, by 2030, reducing 138–153 MtCO2e in gross emissions, depending on baseline efficiency improvements. Tanzania is expected to achieve GHG emissions reductions primarily by addressing land use change and restoring forests, adopting renewable energy and energy efficiency, and managing GHG emissions from transport and waste. Figure 1.9: GHG emissions by sector, 2000–22, and BAU projection to 2050 323.5 3 Historical sector Pathway 300 Energy - Buildings Industrial processes and product use Historical Energy - Electricity/heat Waste (historical) BAU Energy - Fugitive emissions Agriculture (historical) 250 Energy - Manufacturing/construction LULUCF - Land use Energy - Other fuel combustion LULUCF - Forestry Energy - Transportation Total GHG emissions (MtCO2e) 200 150 139.2 100 81.4 50 0 -50 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: World Bank staff calculations based on multiple data sources 14 Tanzania’s Forest Reference Emission Level. 15 The annual emissions rate for transport is expected to increase in the next years as the country experiences economic growth, population growth, and urbanization. 16 https://www.climatewatchdata.org/ghg-emissions. 12  |  Country Climate and Development Report: United Republic of Tanzania 2 © Chris Morgan, World Bank Policy and Institutional Context for Climate Action 2. Policy and Institutional Context for Climate Action Tanzania is signatory of the United Nations Framework Convention on Climate Change (UNFCCC) and Paris Agreement. In 2021, it updated its NDC, which was guided by multiple national policies, goals, visions, programs, plans, and initiatives.17 Tanzania has stated that it is committed to effectively meeting its NDC objectives and will engage in national and international processes to fast-track its implementation (URT 2021b), subject to receiving adequate and predictable financial and technological support. The NDC is the country’s incremental contribution beyond current climate efforts, and its implementation is within the context of the National Environmental Policy, Environmental Management Act, National Environmental Policy, National Environmental Master Plan for Strategic Interventions (2022–32), and sector policies and legislations. The National Climate Change Response Strategy 2021–26 (NCCRS) (URT 2021c) informs Vision 2050, contains the country’s National Action Plan, and serves as its primary climate change policy guidance. In the NCCRS, the government notes its growing concerns of the negative impacts of climate change and variability on the country’s social, economic, ecological, and physical environment. The preparation of the NCCRS coincided with the release of the country’s third Five-Year Development Plan, providing an opportunity to elevate climate change challenges and concerns in the national development agenda and setting a precedent for the climate change agenda in future five-year plans. Despite the strategies and plans for addressing climate change, these issues are not yet sufficiently included in Tanzania’s legal framework. But the country has signed many climate-relevant international agreements and protocols, including several multilateral environmental agreements—from the Convention on Biological Diversity to the African Convention on the Conservation of Nature and Natural Resources—and as a result, the government is implementing strategies, programs, projects, and plans to address climate impacts and vulnerabilities, and mitigate GHG emissions. 2.1. Tanzania has a multisectoral institutional structure for addressing climate change The Vice President’s Office (VPO) Division of Environment is responsible for all national-level climate- related activities and is the national UNFCCC climate change focal point. Providing the institutional framework for environmental management, the Environment Act confers the task of overall policy coordination and articulation of environmental management and central support functions to the VPO and direct operations management for specific natural resources or environmental services—such as agriculture, forestry, wildlife, mining, and water—to sector ministries. The act does not yet recognize the role of the President’s Office Regional Administration and Local Government (PO-RALG), which is mandated to administer and manage regional secretariats and local government. Climate adaptation and mitigation plans outlined in the NCCRS include establishing the National Climate Change Steering and National Climate Change Technical Committees. The steering committee, chaired by the Permanent Secretary—VPO, provides policy guidance to ensure coordinated actions and participation within various sectors and institutions. The technical committee, chaired by the Director of Environment, provides technical advice, encourages more coordinated actions of actors, and broadens participation in addressing climate change. The National Carbon Monitoring Centre, hosted by the Sokoine University of Agriculture, aims to build national capacity to measure, verify, and report adequately on sectoral carbon 17 Its NDC is aligned with the Tanzania Development Vision (2025), Zanzibar Development Vision (2050), Third Five-Year Development Plan, Paris Agreement, UN 2030 Sustainable Development Goals, New Urban Agenda, Agenda 2063 on the Future Africa We Want, and Sendai Framework on Disaster Risk Reduction. Anchored in the NCCRS (2021) and Zanzibar Climate Change Strategy (2014), it reflects and embraces national development initiatives and frameworks, strategic projects and plans, and the construction and improvement of transport systems and networks. Country Climate and Development Report: United Republic of Tanzania  |  15 emissions at national and international levels and manages the National GHG Inventory System, a portal for effective management of sectoral GHG emission data. 2.2. Effective climate change action requires stronger governance arrangements Focusing on four key areas will help Tanzania to strengthen its institutional and governance arrangements to support more effective climate change action. First, it can improve coordination between government departments and across governance frameworks for climate change action. Second, it can mainstream climate consideration across government plans, policies and investments. Third, it can increase stakeholder engagement and communicate more regularly with its citizens. And fourth, it can strengthen the quality and effectiveness of its institutions. Tanzania needs stronger institutional coordination and governance frameworks for climate change action Climate change requires significant coordination between government departments, and strengthening institutional coordination would improve cross-government collaboration. Climate change is a crosscutting issue, with overlapping duties and responsibilities across ministries and confusing demarcations. For example, the Ministry of Water implements projects for conserving water catchment areas that involve vegetation recovery, while the Ministry of Natural Resources is mandated for forest conservation. The National Climate Change Committee is the main national coordination body and includes representatives from all institutions relevant for climate change action. Although the committee’s coordination functions are adequate, it does not hold regular committee meetings, compromising its effectiveness. Continuing to engage in regional climate coordination is also important. Tanzania actively participates in several transboundary projects that play pivotal roles in climate change adaptation and resilience, fostering regional cooperation and managing shared resources. For example, it is part of the Lake Victoria Basin Commission, responsible for coordinating project sustainability and overseeing the management of the basin’s resources. Transboundary initiatives emphasize the importance of regional collaboration in enhancing climate resilience and strengthen Tanzania’s strategies for mitigating climate risks and securing a sustainable future. Vision 2050, which is currently under development, should clearly articulate the government’s goals for climate action. Tanzania undertakes both long- and short-term climate change planning, to reduce GHG emissions, and adopt clean energy and climate-smart agriculture (CSA). It also aims to increase its adaptation capacity and citizens’ knowledge about climate change impacts. The newly reconstituted Planning Commission, which oversees and coordinates all planning-related matters, has made it a priority to monitor climate issues in central and local government, and other public institutions’ plans. Vision 2050 must therefore align with the country’s Long-Term Strategy for Low Carbon and Climate Resilience (LTS), which is also under development. Together, they can consolidate Tanzania’s targets and objectives into a single framework. Clearer responsibilities for coordinating ministries—such as PO-RALG, the Prime Minister’s Office, and the VPO Division of Environment—and improved communication could improve coordination between central and local governments and local government participation in policy design. Local governments form a critical link between climate action and citizens. But the country’s devolution policy has faced significant challenges and there are gaps in implementation, particularly regarding capital investment and contingency management authority and decision-making, which are both key for addressing climate change. Exacerbating this situation, fiscal decentralization, financial autonomy and budget allocations are limited, and there is a lack of climate change resilience awareness and education among officials and communities. 16  |  Country Climate and Development Report: United Republic of Tanzania Climate change is also inadequately integrated into local government tools, such as the Opportunity and Obstacles to Development and the Local Government Development Grant, which are essential for guiding development at grassroots level. Challenges also hamper the capacity of disaster reduction committees and community engagement, and, while information flows in both directions (from the local level up to the line ministry and back down), it is constrained by structural factors and a reliance on PO-RALG officers who are often not climate change experts. Mainstreaming climate across government plans, policies, and investments will make climate action more effective Developing and adopting framework legislation and/or a standalone climate change policy would bring high-level consistency to government policy approaches and ensure the alignment of future policies. Despite increased climate change impacts in the mainland and Zanzibar, Tanzania has no framework legislation or standalone climate change policy. Instead, provisions are disbursed across multiple pieces of legislation and/or policies, including the NCCRS, Zanzibar Climate Change Strategy, the updated NDC (2021), national adaptation plan (under development), and sectoral adaptation plans for health, climate services, agriculture, gender, and water. Tanzania does not have a solid long-term climate strategy in sectors affected by climate change, and instead cites Reducing emissions from deforestation and forest degradation (REDD+), national adaptation plans of action, and Vision 2050 its as long-term climate change strategies. Its legal mechanisms for translating targets into action could also be stronger: except for the NDC, which provides two GHG emissions scenarios, its strategies, policies, and laws have not committed to a reduction target. Mainstreaming climate change considerations in its core government systems would allow the government to make informed decisions and prioritize spending. Budget constraints limit the implementation of planned projects and quality and robust climate monitoring, reporting, and verification (MRV) systems. Tanzania does not have access to comprehensive data on climate-relevant spending, which would enable the government to make informed decisions and prioritize climate investments. Independently of these data gaps, climate spending appears to remain low compared to the needs estimated in its National Climate Change Policy and it relies heavily on external finance. Although budget guidelines and manuals could provide instructions on incorporating climate considerations into the budget process, the Budget Act No. 11 of 2015 does not integrate climate change considerations into core public financial management tools and processes. Both the mainland and Zanzibar Ministries of Finance are establishing climate finance units to guide climate change integration. Adopting a comprehensive approach that spans budgeting, financial reporting, and expenditure tracking will help ensure their effectiveness. Integrating climate change considerations into all public infrastructure projects is a key action to ensure that public investments contribute to build low-carbon, climate-resilient infrastructure. From fiscal year 2023/24, the Ministry of Finance has mandated that all government projects consider climate aspects and issues, and the government has introduced the Climate Project Investment Management manual. But there is still room to strengthen the legal and regulatory requirements for government to address climate change policy throughout the whole investment cycle, rather than just during the project stage. Green practices are yet to be integrated into Tanzania’s procurement processes and requirements. About 70 percent of the annual budget, or $13 billion, is spent on public procurement, offering an excellent opportunity for the government to demonstrate its commitment to sustainability and support climate-friendly products and services. The government is preparing a sustainable supply chain management policy, covering aspects such as green procurement, to encourage the procurement of energy-efficient, low carbon-emitting, and climate disaster-resilient goods, works, and services and better management of environmental risks during construction. It could also focus on building procurement staff knowledge of climate change and its relevance to procurement. Country Climate and Development Report: United Republic of Tanzania  |  17 Robust and comprehensive MRV systems will strengthen climate change data. Generating climate risk and vulnerability information relies on a multilayered approach using diverse methodologies and sources to assess the potential impacts of climate change. But the government has no agreed methodologies for use across its institutions. Climate risk and vulnerability assessments tend to be conducted through projects and on demand, rather than systematically, mainly due to a lack of financing and expertise. The VPO is addressing this shortcoming in its country vulnerability assessment, and discussions around an ongoing climate change program in Tanzania includes attention to MRV systems and data. Tanzania could do more to ensure free public access to the limited climate risk information that is available. Government institutions with access to these data can make them available to targeted stakeholders in a user-friendly format. For example, Zanzibar’s Department of Fisheries provides tailored information to fishers using the limited meteorological information it has. Establishing adequate platforms for sharing climate-related data, research findings, and good practices among would enable such a shift. Increasing stakeholder engagement and communication with citizens will broaden support for climate action Although Tanzania takes climate change seriously, its accountability mechanisms do not support its ambition. Despite environmental policy and climate strategies providing citizens with the right to access information, many documents are not readily accessible as there is no centralized information portal and no regulations stipulate public access to climate information. Much of Tanzania’s climate change-related policies, plans, strategies, and scientific analysis are available online, but citizens need to search on different websites or use search engines to locate documents. Civil society organizations working on climate change note that this fragments information on climate change policies. There is room to strengthen local capacity for collecting and communicating climate change information. Climate change data provide a foundational basis for understanding current and anticipated impacts of climate change, and their availability significantly shapes and influences public decision-making across multiple levels. The role of local government is crucial in understanding the impacts of climate change and helping citizens determine how they can contribute to climate action. Future programs should seek to strengthen local government and citizen roles in climate action. Although government consults with stakeholders on climate change issues, there is limited room for independent voices, even to support the government in taking ambitious steps toward climate action. There is a strong preference for internal expert knowledge, but there are few technical experts and considerable gaps in available climate change technical capacity. There are, for example, no independent expert advisory mechanisms. And while this is attributed to resource constraints, limited financial and human resources, and lack of policy and legal framework, there appears to be no political appetite for this type of advisory support. Strengthening institutional quality will improve government effectiveness Using MRV systems to generate more information would help with effective decision-making. UNFCCC tools are effective for monitoring and reporting, but Tanzania lacks the expertise to continue implementing them without support. It has not integrated its MRV system into existing governance policies and structures and as a result, the data generated do not inform decision-making. Quality climate change information must be more accessible to the public and within government. The Tanzania Meteorological Agency (TMA) lacks adequate monitoring equipment to provide localized and real- time climate and weather information to inform decision-making. Despite the challenges, TMA has made progress in issuing user-friendly weather information, switching from technical to impact-based forecasts 18  |  Country Climate and Development Report: United Republic of Tanzania to enhance public understanding. This includes seasonal forecasts for specific sectors and short-term forecasts that identify potential impacts in certain areas and on specific economic activities. TMA has also joined several global initiatives to improve farmers’ and pastoral communities’ access to weather information through extension officers and mobile devices. Tanzania’s public sector institutions need to be more responsive and agile. High-quality technical expertise in climate change needs to be strengthened across government. Current institutional rules, processes, resources, and incentives are not enough to enable public sector institutions to be more responsive and collaborative, and to implement the necessary climate change actions. More holistic, problem-driven, and sustained reforms to strengthen the public sector’s institutional arrangements could help, especially if linked to producing more and better outputs. Strengthening climate change capacities across human resource management or development processes will be key. Such capacity is not considered when recruiting or assessing the performance of public servants, embedded in individual staff or team performance frameworks, or used to reward performance. Public servants are offered no structured climate change training, courses or capacity-building programs offered to public servants. Facing significant resource constraints, the government’s training offerings have not kept pace with its international commitments. 2.3. A more resilient financial sector is key for effective climate action Tanzania’s financial sector is small relative to regional peers; and it is dominated by banking. In 2023, financial sector assets stood at about 44 percent of GDP (Bank of Tanzania 2024b) “up from 40.7 and 34.7 percent in 2022 and 2021, respectively”. About 70 percent of the sector’s total assets are in banking; the remaining 30 percent are in the insurance, pension funds, and capital market subsectors. Banks are highly vulnerable to climate physical risks due to their credit exposure to vulnerable sectors and regions. Preliminary estimates suggest that about 54 percent of bank credit could be exposed to sectors that are vulnerable to climate physical impacts, such as trade, agriculture, and manufacturing, which are exposed to floods, droughts, and impacts on labor productivity. Demand for agricultural loans is growing and increased by 20 percent to 10.3 percent in the two years to January 2024 (Bank of Tanzania 2024a). Although important to support the sector’s development, if not carefully managed, this expansion could increase the banks’ exposure to physical climate risks. Self-reported data from nine banks suggests that Dar es Salaam accounts for the largest proportion of bank credit,18 and the Bank of Tanzania also reports that nearly 80 percent of refinanced mortgages are in the Dar es Salaam area (Bank of Tanzania 2023). This high level of credit concentration in Dar es Salaam could be another cause for concern, considering the city’s high susceptibility to climate-related disasters. With (life and non-life) insurance penetration at only 2 percent in 2021/2022 (IRA 2023), low insurance take-up could further reduce banks’ ability to mitigate damage caused by extreme climate events.19 And despite the country’s small GHG emissions profile, some banks could also be exposed to transition risks if they are lending to carbon-intensive sectors, such as livestock, agriculture, or fossil fuel, which will need to respond to growing regulatory, consumer and investor pressures to reduce emissions. With more granular data and other climate and financial modeling tools, there is scope to further refine the sector’s climate risk assessment. For example, more granular credit and asset exposure data (in terms of both geographical and sectoral breakdown) could give a better understanding of how climate risks translate into financial risks for banks. Considering the role insurance and climate adaptation measures 18 These data are self-reported by banks and should be interpreted with caution. If the companies taking out loans have their headquarters in the capital, but production units located elsewhere, the banks may overestimate the amount of credit located in Dar Es Salaam. 