Report No: ACS7031 Kingdom of Morocco Climate Change Strategy Notes December 28, 2013 MNSSD MIDDLE EAST AND NORTH AFRICA 1 Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. 2 The analytical work which this volume is based on was carried out by a team led by Andrea Liverani and including Kirk Hamilton, Stefano Paternostro, Manaf Touati,Sylke Von Thadden, Jehanne Aouab, Pierre Demangel, Saad Belghazi, Ismail Ouraich, Wallace E. Tyner, Benedicte Augeard, Dominique Van Der Mensbrugghe; Khalid El Messnaoui; Daniel Camos, Idriss Abbassi, Mohamed Messouli, Julia Oliver, Abdelmourhit Lahbabi, Charlotte de Fontaubert, Rafik Missaoui, Mohamed Bekhechi, Achiko Morita, Giovanni Bo. The team is grateful for input provided by Alex Kremer, Julia Bucknall, Julian Lampietti, Silvia Pariente, Luis Constantino, Christophe Crepin, Jaafar Friaa, Adrien de Bassompierre, Adrian Fozzard, Nicolas Perrin, Kieran Kelleher, Nathalie S. Munzberg, Alberto Ninio, Charles di Leva. Quality control was provided by Hans Lofgren, Martina Bosi, David Treguer, Xavier Vincent. The team is particularly grateful to the numerous partners which supported and were actively involved in the activity, including Mmes Benchekroun, Oucible, Aherdane, Merrss Nbou, Khellaf, Nihou, Errati, Graoui, Addi, Chintouf, 3 4 Executive Summary This volume contains the individual reports produced under the World Bank Program of Economic and Sector Work (P-ESW, ) on Supporting Morocco’s Climate Change Strategy. In 2008 the Government of Morocco asked the Bank’s analytical and technical assistance on the policy implications of climate change. An initial policy note outlining the main drivers of climate vulnerability, as well as the relationship between climate mitigation and energy security for the country was presented to the Government. The note led to the organization of a National Conference held in Rabat on February 11-12, 2009 on the implications of climate change in the country, which saw the active involvement and participation of various ministries (including the Ministry of Economic and General Affairs (MAEG); the Ministry for Energy, Mines, Environment and Water; the Ministry of Agriculture) as well as a range of public agencies and institutions, such as the Directorate of National Meteorology, the National Institute of Agronomic Research, the Municipalities Equipment Fund (FEC), and the National Electricity Office (ONE). The Government confirmed its interest in using the P-ESW to support and develop its climate policy. The deliverables under the Program stem from analytical needs identified from various departments and agencies. Following the conference, a steering committee composed of the Department of Environment, the Ministry for Economic and General Affairs and the Ministry of Economy and Finance was set up to oversee the preparation of various analytical outputs supporting the Government’s climate policy. It was agreed that the P-ESW would deliver products immediately accessible to the various stakeholders in line with their climate policy objectives. The deliverables would be released as a set of Strategy Notes, whose content would feed into the development of the Government’s Sustainable Development Strategy. The P-ESW program was articulated in three main deliverable blocks:  Institutional and Policy Framework  Decision Support Tools  Costing Impacts and Policies Table 1. P-ESW Key Deliverables, 2010-2013 Adaptation Institutional Costing Decision Objectives / Mitigation and Policy Impacts and Support Focus Framework Policies Tools Product 1. Climate Change Public Expenditure and Institutional Review A&M ● ● ● 2. Benchmarking of Climate Legislation A&M ● 3. Poverty and Social Impacts of the Energy Strategy M ● ● 4.Economy-wide impacts of CC (adaptation) A ● ● 5. A Climate Vulnerability Index for Morocco’s Regions A ● 6. Adapting Morocco’s Fisheries A ● ● 7. GHG accounting: from inventories to information systems M ● ● 8.Solar, Wind and Solid Waste NAMAs M ● 5 Table 1 lists each deliverable in its relation to the P-ESW three building blocks and their focus on adaptation or mitigation objectives.1 One planned output (Assessment of climate vulnerability of Morocco’s Energy Systems) was dropped. Seven ministries and agencies were involved in commissioning and/or collaborating on these outputs: Ministry of Economy and Finance, Ministry of General Affairs and Governance, Department of Environment, Department of Energy, Department of Water, Ministry of Agriculture and Fisheries, High Commission for Planning. The section below describes each P-ESW output in terms of teams, counterparts, quality assurance methods followed and impact. 