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Lao People’s Democratic Republic 

Peace Independence Democracy Unity and Prosperity 

Department of Climate Change 

 Ministry of Natural Resources and Environment 

February, 2019 

TABLE OF CONTENTS 

Abbreviations 1

Executive Summary                                                                                                             3

1. Introduction          4

1.1              Background    4

1.2              Country Profile           5

1.3              Climate change profile           6 

                      Climate change impacts             6

                      Climate change hazards                                                                                  6

1.4              Socioeconomic development profile                                                                          7

                      Socioeconomic development status                                                                7

                      Development policies                                                                                     8

1.5              - Climate change policy response       12

                      Legal and regulatory framework                                                                   12

                      Climate related strategies and policies                                                          13

1.6              - Capacity development needs            17

       2. Country priorities and GCF pipeline       18

2.1              Priorities for the Country Programme             18

                      Process for identifying the priorities                                                             18

                      Priorities for the Country Programme                                                           20

2.2              Current GCF pipeline 22

                      Investment projects                                                                                      23

                      Readiness projects                                                                                        24

 25

                      Accreditation pipeline                                                                                  26

       3. GCF coordination and engagement         27

3.1              Institutional arrangements      27

3.2              Accredited Entities     28

3.3              Stakeholder engagement         30

                       Stakeholder coordination and engagement                                                   30

                       Private sector engagement                                                                            31

                      Contribution of key stakeholders to the country programme                         31

3.4              Coordination between GCF and GEF 32 Steering and oversight          33

                    Planning to identify future GCF and GEF investments – NAP process           33

                     GCF-GEF investments                                                                                  33

3.5              Key implementation mechanism: Environment Protection Fund         34

       4. Monitoring and evaluation          35

       5. Implementation plan       36

           Annex 1: List of stakeholders consulted                                                                   37

           Annex 2: Sectoral priority climate activities for Country Programme                       39

           Annex 3: GCF investment criteria                                                                           52

ABBREVIATIONS 

EXECUTIVE SUMMARY 

The Green Climate Fund (GCF) is a multilateral climate fund operating under the United Nations Framework Convention on Climate Change (UNFCCC) to promote paradigm shift towards low-emission and climate-resilient development pathways. The GCF has substantial potential to support Lao PDR to implement its priority climate change adaptation and mitigation projects and achieve broader national goals in relation to green growth and the sustainable use of natural resources.  

Lao PDR’s GCF country programme sets out country priorities in relation to the GCF, as well as the current pipeline of investment and readiness projects. These priorities have been selected since they align with the GCF’s results areas and investment criteria. The country programme was developed by synthesising national climate change and development strategies and action plans, and intensive stakeholder engagement at the national and sub-national level.  

The overall priorities for the Country Programme can be summarised as (not in order of priority): 

• Short term priorities (2019-2021): 

-       Increase and maintain national forest cover  

-       Increase the resilience of urban areas to water impact, in particular to floods  

-       Increase the resilience of rural areas to climate induced droughts and floods  

-        Enhance resilience of smallholder farming communities in vulnerable areas  

-       Climate friendly agribusiness value chain.  

• Medium to long term priorities (2022-2030): 

-       Promote energy efficiency measures   

-       Increase renewable energy supply 

-       Implement low carbon transport measures 

-       Increase the resilience of the health system (infrastructure and population) - Enhance the resilience of urban infrastructure.  

The Country Programme is a live document and will be updated annually, based on changes in national priorities and circumstances including the next National Socio-economic Development Plan. 

1. INTRODUCTION  

Lao PDR is a landlocked country and classified as Least Developed Country (LDC).  Lao PDR is particularly vulnerable to climate change impacts, particularly floods and droughts, due to its high dependence on climate-sensitive natural resources and low adaptive capacity.  Forest cover has declined from 70% of the total land area in 1943 to 41.5% in 2002⁵, resulting in Lao PDR changing from being a net sink to a net emitter. In 2007, the Government committed to increase the proportion of forest to 70% of total land area by 2020^[1].