19 Insurance penetration indicates how much the insurance sector as a whole contributes to the national economy. It is the portion of country’s GDP allocated to insurance premium. Country Climate and Development Report: United Republic of Tanzania  |  19 could play in reducing risk in banking, and conducting a more in-depth scenario analysis could also improve the analysis. The financial sector note prepared for this Country Climate and Development Report (CCDR) primarily relies on a qualitative analysis of banks’ exposure to climate physical and transition risks and does not model potential interlinkages and compounding effects across different macroeconomic, financial, and climate impacts (Mok, Panchamia and Akeel 2024). Climate risk management practices in Tanzania’s banks are relatively underdeveloped, increasing their vulnerability to climate risks. A survey for this CCDR distributed to nine banks with support from the Tanzania Bankers Association aimed to better understand current practices and perceptions around climate risks. Responses suggest that 78 percent of banks are developing strategies to manage climate risks and opportunities and have delegated board responsibility for tracking and managing these risks. But less than half have conducted a climate risk analysis, noting data limitation and a lack of harmonized tools and methodologies as key barriers. Only 22 percent have made internal or public disclosures regarding climate risks, indicating a significant gap in transparency and information availability. Policy measures related to governance, strategy, climate risk management, and market transparency could help address climate-related financial risks. Setting up internal governance frameworks for financial sector authorities would help clarify roles and responsibilities for managing climate risks, and the Bank of Tanzania could conduct a climate-related risk analysis to gauge existing and future climate risks to the sector. The financial authorities could develop a joint roadmap for greening the financial sector, outlining key policy priorities for managing climate-related financial risks and opportunities. It will also be important to assess compliance with Bank of Tanzania climate risk supervisory guidelines for banks and alignment with global guidelines, such as the Basel Commission on Banking Supervision climate risk principles. Over time, the Bank of Tanzania could consider integrating climate risks into supervisory tools and actions, including on/off-site supervision, and when designing policies to manage climate risks, it should prioritize banks that are more vulnerable to climate risks, such as those with a high credit concentration in vulnerable regions or with high exposure to the agriculture sector. The impact of climate risk supervision on financial exclusion also needs careful management, since micro, small and medium-sized enterprises (MSMEs) are likely to be disproportionately affected by climate change. Providing them with targeted training and support would allow them to better respond to climate risk disclosure requirements or risk management due diligence by banks. 20  |  Country Climate and Development Report: United Republic of Tanzania 3 © World Bank Climate Actions for Inclusive, Resilient, and Low-Carbon Growth 3. Climate Actions for Inclusive, Resilient, and Low-Carbon Growth Three mutually reinforcing multisectoral intervention areas are central for climate-positive, resilient, and inclusive growth in Tanzania by 2050. They are: integrating climate considerations into development efforts to build human capital and social protection; optimizing land and water use and management to boost agriculture and rural productivity, increase climate resilience, and reduce GHG emissions; and prioritizing resilient and low-carbon infrastructure systems to enable climate-positive growth in existing and emerging sectors and urban areas. Given the expected impact of climate change on people and the economy, these three intervention areas offer synergies between development objectives and climate action, and have huge potential if combined with efforts to improve governance and address political economy challenges (chapter 2) and initiatives to mobilize climate finance and engage the private sector in their operationalization (chapter 5). 3.1. Integrating climate considerations into development efforts to build human capital and social protection is a no-regrets measure Tanzania’s most vulnerable people are poor households who often deploy detrimental coping strategies, such as spending their savings, changing their eating patterns, or migration. Stimulating inclusive growth and reducing poverty in a manner that enables households to protect themselves from the harmful effects of climate change will mitigate climate crisis-related backsliding on human capital and poverty reduction. Universal access to adequate social protection and basic education, health, and WASH services are key development measures, and if these are climate-informed, it helps ensure essential services are not disrupted by climate events and that safety nets buffer against climate impacts. Having climate-informed foundational services dampens the negative effect of climate change on increased incidence of vector- and waterborne diseases, heat stress, and migration, and helps increase employment in climate-positive activities. Well-financed, climate-responsive social protection will help households buffer shocks and develop resilient livelihoods Targeted support to help households deal with climate shocks could reduce reliance on unsustainable coping strategies. Many poor households depend on agriculture for their livelihoods, making them disproportionately vulnerable to climate change and unlikely to cope with repeated exposure to climate shock or simultaneous exposure to multiple shocks, such as droughts, floods, and heatwaves. Understanding the spatial differentiation in climate change exposure and vulnerability will help target support to those who need it most. A composite index that aggregates coping approaches, identified in household and national surveys, can help identify where households are more able to cope with shocks. Combining this information with exposure data for different climate risks (figure 3.1) provides a spatially explicit proxy for determining household coping capacity and helps tailor support via different social protection programs. An effort to combine such information for Tanzania reveals that coping capacity is high in regions with the lowest poverty rates (Dar es Salaam, Njombe). Where poverty and resilience are both high (Mwanza, Geita), households may have high access to informal credit and at least one household member in private sector employment. Country Climate and Development Report: United Republic of Tanzania  |  23 Figure 3.1: Share of population exposed to different risks and household vulnerability a) Pluvial or fluvial flooding b) Drought c) Heatwaves % exposed fi % exposed fi % exposed fi % vulnerable fi % vulnerable fi % vulnerable fi Source: World Bank Tanzania Poverty Team, 2024 Note: Expected annual exposure for each risk is: panel a: >0.15 meters; panel b: >50% land affected; panel c: three-day max+ wet bulb global temperature >30°C) Tanzania needs to expand the coverage of its safety net programs, particularly in areas affected by climate shocks. Social assistance remains severely underfunded; at just 0.4 percent of GDP—much of it financed by donors—it is well below the Sub-Saharan African average of 1.6 percent. About 1.36 million households (approximately 5.2 million individuals) are covered in all 31 regions. That is only half of Tanzania’s extreme poor; the other half, and the households below the poverty line that cannot access safety net programs, remain widely exposed to shocks. Households covered by Tanzania’s Productive Social Safety Nets (PSSN) program should be less vulnerable to shocks, as its public works program introduces sustainable land and water management practices in rural areas, which helps smooth household income during shocks (figure 3.2). To ensure the PSSN program adequately covers vulnerable households, Tanzania must significantly increase spending on social protection while simultaneously investing in more flexible Figure 3.2: Scope and reach of the PSSN program a) Share of population exposed to flood/drought b) Climate impacts addressed by the PSSN public works covered by the PSSN program program subprojects, as indicated by survey respondents 85.7 80.1 Coverage 73.3 80 1... 62.9 56.7 56.7 57.1 17% 53.3 9% 12% 31.7 40 25.7 8% 25 ... 10% 10% 7% 11% 7% 13% 12% 1... 11% 9% 11% 10% 8% 1% 13% 17% 0 Erosion Landslide Drought Disease High temperature Water preservations prevention Flooding 16% 16% Powered by Bing © Microsoft, OpenStreetMap % PAA % Community Source: World Bank staff calculations and World Bank, 2022a Note: PAA = project area authority. 24  |  Country Climate and Development Report: United Republic of Tanzania delivery systems. The Prime Minister’s Office and Ministry of Finance can develop a medium- to long-term financing framework for social protection programs and devise strategies for increasing domestic financing for the sector. Households in the middle wealth group that rely on agriculture, livestock, and fisheries should also be considered vulnerable due to their primary income sources. A robust, adaptive social protection system (ASPS) is an effective solution to help households cope with climate shocks. The ASPS can adapt its coverage as needed and target different types of household (chronic/extreme poor, near-poor, labor- or climate-migrants, and so on) through fit-for-purpose interventions. The government can consider using PSSN as the platform for developing an ASPS, but will need to make additional investment in social protection delivery systems (identification, targeting, enrollment, payment, and so on), articulate the ASPS programs, objectives, and institutional arrangements, and develop an accompanying financing strategy. The absence of a reliable early warning system linked to the country’s social protection system is a challenge for planning responses. The social registry is also inadequate for shock response in most affected areas, due to low coverage, at only 1.9 million households, providing limited flexibility for the program’s horizontal expansion, and in the absence of disaster risk financing, shock response is implemented on an ad hoc basis. Several no-regret, low-cost measures can help Tanzania advance toward an ASPS that would reduce the likelihood of households using negative coping approaches to handle repeated climate shocks. These include expanding and formalizing the PSSN registry into a national social registry to increase coverage and prioritize the most vulnerable areas. Improving targeting mechanisms and benchmarking transfer amounts against global comparators would allow it to better allocate adequate emergency response resources. Designing climate-smart interventions tied to income diversification and climate-resilient livelihoods for households and communities, particularly women, would strengthen activities, while formalizing synergies between disaster risk management, disaster response, and social protection would allow prevention and a timely, coordinated response from different ministries, departments, and agencies. The ASPS could be based on the National Social Protection Policy. Universal access to WASH and health services will reduce health and labor risks Access to domestic water provides resilience during shocks. Many poor Tanzanians lack access to safe WASH facilities, especially in rural, but also in urban, areas. Climate change could compound WASH-related risks, as the higher frequency and severity of droughts and floods can periodically reduce water availability and quality and increase the risk of waterborne diseases. Without action, these compounding effects could encumber poor households in terms of labor supply and coping strategies. Without accounting for climate change, achieving universal access to basic WASH facilities could reduce Tanzania’s annual economic losses by $1.9 billion by 2030. Within five years, these savings would enable the government to generate benefits equal to its initial $4.1 billion investment to achieve the goals of the third phase of its Water Sector Development Programme. Complementing the government’s commitment to achieving universal health access with a more adaptive health delivery system will boost resilience in the sector. Universal health access will require, among other things, better coordination between ministries to promote synergies, increasing the size and appropriate distribution of the health workforce, addressing shortages of basic essential medical products, making the best use of health technologies, increasing private sector involvement, and ensuring adequate health financing.20 To make the health delivery system more adaptive, Tanzania can make some low-cost shifts that complement ongoing efforts to achieve universal health care. These include ensuring coordination between ministries, departments, and agencies involved in disaster risk awareness and preparedness in the health sector. It can also develop strategies to raise awareness among the health workforce about 20 Health expenditure has not increased in terms of GDP percentage despite growth (1.8% in 2013/14 and 1.5% in 2021/22) and are below commitments made under the Abuja Declaration and the targets needed to achieve universal health care. Country Climate and Development Report: United Republic of Tanzania  |  25 climate change and its health implications, improve monitoring of climate change impacts on disease, health risks, and the health system,21 and ensure delivery of adequate health services to areas that are vulnerable and lagging in terms of access to services. Establishing climate-resilient infrastructure design guidelines and an implementation plan will help minimize damage to health infrastructure or disruptions to health services from climate events. Improving the resilience of food, WASH, social protection, and health systems to climate change can reduce impacts on nutrition. Climate change indirectly affects food and nutrition security, undermining efforts to address undernutrition, one of the world’s most serious but least addressed socioeconomic and health problems.22 Extreme weather events increase food insecurity, reduce food diversity for children, and increase wasting, stunting, micronutrient deficiencies. Tackling climate resilience in the WASH, social protection, and health sectors can help reduce the impact of climate change on malnutrition while also reducing gender inequities, improving livelihoods and access to water and sanitation for women, and boosting social protection and health services for women. Education services must position youth to face climate change challenges and seize opportunities Climate events can disrupt access to school and learning outcomes. In Tanzania, floods cause schools to close, with education infrastructure often being used as emergency shelter, and disrupt learning.23 When schools remain open, floods or extreme heat conditions affect regular teacher and student attendance, impacting the quality of education through the loss of learning hours and low curriculum coverage. Because climate change reduces available household income in agriculture-dependent households, it also reduces the demand for education. On average, the compounding effects of climate change mean that children in hotter climates complete less formal schooling and score lower on standardized tests than their peers in cooler climates. It is important to ensure the education infrastructure can adequately handle localized climate shocks. Two regions can have very different risks and exposures, yet both face poor educational outcomes. For example, in Tabora, 117,000 people are exposed to drought, while in Songwe, 16,517 people are exposed to flooding. As such, regionally specific policies that promote the use of climate-resilient infrastructure design are important to minimize disruptions from local climate risks. Educational infrastructure requirements can also encourage schools to use energy-saving stoves and biogas for electricity and meal preparation, and carbon capture through school-affiliated tree planting campaigns to help reduce GHG emissions. Education can play a key role in raising awareness of climate change and influencing norms and attitudes. Strengthening the curriculum to deepen knowledge of climate change will raise awareness around the issue and deliver the skills needed to tackle it. The primary and secondary curriculum builds foundational knowledge of climate change, but there is room to enhance the technical, vocational education, and training (TVET) curriculum to prepare students for climate change-related professions.24 The national TVET council establish occupational standards to inform the development of climate-related occupational skills programs by training providers and developing quality assurance systems. And, although several public universities offer climate change-related programs, identifying missing thematic areas can help them update or redesign their courses to integrate climate-related education. 21 This could be achieved by integrating climate variables/meteorological information into the health management information and integrated disease surveillance and response systems. 22 The current economic costs of undernutrition are estimated at 5–11% of GDP in Africa and Asia. 23 During the 2023 River Ruvuma floods, 1,400 affected people were housed in schools; and 5,600 people from the Manyara region were evacuated to three schools in the region (IFRC 2023). 24 Qualified students have access to Kikuletwa Renewable Energy Training and Research Centre—a regional flagship TVET institution that increases access and improves the quality of training—which aims to become a center of excellence for renewable energy focusing on hydropower, solar, wind and bioenergy (Najjumba, Goer, and Kulaya 2024). 26  |  Country Climate and Development Report: United Republic of Tanzania Financing will be central to operationalizing resilient education infrastructure and green skills programs. Investments in reducing climate disruptions in education facilities are vital, while encouraging greater student enrolment in climate change-related fields of study—including among women and girls—will help deliver the skills the country needs. The gender imbalance is evident across climate change-related programs in Tanzania’s public universities—for example, in mining and environmental science programs, the female/male enrollment ratio is 1 to 3. 3.2. Optimizing land and water use and management will boost agriculture and rural productivity, increase climate resilience, and reduce GHG emissions Tanzania is abundant in natural assets that can deliver goods, jobs, and ecosystem services to help address climate change, but their potential is undermined by unsustainable use and low agricultural productivity. Climate-resilient development hinges on reversing the decline of renewable natural capital wealth per capita—including fisheries, forests, ecosystem services, pastureland, cropland, and protected areas—and boosting productivity in agriculture and natural asset-based sectors. An integrated approach to management is key because of the interconnections across land uses, which include agriculture, grazing, timber production, protected areas, water storage, and aquaculture. Improving land and natural asset management and boosting agriculture productivity can also help Tanzania meet its NDC commitments on adaptation and mitigation. Around 70–80 percent of the country’s deforestation is a result of converting forest for agriculture due to low farm productivity. Approximately 30 percent of land is used for agriculture, and about 7 percent is classified as shifting cultivation; these are areas with forests in various stages of regrowth, which are often not expected to fully recover (TFS 2019). Maize, cassava, cotton, and tobacco cultivation, and livestock rearing have cleared vast areas of Miombo woodland since 2000. Cattle herds often exceed the area’s carrying capacity and negatively affect the country’s forests and woodlands through overgrazing. There are land degradation hotspots in Dodma, Lindi, Tabora, Singida, Shinyanga, and Arusha regions (URT 2018a). Inefficient land use partly stems from the absence of well-functioning land markets and clear land ownership, and failure to internalize the value of ecosystem services. Weak delivery of extension, credit, and other services and inadequate policy intervention—for example, on firewood or charcoal production— also contribute to land degradation. Accelerating efforts to optimize land use for increased agricultural productivity and ecosystem services, promoting the sustainable use of biomass energy, and curbing illegal land conversion could help reverse deforestation and forest and land degradation. Efficient land use can promote climate-smart rural economies and carbon sequestration Addressing inefficiencies in land use can increase the productivity of economic activities, such as agriculture, while helping reduce emissions. A simplified land allocation model that generates two clusters of outputs—agriculture outputs, such as crops, livestock, meat, and dairy products, and wood product and ecosystem services, such as carbon storage, soil erosion reduction, and biodiversity—reveals that Tanzania could move to more efficient land use practices that increase both types of output (figure 3.3). Country Climate and Development Report: United Republic of Tanzania  |  27 Figure 3.3: Optimizing economic value and carbon storage from land use in Tanzania under different scenarios a) Production possibility frontier and national totals for b) Areas under different aggregated land use current and constructed land use maps classes for 2050 14 100 13 80 Carbon storage (tCO2e, billions) 12 Hectares (millions) 11 60 10 9 40 8 20 7 6 0 0 5 10 15 20 Current BAU BAU with ASP ASP with Optimized Net economic value ($, billions) climate action climate action Frontier Current BAU BAU with climate action Irrigated cropland Rainfed cropland Grazing ASP ASP with climate action Optimized Forestry Non-forest natural Forest Source: Natural Capital Insights. 2024. Notes (panel a): The production possibility frontier presents the best possible combinations of agricultural production and environmental service under different landscape configurations. The x axis depicts the net economic value of productive land use (cropland, grazing, and forestry and nonenvironmental services), minus transition costs; the y axis depicts total carbon storage in above- and below-ground biomass. The frontier extends below zero on the x axis because reaching such a high level of carbon storage requires significant restoration efforts, which have a cost in the model. In these graphs, reference to climate action is regarding the mitigation target. While there are many pathways to the production possibility frontier, complementary measures to land use change are necessary to achieve the country’s NDC commitment on GHG emissions reductions without reducing the net economic value of productive land uses. This section examines land use under the BAU and ASP scenarios, and with climate action. The “with climate action” scenarios include the additional changes in land use needed for the BAU and ASP scenarios to deliver the country’s NDC emissions reductions target. These changes are compared to the production possibility frontier and options are explored for ensuring the land use changes advance Tanzania towards the frontier. There are two noteworthy points. First, irrigation infrastructure plays an important role in reaching the production possibility frontier and will need to be expanded beyond what is envisaged in both the BAU “with climate action” and ASP scenarios. Second, the analysis assumes that protected areas cannot be converted, and that most nonprotected natural areas are dedicated to cropland use, limiting the areas available for additional land use changes. In such a situation, to optimize land use while fulfilling the country’s land-based GHG emissions reductions, Tanzania will need to provide secure land tenure, monetize the provisioning and regulatory ecosystem services generated by forests and conservation of land, and promote the production of higher-value agricultural products. This will incentivize necessary investments and make the land use change financially viable. Expanding irrigation will require approaches tailored to different hydrological realities Many poor smallholder households lack access to climate-resilient irrigation and services. While erratic rainfall is the largest risk factor for smallholder farmers, traditional approaches have not been effective in reaching access levels that build resilience in much of the country. Despite serious government efforts, irrigation has remained far below the National Irrigation Masterplan targets. Some farmers use small pumps and river diversions to increase their access, but for most, such methods remain out of reach due to limited supply markets of quality products, poor knowledge and support systems, and a lack of access to finance (World Bank 2022b). 