2. Strategy Notes Summary Morocco’s commitment to addressing climate change takes place in an environment of finite resources and competing development challenges. The Government’s priority over the last year was to consolidate financial rigor and open up the fiscal space for infrastructure investments supporting growth, and social expenditures in sectors such as health and education where key indicators are lagging. Against this background, calls for additional resources to address adaptation and mitigation objectives need to be matched by increased attention to the efficiency of public expenditures, and a focus on impacts and results. The Climate Change Public Expenditure and Institutional Review (PEIR) pursued the following objectives:  Clarify and quantify the range of climate-related expenditures in a given set of sectors;  Assess the extent to which the expenditures are geared towards meeting specific sectoral or policy objectives;  Assess capacity to execute climate related expenditures (plan, implement, monitor, evaluate);  Proposing a set of measures aimed at increasing the efficiency of expenditures, in terms of financing mechanisms, flows and expenditure categories. The work was carried out in collaboration with the Directorate of Budget within the Ministry of Economy and Finance (MEF) and the Department of Environment. MEF was interested in an analysis of the efficiency of climate related expenditures based on standard PFM assessment tools. Additionally, the MEF was keen in developing an analytical basis to identify budget performance indicators capturing the sustainability dimension of sector expenditures, in the context of the ongoing development of the Organic Law of Finance which is going to introduce performance based budgeting around sector programs as well as Medium Term Expenditure Frameworks (MTEF). Finally, the Government is positioning itself for potentially additional climate finance flows, and the Ministry of Economy and Finance was keen in understanding how Morocco’s National Plan Against Global Warming could be used as a potential vehicle to attract funding. In terms of key findings, the activity: a) Put a dollar number to the Government’s actions on adaptation and mitigation; b) Visualized how public expenditures on both adaptation and mitigation are articulated across different ministries; c) Assessed the capacity of different departments and agencies to manage adaptation and mitigation resources; d) Assessed the capacity of key institutions to formulate, plan, implement CC policy at national and local level, as well as the extent of government coordination around CC issues; e) Provided a template to develop a CC MTEF. 1 The size of the dot refers to the importance of the deliverable for the building block. 6 Morocco’s efforts in setting up sound climate change policies require a legal framework that defines the basic principles as well as the terms and procedures of their implementation. The lack of overarching legal and legislative framework can permanently hinder the effectiveness of such policies and the creation of new ones by preventing their convergence and overall coherence. This note provides a comparative overview of relevant CC legislation which other countries have adopted or are in the process of adopting, lays out lessons learned from experiences worldwide, with a view to providing the Government with an understanding of the various approaches. The note provided the following recommendations: a) to strengthen the legal framework for deliberation, decision and monitoring of climate change policy by involving the key ministries (environment, energy, industry, finance, agriculture, local authorities and economic development for example); b) to strengthen the mandate of the Department of Environment for the preparation, adoption and control of compliance with emission of greenhouse gas emissions, including taxation, control and endorsement for impact studies, programs and plans related to climate change. c) to provide a solid legal basis for the commitment to reducing greenhouse gas emissions d) to define a legal basis for the granting of incentives to (a) develop renewable energy sources, (b) encourage a rational use of energy in transport, housing and other as well as scientific research on new energies, (c) ensure the participation of local authorities, and (d) promote partnerships and collaboration between the private sector, civil society organizations and public agencies in the process of elaborating, adopting and controlling the implementation of policies, plans and programs related to climate change, and e) to strengthen the national response for bilateral, regional and international cooperation on climate change. The energy sector is critical to Morocco’s green growth strategy. The country’s high energy dependency (in 2011 96% of its commercial energy was imported) has important fiscal and trade implications. The current energy profile also has environmental consequences as oil and coal together constitute 84% of total commercial energy. Despite the results of the country’s rural electrification program, energy access remains critical for the Moroccan poor. Moving towards a more renewable energy profile, could potentially entail reducing the foreign exchange burden of energy imports and reduce