Lao PDR’s long-term national development priorities are to transition to an upper-middle-income country by 2030, ensuring green economic growth that prioritises the sustainable use of natural resources and is resilient to natural disasters. This is summarised in Lao PDR’s key strategic development policies: 

• Lao PDR’s Vision 2030 prioritises innovative, green and sustainable economic growth^[2].  
• Lao PDR’s Ten-year Socio-economic Development Strategy (2016–2025) consists of seven strategies, one of which focuses on “green economic growth” and another which focuses on “sustainable and green environment with effective and efficient use of natural resources”^[3]
• Lao PDR’s 8th National Socio-economic Development Plan (2016- 2020) has three outcome areas including the third outcome area: “Natural resources and the environment are effectively protected and utilised according to green-growth and sustainable principles; there is readiness to cope with natural disasters and the effects of climate change and for reconstruction following natural disasters^[4].”

Table 1: Country profile 

Lao PDR’s economy is already experiencing the impacts of climate change, with the majority of the population highly vulnerable to climate hazards, especially to floods and droughts. This is because Lao PDR’s economy and over 70% of population depends on natural resources for their livelihoods and to ensure food security. The agriculture sector is responsible for 29.9 % of gross domestic product (GDP) and approximately 70% of the population are dependent on the sector for their livelihoods.  

Climate change impacts 

Average annual temperatures have increased compared to historical trends, total precipitation per year is increasing across most of the country, and there are a wide range of potential future changes projected to occur over the next 20 to 50 years^[6]:  

• Model projections indicate a fairly quick and drastic change in the spatial distribution of bioclimatic conditions across the northern and mountainous region of the country, with significant warming and modification of rainfall patterns predicted for 2030, increasing in this general trend and direction substantially by 2060. 
• Temperatures are projected to increase across the country as well as in the Lower Mekong Basin and across seasons. The only real uncertainty is the magnitude of the increase and how quickly it occurs. By 2060, the average annual basin-wide increase could be as low as 0.4˚C or as high as 

3.3˚C depending on the global emissions trajectory and pattern of changes that follow. 

• Rainfall could increase or decrease with significant variation in the magnitude of change and the location of impacts. Average change in rainfall by 2060 under the dry and high emission scenario is projected to be -16%, under the wet, and high emission scenario up to +17% in the most part of the country.  

Climate change hazards  

The frequency of the extreme weather events in Lao PDR increased from about once every two years before 1992 to every year or even twice a year after 1992⁶. Approximately three-fourths of the disasters in Lao PDR have been climate related⁵. During 1966 to 2009, flooding was the most frequently occurring climate change hazard, followed by epidemics (such as dengue, cholera, diarrhea and avian influenza (H5N1)), storms and drought⁶. 

Most storms are followed by severe flooding, threatening livelihoods almost every year, and with more frequent and intensified flooding in recent years^[7]. Flash floods in the northern mountainous areas are common. Flooding has an adverse impact housing, health and education, industrial activities, and infrastructure (transportation, water and sanitation). For example, the 2005 floods caused widespread disruption with estimated economic costs of USD 29 million⁵.  The July 2018 flooding affected 13 provinces across the northern, central, and southern parts of the country; Attapeu Province was 

particularly impacted by the breached saddle dam of Xe Pien -Xe Nam Noy hydropower dam. Three flooding incidents in the summer of 2018 affected 17 out of 18 provinces, 90 districts and 268,000 people^[8].

Figure 2:  Flooding during late July 2018 in Attapue province, Lao PDR 

Lao PDR is also experiencing increasingly frequent episodes of drought, with shortages or delays in rainfall contributing to drought. Severe drought occurred in 1996, 1998 and 2003. It is estimated that 6 out of 17 provinces are already at high risk of droughts. Droughts adversely affect water resources, hydroelectricity generation and agricultural production resulting in widespread economic losses⁷.   