28  |  Country Climate and Development Report: United Republic of Tanzania Establishing a micro-irrigation challenge fund to facilitate linkage between farmers, equipment suppliers, financing institutions and regulators could be a game changer, but a tailored approach that responds to local hydrological realities, and stronger institutions are required. While much of Tanzania has swathes of irrigable land and ample water resources to be developed, some basins will require a strong focus on consolidation, conservation, and regulation to protect overall water security. At the same time, irrigation performance in government-led irrigation is below par or nonoperational. Improving governance and service delivery improvement and transparency of budgeting and performance are needed to create an accountable service model, and sustainability of infrastructure and services.  Secure land access, via an effective and functioning national cadaster, can engender climate action Efficient use of public, private, and community lands requires enabling conditions to be in place, including for making medium- to long-term climate-positive investments. Long-term investments are viable when there are well-functioning land markets and systems to quickly resolve land conflicts. All land in Tanzania is public land vested in the president, as a trustee for and on behalf of the country’s citizens. The Constitution provides that every person has the right to own property, and outlines the three categories of land: general (2 percent, includes all urban areas and a large percentage of the population and economic activity), reserved (30 percent), and village (68 percent). Rapid urbanization has strong implications for land use planning and administration. Land ownership documentation is rare, and women landowners are particularly vulnerable. In 2021, only 25 percent of urban land was covered by a formal land certificate, as urban land markets are weak, and most transactions take place outside the formal land administration system, with buyers acquiring land informally, often in unplanned settlements. Land disputes are common in both rural and urban areas, with conflicts arising from increasing population pressure, conflicting land uses—for example, grazing versus cultivation—proliferating peri-urban development, and overlapping land concessions. These issues are exacerbated by the almost complete lack of documentation. The potential for conflict is particularly concerning for women: although women’s land rights are well-supported in law, female rural smallholders have the lowest tenure security in Tanzania, and can lose land through divorce, widowhood, and inheritance. In urban areas, female-headed households struggle to access housing, and their rights are often undermined in informal settlements. Accelerating the establishment of comprehensive cadaster with complete ownership information could help secure tenure, reduce land conflicts, and formalize land markets. Such efforts, particularly if complemented with other programs, can also increase access to credit and insurance, promoting more climate-informed investments. Evidence from donor support for a comprehensive land administration system in the region has resulted in a close to sevenfold increase in formal transactions, from 40,000 in 2014 (adjusted figure) to around 270,000 in 2017, of which around one-third were related to transfers through sale, inheritance, gifting, and so on. But to leverage land titles for the less wealthy, alternative forms of access to finance and innovative credit risk mechanisms will also be necessary (Baldwin, Charles and Iyadema 2019). To help address this, the government could promote village and district land use planning and registration of collective/communal certificates of customary right of occupancy that build on existing consultation models but include shared land uses of available land. As well as protecting communal resources—for example, by creating connected landscapes to facilitate coexistence between livestock and wildlife habitats—these models can reduce land use conflicts, promote equal access, share benefits, and enhance land governance with more environmentally sensitive land use management practices. These models already exist25 and could be upscaled. It is important to note that national land use planning 25 See, for example, https://www.ujamaa-crt.or.tz/. Country Climate and Development Report: United Republic of Tanzania  |  29 guidelines recommend the preparation of joint village land use plan as a tool for natural resource use and management, and to ensure alignment and cooperation across various administrative boundaries (National Land Use Planning Commission, 2020). Such planning could engender broader collaboration and aims to foster resilience in food systems, mitigate land-use conflicts, conserve ecosystems, and promote sustainable resource management. Conservation and improved natural habitat management can create economic opportunity There are untapped opportunities to generate revenue from natural forest habitat conservation and management. In 2019, Tanzania ranked 10th out of more than 50 African states for tourism growth and has potential for further growth in this sector (Spenceley 2024). Nature-based tourism is the country’s second-largest component of GDP after agriculture, and third-largest source of employment (UNWTO 2023). The country already has policies and laws that offer incentives for conserving protected areas, including tax benefits for companies and individuals engaged in conservation, subsidies for communities actively involved in managing protected areas, and subsidies for sustainable management practices that are compatible with conservation, such as sustainable agriculture and ecotourism. Updating the 2002 Integrated Tourism Masterplan in a consultative and inclusive way and enforcing the updated plan could enable sustainable expansion of the country’s ecotourism network26 while addressing challenges such as human-wildlife conflict and avoiding the involuntary displacement of traditional inhabitants. Using information on the potential impacts of climate on the tourism sector (figure 3.4) to inform where to Figure 3.4: Temperature change and drought risk in Tanzanian protected and conserved areas a) Temperature increase (dry hot) by 2050 b) Drought risk (dry hot) by 2050 Source: Spenceley 2024. 26 Protected wildlife areas cover 26.6% of the country’s total land area (Solimar International 2021). Opportunities include establishing public- private partnerships (PPPs) to co-manage conservation areas, as seen in Botswana and South Africa. Tanzania’s Chumbe Island Coral Park, which is co-managed by a PPP, is an example of best practice. 30  |  Country Climate and Development Report: United Republic of Tanzania expand activities, site seasonal and special camps, and how to smooth the seasonality of visits could reduce the risk of stranded tourism assets, making an updated tourism masterplan more climate resilient. Increasing yield per visitor and trip, rather than number of visitors, adapting tourism products and services, and targeting local markets through promotions and pricing is also advisable. Preserving natural habitats can also help maintain carbon stocks. Humid montane forests, lowland forests, and mangroves have the highest average carbon stock among Tanzania’s land classes, at 82.4, 58, and 78.9 tonnes of carbon per hectare, respectively (Mauya et al. 2019). Targeted support and disincentives can improve forest management and reduce forest degradation In 2015, approximately 35 percent of Tanzania’s forests were protected through forest reserves, national parks, and game-controlled areas. But 65 percent are on unprotected, general-use land and therefore vulnerable to degradation or deforestation, through agriculture, biofuel production, uncontrolled firewood collection, illegal charcoal production, and forest fires (Elikana et al. 2020).  Supporting a commercial approach to forest plantation management could increase productivity, motivate more investment in forest plantations, and reduce the degradation of these assets. Tanzania has approximately 325,000 hectares of forest plantations, including small-scale pine and eucalyptus woodlots. Small and medium-scale tree growers manage 54 percent of this area, with the rest managed by the Tanzania Forest Service (31 percent) and large private plantations (15 percent). Implementing improved silviculture and lengthening rotation would increase future productivity and the value of standing timber. Working together in groups to aggregate supply could increase the certainty of the quantity and quality of supply, expanding access to markets. This would allow the small-scale producers to respond to the project increase in demand for wood products from the construction, furniture, and pulp and paper industries. (Held et al. 2017) Targeted incentives and disincentives can help scale up natural regeneration or active restoration approaches in participatory and community-based forest management regimes. Available instruments include taxation, penalties, subsidies, permits, quotas, tenure rights, and green loans (figure 3.5). The three most effective mechanisms are: secure access to ecosystem service benefits, such as soil erosion control or gum harvesting; penalties for violations on private and communal forest management areas; and quotas and permits for grazing and harvesting of timber in community management areas. It is common to use a package of incentives to motivate the creation of enclosures or fodder reserves to restore forests, with carefully designed monetary incentives that have clear and attributable metrics for payment, and assurance of continued payments for performance alongside non-monetary incentives. The combination should be based on the tenure of the degraded land because the restoration objective can vary by tenure regime. Other factors—such as local knowledge, social capital, participation in decision-making, and inclusiveness of activities—also influence the effectiveness of packages. The country should produce biomass-based energy sustainably while it transitions to clean cooking Unsustainably sourced biomass and illegally produced charcoal are the dominant form of cooking fuel in Tanzania.27 Although the number of households, institutions, and industries that rely on biomass has declined, the rate of change has been slow, and for some fuels, absolute values have increased. Tanzania’s 27 On the mainland, firewood is the main source of cooking energy (60.9%), followed by charcoal (28.8%), industrial gas (3.2%), electricity (2.1%), paraffin (1.3%), and solar (1.1%), with firewood more common in rural than urban areas (84.8% and 17.4%, respectively), and charcoal more common in urban areas than rural ones (60.5% and 11.5%, respectively (NBS Tanzania 2019). On Zanzibar, there is a similar situation: firewood is the main cooking fuel (50.8%), followed by charcoal (34.1%) and industrial gas (7.7%) and firewood used more in rural areas than urban areas, at 80.5% and 18.3%) (Office of the Chief Government Statistician 2020). Cooking with charcoal is dominant in urban areas (60.3%), compared to 13.1% in rural areas. Gas is also more common in urban than rural areas, at 14.5% and 2.4 %, respectively (ESMAP 2024). Country Climate and Development Report: United Republic of Tanzania  |  31 Figure 3.5: Incentives and disincentives that drive regeneration and restoration a) Range available Incentives and disincentives Regulatory Voluntary Economic and financial Taxation Payments for ecosystem services Eco-labeling & certification Penalties REDD+ Green loans Cost-sharing initiatives Monetary awards Subsidies Low-interest loans Permits and quotas Rewards for ecosystem services Performance recognition Non-financial Property and tcnure rights Temporary use restriction Education and awareness creation Access denial Farm set-asides Technical assistance Currently applicable incentives Potentially applicable incentives b) Mentioned in focus groups 100 90 80 Share of participants (%) 70 60 50 40 30 20 10 0 Conservation Penalties Quotas and Education and REDD+ Well-defined Rewards benefits permits Information property rights Source: Wainaina et al. 2021. charcoal sector contributes approximately $650 million to employment, rural livelihoods, and the wider economy every year, providing an income for several hundred thousand people in urban and rural areas. This includes informal employment as small-scale producers or traders for people in poorer households in urban and rural areas with limited options for income generation (World Bank 2010). The unclear regulatory framework and complex requirements for permits, levies, and so on, has resulted in a large share of extra- legal activities in the sector. This absence of effective regulation in the sector costs the national and local governments an estimated $100 million per year (World Bank 2010). Despite the wide-ranging initiatives aimed at transitioning households to improved cooking systems, charcoal and wood energy will continue in the foreseeable future and will be part of the transition. This scenario is underscored by population growth and urbanization (especially in secondary cities) as well as historical user preference for solid biomass for cooking. According to the government, achieving 80 percent modern-energy cooking systems by 2034—a goal of the National Clean Cooking Strategy (2024–34)—will cost the public sector $180 million per year to bridge the affordability gap for poor and vulnerable households, and unlock private investments for installing downstream modern-energy cooking infrastructure. Before launching the strategy, mainland Tanzania’s clean cooking targets through the Sustainable Energy for All 2015 Action Agenda aimed to reach 75 percent modern-energy cooking systems by 2030, which would 32  |  Country Climate and Development Report: United Republic of Tanzania cost $843 million per year but can unlock potential benefits worth $9.7 billion.28 To reach these ambitious targets, Tanzania will need to establish a robust enabling environment for the clean cooking sector, build capacity for clean cooking projects, access climate finance, and conduct targeted awareness and behavior change campaigns. As solid biomass will be part of household’s clean cooking transition to 2034, promoting sustainable charcoal production and more efficient use of these fuel resources is key. Policy measures to enable a sustainable charcoal sector could include fiscal empowerment of local government institutions and sustainable forest resource management for charcoal production (World Bank 2010). Diversifying and strengthening reporting on charcoal-related revenue collection within government systems and structures would create more transparency at all levels of government and help track the charcoal sector’s contribution to the national economy. Empowering the village and district-level institutions responsible for implementing and enforcing charcoal sector policies to retain a percentage of charcoal revenues to reinvest in sustainable charcoal production would also provide an incentive. Linked to other reforms mentioned here, a performance-based grant scheme with silvicultural packages could support the establishment of plantations. With robust monitoring and enforcement, and the promotion of improved technologies, such a scheme could reduce emissions from forest degradation and generate other ecosystem services within urban charcoal catchment areas. Institutions, industry, and the service sector will also need to be incentivized to transition away from charcoal. Improved farming methods and inputs can help boost agriculture productivity and resilience Tanzania’s agriculture is characterized by low crop and livestock yields. Its cereal and beef yields are just 40 and 60 percent of the world average, respectively, and only 2.5 percent of its irrigable land is irrigated. Across the country, 60–100 percent of farmers report perceiving the gradual impact of climate change on their agricultural activities in recent years, noting the increased variability of temperature, rain, and wind patterns (URT 2017). Agricultural production decisions have significant impacts on the use of natural resources and associated ecosystem services, and production grew between 2007/08 and 2019/20, not due to productivity gains, but because the country’s cultivated area expanded from 8.3 to 13.9 million hectares. Although the agriculture sector’s aggregate share in the economy (from crops, livestock, forestry, fishery, and agricultural services) is due to reduce under both the BAU and ASP scenarios, its total value add stands to increase almost fivefold 2050. But unless it urgently addresses allocative inefficiencies and climate change, Tanzania stands to miss these targets. Embracing CSA solutions can sustainably increase productivity and make agriculture more climate resilient. Meeting the growth targets by expanding agriculture would lead to land conversion and come at the expense of ecosystem services. Although Tanzania’s NDC notes the importance of investing in agricultural productivity and resilience to climate change, few actions have been implemented. The NDC proposes multiple adaptation measures, such as improving land and water management, increasing sustainably through CSA interventions, protecting farmers against shocks though insurance, strengthening research and development extension services, and diversifying livelihoods. There is also high variance in implementation across the country (URT 2021a). The low implementation of NDC agriculture actions is due to a lack of specific plans or strategies to develop crop insurance and early warning systems for crops and livestock, prioritize methane mitigation in livestock and rice, promote farmer-led innovation or mechanization, and so on. Expanding irrigation is a no-regret action, considering that every dollar the government spends on irrigation yields up to 16 times the value in increased farmer income (World Bank 2022b). Of the country’s 44 million hectares of arable land, 29.4 million are suitable for irrigation: 2.3 million have high potential, 28 Calculated with https://energydata.info/cleancooking/planningtool/. Country Climate and Development Report: United Republic of Tanzania  |  33 4.8 million have medium potential, and 22.3 million have low potential (URT 2018b). But only 727,000 hectares are equipped with public irrigation infrastructure, some of which are not operational (Minister of Agriculture 2023). Solar and micro-irrigation technologies present climate-smart farmer-led opportunities for expanding irrigation.29 Dairy farms can also introduce solar milk chillers to reduce wastage. Improving seed and breed varieties is another no-regret action. Increasing the percentage of planted areas using improved seeds would lead to productivity gains. Investing in seed systems has one of the highest benefit-cost ratios of any public investment, returning 17 times more value to farmers than the original investment (World Bank 2022b). Improving livestock breeds is a priority for bridging Tanzania’s dairy and carcass yield gap, as average carcass weights (139 kilograms) are less than the half the average among leading livestock producers in Africa (273–325 kilograms). Average dairy production is 5 liters a day, compared to a potential 30 liters/day. Improving breeds is necessary for other production and policy measures and investments to generate their intended positive outcomes. Complementing these no-regret actions, climate-related interventions are important for sustaining productivity gains. Investing in research and development to climate-proof seeds and maximize livestock yield potential in each of Tanzania’s agroecological zones can ensure yields are not compromised under different climate change futures. For example, conservation agriculture-produced maize yields can be 1.8–2.7 times higher than maize grown with conventional methods under mild drought conditions (Cairns et al. 2013). In the semi-arid Singida region, simulations using well-adapted and improved varieties offset yield losses due to prolonged high temperatures from climate change more effectively than other methods, including irrigation, mulching, and increased fertilizer usage (Volk et al. 2021). Crossbreeding hardy and adaptable Indigenous breeds with high-yielding exotic breeds leads to sustainable yield improvements, while also adapting to climate change. Early trials of crossing Taurus cattle (such as the European Sussex, which have high growth rates and heat tolerance) and Indicus cattle (such as the Indian Boran or Brahman, which have adaptable traits to control pests and resist disease) yielded increased carcass weight of 200–250 kilogram in Tanzania’s hotter agroecological zones.30 Zanzibar would benefit from focusing complementary measures on improving the resilience of seaweed farming and transitioning production systems to cope with saltwater intrusion, including diversification strategies that embrace the new normal. Improved soil health and water management will unlock the full potential of improved crop varieties. Integrated soil fertility management supports sustainable soil health management over a long period and encourages minimal use of artificial inputs, reducing nutrient loss and encouraging natural re-fertilization. Supporting micro-irrigation systems, such as drip irrigation and hand pipes, is a low-cost, farmer-led initiative that increases irrigation efficiency. The government can redirect chemical fertilizer subsidies to results- based incentives, rewarding farmers for climate-smart practices that promote long-term soil health and water efficiency, thereby enhancing climate resilience. Improving feed availability with animal productivity and incentives for destocking would enable the country to produce the necessary quantities of beef and dairy products with fewer animals and lower GHG emissions.31 Although Tanzania has 3,384,485 hectares of designated pastureland (MoFLD 2023), these are largely undeveloped. Sustainable pastureland and water management are also crucial, as they guarantee feed and water for grazing animals. Improved livestock breeds, alongside incentives to lower herd size, can help reduce GHG emissions (box 3.1), but destocking will require motivating changes in cultural and social preferences. 29 Solar irrigation can convert diesel irrigation pumps to renewable energy and bring additional irrigable lands under productive farming to increase yield. 30 Interview with Mbogo Ranches, a pioneering beef cattle breeder in Tanzania. 31 Countries with low dairy productivity—producing less than 2,000 kilograms (kg) of fat and protein-corrected milk (FPCM) per cow per year—emit 5–25 kCO2e per kg of FPCM produced. More productive countries, with cows producing 2,000–10,000 kg of FPCM per cow per year, emit as little as 2 kCO2e per kg of FPCM produced. 