greenhouse gas (GHG) emissions at the same time. The Government 2009’s energy strategy has three major goals:  To guarantee adequate energy supply while at the same time reducing dependence on foreign energy supplies;  To limit the environmental impacts of the Moroccan growth model by encouraging investments in renewables (wind, solar and hydro) whilst improving efficiency;  To guarantee energy access to the population, especially the poor The Poverty and Social Impact Assessment of Morocco’s energy strategy provides for the first time, an economic assessment of the Government’s energy strategy and it s macro and sector implication based on a country-calibrated computable general equilibrium (CGE) model named MANAGE (Mitigation, Adaptation, and New Technologies Applied General Equilibrium Model). MANAGE is a hybrid model in that it is a prototypical CGE model but with a greater richness in technologies employed in the energy sector. Thus, the energy component has “bottom-up” features that are well integrated with the top-down CGE structure. The HCP’s Directorate of National Accounts supported the development of a s pecific social accounting matrix (SAM) based on the standard 2007 SAM including renewable energy (solar and wind) and providing additional specificity to the electricity sector. The analysis concluded that: 7  A no policy scenario (i.e. a failure to implement the energy strategy) would involve huge increases in energy consumption thus increasing dependence on imported energy, large increases in GHG emissions, and a substantial increase in the government budget burden and overall economic burden of the energy subsidies;  Under scenario 1 (strategy implementation without addressing the energy subsidy issue), the implementation of the strategy involves a reduction in economic growth due to the high cost of large investments in renewable energy coupled with the continued energy subsidies;  Scenario 2 (subsidy removal combined with renewable investments under the strategy) has several valuable lessons:  Subsidy removal impacts are quite different in the short and long term. In the short term, economic growth is reduced, but it accelerates substantially in the long term due to the stimulus of reduced taxes and increased energy efficiency.  Elimination of energy subsidies causes adverse impacts on the poor households such that considerations of an improved social safety net would be needed to accompany the subsidy reductions.  The subsidy removal-induced inflation causes appreciation of the real exchange rate. A fixed (nominal) exchange rate policy is not compatible with the policy of subsidy reduction because it exacerbates the economic impacts of the subsidy removal.  Subsidy reduction combined with renewable energy and efficiency investments can increase economic growth and reduce GHG emissions. Historically, Morocco’s economy has shown a strong and positive relationship between aggregate growth rates and agricultural GDP growth, with a correlation coefficient of 0.93 over the past 30 years. Weather and rainfall variability have major spillover effects on the rest of the economy, and when drought affects agriculture, the whole economy suffers. Despite growing awareness of the expected impacts of climate change on Morocco’s agricultural sector, there is still a limited understanding of their broader ramifications for the overall economy. The early literature on economic impact assessments of climate change provided useful insights on how alterations in rainfall patterns and increasing temperatures will most likely translate into yield reductions in many crops (Gommes et al. 2009), but remained limited in scope and depth. The 2010 study led by the Ministry of Agriculture and Fisheries (MAPM) and the World Bank (WB), in collaboration with the National Institute for Agricultural Research (INRA), the Food and Agriculture Organization of the United Nations (FAO), and the Direction of National Meteorology (DMN) did precisely that. Nevertheless, today’s generalized awareness on the impact of climate change has led policymakers to call for analysis that can draw the linkages between climate change and the economy. The analysis contained in the report, based on an activity led by UNU-WIDER/Purdue University analyzes the potential welfare losses/gains from climate change over identified climate scenarios (A2 and B2) and differing assumptions of CO2 fertilization. Additionally, the paper aims to test the adaptation potential of Morocco’s Agricultural Strategy, the Plan Maroc Vert. The paper builds on a) the results of the 2010 MAPM/WB/FAO/INRA/DMN study regarding climate impacts on yields; b) IFPRI’s CGE model structure, updated by Dudu and Cakmak (2011). One specific feature of the model is that it tries to capture Morocco’s heterogeneous distribution of agricultural production activity across regions. This diversity in the regional structure of agriculture brings about complicated linkages in terms of projected impacts