The sectors most exposed to more frequent and severe damages from climate change (especially flooding and drought) are agriculture, housing, transportation networks and public health services⁵. The most vulnerable sector overall is agriculture, compounded by vulnerabilities in sectors linked to agriculture such as water, transport and public health. Increasing climate resilience with respect to agriculture is therefore a high priority, as well as the provision and management of water resources.   

Socioeconomic development status 

Lao PDR is a lower middle income country and has the long term goal to become an upper middle income country by 2030. Lao PDR is one of the fastest growing economies in Southeast Asia, with the economy grew at an average annual rate of 7.9 percent over 2011 to 2015. Gross domestic product (GDP) per capita was US$1,217 in 2011, increasing to US$1,671 in 2014 and US$1,730 in 2017. This continuous economic growth is due to the appropriate macroeconomic management measures and mechanisms of the Government, peace in the country, social order, political and economic stability, and increased regional and international integration⁴ . Poverty rates have been consistently declining since 1990, however 80% of the population live in rural areas, of which the majority still rely on subsistence agriculture^[9].  

Table 2 below summarises the Lao PDR data from the 2018 Committee for Development Policy (CDP) triennial review, showing significantly improving living standards for many Lao citizens and Lao PDR reaching the threshold for graduation from LDC status. For example, gross national income (GNI) per capita grew from $510 to $1,996 between the 2009 and 2018 reviews. 

Table 2: Lao PDR LDC graduation data over time¹⁰

The components of the Human Asset Index (HAI) are further detailed in Table 3 below, illustrating progress across all dimensions of the HAI, especially those related to education. For example, since 2006, adult literacy increased from 69% to 85% of the population and gross secondary enrolment ratio rose from 44% to 62%. 

Table 3. Components of the Human Asset Index10 

Development policies 

Lao PDR’s priorities and development goals are set out in a number of harmonised national development strategies: Vision 2030, Ten-year Socio-economic Development Strategy (2016–2025) and 8th National Socio-economic Development Plan (2016- 2020).  

Vision 2030 aims to transform Lao PDR into an upper-middle income developing country by 2030, with innovative, green and sustainable economic growth, quadrupling the country’s per capita GDP and GNI. This includes a strong basic infrastructure system to support industrialisation and modernisation, the country systematically following a socialist market economy, social justice, peace and order, improving people's livelihoods and solidarity, reduced development disparities between urban and rural areas, improved human development that ensures all have access to quality social services, people's rights protected under the effective rule of law, the administrative system following the Three Builds¹² directive, 

10

 Source: United Nations, Lao PDR Department of Economic and Social Affairs (DESA), Committee for Development Policy Secretariat 

11

 Note that the CDP review dates do not directly align with data for that specific year. They typically refer to the most recently available data point for each indicator. This means that the increases between the 2015 and 2018 reviews are not necessarily representative of changes during the 8^th National Socioeconomic Development Plan period. For example, the literacy rate measured during the 2018 review for Lao PDR is from 2015. 12

 Three Builds Directive on devolution aims to build up provinces as strategy-making units, districts as comprehensively strengthened units, and villages as development units. Further information: https://laospdrnews.wordpress.com/2013/03/21/vice-president-addressesvie..., https://laospdrnews.wordpress.com/2013/03/31/sam-sang-directive-to-be-de...

environmental protection through efficient utilisation of natural resources to ensure sustainability, political stability and strength and Lao PDR actively moving towards regional and international integration. 

The Ten-year Socio-economic Development Strategy (2016-2025) aims to double per capita gross national income by 2020, underpinned by seven sub-strategies⁴ : 

• Strategy on quality, inclusive, stable, sustainable and green economic growth 
• Strategy on least developed country (LDC) graduation by 2020 and progress on the Sustainable Development Goals 
• Strategy on human development 
• Strategy on sustainable and green environment with effective and efficient use of the natural resources 
• Strategy to enhance government’s role in social management under the effective rule of law  Strategy on regional and international integration  Strategy on industrialisation and modernisation. 