34  |  Country Climate and Development Report: United Republic of Tanzania Box 3.1: Opportunities for reducing methane emissions in the livestock sector With 36.6 million heads of cattle, representing 11 percent of Africa’s cattle population, there is significant potential for reducing methane and GHG emissions in Tanzania’s livestock subsector. Enteric fermentation from livestock, which primarily produces methane, accounts for over 60 percent of all the country’s agriculture sector emissions (World Bank 2023b). Sustainable intensification through improved animal genetics, health, and feed will significantly reduce emissions while meeting national food needs. Intensive and efficient livestock systems have enabled South Africa to produce twice as much beef as Tanzania with one-third the cattle stock, yielding just 14 kilograms of CO2e (kCO2e) per kilogram of meat produced, compared to Tanzania’s 60 (FAO, 2022). This trend is consistent with other highly productive African peers, such as Zimbabwe and Egypt, whose emissions are 9 and 3 kCO2e, respectively. High- productivity dairy cattle can also lower the emissions, from 25 to 2 kCO2e per kilogram of milk produced (FAO 2019). The sector can further help reduce GHG emissions by steering consumption toward monogastric livestock, such as poultry and pigs, and dairy, which have up to nine times lower emissions-intensity per kilogram than ruminants (FAO 2019). Investing in the agriculture value chain and climate-resilient market infrastructure, and strong private sector involvement, is vital for sustainable agricultural development. Private sector investments in innovative technologies, such as precision agriculture and renewable energy, can enhance productivity, reduce environmental impacts, and boost efficiency across the value chain—from climate-resilient storage to low-carbon transportation—bringing high-quality products to market via low-carbon supply chains. Reforms and incentives are essential to increase private sector investment in resilient food systems. Helping farmers access extension services would accelerate productivity gains. Every public dollar spent on extension services yields nine times the value in farmers’ income gain (World Bank 2022b). But in 2020, only 7 percent of the farming population (537,700 households) received support from extension workers—a steep decline from 67 percent in 2008—and only 9 percent of livestock keepers (250,768 households) received extension services (NBS Tanzania 2020a). Innovative approaches include using digitalization to scale technologies and extension services, incentives for third party players to share the extension burden,32 and farmer-led extension services and farmer field schools to expand the scale of extension. Improving access to financial services can help farmers adopt improved inputs, shift away from informal credit systems, and increase access to affordable insurance. In the 2019/20 season, 294,000 smallholder households borrowed TZS 200.7 billion in agricultural credit and repaid TZS 284 billion (URT 2021a), demonstrating a willingness to pay market-rate interests to access formal agricultural credit. Bundling financing instruments with financial literacy packages, insurance, or climate-smart input use would further reinforce efforts to sustain CSA. Clear tenure could also help improve access to such financing instruments. Increasing the penetration of crop and livestock insurance could help farmers recover from shocks and boost investment confidence. Weather-indexed crop insurance, which automatically pays out during extreme events, significantly lowers the cost of servicing low-income, small-scale farmers (who have a high acquisition cost relative to the price they pay), since there is no need for traditional services associated with insurance, such as in-person claim assessments. Delivering digital financial services— such as microinsurance covers and unsecured loans from mobile network operators, including BIMA PIMA, Vodacom’s M-Pawa, Tigo’s Nivushe, and Airtel’s Timiza—can enhance farmers’ access, and when properly tailored to their needs and income cycles, can boost their resilience to climate change effects. 32 Private sector parties, large farmers, and nongovernmental organizations could be sensitized to offer extension services that align with their mission, such as meat processors working with livestock keepers to boost carcass weight, and crop plantations establishing outgrower schemes and training farmers to meet required quality and quantities. Country Climate and Development Report: United Republic of Tanzania  |  35 3.3. Prioritizing resilient and low-carbon infrastructure systems will enable climate-positive growth in existing and emerging sectors and urban areas Tanzania would benefit from taking a systems approach to infrastructure planning and investment that builds in resilience considerations and enables low-carbon growth in cities and across the country. High-quality energy, transport, and digital infrastructure systems are necessary for economic prosperity and structural transformation, as they can help unlock new opportunities, boost productivity, and catalyze growth. Meeting growth targets with new and existing sectors comes with increasing demands on infrastructure and a need for additional infrastructure, which have implications for system functionality and efficiency. For cities in Tanzania, improved connectivity will also allow for increased engagement in tradeable activities, from manufacturing to professional services. Connectivity within and between cities is also important for affordability of foods, goods, and services. A well-functioning infrastructure system is a necessary condition for greater private sector investment, greater engagement in global value chains, and increased productivity under all climate change futures. Both existing and planned infrastructure will need to withstand expected climate impacts, increased demand from a growing urban population and expanding industry and service sectors. Bolstering the resilience of Tanzania’s infrastructure system to climate change is central for ongoing connectivity and access. The need for inclusive growth in Tanzania underscores the importance of a resilient infrastructure system, as it ensure access to markets and basic services across all landscapes. It is possible to build resilience in key transport networks while also maintaining a low-carbon transport footprint Tanzania’s highest-traffic routes carry nearly 10 million tonnes and $10 billion of goods per year, at baseline. The segments with the highest tonnage flow are linked closely to Dar es Salaam, particularly toward Zambia, and then through Dodoma to Lake Victoria, and the spatial distribution of the dollar value of freight flow is similar. In terms of network criticality,33 the A109 route, which connects the many international trade routes around Lake Victoria, is most important, followed by the T4 close to Lake Victoria, and other routes, including to the south from Dar es Salaam. In terms of both flow tonnage and value criticality,34 the most important routes are the T1 and T3, followed by the T18 and T17, which all connect Dar es Salaam with Dodoma, the northwest and west, and the southeast. The greatest mining value criticality is observed on the T1 between Iringa and Makambako, which is associated with the flow of mining goods between the southwest and Dar es Salaam. The rail network is limited, carrying only around 3.8 percent of total freight volume. While there are some important rail links, none are in the top 10 most critical links in the multimodal rail-road network. Several types of transport network intervention can bolster resilience against climate shocks and stressors and reduce infrastructure disruptions, to avoid isolating communities and industries from services and markets across the country and within cities. Drainage rehabilitation of vulnerable paved links and paving nearby unpaved links to increase redundancy can help reduce flood risks. An aggressive strategy, based on paving 750 kilometers of unpaved highway and rehabilitating 250 kilometers of paved highway would incur substantial costs, but these would be offset by savings in the early 2030s, and save over $1 billion (not discounted) under BAU scenarios by 2050, with higher savings in the pessimistic climate pathway. These adaptations are vital in vulnerable areas, including the regions abutting Lake Victoria, which are likely to experience the highest direct and indirect losses due to both flood exposure and their positioning on border trade routes. They are assumed to be standard under the ASP scenario; implementing a more aggressive adaptation strategy under the ASP scenario would lead to greater cost reductions over a similar timeline. 33 This measure is equal to the percentage change in total travel time between all origin destination pairs if a segment experiences a large traffic jam. 34 This is similar to normal network criticality, but weights routes by flow tonnage or value. 36  |  Country Climate and Development Report: United Republic of Tanzania Robust transport sector planning can reduce Tanzania’s vulnerability to climate risks. It necessitates examining observed historical flood events and losses to inform whether assumptions in economic loss estimations are reasonable or under/overpredicting and creating a geolocated asset inventory with measurable standards. Although many inventories are available for Tanzania, these are difficult to combine with other geocoded databases because they either lack geographic information system specification or use standards that cannot be translated to measurable numbers. For example, if a bridge is listed as being in “poor condition”, it cannot readily be translated into susceptibility to flood events, making it hard to use context-specific data. It is also important to log and study any modifications to reduce direct/indirect flood risk costs, including different modification options, and their efficacy/cost. Transport sector planning should include contingency planning, with attention to vulnerability and criticality. This can reduce system vulnerability by examining where trade flow and criticality is highest during decision-making. Robust road network improvements around flood-prone areas in the Lake Victoria region with high international trade importance (especially the western side) will be central to such plans. Contingency planning should also account for infrequent high-cost events, physical damage mitigation, rehabilitation response, and availability of funding. It is important to raise awareness that, as well as causing hazards to the transport network, climate change will cause disruptions with large costs, depending on the climate scenario pathway. Maintaining a low-carbon footprint in the logistics sector will help Tanzania meet its emissions targets and eventually reach net zero. As Tanzania is projected to become an East African logistics hub, with inter-regional cargo trips exceeding intra-regional ones, it is important to ensure inter-regional trips are primarily via railway. Using different projections for shifting to low-carbon transport options,35 interventions in this sector are as effective as those in the mass transit sector, even if the share of cargo trips is smaller than passenger trips. Assuming the railway offsets 0.0008–0.0013 tCO2e per dollar, it is recommended that the increase in cargo transport under the ASP scenario be met by shifting most of the inter-regional cargo transport to rail. As railway is an expensive investment from an emissions reduction perspective, it is justified based on other co-benefits, such as faster delivery and streamlined cargo processing, and reducing congestion on inter-regional road networks. Over time, building more lines will make the railway more efficient. Nearly doubling the additional railway infrastructure increases the offset emissions. But in rural areas, where cargo transport demand does not justify the cost of new railway infrastructure, shifting cargo trips from 2-axle trucks to articulated trucks will be more suitable for lowering emissions. Increased private sector and international development agency financing for transport is necessary for Tanzania to meet its NDC targets. For the transport sector alone, aggressive efforts to develop infrastructure for low-carbon transport modes, such as cycling, mass transit, and railway, would require $18.7 billion. The planned economywide budget of $19.2 billion for all NDC activities will therefore not be enough to achieve the ASP emissions reduction scenario, so private sector investment will be needed to augment the government’s efforts. Increasing the share of renewable energy can help Tanzania meet demand while also reducing emissions Tanzania’s energy sector will need to balance meeting growing demand with its NDC commitments to reduce emissions. Peak electricity demand is expected to increase from 1,350 megawatts (MW) in 2022 to 5,400 MW in 2044 under the BAU scenario, reflecting long-term GDP growth of 6 percent, and 35 The BAU “with climate action” scenario included a 5–10% shift of car trips to cycling in Dar es Salaam; 20, 5, and 10% adoption of electrification in the two- and three-wheeler, private car, and commercial and public transport sectors, respectively; a 7.5% shift to compressed natural gas (CNG) in the high-capacity bus sector; 13.3 and 0.82% growth in modal share of bus rapid transit and railway, respectively; and a 3–14% shift to articulated trucks in inter-regional cargo transport. The ASP “with climate action” scenario included: a 6–15% shift of car trips to cycling; 50% adoption of transport electrification in the private car sector due to electric vehicle infrastructure development and government support, and 80% adoption across all other sectors due to policy support and push; a 20% shift to CNG in the high-capacity bus sector; 24.46% growth in bus rapid transit modal share; and a 3.4–18% shift to railway in the inter-regional cargo transport. Country Climate and Development Report: United Republic of Tanzania  |  37 7,000 MW under the ASP scenario, with long-term GDP growth of more than 8 percent. A recent power system assessment determined how much new generation capacity is needed, and when, to meet growing demand under the two scenarios. The optimal expansion plan includes a significant share of renewable energy. With the JNHPP due to be fully operational by 2027, hydro plants will meet 95 percent of the country’s energy demand, resulting in a 50 percent reduction in power supply costs and near-zero carbon emissions. In the long term, the generation mix evolves toward a system based on wind, solar photovoltaic (PV), and hydro plants (figure 3.6). Variable renewable energy (VRE)—wind and solar PV—provide electricity at the lowest price, while hydro reservoirs cost-effectively provide the flexibility needed to operate a system with high shares of VRE. Curtailment is not an issue in this system. Even with high VRE penetration, the modeling on generation expansion plans finds that the hydro reservoirs provide ample flexibility to absorb intermittency of VRE.36 Geothermal power represents a small share of the generation mix, while coal, combined cycle gas turbine and hybrid PV plants are not cost-efficient in Tanzania. Figure 3.6: Tanzania’s capacity and energy mix, 2023–44 a) Capacity (BAU scenario) b) Capacity (ASP scenario) 14 20 0,08 0,08 12 18 2,65 5,15 0,08 16 Installed capacity [GW] Installed capacity [GW] 10 0,08 2,11 1,37 14 4,10 1,37 12 3,20 8 3,62 10 2,45 6 2,60 0,10 8 5,56 0,15 0,70 0,10 4,49 0,08 0,83 6 0,26 4 0,88 0,28 0,44 0,08 0,58 0,23 3,69 4,22 4 2 0,90 0,83 0,08 0,90 0,23 4,02 4,54 0,23 2,75 2 0,23 2,75 0 0,56 0,32 0,32 0 0,56 0,00 0,22 0,22 2023 2030 2041 2044 2023 2030 2041 2044 Geothermal Large hydro Combined-cycle gas turbine Open-cycle gas turbine Wind Solar PV Other Peak load c) Generation (BAU scenario) d) Generation (ASP scenario) 35 45 30 40 35 25 Generation [TWh] Generation [TWh] 30 20 25 15 20 15 10 10 5 5 0 0 2023 2026 2029 2032 2035 2038 2041 2044 2023 2026 2029 2032 2035 2038 2041 2044 Geothermal Large hydro Combined-cycle gas turbine Open-cycle gas turbine Wind Solar PV Other Source: Engie Impact 2023. 36 The power system analysis assumes that the water basins will be able to meet all water demand. But the analysis on the impact of climate change on basin water balance conducted for this CCDR found that existing and projected water demands on three basins fall short of their current yields. While Rufiji Basin has the country’s highest existing storage capacity, projected water use far outstrips available water, and consumptive water stress in Rufuji is moderately high compared to other basins. The total Water Stress Index exceeds 1, suggesting that this basin will become more water-stressed in the future (IEc 2024). It will be important for the government to reconcile information from the power sector modeling and the water analysis for hydropower by assessing and incorporating water availability constraints in the least-cost power system planning methodology. 38  |  Country Climate and Development Report: United Republic of Tanzania Natural gas is important for the transition to renewables. Some open cycle gas turbine capacity is initially developed in both scenarios to prevent load-shedding during drought years when hydro generation is essentially reduced. But their subsequent expansion is mainly driven by the firm capacity requirement of 15 percent. Although gas-fired power plants only supply a maximum of 10 percent of the country’s energy needs during dry weather years—and less than 1 percent of overall production in other years— under the ASP scenario, they are critical to prevent load shedding.37 Under the BAU scenario, gas-fired plants become must-run units in 2030 to provide primary reserve (rarely dispatched); under the ASP scenario, battery storage is used instead, and greater VRE capacity is developed. Both scenarios show a significant development of VRE power plants in the long term (4 GW under BAU, 8.35 GW under ASP).38 Higher VRE share combined with using batteries for primary reserves will reduce electricity supply costs by 4–5 percent. A significant reduction in the emissions factor is observed with the transition to a cleaner power mix. Tanzania’s power system has a grid emission factor of 340 grams of CO2e per kilowatt hour (kWh). This factor reduces to 20 and 8 grams per kWh under the BAU and ASP scenarios, respectively, by 2044. Increased electricity access would also facilitate a reduction in emissions as households and businesses switch from biomass and fossil fuels to cleaner sources of energy. Tanzania must strengthen the legal and regulatory enabling environment for greater renewable energy development through private sector investments. Public funding will not be enough to deploy the needed grid-connected and distributed renewable energy infrastructure, so the private sector has an important role to play. Controversies surrounding past independent power producers/small power producers/renewable energy companies hinder new prospects for private investment, and bankability issues have been a barrier to securing financing. Challenges include a need to define appropriate risk- sharing arrangements, government unwillingness to backstop projects, and a need to revise regulations to attract private investment. Developing a climate resilience strategy is vital, and such a strategy should consider further assessment of the possible trade-off in allocating water to irrigation versus hydropower, particularly in the Rufiji Basin. The power sector is vulnerable to climate events such as drought and flooding, which have the potential to disrupt reliable electricity provision across the country. And, as current sector modeling does not analyze the extent or probability of climate events and associated impacts, the government should prioritize undertaking a climate impact assessment of current and planned power infrastructure, and further define technical standards and policies to mitigate risks. As part of its climate resilience strategy, it will be important to consider that the Irrigation Master Plan (URT 2018b) expands the area under irrigation to 800,000 hectares by 2035, with over half in the Rufiji Basin. Most of the proposed irrigation is upstream of the JNHPP, as there is limited opportunity to develop irrigation downstream of the hydropower plant. This is likely to result in an economic development trade-off between providing enough water for irrigation versus enough water for hydropower production. Under hot/dry scenarios, climate change could further exacerbate this trade-off, reducing annual runoff to the basin by up to 13 percent (IEc, 2024b). Further research and modeling on the extent of this trade-off and optimal ways of managing its consequences will be important. The strategy should also consider the role of the regional power trade in enhancing adaptation and resilience and fostering regional cooperation and shared resource management. Interconnectors already link Tanzania with Kenya, Rwanda, and Burundi, and the interconnectors with Zambia and Uganda are under construction or being prepared. 37 The government will need to make a focused effort to ensure that legacy generation is operated and decommissioned in a manner that minimizes costs of the sector. 38 By 2030, VRE power plants can supply at most 10% of the demand. This limit linearly increases to 30% by 2040 under BAU, preventing additional capacity from being built after 2040. Under ASP, the limit increases to 40% by 2040 and 50% by 2044, and VRE penetration increases to 47% by 2044. Country Climate and Development Report: United Republic of Tanzania  |  39 The global decarbonization agenda offers Tanzania the chance to unlock ETM-related opportunities Tanzania could be well poised to seize opportunities created by the global decarbonization agenda and growth of renewable energy, which are increasing demand for specific minerals. The decarbonization agenda is calling for the expansion of green supply chains, putting a spotlight on the low-carbon nature of all aspects of supply chains (including power and logistics) in agribusiness, industry, manufacturing, and services, including digital services. The demand for minerals is expected to grow 10-fold over the next decade, and Tanzania is well positioned to supply nickel, graphite, and rare earths (lanthanides) for battery manufacturing (World Bank Tanzania Extractives Team, 2023). Recent nickel, helium, graphite, uranium, and coal finds have spurred interest from investors, and production forecasts suggest an increase in several key extractives. This interest in Tanzania’s minerals is reflected in the increase in exploration permits awarded to explorers of graphite, nickel and rare earth minerals compared to permits for gold. Substantial new foreign investment has been attracted to mineral development exploration, surpassing $1 billion.39 Commodity production forecasts (figure 3.7) under both the BAU and ASP scenarios are positive, except for coal, which is expected to remain constant due to the global decarbonization trend.40 Figure 3.7: Forecasts for different commodity production levels under two scenarios a) Coal (BAU scenario) b) Coal (ASP scenario) 16 16 14 14 (million tonnes) (million tonnes) Coal Production Coal Production 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2025 2030 2035 2040 2045 2050 2025 2030 2035 2040 2045 2050 c) Graphite (BAU scenario) d) Graphite (ASP scenario) 400 1 350 9 8 Graphite Production Graphite Production 300 (thousand tonnes) 7 (lakh tonnes) 250 6 200 5 150 4 100 3 2 50 1 0 0 2025 2030 2035 2040 2045 2050 2025 2030 2035 2040 2045 2050 e) Nickel (BAU scenario) f) Nickel (ASP scenario) 100 140 120 (thousand tonnes) (thousand tonnes) 80 Nickel Production Nickel Production 100 60 80 40 60 40 20 20 0 0 2025 2030 2035 2040 2045 2050 2025 2030 2035 2040 2045 2050 Source: World Bank staff calculations, based on S&P Mining Intelligence and company technical reports Note: The BAU projections are based on announcements made by companies; the ASP projections compare the grade and volume of known Tanzanian mineral deposits with those being developed in better investment climate jurisdictions, with the difference showing the potential growth that could arise through improvements in the investment climate. 