of climate change across regions, which in turn trickles down to affect the rest of the economy. Climate change would intervene by substantially changing the regional production patterns and hence, introduces changes in prices of commodities. CGE model is adapted to shed light 8 on interregional linkages under different climate-driven agricultural productivity shocks. Under the P- ESW the Bank provided support to the Purdue team carrying out the analysis regarding the treatment of hydrological data and its re-distribution on a river basin basis in order to allow for a more meaningful analysis of the impact of different climatic scenarios and their effects on market outcomes. The results confirm the linkage between agriculture and the rest of the economy under the different scenarios, with GDP falling substantially due to climate change and all sectors being impacted to different degrees. Under the worst case scenario (A2, no adaptation, no CO2 fertilization), the fall in agricultural production lead to agricultural trade deficit. The analysis shows that Morocco can adjust based on the timely adoption of policies and investments, such as those foreseen in the agricultural strategy. Reducing the country’s vulnerability to climate change is an important priority for GoM, and an increasing attention is being given to mainstreaming climate change adaptation and mitigation measures into sector strategies, like the Plan Maroc Vert. The Bank has been assisting the government in this respect following a sector approach, and focusing particularly on the agriculture and water sectors. However, significant gaps exist in the capabilities and resources to produce assessments of vulnerability across sectors. Under its regionalization agenda, GoM is considering options to decentralize decision making, capacities and resources to Morocco’s regions. Increasing environmental concerns have raised demands for closer analysis and context specific assessments regarding environmental and climate vulnerabilities. The GoM is setting up Environmental Observatories in every region, tasked with collecting indicators and providing information for decision making. The note presents an example of Climate Vulnerability Index to be used to assess vulnerabilities of Morocco’s regions. In particular, this activity aimed at: a) Demonstrating the value added of having a regional level system of Climate and Environmental Vulnerability Indexes (CEVIs); b) Analyzing the needs in terms of institutional set up, data availability, methods used, technical skills to set up a vulnerability index to be used by the Environmental Observatories; c) Presenting an action plan towards the establishment of CEVIs. The study presents two different models of vulnerability index: the "Environmental Vulnerability Index” (EVI) and the Mapping of Climate Vulnerability (CVCC in French). A comparative analysis based on the strengths and weaknesses of both models was carried out in the study. It highlighted that EVI would likely be the most appropriate index for Morocco, given that the data requirements for the CVCC approach would not allow for an adequate coverage of all the regions of Morocco. The study therefore recommends the EVI and demonstrates its practical use by applying it to two regions, Marrakech and Errachidia with a roadmap for the systematization of its use to all regions of Morocco. The EVI uses 50 indicators seeking to capture a large number of elements in a complex interactive system. The indicators selected are founded on the best scientific knowledge currently available and have been developed in consultation with international experts, national experts, other organizations and interest groups. The indicators are classified into five categories: meteorological, geological, geographical, characteristics of the region and anthropogenic. In addition to providing a detailed explanation of the methodology of the EVI, the study provides insight and recommendations on how to mainstream its use within local institutions. 9 Climate change is increasingly recognized as a source of threats, both direct and indirect, to fisheries worldwide. These threats range from the expected biophysical impacts of climate change on the distribution or productivity of fish stocks (including through ocean acidification, habitat damage, changes in oceanography and disruption to precipitation and freshwater availability) to more indirect impacts on the critical marine ecosystems on which they depend. Future direct and indirect impacts of climate change are amplified by current policy failures, as healthy ecosystems, the cornerstone of healthy fish stocks, are often threatened by unsustainable fishing practices, which sometimes lead to the destruction of coral reefs, seagrass beds, mangroves, and other key ecosystems in Moroccan waters. In spite of this growing threat, however, Morocco represents one of the few remaining instances where fisheries are managed sustainably, where the level