The 8th National Socio-economic Development Plan (2016-2020) (8^th NSEDP) set out actions to implement the Ten-year Socio-economic Development Strategy, with the overall objective of: ensuring political stability, peace and order in society, significantly reducing poverty in all areas, continuous, inclusive and sustainable growth to graduate Lao PDR out of LDC status by 2020,  effective management and efficient utilisation of natural resources, enhancing development through the national potential and advantages and participating in regional and international integration with ownership. The 8^th NSEDP has three outcome areas: 

• Outcome 1: Sustained, inclusive economic growth with economic vulnerability reduced to levels required for growth support.  
• Outcome 2: Human resources are developed and the capacities of the public and private sectors are upgraded; poverty in all ethnic groups is reduced, all ethnic groups and both genders have access to quality education and health services; the unique culture of the nation is protected and consolidated; political stability, social peace and order, justice and transparency are maintained. 
• Outcome 3: Natural resources and the environment are effectively protected and utilised according to green-growth and sustainable principles; there is readiness to cope with natural disasters and the effects of climate change and for reconstruction following natural disasters. 

Outcome 3 of the 8^th NSEDP is focused on natural resources and the environment, with three output areas:  

• Output 1: Environmental protection and sustainable natural resources management 
• Output 2: Prepare to cope with the disaster risks and impacts from climate change 
• Output 3: Reducing the instability of agricultural production caused by disaster impact. 

The priority activities and projects to achieve Output 2 of Outcome 3 of the 8th NSEDP are:  

• Enhance capacity to adapt and alleviate the impact of climate change by conducting a study in areas vulnerable to climate change and high risk areas 
• Enhance and develop reduced emissions from deforestation and forest degradation (REDD+) projects to reduce greenhouse gas (GHG) emissions 
• Establish a committee to prevent and control disasters and climate change at both the central and local levels 
• Establish a system to systematically and comprehensively manage, monitor and evaluate the impact of water, air and noise pollution 
• Establish mechanisms for managing, grouping and reducing the amount of waste by promoting four approaches (reduce, re-use, recycle and rehabilitation) 
• Establish mechanisms for managing toxic chemicals and hazardous waste and wastewater treatment systems in cities and provincial municipalities and Vientiane Capital 
• Establish a comprehensive warning system (with testing equipment, tools, vehicles and personnel with knowledge and skills to respond to an emergency in a timely manner) 
• Establish sustainable financial mechanisms to manage natural resources and protect the environment as tools for determining sustainable sources of funding and capital 
• Establish management mechanisms and information sharing network systems to ensure regional and international integration in accordance with national commitments by implementing international agreements and conventions effectively within the given timeframe 
• Strengthen disaster management 
• Establish guidelines for incorporating climate change, risk mitigation and GHG reduction in the strategy and action plan of the priority sectors to develop capacity on these issues 
• Create a map of vulnerable areas and develop medium- and long-term national adaptation plans and provincial and sectoral plans 
• Develop the Third National Communication on Climate Change and develop plans to reduce GHG emissions in relevant sectors (land use and forestry, agriculture, energy, industry and waste management) 
• Create favorable conditions for Lao PDR to access international funds on climate change 
• Improve the Committee for Prevention and Disaster Management at each level, and develop risk reduction and readiness and response plans to disasters at national and local levels 
• Establish the national emergency coordination and command centre, as well as providing information and communications technology equipment for reporting and communicating data and solving disaster-related problems on a timely basis. 