39 In 2020/21, the mineral sector contributed 7.2% of GDP (up from 6.7% in 2019/20) and became the economy’s leading foreign exchange earner. It is projected to contribute 10% of GDP by 2024/25 (World Bank Tanzania Extractives Team. 2023). 40 The Ministry of Energy is not considering coal generation as a candidate power source at all in its upcoming planning and projections, due to the emissions implications (World Bank staff communication, November 2024). 40  |  Country Climate and Development Report: United Republic of Tanzania There are several downstream market opportunities to add value to Tanzania’s gold, nickel, graphite resources, but mining sites for certain minerals and investments in coal need careful consideration. The focus on minerals for the energy transition could mean that Tanzania’s coal becomes a stranded mineral. While current demand creates short-term opportunities, further investment in coal would have implications for hitting GHG emission reduction targets. But there is renewed interest in adding value to mineral resources by installing gold processing refineries and joint ventures are planned to refine nickel and process graphite flakes into graphite spheres. Additional interest in graphite processing facilities may emerge as battery demand increases. Extracting uranium in Mkuju has long been a government objective and, while this has revenue potential, it comes at a high cost. The uranium is in the Selous Game Reserve, Africa’s biggest wildlife conservancy area. While new technology that reduces environmental impacts can partly address environmental concerns, there are questions about job implications and the sustainability of the transitions in the economy. Tanzania’s mining sector runs on two parallel tracks—small and large-scale—underscoring the importance of a just transition in the sector. Significant investments in the mining sector have not translated into structural change. The emphasis has been on reforming the mineral taxation regime to generate more mining revenues, and limited attention has been given to integrating the large mining sector into local economies. Artisanal small-scale mining, an important contributor to the economy and a viable response to rural poverty, has been beset with environmental and social problems. As the mining sector transitions, and targets an environmentally conscientious market, it will need to address green job creation and the environmental footprint of mining and energy use. All mining companies will also have to adapt to changes in precipitation and water levels, as some of the larger mining companies have already found. To avoid a boom-and-bust situation, Tanzania will need to overcome some governance and infrastructure challenges. The large government stake in mining companies affects the way they operate and could constrain new mineral investments. At the same time, illegal mining and trespassing on mining operations is a source of elevated operational and security risks at some mines, raising costs for investors and increasing risks for communities. According to the Fraser Institute’s Investment Attractiveness Index, Tanzania was ranked near the bottom of investment locations for 2020–22 and dropped further for 2022–23 (Mejia and Aliakbari 2022, 2023). To meet the demands of ETM export opportunities, the country must urgently address its inadequate road, rail, and power infrastructure. Further work is also needed to improve value addition, domestic spillovers, and compliance with environmental regulations. Unlocking opportunities and promoting climate-smart mining will require key sectoral reform and targeted transportation and energy infrastructure, using a mines-to-market framing. Tanzania needs to create a stable regulatory environment for the mining industry to provide the confidence needed to invest in the sector for the first time or expand existing operations (table 3.1). Mineral development can create anchor demand to drive new transportation infrastructure to connect mining facilities with ports, enabling the import of capital goods and export of commodities. Investing in the quality of the roads and addressing congestion along transport corridors to connect mines to ports would also improve travel times and costs for other industries, such as agriculture. With the necessary infrastructure systems in place, Tanzania could also benefit from being a key export route from the Central African Copperbelt, giving it a bigger role in logistics. Country Climate and Development Report: United Republic of Tanzania  |  41 Table 3.1: Climate-smart mining diagnostic summary table General policies Climate Climate Market Geological Human capital Value-added mitigation adaptation opportunities information on opportunities climate action minerals National policies Emissions Resilience Strategic planning Tailings geology Sector- Value addition reporting and regulation and reporting specific skills strategy reduction planning requirements development Government Energy Forest and water Derisking coordination, efficiency management investment for capacity and climate action engagement minerals Replacement of Post-closure fossil electricity and land- use planning Replacement Stability of mine of liquid fossil tailings fuels Carbon offsets and capture Scoring key Very low Low High Very high Investing in climate-informed infrastructure systems will create livable, productive, and resilient cities Planning and development controls are an important part of supporting productive cities that are affordable and livable. Improving connectivity, access to services, and development patterns that avoid hazardous areas will facilitate mobility and low levels of congestion, and reduce pollution, enabling Tanzania’s cities to thrive and avoiding costs from damages to physical infrastructure and human health. Plans to guide and manage the rapid pace of physical developments in built-up areas should encourage efficient land use that promotes densification, prevent encroachment in hazard lands and into rights-of-way, and ensure that future service provision is efficient and cost-effective. But local governments have few resources or tools for implementing such plans or managing encroachment and unplanned land conversions. As a result, rapid and unplanned urban growth over the last three decades has encroached on riverbanks and buffers, increasing flood vulnerability. Public spaces and green areas are scarce and city centers are mostly composed of hard surfaces with little green cover or tree canopy. Where green spaces in wetlands and river basins exist in cities, they are degraded by unplanned conversion, solid waste dumping, and emissions of toxic effluents and untreated sewage. In Dar es Salaam, built-up areas expanded from 318 to 634.7 square kilometers between 2007 and 2016, at an average rate of 32 square kilometers every year. Over 5,500 hectares of tree coverage was lost between 2001 and 2022—a 35 percent decrease, representing around 2.27 MtCO2e. Building urban resilience to climate events will require a coordinated national effort that can be tailored to the needs of individual municipalities. While many ad hoc efforts have attempted to rectify current urban development patterns that lead to climate vulnerability, Tanzania lacks a national program on resilient planning and development of human settlements that provides guidance, standards, and resources to municipalities. Such a program could rein in sprawl and help redevelop vulnerable unplanned settlements. Flood-prone cities would benefit from standardized flood hazard assessments to inform planning and land use decisions. Such data can also help develop climate and resilience action plans for urban infrastructure based on the hazards, exposure, and vulnerability of their human, social, 42  |  Country Climate and Development Report: United Republic of Tanzania environmental, and physical assets, support long-term decisions, and ensure investments are climate- proofed. An evidence-based approach can provide a valuable starting point for discussion and planning and form the basis for any additional analysis. Resilient urban infrastructure investment plans should be aligned with impact type and scope Climate change will impact cities differently and investments need to be informed by detailed and differentiated assessments of risks. For example, in Dar es-Salaam, which is subject to fluvial flooding, challenges include the number of river crossings, sedimentation and solid waste reducing conveyance capacity, and the confluence of different tributaries. So, a strategy of improved conveyance on the main drainage channels, combined with carefully planned and located sustainable drainage systems in the upper catchment areas to reduce run-off, prevent erosion, and manage solid waste will provide the greatest benefits. Flood forecasting and early warning is feasible for many of the city’s flood problems, due to the lead time for anticipating fluvial flooding.41 But in Zanzibar, pluvial floods are the main hazard, tidal influences are minimal, and several ponds and wetlands are the major receivers of stormwaters and important for both flood reduction and groundwater recharge. So, the strategy should include local targeted drainage improvements, green and blue sustainable draining system approaches, land use planning, and building codes and standards to protect the wetlands and improve the resilience of buildings, assets, infrastructure. Reducing the vulnerability of flood-prone cities in Tanzania, most of which have poor water and sanitation coverage, is also key to prevent waterborne disease outbreaks such as cholera, which often occur during El Niño years (Moore et al. 2017). Developing and enforcing risk-informed plans for cities will reduce exposure to climate change. In smaller urban areas, unplanned development and sprawl are not at the scale seen in Dar es Salaam’s fragmented development. But medium-sized cities are experiencing substantial encroachment in hazardous and sensitive areas, and within needed reserves for future infrastructure. Where there is unplanned development, cities need fair, transparent, and clear processes to handle resettlement and should, where feasible, work with communities on alternatives such as in-situ upgrading to mitigate hazard risk. Using risk-informed planning tools can help direct investments in basic services, housing, and industry, and steer planned urban development to be resilient and low-carbon. Medium-sized cities can protect environmentally sensitive lands, plan and reserve rights-of-way early, and reduce encroachment into hazardous areas. Citywide integrated drainage systems need to mainstream climate-resilient standards and technologies. Tanzanian cities tend to take a piecemeal approach to infrastructure development as financing becomes available, often on a sector-by-sector basis. This undermines resilience, as the fragmented approach to drainage displaces the flooding problem, often impacting poor settlements in hazard areas. Several cities have produced drainage and sanitation development plans to address flooding but lack financing to implement them, as drainage is a lower priority than other development needs. Improving urban resilience to floods requires investments in citywide drainage systems and adopting green infrastructure solutions such as wetlands, buffer zones, green roofing, detention ponds, street-side swales, rain gardens, and porous pavements. Incorporating a combination of traditional stand-alone gray infrastructure drains and sustainable urban drainage systems can expand drainage network capacity while encouraging water retention, storage, and infiltration. This attenuates flood peaks, increases groundwater recharge water treatment, and reduces erosion. Drainage designs can include landscaping and trees that help sequester carbon, reduce urban heat, and improve public spaces. Water supply, drainage, and sanitation master planning should include climate change scenarios to identify citywide priorities, prioritize investments in key affected areas, and develop standard operating procedures for drainage operation and maintenance. 41 The Msimbazi Basin Development Project is an example of integrated planning and flood mitigation that addresses extreme flooding through a combination of gray and green infrastructure, preventative resettlement, catchment management, disaster risk management, and institutional reforms (World Bank 2023c). Country Climate and Development Report: United Republic of Tanzania  |  43 Strengthening institutional structures and capacity will support climate-smart cities. Given the trend of unplanned low-density expansion, institutional arrangements for urban management must be carefully evaluated if they are to support resilient and low-carbon growth. The practice of subdividing urban areas into municipal councils complicates coordination mechanisms, and duplicates services, driving up inefficiencies and costs. It also makes achieving climate resilience a challenge since the issues are crosscutting and interinstitutional in urban contexts. As Tanzania’s cities change and develop, municipalities need to be empowered to mobilize and manage their budgets for drainage, transportation, and solid waste management infrastructure and services. While Tanzania’s cities have developed urban planning instruments in the past, their implementation has been limited, largely due to disconnects between the planning and budgeting processes and the lack of authorities for cross-sectoral, interinstitutional decision-making. Strong subnational coordination mechanisms between district, city, and regional governments and other urban development actors—including water and sanitation utilities—are crucial for ensuring efficient urban infrastructure and land use, to minimize service extensions having to follow unplanned, sprawling development. The problem is not a failure to plan, but a failure to enforce these plans, and this can be more effective when managed at the local level. Empowering local authorities and increasing the reliance on and leverage of lower levels of government, who have the keenest local knowledge of land transactions and developments in their areas, can encourage greater density and prevent settlements in hazard areas. With the right resources and capacity, local governments are also well placed to enforce planning. The national government could devolve some development controls, alongside measures to ensure accountability and oversight by higher levels of government. Enabling the use of nonmotorized and public transportation systems can help reduce GHG emissions To decouple urban growth and carbon emissions, shifts in cities’ energy and transport systems will be important. Economic growth is also likely to be followed by private car ownership growth, which is estimated to reach 10 percent under the ASP scenario. Improving the coverage, quality, and reliability of high-capacity public transport services, including through electrification, will play an important role in limiting private car ownership growth to less than 10 percent. Transport shifts that are within the control of city governments include promoting the public transport sector, with a target to increase public transport share to 12 percent by 2040. Developing up to 339 kilometers of inter-regional high-capacity public transport infrastructure will be key for achieving this target. In terms of motorized transport, bus rapid transit is more efficient than rail, offsetting 0.011 tCO2e per dollar. The emissions reduction potential of various sustainable transport alternatives in Tanzania ranges from 1 to 2.5 percent, except under an ASP electrification scenario, which can reduce up to 33.75 percent of cumulative transport emissions through 2050. A target to electrify at least 80 percent of Tanzania’s commercial, public transport, two- and three-wheeler fleets, and at least 50 percent of its private cars is congruent with those of other similar developing economies. Tanzania is already East Africa’s market leader for electric vehicles (EVs) and has more stocks than of all the other countries combined. While up to 95 percent of EV charging is expected to occur in private homes and garages of public and commercial fleets, it is important to establish an EV charging network in key cities and tourism hotspots. Investing in nonmotorized transportation (NMT) infrastructure while making efforts to lower emissions from motorized transport would help put cities on a low-carbon transport path. More than half of all kilometers travelled in Tanzania are on foot or by bicycle. To contain the impact of urban sprawl and growth in private car ownership on mass transport and maintain a high share of NMT, improving pedestrian safety through safe sidewalks and dedicated cycle lane infrastructure will be vital, and benefit Tanzanian women, who make more frequent short trips, in particular. Investing in NMT infrastructure is quite efficient for reducing emissions, offsetting 5.4 tCO2e per dollar. Under the ASP scenario, Tanzania should develop 143 and 627 kilometers of cycle lanes along urban roads by 2040 and 2050, respectively, to help meet climate change mitigation and adaptation goals. 44  |  Country Climate and Development Report: United Republic of Tanzania Managing urban waste will help lower methane emissions Expected levels of urban expansion under the BAU and ASP scenarios will increase waste generation, and in turn GHG emissions, unless this is proactively addressed. Solid waste management services are the responsibility of the municipalities who contract private companies and community-based organizations for waste collection. Gaps in collection and disposal are leading to waste accumulating in the streets, at collection points, and in drains and rivers, exacerbating flooding. Dar es Salaam, where GHG emissions are estimated to surpass 12 MtCO2e, lacks a sanitary landfill and waste collection rates are low, at 40 percent, although this outpaces most secondary cities. According to the Dar es Salaam climate action plan, solid waste disposal—which includes methane from the decomposition of organic matter in anaerobic conditions— is the city’s fifth-highest-emitting subsector. The plan commits to achieving at least a 30 percent reduction in GHG emissions compared to BAU by 2030 and carbon neutrality by 2050. With external support, the extended action scenario includes achieving a 43 percent reduction in emissions by 2030 and an 87 percent reduction by 2050. Other cities and countries have successfully reduced food and organic waste, which is easier to reduce or recover than other types of waste. Although both individuals and business already understand the advantages of reducing food loss and waste, introducing information and analytics on the subject and developing partnerships to implement concrete actions will be key to unlocking its potential. Expanding resilient digital infrastructure will support climate-positive growth Reducing the carbon footprint of Tanzania’s digital infrastructure will contribute to climate adaptation and mitigation in the country. Digital is a key priority in the Vision 2050 strategy, which makes a strong commitment to move to more digitalized public service delivery and expand internet access across the country. As the economy continues to grow and become increasingly digitized, ensuring that telecommunications and data-hosting infrastructure transitions to green sources of power and use energy-efficient technologies will be key to reducing the sector’s climate impact. As the country’s digital infrastructure footprint continues to grow and demand increases, ensuring that climate resilience and sustainability are central to the design and deployment of new infrastructure will be essential to realizing the benefits of the low-carbon transition in the sector. This will require a multistakeholder approach, with commitment from government, regulators, and the private sector, who are all actively involved in the digital development agenda. Increasing its ambition in the transport, energy, and urban sectors can help Tanzania achieve its GHG emissions target Inaction to lower GHG emissions could increase Tanzania’s net emissions between 2020 and 2050 by nearly 130 percent under the BAU scenario and nearly 60 percent under the ASP scenario (figure 3.8a). This can be limited to 80 percent under BAU with climate action and 40 percent under the ASP with climate action if the country heavily increases its forest cover to deliver its NDC GHG emissions commitments (figure 3.8b). Without accompanying measures, this approach could be at the expense of land for other productive uses, including CSA (section 3.2). But making a concerted effort to increase its ambition in reducing GHG emissions in the transport, energy, solid waste management, and livestock (see box 3.1) sectors could help rebalance the way Tanzania meets its targets, while also motivating greener supply chains and controlling environmental pollution in cities. Country Climate and Development Report: United Republic of Tanzania  |  45 Figure 3.8: Tanzania’s projected GHG emissions paths to 2050 a) Under different scenarios, 1990–2050 323.5 Historical sector Pathway 300 Energy - Buildings Historical Energy - Electricity/heat BAU Energy - Fugitive emissions BAU with climate action Energy - Manufacturing/construction 252.4 250 ASP Energy - Other fuel combustion ASP with climate action Energy - Transportation Total GHG emissions (MtCO2e) Industrial processes and product use 200 Waste (historical) 220.9 Agriculture (historical) LULUCF - Land use LULUCF - Forestry 150 139.2 144.4 100 81.4 50 0 -50 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 b) Under the ASP with climate action scenario, 2020–2050 250 Energy - Fugitive emissions Energy - Manufacturing/construction Agriculture (historical) Energy - Other fuel combustion Industrial processes and product use Agriculture - Crops Energy - Buildings Waste (historical) Agriculture - Livestock Energy - Electricity/heat Waste - Solid waste LULUCF - Land use 200 Energy - Transportation Waste - Wastewater treatment LULUCF - Forestry 146.1 144.4 150 Energy - Transportation Total GHG emissions (MtCO2e) 139.2 100 Agriculture - Historical 81.4 Agriculture - Livestock Agriculture - Crops 50 LULUCF - Land use LULUCF - Land use 0 LULUCF - Forestry LULUCF - Forestry -50 -100 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: World Bank staff calculation using analysis in SISEPUEDE. 2024. 