of fishing is relatively controlled, and overall compliance is much higher than in the other countries in the MENA Region. The Government of Morocco has recently launched an ambitious initiative to energize its fisheries sector, though the adoption of its ‘Plan Halieutis’, also dubbed the ‘Plan Maroc Bleu’, which aims to replicate for fisheries what the ‘Plan Maroc Vert’ did for agriculture in Morocco. The activity aims to identify and assess these effects on the fisheries sector, and to identify concrete and realistic options that can be expected to mitigate these impacts. The assessment of the vulnerability of Morocco’s fisheries sector to climate change was based on a desk review of available literature, key stakeholders’ interviews and a survey of Moroccan artisanal fishermen’s perceptions on the impact of sustainability practices and climate change. T he study highlighted key risks in meeting the objectives of increased production and expected limits to available resources which will have important consequences on the livelihoods of Moroccan fishermen. Addressing these risks and containing the expected costs for fisheries actors who are often already in great difficulty, will require a multi-pronged approach. It will be necessary to prioritize activities to increase the value of the catch, without increasing the amount. In its first stage, this will entail implementing measures which already made sense without climate change, such as better enforcement of quotas and the enhancement of other control measures, particularly of illicit fishing practices. Although the impacts of climate change are clearly having an effect on stocks, particularly in relationship to the appearance of new species and the displacement of old ones, and changes in the reproductive cycle, most negative impacts are still due to fisheries mismanagement. Redressing this will involve not only a renewed involvement of the Department of Fisheries, but also other ministries and actors involved in control activities such as the Royal Marine and Gendarmerie. The Note develops an integrated roadmap for adaptation based on cross-sectoral partnerships and including key stakeholders such as fishermen’s associations and cooperatives. The roadmap would: a) refine the assessment of future risks and vulnerabilities based on robust climate modeling; b) continue to demonstrate and emphasize the need for no-regret fisheries management; c) identify (and refine) adaptation practices and develop plans; d) Identify the communities’ contribution to implementing the adaptation plans. Morocco does not yet have a system in place to periodically monitor GHG emissions across sectors. Instead, the Government periodically outsources the production of GHG inventories in the context of the process leading to the production of National Communications to the UNFCCC and other reporting duties. This not only leaves the country in a position of not being able to quality control the outputs, but also has an impact on the country’s capacity to assess the carbon footprint of its policies and investments in the short and long run, beyond mere reporting duties. The Note contains an institutional feasibility analysis highlighting the benefits of a permanent GHG Monitoring and Information System focusing particularly on its institutional set up, data availability, methods used and technical skills needed to set it up. The report also provided a review of international experience and practice in this matter and presented a detailed action plan towards the establishment of such an information system. 10 At the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) held in Copenhagen in December 2009, Parties noted the Copenhagen Accord as a political declaration. Pursuant to Paragraph 5 of the Copenhagen Accord, Non-Annex I Parties make reference to ‘nationally appropriate mitigation actions’ (NAMAs) without compromising growth, by transferring finance, technology and capacity-building assistance from developed countries in a “measurable, reportable and verifiable” manner. Subsequently parties were asked to formally communicate their association with the Copenhagen Accord to the UNFCCC Secretariat. The outcome of the 16th Conference of Parties to the UNFCCC in Cancun in December 2010 further emphasized the decision that developing countries shall receive “enhanced financial, technological and capacity-building support for the preparation and implementation of nationally appropriate mitigation actions”. The Note presents background documents for the production of NAMA proposals based on existing national programs with substantial mitigation potential: the Wind, Solar and Municipal Solid Waste Programs. The proposals summarize the main characteristics of the programs selected, stage of implementation, partners involved, emission reductions scenarios for each program, financing arrangements and financing gap and possible scenarios for their financing under credited and supported options. 11