Enhancing Renewable Energy Deployment In Malawi Through Climate Finance Instruments: Policy Challenges and Prospects A thesis approved by the Faculty of Environment and Natural Sciences at the Brandenburg University of Technology Cottbus – Senftenberg in partial fulfilment of the requirement for the award of the academic degree of Doctor of Philosophy (Ph.D.) in Environmental Sciences By Master of Science Dumisani Chirambo from Mwazisi Village, Rumphi, Malawi Supervisor: Prof. Dr. iur. Eike Albrecht Supervisor: Prof. Dr. agr. Bachar Ibrahim Day of the oral examination: 23.05.2017 ii Declaration I hereby declare that this dissertation is the result of my original research carried out at the Brandenburg University of Technology Cottbus-Senftenberg, Germany within the framework of the doctorate programme Environmental and Resource Management. I hereby admit that this dissertation has never been published by another person or submitted to any examination board for the award of any other degree. All the sources used have been duly acknowledged. ________________________________ Dumisani Chirambo B.Sc (Hons) (Brighton), M.Sc. (Brighton) iii Dedication This dissertation is dedicated to my family, friends and numerous people that have supported and encouraged me as I was at various stages of the PhD journey. Others have achieved more with less (opportunities) than what I had and others have achieved less with more (opportunities) than what I had. What I know is that I have achieved my best with what I had. Soli Deo Gloria iv Acknowledgement I owe my supervisor Prof. Dr. iur. Eike Albrecht a debt of gratitude for his exceptional guidance and insights on my academic and non-academic affairs. Through his humour and direction I have managed to find the PhD journey exciting, relevant and fulfilling. I especially acknowledge and thank my parents (Clevin and Doreen Chirambo), three brothers (Keith, Alex and Mike) and numerous relatives (especially the Chirambos in Lilongwe and Uncle Kelvin) for the encouragement and assistance that they have always given me even before starting the PhD programme. I did the writing but without their support I would not have made it. I would also like to thank my colleagues at my Department and fellow ERM PhD candidates for their company and encouragement during my work. My appreciation also goes to the many people that facilitated the data collection for this this research by being respondents or pointing me in the right direction. Lastly, I thank the Faculty of Environmental Sciences and Process Engineering at Brandenburg University of Technology Cottbus-Senftenberg for giving me the opportunity to develop my research and interpersonal skills at such a wonderful institution. I am definitely a very different person from what I was before the start of the programme. v Abstract Malawi is a Least Developed Country located in Southern Africa to the East of Zambia. Malawi has a low electrification rate of 9%. Furthermore, unreliable and inadequate power supply are estimated to reduce Malawi’s GDP by 7%-9%. These energy sector challenges diminish the country’s prospects for sustained growth, poverty reduction, and improved delivery of health and education services. Various studies have been undertaken to determine how Malawi can improve its energy sector through the deployment of renewable energy. However, these studies have not specifically examined how climate change related financing mechanisms such as the Clean Development Mechanism (CDM) could be utilised to mobilise financing and capacity development for renewable energy deployment in the country. This is despite the assertion that developed countries are committed to jointly mobilising US$100 billion per year by 2020 to support climate change mitigation and adaptation activities such as renewable energy deployment in developing countries. Through the use of questionnaires, case study analyses, policy reviews, academic literature reviews and interviews, this research sought to determine Malawi’s regulatory and institutional challenges and prospects for enhancing renewable energy deployment through climate finance instruments. Among some of the research findings was that Malawi has relied on external support in order to develop capacity in the field of climate finance, hence in the absence of external assistance there are limited opportunities to incentivise various stakeholders to implement projects and to enhance awareness about climate finance. The study also discovered that Malawi’s climate finance determinants resemble a non-market seeking Foreign Direct Investment profile, hence the presence of opportunities for cheap and abundant emission reductions could improve climate finance investment patterns rather than the opportunities for emission reductions and co-products such as electricity through renewable energy technologies. The study therefore recommended that Malawi should create a Renewable Energy and Climate Finance Promotion Agency to assist with soliciting funding for renewable energy projects from concessional and non- concessional sources and drafting and implementing renewable energy policies. Another recommendation was that the country must create a Renewable Energy Fund to reduce the funding constraints that the media, project implementers and financiers have in undertaking various roles related to enhancing renewable energy deployment. Lastly, the study concluded that Malawi’s prospects for accessing vi various forms of climate finance and deploying climate finance projects can be improved through improvements in Malawi’s renewable energy and climate change institutional framework, and the modifications of climate finance instruments and methodologies to encourage flexibility and reduce institutional constraints. Keywords: Africa, Clean Development Mechanism (CDM), Climate Finance, Renewable Energy, Nationally Appropriate Mitigation Action (NAMA), Voluntary Carbon Market (VCM) vii Table of Contents Declaration ................................................................................................................. iii Dedication .................................................................................................................. iiv Acknowledgement ....................................................................................................... v Abstract ...................................................................................................................... vi Table of Contents ..................................................................................................... viii List of Figures ............................................................................................................ xii List of Tables .......................................................................................................... xivv List of Acronyms and Abbreviations ........................................................................ xvv Chapter 1 Introduction ................................................................................................ 1 1.1 Introduction to Chapter One .............................................................................. 1 1.2 Background to the Study ................................................................................... 1 1.3 Motivation for the Work ..................................................................................... 7 1.4 Scope of the Study and Specific Objectives .................................................... 13 1.5 Structure of the Thesis .................................................................................... 13 Chapter 2 Renewable Energy Deployment in Malawi: Key Drivers and Obstacles .. 15 2.1 Introduction to Chapter Two ............................................................................ 15 2.2 Fundamental Issues Influencing the Development of the (Renewable) Energy Sector in Malawi .................................................................................................... 15 2.2.1 Geographical, Demographic and Economic Information .............................. 15 2.2.2 Energy Sector Background Information ....................................................... 18 2.2.3 Energy Policy and Climate Change.............................................................. 22 2.2.4 Biomass Misconceptions .............................................................................. 25 2.2.5 Biomass, Renewable Energy and the Millennium Development Goals (MDGs) ................................................................................................................ 28 2.2.6 Rural Electrification in Malawi ...................................................................... 30 2.2.7 Private Sector Participation in the Energy Sector......................................... 32 2.3 Chapter Conclusion......................................................................................... 37 Chapter 3 Climate Finance and Climate Risk Management in Malawi ..................... 39 3.1 Introduction to Chapter Three ......................................................................... 39 3.2 The Role of Climate Finance in Promoting Climate Reselient Development ... 39 3.3 Malawi’s Climate Change Regulatory and Institutional Framework ................ 41 3.3.1 National Adaptation Programmes of Action (NAPA) .................................... 42 3.3.2 Malawi Growth and Development Strategy (MGDS) II (2011-2016) ............ 43 3.3.3 The Malawi Economic Recovery Plan (ERP) (2012-2017)