46  |  Country Climate and Development Report: United Republic of Tanzania 4 © John Morton Impact of Climate Action and Inaction on Tanzania’s Growth 4. Impact of Climate Action and Inaction on Tanzania’s Growth Tanzania’s impressive growth performance over the last two decades helped it reach LMIC status in 2020, but climate action will be crucial for unlocking its growth potential and building a more prosperous, inclusive, and resilient economy. As highlighted in previous chapters, Tanzania faces increasing vulnerabilities, threatening its comparative advantages—fertile land, mineral endowments, political stability, a sizable domestic market, and regional and global trade potential—which have helped drive growth. These vulnerabilities pose a threat to overall growth and could jeopardize the country’s efforts to reverse the trend of a weakening link between economic growth and poverty reduction. This chapter highlights the macro-level impact of climate change and the net benefits of adaptation and mitigation commitments, to help inform Tanzania’s Vision 2050 exercise and guide the country toward achieving UMIC status. By focusing on macroeconomic implications, this analysis aims to better integrate climate-related policy and investment considerations into the broader dialogue on Tanzania’s development agenda. A Computable General Equilibrium (CGE) model is employed to assess the longer-term economywide impacts of future climate change on key macroeconomic indicators including GDP, poverty, and fiscal sustainability (box 4.1). The CGE model structure allows for the analysis of sectoral dynamics and movement of labor across sectors over time—that is, structural transformation under the ASP scenario. The baseline assumptions and aspirational targets have been discussed with the government in the context of developing its Vision 2050. Box 4.1: Macroeconomic modeling and scenarios: estimating the economic impacts of climate change The Mitigation, Adaptation and New Technologies Applied General Equilibrium (MANAGE-WB) model is a detailed simulation of Tanzania’s economy designed to support World Bank teams and the government in macroeconomic analysis in a wide range of topics. The technical term for the type of model the MANAGE-WB belongs to is a single-country recursive dynamic CGE model. While others paint much rougher pictures of the economy, MANAGE-WB models a multitude of sectors and the dynamic interactions between producers, households, and government, building on a country’s social accounting matrix, which is a snapshot of economic transactions between economic actors in a particular year. It is a small open economy model that allows for producers to switch to cheaper inputs in response to developments, including choice of fuel, and all inputs and outputs are traded in markets for which the model calculates a solution where nothing remains unused. MANAGE-WB is applied based on core 2022 data for Tanzania, along with projections concerning population trends, economic growth, the mining industry, power generation, energy consumption and land use and land cover change through to 2050, as provided by sector teams. The analysis of the economic implications of policy action to support economic development is based on two baseline scenarios: BAU and ASP with current policy. Both assume that a large liquefied natural gas project (currently under development) is realized, with conservative estimates of economic benefits given uncertainties. The model considers climate change impacts on the economy through seven major impact channels: heat stress on labor productivity, human health, soil erosion, livestock, crop yields, roads and bridges, and inland flooding. These shocks affect labor productivity, labor supply, land productivity, the production of livestock, the production of crops and the loss in capital and labor supplies in the MANAGE-WB model. Soil erosion affects the productivity of land, livestock affects the top nest of the production of livestock sector, and crops yields affect the top nest of production of the crop sector. The use of production factors are endogenous and crop yield and livestock yields are measured as the outcome of the shocks. Country Climate and Development Report: United Republic of Tanzania  |  49 4.1. Climate change will have aggregate economic implications in Tanzania Climate change could impair Tanzania’s ambition to achieve UMIC status by 2050 and hamper in poverty reduction. The economy, which relies on agriculture for about 28 percent of GDP and 70 percent of rural employment, is highly vulnerable to climate impacts. Climate change is expected to affect the economy through multiple channels, with impacts depending on: • Climate scenario: Impacts under a dry/hot future are consistently negative, while a wet/warm future presents more ambiguous outcomes. • Economic development model: Impacts are more pronounced under the ASP scenario than BAU. • Adaptation and mitigation actions: Tanzania’s ability to follow through on some elements of its NDC commitments can help alleviate the economic impacts of climate change, but could have trade- offs for some sectors and their contribution to the economy. Projections indicate that under a dry/hot future, inaction could lead to a 4 percent reduction in real GDP by 2050, compared to the baseline scenario that assumes no climate variability (figure 4.1a). But implementing climate adaptation measures could reduce this decline to 3 percent. Under the ASP scenario, the impact of a dry/hot future would reduce real GDP by 3.8 percent compared to the baseline; but with climate adaptation efforts, this could be lessened to 2.7 percent. In contrast, if the country implements certain elements of its NDCs under a wet/warm future, the negative effects on infrastructure and livestock could be offset by gains in crop yields. Under these conditions, climate change could become a net contributor to Tanzania’s economy, potentially increasing GDP by up to 0.1 percent compared to baseline by 2050 (figure 4.1b). Figure 4.1: Deviation in real GDP from baseline due to climate change impacts, by damage channel and scenario, 2050 a) Dry/hot future b) Wet/warm future 2% 2% 1% 1% Deviation from baseline (%) Deviation from baseline (%) 0% 0% -1% -1% -2% -2% -3% -3% -4% -4% -5% -5% BAU BAU with ASP ASP with BAU BAU with ASP ASP with climate action climate action climate action climate action Health Erosion Roads and bridges Livestock Inland flooding Labor Crops Total Source: World Bank staff calculations using IEc (2024a) results. While the ASP scenario exposes more of Tanzania‘s economy to climate-related risks, it also leads to a significantly larger economy and offers better protection for its population. Although the area under irrigation increases under this scenario, agriculture expands into more susceptible areas due to land constraints, increasing the potential impact of climate-related shocks, particularly under a more adverse 50  |  Country Climate and Development Report: United Republic of Tanzania dry/hot future. But despite these risks, the economy is projected to be more than 50 percent larger in 2050 under the ASP scenario. Structural transformation is important for sustained and more inclusive economic growth (World Bank 2023d) and can help increase the country’s resilience to climate-related shocks, even if it cannot eliminate the shocks altogether. 4.2. Three impact channels account for most of the climate impacts Of the seven impact channels, three account for the vast majority of climate impacts on the economy under a dry/hot future. Integrating the following climate impact channels into the CGE model yields the following insights into relative damages: • Crop yields: Across economic development scenarios, losses in crop yields in a dry/hot future account for 25–50 percent of all economic damages due to climate change. A 1.1 and 1.9 percent reduction in GDP under the BAU and ASP scenarios, respectively, may appear moderate, but three factors aggravate these losses. First, because agriculture is a much smaller share of the economy by 2050 (15–25 percent), these are major losses as a share of the sector. Second, these losses are unlikely to be distributed evenly across years; rather, they will be concentrated in drought years. And third, while only a small part of the economy, farming is the main breadwinner for many vulnerable Tanzanians. • Labor productivity: Heat stress in a dry/hot future means that workers become less productive, accounting for 20–40 percent of all economic losses from climate change. A 1.6 and 1.1 percent reduction in GDP under the BAU and ASP scenarios, respectively, is significant and will primarily be borne by workers, as firms will not be willing to pay as much for less productive Tanzanian workers. This comes in addition to the significant discomfort of working in heat, especially under the BAU scenario, where more Tanzanians remain working in agriculture. • Inland flooding: Across scenarios, inland flooding constitutes 6–15 percent of climate-related economic damages projected by 2050. Not only do these increase over time; they are also worse under the ASP scenario than the BAU. This is because more of Tanzanians’ wealth is tied up in capital that can be damaged by flooding under the ASP scenario. In total, climate change reduces GDP by 0.5 and 06. percent by 2050 under the BAU and ASP scenarios, respectively. Potential maximum damage could even be higher as climate change could change the future distribution of flooding damages. • Other channels: Other channels tend to contribute less than 10 percent to total GDP losses due to climate change by 2050. But that does not mean that select channels will not be very important to a subset of Tanzanians, such as those working in livestock. While circumscribed to less than 0.7 percent of GDP across all scenarios, such losses can be significant if one-third of the population continues to generate income through livestock value chains (World Bank 2024b). Some channels illustrate that even generally adverse climate change scenarios can have select upsides—for example, costs to health from wet weather decrease under a dry/hot future, and climate change presents opportunities such as ETM production across all scenarios. 4.3. Tanzania will have to manage the costs of climate action Tanzania’s commitment to its NDC yields economic benefits. Climate-related economic losses by 2050 could be reduced by at least 25 percent. Under a wet/warm future, effective climate action could potentially transform climate change from a net economic cost into a net economic benefit. But not all climate action yields the same level of returns. The model identifies adaptation measures targeting labor, livestock, and inland flooding in line with the NDCs as some of the most impactful, potentially boosting GDP by 0.3 percent each by 2050, while others—such as those in the roads and bridges sector—show lower returns. Under a hot/dry scenario, high associated costs mean that adaptation efforts in this sector will require careful prioritization of the most critical infrastructure to ensure net positive economic benefits. Country Climate and Development Report: United Republic of Tanzania  |  51 Looking at climate adaptation actions to help offset the negative impacts from the seven impact channels modeled in this report, costs will fall on individuals and government.42 Under the ASP scenario in a dry/hot future, firms may reduce investment as resources are redirected toward climate initiatives, while the government increases spending to finance these actions. Between 2025 and 2050, public expenditure is expected to rise by an average of 0.12 percentage points of GDP each year with climate action compared to non-NDC scenarios—financed by improved domestic resource mobilization, higher taxation, or borrowing—while private investment could decline by 0.06 percentage points of GDP. Costs incurred by the government will need to preserve public debt sustainability as a cornerstone of the country’s macroeconomic stability. Tanzania has a strong track record of prudent fiscal management and manageable deficits and is one of the few post-Heavily Indebted Poor Countries to avoid high risk of external debt distress. Sound fiscal policies have been a foundation for the country’s impressive macroeconomic stability. Debt levels as a share of GDP are assumed to maintain the current moderate risk of external debt distress, a reflection of Tanzania’s past resilience in managing spending pressures more effectively than many of its peers. Increased adaptation spending will require a strong role for the private sector and leveraging climate finance, to ensure the government can continue playing its role in providing public goods and delivering essential services where private sector support is weak or absent, especially under the ASP scenario. Climate change could challenge the flexibility of Tanzania’s macroeconomic policy framework. With increased climate-related shocks and a lack of robust automatic fiscal stabilizers, the government may need to actively adjust and adapt fiscal balances, monetary policy, and external balancing measures such as the exchange rate in response to evolving climate conditions and their economic impacts. 4.4. Climate change shocks and action will impact poverty Climate impacts disproportionately affect the vulnerable, with poverty rates projected to be higher than they would be in the absence of climate effects. Tanzania’s poverty trajectory will heavily depend on the economic path it pursues, and the effectiveness of its climate action measures, alongside other influencing factors. In line with Tanzania’s transition to LMIC status, we project poverty by 2050 using the LMIC poverty line of $3.65 (2017 purchasing power parity) per day, and to align with its aspirations of achieving UMIC status by 2050, we also reference the $6.85 (2017 purchasing power parity) per day poverty line for comparison. Under the BAU scenario, and assuming no additional climate impact, poverty is projected to reach 25.8 percent using the LMIC poverty line, and 53.2 percent using the UMIC line (figure 4.2). The ASP scenario could reduce poverty significantly, with 11 million fewer people living in poverty by 2050 compared to BAU, based on the LMIC line. But climate variability complicates these projections. A dry/hot future poses considerable risks to economic growth and poverty reduction. Under BAU, climate change could push an additional 2.6 million Tanzanians into poverty by 2050. By pursuing a higher growth trajectory and implementing effective climate adaptation and mitigation measures, Tanzania could counter the adverse effects of climate change and mitigate its impact on poverty. As we look toward 2050, profiling those likely to be poor or poorer due to climate impacts requires moving beyond traditional monetary measures. Using a coping capacity index43 reveals that these are predominantly households whose members have primary education as their highest level of schooling, are less likely to have visited a health care provider, are more likely to have agriculture as their only source of 42 The climate adaptation costs noted here reflect only those with available data and related to the seven major impact channels listed in Box 4.1. Chapter 5, and particularly Table 5.3, includes a broader set of possible climate actions, informed by the three intervention areas in Chapter 3 and including mitigation efforts. 43 This nuanced, relative measure derived from household responses to shocks provides a more precise understanding of vulnerability, capturing coping abilities through several household-level binary indicators, and aggregating them into a composite index that indicates a household’s coping capacity. By defining vulnerable households as those whose coping capacity index score falls below the national median, we can identify those likely to be most affected by climate-related shocks. 52  |  Country Climate and Development Report: United Republic of Tanzania income, are less likely to be involved in wage work, have limited access to public services such as improved drinking water sources, sanitation, and electricity, and whose house is more likely to have mud walls, earth floors, and a grass roof. They are predominantly located in the Central, North-Western, and Southern parts of the country, particularly in Tabora, Shinyanga, Simiyu, Mara, and Kagera (figure 4.3). Figure 4.2: Poverty rate by 2050 27.8% 27.2% Lower middle-income 25.8% poverty rate ($3.65) 18.9% 18.4% 17.4% 55.6% 54.9% Upper middle-income 53.2% poverty rate ($6.85) 44.0% 43.2% 41.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% BAU, dry/hot future BAU with climate action, dry/hot future BAU baseline ASP, dry/hot future ASP with climate action, dry/hot future ASP baseline Source: World Bank Tanzania Poverty Team. 2024. Figure 4.3: Vulnerable population profile in 2050 a) Vulnerability and socioeconomic characteristics b) Location of vulnerable populations Average marginal effects with Average marginal effects with % Vulnerable 95% confidence intervals 95% confidence intervals 0.594 to 0.700 Wage income Mud wall Mara 0.509 to 0.594 Kagera 0.455 to 0.509 Mwanza Arusha Simiyu 0.425 to 0.455 Geita Shinyanga Kilimanjaro 0.271 to 0.425 Grass roof Agriculture Effects with respect to Effects with respect to income Kigoma Manyara Kaskazini Pemba Tabora Tanga Kusini Pemba Improved Singida Dodoma Kaskazini Unguja water Mjini Magharibi Katavi Kusini Unguja Dar−es−salaam Complete Pwani secondary Iringa Morogoro Improved Rukwa sanitation SongweMbeya Njombe Lindi Visit Electricity healthcare -.3 -.2 -.1 0 .1 -.2 -.1 0 .1 .2 Ruvuma Mtwara Effects on poverty (vulnerable) Effects on poverty (vulnerable) Source: World Bank Tanzania Poverty Team. 2024. Country Climate and Development Report: United Republic of Tanzania  |  53 5 © Chris Morgan, World Bank Prioritizing and Financing Climate Action 5. Prioritizing and Financing Climate Action 5.1. Structural transformation alone is not enough for climate-resilient, low- carbon growth Tanzania must also take climate action, with greater attention to adaptation, to reduce its economy exposure to climate risks and foster low-carbon growth. Different climate futures could negatively impact agriculture, livestock, labor, and roads and bridges, regardless of structural transformation. While structural transformation can contribute to the country’s commitment to reduce emissions, fulfilling the commitment will require more ambitious climate action in the transport sector or increased investment in afforestation, reforestation, and natural regeneration of forests. The benefits of structural transformation on lowering GHG emissions are more evident after 2030. Five key multisectoral intervention areas can bolster Tanzania’s resilience to climate change and unlock opportunities from a decarbonizing global economy. First, integrating climate considerations into development efforts that build human capital and expand social protection. Second, optimizing land and water use can boost agriculture and rural productivity, climate resilience, and reduce GHG emissions from land- based sectors. Third, prioritizing resilient and low-carbon infrastructure systems can support the country’s growth goals, especially in urban areas, and its existing and emerging economic sectors. Fourth, creating an enabling policy and institutional context—through coordination, consultation, and implementation of climate policy, effective disaster risk management, and by increasing the financial sector’s understanding of, and resilience to, climate risks—will facilitate the effective delivery of these climate-positive interventions. And fifth, facilitating the mobilization of public, private, and dedicated climate financing is central to delivering on these four intervention areas. More ambitious and specific climate actions could increase the benefits at the sector level, lower exposure, and contribute to overall development. The CCDR analysis identifies close to 160 policy and investment recommendations that span whole-of-economy and sector-specific actions, most of which are reflected in Tanzania’s NDC. While many of these actions are currently affordable and achievable, sector experts ranked 134 of them for urgency and considered 92 to be urgent, as delay in action would increase the cost of reaching the same end point. Of these, 57 could be financed with government financing or via innovative financing instruments (table 5.1). And of those 57, 41 have a receptive political environment, 39 have positive synergies with development, and the government has either high or medium capacity to implement 34 of them. The top three priority sectoral recommendations all contribute to development, and only five could be deferred to the medium term. 5.2. The government needs to mobilize financing for climate action44 Available data indicate the government needs to mobilize $12 billion of its estimated NDC implementation budget of $19.23 billion, or nearly 16 percent of its 2022 GDP. The government’s NCCRS (2021–26) funding requirement is $150.67 million, made up of $83.32 million for adaptation, $46.25 million for mitigation, and $21.28 million for crosscutting activities. Due to limited accessible data, it is difficult to assign financing needs to specific sectors. But available data—on the government’s budget allocation for adaptation from 2014/15, financing needs for sectoral adaptation and mitigation actions in the NCCRS, estimates of adaptation financing needs by sector, and spending on climate adaptation for the mainland and Zanzibar—builds an indicative and differentiated picture of financing needs and spending on climate action. While an imperfect picture, the financing gap remains large, and not all investments have been fully accounted for in the NDC, reinforcing the need to mobilize financing. 