These national development strategies are supported by sectoral strategies and action plans, as summarised below:  

• Ten Year Natural Resources and Environment Strategy 2016-2025 (NRES 2016-2025): The vision is to make Lao DPR green, clean and beautiful, based on green economic growth, ensuring ensure sustainable, resilient economic development. The strategy includes 2030 targets that address forest cover, biodiversity protection, tree planning, urban parks, water and air pollution, water quality, use of hazardous chemicals in the agriculture and forestry sector, municipal waste generation and separation, waste collection systems, climate change mitigation, green production, resource consumption from industry and tourism, minimising social and environmental impacts from investment projects (e.g. hydropower, mining, infrastructure, industry, industrial plantation, urban development), access to climate change data and information, knowledge and understanding to respond and recover from disasters, and reducing risks and impacts from natural disasters. The following five objectives are to be achieved by 2025: 

-       Ensure sustainable use, management, protection and conservation of natural resources to support long term sustainable economic development  

-       Improve the environmental quality in Lao Cities and rural areas to ensure better quality of life of Lao people  

-       Ensure Lao PDR is informed and prepared for adapting climate change, responding to climate change impacts (natural disasters) and contributing to global greenhouse gas emission reductions  

-       Ensure effective and collaborative implementation of MoNRE vision, strategy and action plan including multilateral environmental agreements related to natural resources and environment to ensure mutual benefits and to reduce cumulative and trans-boundary impacts  - Ensure MoNRE has capacity to achieve the MoNRE mandate.  

• Renewable Energy Development Strategy: The vision for the Renewable Energy Development Strategy is to promote renewable energy as an important part of national economic development, to ensure energy security, sustain socio-economic development and enhance environmental and social sustainability. The Renewable Energy Development Strategy includes targets to increase the share of renewable energy to 30% of total energy consumption and the share of biofuels to 10% of transport fuel demand by 2025.  
• Agriculture Development Strategy to the Year 2025 and Vision to 2030: The vision to 2030 for the agriculture sector is to ensure food security, produce comparative and competitive agricultural commodities, develop clean, safe and sustainable agriculture, and shift to a modern, resilient and productive agricultural sector, linked with rural development and contributing to the national economy. The Strategy 2025 focuses on preventing, controlling and addressing impacts from natural disasters including flood, drought, outbreak of animal and plant diseases, particularly in agricultural production areas. Strategy 2025 sets out priority measures: 

-       Construct, improve and renovate water gates and weirs such as the areas along both river banks of Xe Bang Fai (Khammouan and Savannakhet), along Xe Bang Hieng river bank and other areas with risks 

-       Utilise infrastructure such as irrigation reservoirs and hydropower reservoirs by controlling and determining appropriate and safe water level in the reservoirs ahead of flooding season  

-       Carry out the study, research, development and improvement and turn to use rice and crops/plant seeds that are durable, resilient and can be able to adapt with climate change such as durable to flooding and drought a long side with the development and application of appropriate plantation techniques 

-       Promote people to stock water by constructing small-scale weirs to block creeks, making small-sized ponds for stocking water for drought risk area. 

• Climate Change and Health Adaptation Strategy: The vision of the Climate Change and Health Adaptation Strategy is for people to be healthy and strong, with the overall target of promoting public health and community sectors to protect people’s health from unstable and changing climate conditions.  
• Urban Development Strategy to 2030: The vision for the Urban Development Strategy is for modern towns, protecting their artistic and cultural uniqueness and architecture, ensuring liveable environments, and supporting towns be economic, cultural, social and services centres that enable rural development, industrialisation, modernisation and linkages to the Greater Mekong Subregion. 

1.5 - CLIMATE CHANGE POLICY RESPONSE  

Figure 3:  Synergies and interactions between key development and climate change policies 

Lao PDR’s climate change challenges are recognised in Lao PDR’s key development strategies and plans. A number of climate change strategies, action plans and legislation have been developed to guide and drive Lao PDR’s response to climate change. Figure 3 summarises the synergies and interactions between key development and climate change policies.  

Legal and regulatory framework  

The Lao PDR ratified the United Nations Framework Convention on Climate Change in 1995 and ratified the Kyoto Protocol in 2003. As a party to the Convention, Lao PDR submitted its First National Communication in 2000, National Adaptation Programme (NAPA) in 2009, National Strategy on Climate Change in 2010 with action plan for 2013-2020, and submitted Second National Communication in 2013. 