44 Most of the information on available financing is from (URT 2023). Country Climate and Development Report: United Republic of Tanzania  |  55 Table 5.1: Priority climate actions for Tanzania with synergies with development Urgency Feasibility High Medium Delays in implementing this action could Action has lower lock-in risks increase the cost of achieving the same end objective High Actions that should not be postponed and Actions that have high level of readiness and Legal measures are in place, there is general produce a high impact impact and no significant lock-in effects support for the action and financing is Actions that risk locking in climate-unfriendly available practices if delayed Medium Urgent actions with risk of delayed Actions with lower lock-in effects that need The action requires additional resources/ implementation that need additional dialog additional resources to be implemented dialog to be ready for implementation and resources to be implemented     Strategy, regulation, standard, fiscal instrument Planning and information Investment Intervention area: Strengthen institutional effectiveness for addressing climate change Actions with synergies with development A: Develop and implement a program of capacity building for public servants on climate change and integrate climate change issues into existing capacity building programs by 2026 VPO; ministries, departments and agencies A&M: Develop and adopt framework legislation, supported by a long-term strategy on climate change to bring high-level consistency to the policy approaches by 2026–27 PO-PSMGG; VPO A: Integrate climate into core public financial management and processes, develop budget guidelines and manuals on including climate in budget processes by 2028 MoF A: Strengthen financial and technical capacity of all local disaster management committees to improve implementation and coordination of disaster management by 2027 and build up weather and climate infrastructure and an early warning system PMO-DMD (mainland); Disaster Management Commission (Zanzibar) A: Improve National Emergency Communication and Operations Center and establish regional multihazard emergency communication and operations centers to improve emergency preparedness and response by 2027 PMO-DMD A&M: Set up interministerial taskforce and internal governance within financial sector authorities BoT; CMSA; MoF A&M: Undertake a climate and nature risk analysis for the financial sector BoT A&M: Develop internal targets/strategy and governance framework for climate risk and green finance and communicate this with sectors BoT; CMSA; MoF Intervention area: Integrate climate considerations when strengthening human capital and social protection Actions with synergies with development A: Develop a medium-to long-term financing framework for social protection programs and increase domestic financing for the sector to ensure adequate coverage of vulnerable households by 2025 PMO; MoF  A: Formalize the PSSN registry into a national unified social registry with clear protocols for data collection and data sharing by 2027 PMO A: Formalize synergies between disaster risk management/disaster response and social protection. by 2027 PMO A&M: Promote adaptation of schools and education institutions through changes in energy systems (increasing solar power; energy-saving cookstoves), tree planting, awareness-raising on climate change, and designing climate-resilient infrastructure MoEST M: Enhance health system resilience to climate-related hazards in all 26 regions MoH 56  |  Country Climate and Development Report: United Republic of Tanzania M: Develop and implement climate-resilient infrastructure design guidelines for health facilities by 2025 MoH A: Tighten up full cost recovery and improve efficiency for safely managed water services in urban areas to address inefficiencies and vulnerability to climate variability by 2025 MoW A: Develop a ‘basic access first’ public capital expenditure allocation policy for water by 2025 MoW A: Refine existing financing mechanism and monitoring and evaluation system to improve sustainability of water supply and sanitation services by 2026 MoW A&M: Identify and fill gap in thematic areas on climate change for primary, secondary, and tertiary curriculums and open dialogue with the National Council for TVET on identified gaps and the need to develop occupational standards MoEST M: Ensure that national, 100 percent of regional, and local plans and budgets are climate sensitive MoH Intervention area: Optimize land and water use and management to boost agriculture and rural productivity, augment climate resilience, and lower GHG emissions Actions with synergies with development A&M: Establish a comprehensive cadaster with complete ownership information by 2025 MoLHHSD A&M: Establish NSDI Steering Committee and develop an NSDI policy by 2025 MoLHHSD A&M: Establish measures that provide incentives for changed behavior and promote new plantation-type forest areas as smallholder woodlots or plantations on village lands outside existing natural forests under community-based forest management by 2025 MoNRT; PO-RALG A&M: Implement and enforce land use designations, land titles, and management plans on public lands and provide incentives to conserve and manage natural habitats MoNRT; PO-RALG A&M: Empower village and district-level institutions that are responsible for implementing and enforcing charcoal sector policies to retain a percentage of charcoal revenues to reinvest in sustainable charcoal production MoF M: Strengthen data collection and management to improve monitoring and evaluation in the clean cooking sector MoE M: Facilitate training and capacity building for entities overseeing climate finance management for clean cooking VPO A: Incentivize producers and farmers and liberalize the seed sector to increase access and usage of improved and adapted agriculture seeds (60% of all seeds by 2050) Ministry of Agriculture A&M: Provide tax and results-based incentives for breeders, subsidies for farmers, and investments in breeding programs; >60% livestock with improved genetics/breeds to increase productivity MoLFD A&M: Design and implement climate-informed marine spatial planning. This could include the expansion of Marine protected areas + suitable locations for aquaculture by 2026 MoLFD (mainland); MBEF (Zanzibar); DSFA A: Improve fish stocks data collection and monitoring; run fish stock/biomass assessments MoLFD; MBEF; DSFA A: Develop the aquaculture sector, including hatcheries, fish feed production, and species selection research MoLFD; MBEF A&M: Develop methodology for multi-land use planning; develop and enforce multi-land use management plans on public lands that are well consulted and draw on local knowledge by 2025 MoLHHSD A: Establish public-private partnerships (PPPs) to co-manage conservation areas (agreements for 10 protected areas by 2030 MoNRT A: Develop feasibility studies and tourism plans for less-visited protected and conserved areas for 10 undervisited protected areas by 2030 MoNRT; MoF Country Climate and Development Report: United Republic of Tanzania  |  57 A: Increase financing for storage and recharge and utilize data-driven approaches to determine optimal locations for storage investments and ensure proper management/maintenance MoW Establish a comprehensive data management strategy and utilize it for planning, allocation and resilience across all basins by 2030 MoW 6 Basin Plans updated and Basin plan for Pangani completed by 2028 MoW; Basin Water Boards Actions with potential tradeoffs with development A&M: Use a range of incentives and disincentives to drive and scale up natural regeneration or active restoration approaches including of unprotected, general use land by 2030 MoNRT; PO-RALG A: Expand conservation area estate for nature-based tourism, including 30% marine protected area by 2030 MoNRT; National Land Use Planning Commission; Marine Parks and Reserves Unit, Fisheries Division Intervention area: Promote resilient, low-carbon infrastructure systems for existing and emerging sectors and urban areas Actions with synergies with development M: Ensure that both public and private sectors develop climate-resilient digital infrastructure roadmaps to support the transition to low-carbon sector Ministry of Communication and Information Technology; e-Government authority M: Improve the coverage, quality, and reliability of high-capacity public transport services, including electrification of the sector (12% by 2040) MoT; municipal governments A: Implement cost-benefit balanced adaptation measures on identified vulnerable and critical transport assets, especially around the Lake Victoria region by 2030 MoT A: Establish a geolocated transport asset inventory database with measurable standards of transport asset conditions and its resilience to climate hazards and mainstream climate resilience of transport asset management and planning by 2025 MoT M: Strengthen enabling environment—for example by promoting favorable risk sharing-arrangements—to attract private investment to develop renewable energy; revise the PPP Act by 2026 MoE M: Prioritize investments in grid-integrated solar PV and wind (225MW by 2030; 3 GW by 2040) MoE M: Conduct geological surveys and disseminate information, increase energy capacity and grid access, and improve transport infrastructure to attract new investors and diversify the mineral sector, including ETM by 2025 MoM M: Revise the Mining Act to address issues of resource nationalism, fiscal provisions, and security of mining agreements; strengthen public financial management and institutional capacity to implement and monitor policies MoM A&M: Strengthen climate resilience for mining-impacted communities and environmental stewardship MoM; VPO A&M: Update Zanzibar’s draft planning and development act; establish the legal basis for the new Building Code by 2025 Ministry of Land and Housing Development (Zanzibar) A: Develop a strategy of improved conveyance on the main drainage channels for Dar es Salaam, combined with carefully planned and located sustainable urban drainage systems (retention, infiltration, attenuation) in the upper catchment areas by 2026 PO-RALG; municipalities A: Undertake area-based investments to catalyze private investment and urban regeneration in the Dodoma central business district by 2026 PO-RALG; PMO M: Lift the 30% limit on VRE penetration and enable the use of battery technologies to provide primary reserve capacity MoE Notes: Only the lead government body or bodies responsible for the action are listed in this table. For several actions, other ministries, departments and agencies and private sector actors are expected to be involved. A = adaptation; M = mitigation; A&M = adaptation and mitigation; BoT = Bank of Tanzania; CMSA = Capital Markets and Securities Authority; DFSA = Deep-Sea Fishing Authority DMD = Disaster Management Department; MBEF = Ministry of Blue Economy and Fisheries; MoE = Ministry of Energy; MoEST = Ministry of Education, Science and Technology; MoF = Ministry of Finance; MoH = Ministry of Health; MoLFD = Ministry of Livestock and Fisheries Development; MoLHHSD = Ministry of Lands, Housing and Human Settlement Development; MoM = Ministry of Minerals; MoNRT = Ministry of Natural Resources and Tourism; MoT = Ministry of Transport; MoW = Ministry of Water; NDSI = National Spatial Data Infrastructure; PMO = Prime Minister’s Office; PO-PSMGG = President’s Office, Public Service Management and Good Governance; PO-RALG = President’s Office Regional Administration and Local Government; VPO = Vice President’s Office. 58  |  Country Climate and Development Report: United Republic of Tanzania Current spending and financing for climate action fall short of what is needed The government of Tanzania is estimated to have spent $4.85 billion of climate change and allocated $1.72 billion to its adaptation budget (table 5.2). Donor financing was often in the range of 80 percent of the necessary climate financing during this period (Yanda et al. 2013; URT 2023). Available data suggests the government allocated $50–$360 million for adaptation annually since 2014/15. Spending on adaptation increased on the mainland and in Zanzibar since 2017/18. During the past 5 years, adaptation spending exceeded the public budget allocation. Climate spending in 2021/2022 is estimated to been $2.6 billion, using government, private sector, and development partner financing. In 2023/24, Tanzania mobilized climate financing from the Climate Investment Funds, Urban Water Supply and Sanitation Authority Green Bond issuance, International Monetary Fund, and World Bank. Table 5.2: Adaptation budget and climate spending, 2014–22 ($, millions) 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Adaptation budget 189 166 100 318 211 50 320 364 Climate spending in Mainland - - - 123 115 119 1,779 2,541 Tanzania Climate spending in Zanzibar - - - - 23 24 50 78 Sources: World Bank staff calculations, based on Pauline et al. 2023; URT 2023; BIOFIN 2022 Note: This increase from 119 to 1,779 in 2020/21 is due to a large increase in infrastructure spending. The country’s third five-year development plan provides for mobilizing $304 million in climate financing. During the 2024/25 budget period, the government plans to allocate additional budget to climate action. The 2024/25 budget book includes some development expenditure that is relevant for climate change, though the percentage of total budget is modest. For example, the budget for CSA and enhanced and sustained environmental and ecosystem management is 0.3 percent of the total for the National Irrigation Commission. VPO, which receives 0.3 percent of total development funds for ministries, departments, and agencies and regions, has earmarked 46 percent of its allocation to climate actions (URT 2024). Private sector climate financing is difficult to track due to the absence of a green taxonomy. Private sector financing has been available via different banks, including NBC Bank, which made $2.5 million available in 2022 for irrigation and livestock, and facilitated insurance for agriculture, fisheries, livestock, and food systems, and CRDB Bank, which made TZS 480 billion available for the blue economy and is expecting $100 million from the Green Climate Fund (GCF), which it will match. Tanzania Agriculture Development Bank and NMB Bank are also seeking GCF accreditation. Financing needs for select climate investments will contribute to better development Considering the limited public, development partner, and private climate financing mobilized to date, prioritizing climate-positive investments and mobilizing additional financing is vital. While several investments are key for embarking on a resilient and low-carbon growth path, few are at the expense of development or growth. This is evident in the estimation of investment needs for a subset of key interventions (table 5.3) that contribute to Tanzania’s development and NDC objectives. It is noteworthy that the investments needed for clean cooking and energy interventions under the BAU and ASP scenarios will also fulfill the sector-specific NDC commitments with no additional investments, so the costs for the “with climate policy” scenarios are the same. When fulfilling a sector-specific NDC adaptation target requires additional investments to those made under the BAU and ASP scenarios—such as restoring forests, reducing forest degradation and boosting agricultural productivity—there can be positive net economic benefits. When meeting NDC targets requires infrastructure investments additional to those made under the BAU and ASP scenarios, ASP requires much less investment than the BAU scenario. Country Climate and Development Report: United Republic of Tanzania  |  59 Table 5.3: Estimated costs and investment needs for selected actions ($, millions) BAU BAU with climate ASP ASP with climate action action 2023–30 2031–50 2023–30 2031–50 2023–30 2031–50 2023–30 2031–50 Integrate climate considerations into development efforts to build human capital and social protection Universal access to safely managed WASH 2,153 1,650 16,394 16,085 16,394 16,085 16,394 16,085 Investment need: CAPEX 2,153 1,650 16,394 16,085 16,394 16,085 16,394 16,085 Optimize land and water use and management to boost agriculture and rural productivity, increase climate resilience, and reduce GHG emissions Restore forests and reduce forest degradation 78 412 265 535 31 84 385 1,063 Investment need: afforestation/reforestation, 53 132 181 453 21 52 263 657 agroforestry, plantation forestry, restoration of degraded lands Operations and maintenance 25 280 84 82 10 32 122 406 Promote clean cooking 15,187 18,005 15,187 18,005 15,831 33,760 15,831 33,760 Investment need: stove cost (CAPEX) 102 58 102 58 365 723 365 723 Operations and maintenance: fuel costs 15,085 17,947 15,085 17,947 15,466 33,037 15,466 33,037 Boost agriculture productivity and resilience 1,557 915 4,234 6,008 2,149 1,901 6,700 13,254 Investment need: expanding CSA and irrigation 816 539 1,592 1,381 1,361 1,284 2,060 3,528 Operations and maintenance 741 376 2,642 4,627 788 617 4,640 9,726 Prioritize resilient and low-carbon infrastructure systems to enable climate-positive growth in existing and emerging sectors and urban areas Resilient transport networks and low-carbon 733 919 1,379 1,521 4,992 6,461 5,237 6,796 transport modes Investment need: modal share CAPEX 0 0 245 335 3,843 5,251 4,088 5,586 (infrastructure) Investment need: resilient infrastructure 0 0 401 267 401 267 401 267 Operations and maintenance: existing paved 733 919 733 919 748 943 748 943 roads Increase share of renewables in power mix 3,822 6,852 3,822 6,852 3,798 8,173 3,798 8,173 Investment need: power generation 1,586 5,437 1,586 5,437 1,558 6,979 1,558 6,979 Operations and maintenance (incl. fuel costs) 2,236 1,415 2,236 1,415 2,240 1,194 2,240 1,194 Total discounted investment and operations 23,530 28.753 41.281 49,006 43,195 66,464 48,345 79,131 and maintenance cost Additional investment and operations and 5,223 7,725 23,269 30,786 maintenance cost for climate action Notes: Investment needs included in this table are those that data were available for. Orange cells represent the period in which the discounted costs and benefits from investments and maintenance generate net benefits. For Restoring forests and reducing forest degradation, this is due to revenues from timber and carbon sequestration; for Promoting clean cooking, it is due to the benefits of avoided deaths and disability-adjusted life years; for Boosting agriculture productivity and resilience, it is from increased production efficiency. For Resilient transport networks and low-carbon transport modes, there were insufficient data to estimate the net benefits, and the zero value under BAU is due to the assumption that, despite the growing need to enhance the resilience of transport networks, no new investments are made to adapt the infrastructure to future climate. For Increasing the share of renewables in the power mix, there were also insufficient data to estimate the net benefits, and the unchanged values for the “with climate action” scenarios are due to the models used to generate expansion plans being based on projected demand and aimed to optimize resource use. The recommendations resulting from these models for BAU and ASP fulfill the country’s NDC commitments in the energy sector and so do not require additional investments in the “with climate action” scenarios. CAPEX = capital expenditure. 60  |  Country Climate and Development Report: United Republic of Tanzania Tanzania needs to mobilize climate finance from multiple sources To fill the financing gap for climate-positive development, Tanzania, like its peers, will need to leverage multiple sources of climate finance. The government has different options for mobilizing public, private, and dedicated climate finance. To ensure the overall economy is resilient, it will be important to ensure that over time, all investments are resilient. As such, focusing on a few innovative financing products could be high in transaction costs and premature if the necessary systems have yet to be established. Developing these financing instruments, over time, will help Tanzania target a specific investor category. This section presents options for how mobilizing financing from diverse sources and ways of combining different sources in the agriculture, energy, and transport sectors for illustration purposes. Tanzania could improve use of public policy and spending for climate action Using fiscal or policy instruments, including carbon pricing, to make explicit the unpriced impact of government spending on air pollution, human health, and climate change could ensure public policy and spending avoids unintended negative consequences. These unpriced impacts, or negative externalities, are implicit subsidies that are provided for socially harmful behavior.45 For example, in Tanzania, the cost of externalities from underpricing fossil fuels—which result in GHG emissions, local air pollution, and therefore damage to health—amounted to $844.9 million in 2021. By underpricing fossil fuels, Tanzania also lost out on $52.24 million in potential revenue in 2021 (Damania et al. 2023). Tanzania would benefit from assessing carbon pricing options and other potential fiscal instruments to incentivize low-carbon growth, and their impact on the economy and households. The agriculture sector provides a good example of the opportunities to improve public spending and strengthen public expenditure effectiveness by repurposing distortive subsidies. In 2022, only 5 percent of budgetary transfers directly supported producers, mostly through distortive input subsides in agrochemicals, seeds, seedlings, and so on.46 And despite its importance in sustaining productivity and resilience, CSA funding was marginal, at about 0.05 percent (World Bank 2022b). Repurposing distortive subsidies through income subsidies or input support linked to on-farm capital formation would reduce market distortions and improve competitiveness and productivity. If accompanied by an increase in development spending over time, this could help unlock the sector’s potential, scaling up budget for research, irrigation, and CSA plans, and help reallocate 20 percent of local government revenues to agriculture. Improving spending in the largely neglected livestock subsector would also help fight malnutrition, improve food security, and contribute to climate change mitigation (World Bank 2022b). Aligning agricultural expenditures and policies with climate change adaptation, mitigation, and soil, water, and other natural resource protection could also help ensure medium- and long-term productivity and resilience to shocks. Finally, targeting spending geographically and to strategic value chains—especially for extension and irrigation—would improve spending effectiveness (table 5.4). 45 Implicit subsidies are measured as unpriced externalities and account for the rest of the burden of subsidies on society and the economy. 46 Such input subsidies alter marginal returns, which alters production decisions. Country Climate and Development Report: United Republic of Tanzania  |  61 Table 5.4: Prioritization of proposed actions emerging from agriculture public expenditure review Recommendation Short term (1–2 years) Medium term (2–4 years) Long term Increase public funding Increase public investments in developing the Allocate 0.5% of agricultural GDP to Allocate 1% of agricultural for agricultural public agriculture and livestock sectors research GDP to research goods Scale up budget for research, water efficient Develop alternative funding for Ensure financial irrigation, and CSA Plan research, extension and irrigation sustainability with private funding Reallocate 20% of local government revenues Rationalize cess and agency taxes to agriculture Evaluate scope and impact of cess and agency taxes Boost the effectiveness Align the budget with climate change resilience Optimize spatial distribution of Upscale extension services of public expenditure and soil and water protection funds and investments Improve water use Improve access to extension services Build institutional linkages between efficiency research and extension Bridge the gap between area equipped for irrigation and area used Improve central extension coordination Reallocate input subsidies to less distortive support Pilot e-extension Fast-track enabling environment reform Promote farmer-led extension and (blueprint) in agriculture irrigation Phase out ad hoc marketing interventions (e.g. cashews) Allocating public financing to local-level climate action would help address high vulnerability in poor households. Analysis of Tanzania’s national budget from 2014–22 found that about 5 percent of climate change adaptation projects channeled the bulk of their funds to local governments for planning and public financial management procedures and 33 percent of adaptation-relevant projects involved some community participation at district level. Increasing the share of community participation in projects through employment or by supplying materials for social service infrastructure helps build community capacity in addressing climate-related challenges. Strengthening the performance monitoring of and allocating resources to programs that allows local government to access and use climate finance to build verifiable climate-resilient local economies and communities—would help channel funds for locally-appropriate climate action and increase climate resilience at the local level. Greater private financing for climate action is necessary Despite the relatively small size of Tanzania’s capital market and domestic banking sector, the financial sector can play a key role in supporting climate finance. Financial institutions can help channel resources toward climate action by integrating climate considerations into their lending, investment, and risk management practices. Crucially, domestic financial institutions can also serve as conduits for channeling international investments into Tanzania. Tanzania’s financial sector is increasing its engagement in green finance. For example, in 2023, NMB Bank and CRDB Bank launched their own green bonds ($400 and $300 million, respectively), and financial sector authorities have initiated various policy initiatives to scale green finance, drafting a sovereign sustainable finance framework and initiating the development of a green taxonomy. But several barriers remain, limiting financial institutions’ engagement in climate finance at scale. Some crucial projects for the climate agenda—such as solar homes in rural communities or mangrove restoration— do not generate enough