In 2015, Lao PDR passed a national law on its NDC, making it the first country in the Association of Southeast Asian Nations (ASEAN) and 26^th country in the world to ratify the Paris Agreement under the UNFCCC^[10].

Currently the Climate Change Law is being developed and will provide an overarching legal framework for climate change adaptation and mitigation. The law will clarify the legal mandates and reporting lines among relevant ministries and different administrative bodies in relation to climate change. The law will identify sources of climate finance and the management of these funds. At the same time, Third National Communication is  being developed and is intended to be submitted to the UNFCC by the end of 2019.  

The Forestry Law was revised in 2008 and informs national policy on reforestation and deforestation, sustainable use of forests and forest resources, and the use of forests and ecosystems for ecotourism. The law requires the increase of forest cover as sink source for greenhouse gas emissions, classifying forests into three types for their management and use:  

• Protected Area with the main objective of conserving rich forest, forest resources and biodiversity 
• Protection Forest with the main objective of protecting forests for specific uses (e.g. watershed management, upstream forest protection)  Production Forest for sustainable use.  

The Water and Water Resources Law was updated in 2017 and aims to improve the sustainability of Lao’s water resources. The law is expected to influence the monitoring, management and planning of the country’s rivers. The update adds new provisions on water rights and use, including waste-water discharge permits, wetlands and water-resources protection, ground-water management, and river-basin management. Additionally, the law expands the terms and conditions of large, medium, and small-scale uses and includes articles on environmental flows for hydropower as well as stipulations related to irrigation use¹⁶.  

Climate related strategies and policies 

The National Climate Change Strategy (2010) ^[11] has the overall objective of securing “a future where Lao PDR is capable of mitigating and adapting to changing climatic conditions in a way that promotes sustainable economic development, reduces poverty, protects public health and safety, enhances the quality of Lao PDR’s natural environment, and advances the quality of life for all Lao People”.  The National Climate Change Strategy sets out mitigation and adaptation measures in seven sectors: agriculture and food security, forestry and land use change, water resources, energy and transport, industry, urban development and public health. 

To support the implementation of the National Climate Change Strategy, the draft Action Plan on Climate Change (2013-2020) sets out climate change actions for the seven priority sectors in the National Climate Change Strategy. Priority climate change adaptation actions include: (i) climate resilient agriculture, land use change and forestry, (ii) water resource management; (iii) ecosystem based adaptation solutions, (iv) climate resilient transport and urban development and (v) adaptation in health sector. Priority climate change mitigation actions include: (i) increasing and maintaining national forest cover, (ii) increasing use of renewable energy sources and energy efficiency in rural electrification, (iii) emission reduction by developing public transport services.  

Lao PDR’s Nationally Determined Contribution (2015)^[12] (NDC) sets out adaptation and mitigation activities to be implemented over 2015-2030, as summarised in Tables 4 and 5 below.  

Table 4: Mitigation activities set out in the NDC

Table 5: Adaptation projects and programmes set out in the NDC 

The National Green Growth Strategy^[13] sets out priorities, activities and a monitoring framework to support the country’s vision of green growth and help mainstream green growth into Lao PDR’s planning systems. The Green Growth Strategy identifies six priority sectors/areas: agriculture, forestry, urban development, transport, energy, and tourism. Climate change mitigation indicators are expected to include total greenhouse gas emissions, average greenhouse gas emission per person, share of renewable energy within the energy mix, urban waste reuse and disposal, natural forest coverage rate and conservation forest coverage rate. 

The National Adaptation Programme of Action (2009)^[14] (NAPA) identifies 45 projects to increase resilience in the priority sectors of agriculture, forestry, water and public health, setting out the objective, activities, outputs, implementing agencies and budget for each project.   

The Plan of Action for Disaster Risk Reduction and Management in Agriculture 2014-2016 (2014)^[15] provides a roadmap for operationalising a proactive approach to managing natural hazards and risks by emphasising mitigation, prevention and preparedness in short term and long term planning. The Plan of Action consolidates needs and priorities for the sector, with actions and areas of work around five priorities: 

• Strengthening good governance, institutional and technical capacities for disaster risk reduction and management (DRRM) and climate change adaptation in agriculture 
• Assessing and monitoring climate risks and vulnerabilities and issuing early warnings for food and nutrition security and transboundary threats 
• Improving knowledge management, awareness raising and education on DRRM, climate change impacts and adaptation 
• Reducing underlying risks and vulnerabilities by promoting technical options and communitybased planning for DRRM/climate change adaptation in the agriculture sector 
• Enhancing capacities, facilities and procedures for effective disaster preparedness and response and integrate climate change adaptation in recovery initiatives. 

Renewable Energy Development Strategy seeks to increase the share of renewable energy within total energy consumption to 30% by 2025. The key objectives of the strategy are: (i) ensuring adequate supply of energy and energy security, including promoting energy efficiency and energy conservation, and supporting the cultivation of biofuel crops to replace imported fossil fuels, (ii) delivering socio-economic benefits and (iii) ensuring environmentally and socially sustainable development through enforcement of adequate safeguards. The priority actions to achieve these goals include the promotion and development of biofuels and other alternative energy sources for the transport sector, as well as small-scale hydropower, solar, biogas, energy, biogas and wind energy. To support these actions, the strategy proposes to establish a renewable energy fund under the Institute of Renewable Energy Promotion. 

A Climate Change Strategy for the Health Sector is currently under preparation, to strengthen the capacity of the health and community sectors to address the health related impacts of climate change, with the overall vision of ensuring that ‘people are healthy and strong’. Strategic priorities within the strategy are strengthening resilience to climate change including technology and infrastructure, developing a public health plan that incorporates climate change data, financing the implementation of the strategy, integrating the monitoring of climate risks into early warning systems and undertaking further research into the health impacts of climate change.  

Two sectoral climate investment plans have been prepared: Climate Investment Plan Agriculture and Forestry (2018), and Climate Investment Plan Sustainable Cities (2018)^[16]. The objective of the climate investment plans is to identify projects which can synergistically support paradigm shift towards a low carbon, climate resilient development pathway for the sectors. The climate investment plans set out project pipelines and strategic interventions to scale up climate investment for each sector. In addition, a GCF Programmatic Approach for Forestry and Land Use is under preparation (see section 2.2 for more details). 

The draft Clean Renewable Vehicle Development Strategy is being prepared by the Ministry of Energy and Mines, and focusses on: (i) promoting the development of electric vehicles, (ii) promoting the development of hydrogen vehicles, (iii) applying advanced technologies in the vehicle industry, and (iv) developing the infrastructure networks needed for clean renewable vehicles. The first strategy will cover 2018-2025, the second round of the strategy will cover 2026-2030 and the third round 2031 – 2050. To achieve this strategy, the following priority actions are proposed for implementation: 

• Promote and develop electric motorbikes 
• Promote the conversion of existing gas stations into electric charger stations (about 500 stations over the country) 
• Promote the use of electric transport in the central and southern parts of the country  Implement pilot hydrogen vehicle projects. 

1.6 - CAPACITY DEVELOPMENT NEEDS 

Considerable capacity exists within MoNRE in relation to climate change and the development of project investment proposals. 

However, the development of GCF projects and investment proposals (and hence the implementation of the Country Programme) will require leadership and engagement from other Ministries, especially those active within the priority sectors identified in section 2.1. In order to further engage line Ministries and sectoral stakeholders, the NDA is channelling readiness resources to these sectors to enhance climate finance coordination, private sector engagement and to define programmatic approaches to financing climate change action (see section 2.2 for more information). Further development of capacity and skills is required across Ministries on the below topics: 