revenue to attract large-scale commercial investors. The absence of an approved national green taxonomy and data constraints further hamper investors’ ability to make climate investment decisions. The lack of guidelines, technical assistance, and incentives are also key barriers to green finance 62  |  Country Climate and Development Report: United Republic of Tanzania instruments. The limited awareness and capacity of domestic institutional investors such as pension funds limit the potential of leveraging long-term capital to support climate action. Table 5.5 summarizes some policy recommendations that could address key challenges. Table 5.5: Summary of policy recommendations for green finance markets Policy action Lead entity Suggested timeline Capacity building for financial institutions on green finance BoT, MoF or TBA < 1 year Capacity building on climate disclosures, including international guidance CMSA, NBAA < 1 year (e.g. International Sustainability Standards Board (ISSB)) Roadmap for greening the financial sector BoT, MoF, NSSRA, CMSA, TIRA 1–3 years Disaster risk finance strategy, including considerations on how climate risk MoF, TIRA 1–3 years insurance products could be expanded Sustainable finance taxonomy CMSA 1–3 years Labeling framework and incentives for green and sustainability-linked loans MoF 1–3 years Sovereign Sustainable Financing Securities Framework MOF 1–3 years Green, social, sustainable and sustainability-linked (GSSS) bond and loan CMSA, BoT, MoF 3–5 years guidelines and incentives Greening non-depository financial institutions: building capacity, setting the climate TIB and TADB 3–5 years governance and strategy framework, conducting a climate risk analysis, developing green finance instruments Source: Mok, Panchamia and Akeel 2024. Notes: BoT = Bank of Tanzania; CMSA = Capital Markets and Securities Authority; MoF = Ministry of Finance; NBAA = National Board of Accountants and Auditors; NSSRA = National Social Security Regulatory Authority; TADB = Tanzania Agricultural Development Bank; TIB = Tanzania Investment Bank; TIRA = Tanzania Insurance Regulatory Authority. Tanzania is well positioned to leverage emerging opportunities with FDI in climate finance. FDI globally is shifting toward green sectors and can help transfer technologies and business capabilities to support adaptation efforts. To support FDI into climate finance, the government can ensure a predictable regulatory environment for investors in distributed renewable energy, mini-grid, and off-grid technologies, proactively adopt best practices in carbon credit regulations—following the example of other East African countries, which are opening up opportunities for foreign private investments in clean cooking, forestry management, and more—and lower currency risk, since most climate projects generate revenue in local currency. Improving the availability and quality of data needed to inform green investment decisions will help attract international investors. To improve market transparency, the Dar es Salaam Stock Exchange and National Board of Accounts and Auditors have taken important steps to scale climate disclosures and reporting, including by introducing environmental, social, and governance disclosure guidelines for listed companies and requiring entities to align with International Financial Reporting Standards 1 and 2. The Ministry of Finance, jointly with key stakeholders, should further develop a national green taxonomy and expand the use of climate labeling to help investors efficiently identify green assets. Capacity building for financial regulators and firms will be key to ensure that climate disclosure requirements can be implemented effectively. Expanding the insurance industry could create opportunities for adaptation financing. Tanzania’s agricultural insurance sales reached TZS 2.4 billion in 2022, representing about 0.3 percent of total insurance sales. This is lower than neighboring Kenya and Uganda. The low penetration of (mostly public sector) insurance in agriculture is attributed to farmers’ inability to afford the premiums. To address this challenge, the Ministry of Finance could develop a disaster risk finance strategy to explore the use of different risk instruments, including insurance, to respond to climate shocks. Lessons from other countries in the region Country Climate and Development Report: United Republic of Tanzania  |  63 on the application of climate risk insurance and other risk mitigation products can be useful. For example, the World Bank’s De-risking, Inclusion and Value Enhancement of Pastoral Economies in the Horn of Africa Project includes a financial resilience component that offers an integrated package of financial services, which includes index-based livestock insurance, to enhance pastoralists’ resilience against drought.47 Developing guidelines and incentive mechanisms can stimulate the development of GSSS bonds and loans. Building on international principles (and a sustainable finance taxonomy, if this becomes available), national guidelines for GSSS loans and bonds could harmonize the process for issuing these instruments and avoid greenwashing. Establishing incentive mechanisms—such as partial credit guarantees and government support for project preparation and aggregation—could stimulate the use of these instruments. For GSSS bonds, other countries, such as Thailand, have explored the use of tax incentives, and some regulators work with stock exchanges to provide capacity building for potential issuers. The Capital Markets and Securities Authority could also explore ways to expand interest from domestic retail and institution investors—for example, through outreach and investor guidelines. But since the local currency capital market is underdeveloped, it will likely only be able to play a marginal role in supporting Tanzania’s climate agenda in the short run, and broader capital market reforms will be needed to ensure the success of these markets. Private sector financing can also be mobilized for productivity-enhancing technologies and systems, green buildings, and low carbon manufacturing. With the dissemination of standards such as the Building Resilience Index, there are emerging opportunities for the private sector to finance green buildings and low-carbon manufacturing in base material sectors, such as cement, steel, and glass. Opportunities in the agriculture, energy, and transport sectors are briefly described in section 5.3. Climate finance and financial inclusion should be addressed together. Marginalized segments of the economy already face significant challenges in accessing finance. For example, in 2023, loans to small and medium-sized enterprises (SMEs), amounting to TZS 3.63 trillion, accounted for only 12 percent of Tanzanian banks’ total loan portfolio (World Bank 2023a), and climate impacts could worsen MSMEs’ financial access by reducing the reliability of their collateral and firm productivity. Additional policy efforts can ensure that climate change does not exacerbate financial exclusion challenges in Tanzania—for example, by ensuring climate risk and disclosure requirements do not disproportionately penalize MSMEs. The government can also work with non-depository financial institutions to develop financial mechanisms— such as partial credit guarantee schemes or patient capital investments—that scale climate finance for green or greening MSMEs. Carbon markets could provide opportunities for Tanzania Carbon markets can offer an important source of non-debt financing for climate mitigation projects by providing an additional revenue stream. The volume of carbon trades in global carbon markets has been reasonably steady, despite uncertainty, and with the right policy, regulation, institutions, and infrastructure, global compliance carbon markets under the Paris Agreement are expected to grow to about $250 billion per year by 2030 (CPLC and IETA 2019). Voluntary carbon markets grew rapidly driven by corporate decarbonization goals, with markets quadrupling in 2020–21 to $2 billion. But they have contracted in recent years due to greenwashing concerns and uncertainty related to the eligibility and use of credits. Although markets are fragmented globally, guidance is emerging that could reduce fragmentation. There are different preferences and requirements for buyers across market segments—for example, voluntary buyers have different preferences, such as sustainable development co-benefits, credit vintage, and so on, while compliance buyers require corresponding adjustment. And this has implications on price, depending on the type of buyer, as there can be an expectation that corresponding adjustments can fetch a higher price. 47 https://www.worldbank.org/en/news/infographic/2022/06/24/the-de-risking-inclusion-and-value-enhancement-of-pastoral-economies-in-the- horn-of-africa-drive-in-a-nutshell. 64  |  Country Climate and Development Report: United Republic of Tanzania Carbon markets can also create economic opportunities for services across the carbon value chain, such as validation and verification. Tanzania has issued some carbon credits. Tanzania generated about TZS 32 billion ($12 million) in carbon revenues between 2018 and 2022, participating in carbon markets to a limited extent under the Clean Development Mechanism through renewable energy, fuel switch, methane recovery, and forestry projects. In 2023, the country obtained pledges for $20 billion toward carbon offset credits in the coming years, primarily in land-based activities,48 and the VPO expects pipeline projects to bring in TZS 2.4 trillion ($1 billion), with a focus on forest resources (Carbon Pulse 2024b). In voluntary carbon markets, Tanzania has a little over 2 million nonretired units in circulation, which is much lower than peers such as Kenya (Carbon Pulse 2024a). In 2023, there were 36 registered carbon projects in Tanzania, including five in clean cooking and one in solar energy; 43 percent are REDD+ projects.49 In April 2024, Tanzania authorized a cookstove project and agreed to not use credits from the project toward its own NDC commitment. Tanzania’s Carbon Trading Regulations establish the rules and procedures for entities to participate in carbon markets. At 61 percent of gross revenue, they impose one of the highest benefit-sharing percentages for land-based projects. The country has made progress in developing a GHG mitigation strategy and is developing market infrastructure through its MRV system (Neyen 2024); but the registry is yet to be fully implemented, and Tanzania still needs to develop documented procedures for meeting UNFCCC reporting requirements and to prevent double counting. Tanzania’s framework for participating in carbon markets needs to be strengthened to meet its ambitious goals. Strengthening the National Carbon Trade Guidelines could help demonstrate the alignment of mitigation activities with NDCs and provide guidance on the full carbon activity cycle. Other challenges to consider include the limited availability of upfront financing and fees and incentives for developing climate mitigation projects. There is a need to update and finetune the regulations and guidelines periodically to provide clarifications and incorporate necessary amendments for increasing transparency and efficiency for relevant actors in the national carbon markets space. Given the dynamic nature of the market, Tanzania will need to build flexibility into its carbon guidelines and regulations and establish mechanisms to receive stakeholder input to incorporate updates or amendments on a periodic basis. Adopting a flexible approach would allow the country to adapt to evolving market conditions and not define ex-ante which sector to focus on for carbon trading. Establishing a stakeholder consultation and citizen engagement process would ensure it periodically and actively reviews and updates its carbon market guidelines and regulations. Tanzania will need to continue tapping into dedicated climate finance Tanzania already has access to various forms of dedicated climate finance. With the VPO and Ministry of Finance as focal points, Tanzania has been a member of the NDC Partnership since 2022. Since joining the partnership, it has sought support related to priority actions for the NDC stocktake, finalizing the NDC Implementation Plan, and deploying an NDC Partnership in-country facilitator and climate finance advisor. Via the Global Environment Facility (GEF), the country has accessed $27.1 million for climate change and used close to 85 percent of the available funds. The GCF, with the VPO as national designated authority, has provided $288.1 million for eight climate action projects and $4.3 million for four readiness activities. The Adaptation Fund is supporting six projects with nearly $14.9 million. Tanzania should continue to tap into dedicated climate financing and leverage these funds to mobilize additional resources, especially private sector financing. While the available financing for mitigation versus adaptation is skewed toward the former, there have been concerted efforts to increase support for 48 https://www.green.earth/news/tanzania-attracts-20-billion-investment-in-carbon-offset-credits#:~:text=Tanzania%20is%20set%20to%20 receive,billion%20in%20carbon%20offset%20credits. 49 https://www.ncmc.sua.ac.tz/application-of-projects. Country Climate and Development Report: United Republic of Tanzania  |  65 adaptation. But given the rate at which adaptation financing is becoming available, it is important to use any financing effectively to mobilize private financing. The country could build on its experience with CRDB Bank mobilizing GCF funds (described at the start of section 5.2) and consider how to use other dedicated climate finance for similar purposes. The Adaptation Fund’s updated strategy makes more references to the private sector under its three pillars,50 and while there are few examples of the fund being leveraged for private financing (Grimm, Ryfisch and Weber 2022), it is possible to use Adaptation Fund financing to create incentives for the private sector to engage in adaptation activities, particularly to overcome barriers to private sector participation in climate action. There are opportunities to blend different sources of climate finance Agriculture sector resilience can benefit from blending public, private, and carbon financing Agricultural public expenditures should be aligned with policies with climate change adaptation and mitigation and natural resources management. This can be achieved by promoting improved budget targeting geographically and in strategic value chains (such as for extension and irrigation), reallocating remaining input subsidies to less distortive support, and accelerating the implementation of agriculture reforms under a blueprint to improve the business environment. Reallocating support to fixed capital formation and on-farm services can contribute to both structural transformation and resilience. Private sector financing can be mobilized for productivity-enhancing technologies and systems. Private sector can promote solar-powered productive appliances in agriculture. In Tanzania, solar-powered water pumps and off-grid cold storage provide the best investment case in the agriculture sector as the technological solutions can help improve productivity. Forestry and organic fertilizers are areas with potential for carbon revenues. Afforestation and agroforestry projects can raise revenues against sequestration of carbon while offering longer-term improvements in soil health and other ecosystem services, such as biodiversity preservation. To be considered for carbon credits with environmental integrity, it will be important to put all the necessary requirements (e.g., benefit sharing) in place. To incentivize substitution of Tanzania’s synthetic fertilizer which had an import bill of over $550 million (in 2022), the government could explore carbon credits. It is possible to leverage the private sector, guarantees, and carbon markets for greener energy Engaging the private sector in commercial and industrial solar energy could help lower the carbon footprint of Tanzania’s growth, as expanding VRE is expected to require $7–8.5 billion in capital investments. Solar energy can be used to electrify remote households, and there are opportunities for SMEs to get involved in energy production by installing solar systems to power businesses and institutions, including fuel stations, schools, health facilities, hotels, and tourist lodges.51 At the industrial scale, enterprises can install solar systems to power high-energy manufacturing activities.52 The production of solar energy, which has the potential to make up a significant share of the renewable energy mix, is led by the private sector, as the government has focused on hydropower and gas. The government will need to undertake sector reforms to attract the needed private capital. Key sector reforms include updates to tariff policy and enforcement of tariff regulations, enhancements to PPP frameworks, enabling the use of guarantees and backstop instruments, improving legal, regulatory, and procurement frameworks, and updating the Energy Policy 2015. 50 For example, under its Action pillar, it has, as a crosscutting theme, “expanding the Fund’s synergies with existing and new adaptation funders and actors and initiatives, including the private sector” (Adaptation Fund n.d.). 51 For example, Power Providers Tanzania designed, supplied, and installed a 26.5-kilowatt peak (kWp) solar power system for a hospital in Karatu to power the operating theater, neonatal unit, laboratory, IT system, and maternity ward (IFC 2024). 52 For example, Shanta Gold has a 693 kWp solar power plant that provides 2% of mine’s energy, and Ensol Tanzania Ltd installed a 120 kWp solar rooftop system for a milk factory in Kibaha. 66  |  Country Climate and Development Report: United Republic of Tanzania While the immediate opportunities in commercial and industrial solar energy are limited to energy production for internal use and associated services, the long-term potential is high. The long-term opportunities include selling excess electricity to the national grid at feed-in tariffs, powering charging stations, including batteries for mining companies’ EVs, producing green hydrogen, and selling electricity to industries that cannot install solar rooftops. The government’s decision to remove value-added and import taxes from the main solar components (panels, batteries, inverters, and regulators) has catalyzed sector growth. Expanding hydropower in the national grid, including the JNHPP, will also influence growth of solar power for commercial and industrial use because it can ensure solar power’s stability, particularly in the mining sector, which needs to sustain operations (IFC 2024). Lifting the 30 percent limit on VRE penetration and enabling the use of battery technologies to provide primary reserve capacity are both central to mobilizing private financing to ensure VRE makes up 45 percent of the energy mix by 2045. The cost of solar energy kits, particularly panels and batteries, also need to go down further if solar is to be commercially viable for large-scale investment,53 and affordable, flexible financing options with a long payback period are also necessary. Competitive feed-in tariffs into the national grid for solar energy to cover production costs and clarity on future regulation of commercial and industrial-scale solar energy production will also help. Using guarantees to reduce private sector risks in power purchase agreements will also be important. For example, the parastatal Tanzania Electric Supply Company Limited is both a buyer and distributor of energy, creating risk for the private sector. So, to motivate private sector actors to engage, guarantee instruments for renewable energy or insurance for large projects will be necessary. But it is important that such credit guarantees do not serve as a subsidy, especially when targeting SMEs. Requiring adequate reporting on guarantees and ensuring partial credit guarantees are of a high level before they trigger a full guarantee can also help avoid defaults. Certified emission reductions can also provide incentives to reduce emissions in the energy sector. Clean cooking is an area that could raise carbon revenues. As less than 10 percent of the population has access to clean cooking (IEA et al. 2024), there is a large market for cookstoves and their fuel. Gas and electricity are the most common clean cooking solutions, but households are not adopting them due to affordability, availability, and consumer preference. Liquid bioethanol is a fast, safe, and affordable alternative to unsustainably sourced biomass-based fuels. Investors in this space rely on two revenue streams: the sale of cookstoves and bioethanol fuel, and carbon credit revenue from using clean cooking solutions. Leveraging carbon credits allows investors to provide bioethanol at a cost that is 40 percent cheaper than charcoal. Over time, investors can consider local production, supporting the upstream agricultural sector in producing the raw material. To unlock this potential, climate finance capacity in the clean cooking subsector is necessary as well as robust monitoring and reporting systems, which will secure transparency and help mitigate any potential reputational risk. The PPP agenda and innovative bonds could finance climate action in the transport sector The government can use various instruments to make investing in the resilience of the transport sector commercially attractive. To encourage private sector investors, it may need to lower the cost of capital and provide insurance on investments. In the short term, it may be possible to mobilize patient capital using the structures of an equity fund. But in the medium to long term, Tanzania may want to consider issuing use-of- proceed or sustainability-linked bonds to mobilize private financing. PPPs could encourage private sector actors to invest in resilient and low-carbon transport systems and infrastructure. Amendments to the PPP Act and revisions to the PPP Regulations of 2020 can help ensure 53 Increasing fossil fuel prices are likely to strengthen the business case for commercial and industrial solar energy (IFC 2024). Country Climate and Development Report: United Republic of Tanzania  |  67 that the PPPs contribute to climate action. An amendment to the PPP Regulations explicitly mentions the need to show how climate change adaptation measures are considered in project design, during construction, and in the operation phase, and how the climate change adaptation measures are likely to impact project financing structures. There would be value in further strengthening the PPP ecosystem by developing PPP guidelines, designing a framework for managing fiscal commitments and contingent liabilities, and completing the ongoing comprehensive pipeline screening and prioritization exercise. Filling policy and regulatory gaps in the enabling framework for PPP implementation is vital to ensure that support from the government’s PPP Center for Initiatives—such as that provided to Tanzania National Roads Agency for implementing Tanzania’s first PPP toll road (Kibaha Chalinze)—is effective. To advance PPPs for transport, it will be important to address some of the regulatory gaps, including the tolling law, a controlling policy, and a mechanism for handling toll revenues. 5.3. A resilient, inclusive, and low-carbon growth path for Tanzania In Tanzania, climate action can complement and support development goals. 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Box 2054 Dar es Salaam, Tanzania Read more on linkages Tel : +255-22-216-3200 between climate and tanzaniaalert@worldbank.org development in Tanzania