• Identifying, screening and developing climate change projects, including developing the climate change rationale for projects supported by climate change logic models 
• Understanding linkages between sectoral development objectives and Lao PDR climate change policies, targets and action plans 
• Accessing and engaging with international public climate finance funders, including the GCF but also co-financiers for GCF projects such as bilateral and multilateral funders 
• Preparation of GCF funding proposals including the GCF’s results areas and investment criteria 
• Improved tracking of climate finance, including considering integrating a climate change marker into the Official Development Assistance Management Information System (ODA-mis.gov.la) being developed by MPI 
• Enhancing inter-sector and inter-agency dialogues and coordination on climate resilience, mitigation and climate-related disaster risk reduction -for example, by reinforcing the function of the existing Climate Change Committee 
• Enhanced planning of the technical assistance and capacity building required to deliver paradigm shift in priority sectors – for example, by developing long term sectoral technical assistance and capacity building roadmaps. 

Process for identifying the priorities  

The priorities for the Country Program were identified via a combination of top-down and bottom-up approaches as summarised in Figure 4 below. 

Figure 4: Combined top-down and bottom-up approach used to identify the priorities for the Country Programme 

Lao PDR has defined its overall priority climate investment areas in its NDC, as summarised in Figure 5 below.  

M5- Institutional and policy A5-Public Health framework • Public health infrastructure and water supply 

•  Climate change policy and      systems implementation plans 

Figure 5: Summary of priority climate investment areas in Lao PDR’s NDC 

Taking a top-down approach based on the NDC, the key priority areas for GCF financing were identified as below (not in order of priority):  

• Climate change mitigation  

-       REDD+ by forest management and responsible agriculture measures  

-       Low carbon transport including public transport and biofuels 

-       Energy efficient and clean technologies 

-       Renewable energy expansion and diversification.  

• Climate change adaptation 

-       Increasing resilience to climate change related disasters and changes in water flow, especially in the water, agriculture and urban sectors 

-       Increasing the resilience of the health sector. 

-       

Sectoral priority climate activities to implement the above GCF priority areas were identified via extensive provincial and national stakeholder consultations (see section 3.3), analysis of sectoral strategies and action plans, bilateral meetings and multi-stakeholder workshops (bottom-up). The sectoral priority climate activities are summarized below (not in order of priority), with more detail available in Annex 2:  

• Short term priorities (2019-2021): 

-       Increase and maintain national forest cover  

-       Increase the resilience of urban areas to water impact, in particular to floods  

-       Increase the resilience of rural areas to climate induced droughts and floods  

-       Enhance resilience of smallholder farming communities in vulnerable areas  

-       Climate friendly agribusiness value chain.  

• Medium to long term priorities (2022-2030): 

-       Promote energy efficiency measures   

-       Increase renewable energy supply 

-       Implement low carbon transport measures 

-       Increase the resilience of the health system (infrastructure and population)

-       Enhance the resilience of urban infrastructure.  

Priorities for the Country Programme  

Tables 6 and 7 set out potential GCF projects for each of the sectoral priority climate activities, taking into consideration the GCF’s investment criteria (see Annex 3) and GCF’s results management framework. The tables cross-reference any relevant investment projects (P1, P2, etc) or readiness projects (R1, R2, etc) already in the pipeline.  The priorities will be updated annually, based on changes in national priorities and circumstances including the next National Socio-economic Development Plan. 

Table 6: Lao PDR GCF Country Programme short term priorities (2019-2021) 

Table 7: Lao PDR GCF Country Programme medium to long term priorities (2022-2030)  

To support the development of a strong GCF project pipeline, several areas of activity are being undertaken in parallel: 

• Investment projects- this includes the preparation and submission of GCF investment project funding proposals, as well as enhanced engagement with stakeholders and coordination between Accredited Entities to support the development of future GCF investment projects 
• Readiness projects – these activities include enhancing climate policy frameworks to identify potential GCF projects and capacity building to support the development of climate change projects and GCF investment project funding proposals 
• Accreditation of national entities – this includes identifying potential national Accredited Entities who can access and blend domestic and international sources of funding. 

Figure 6: Activities being undertaken in Lao PDR to build a strong GCF investment project pipeline

Investment projects 

Table 8 provides GCF project funding proposals either submitted or currently under preparation. Note that the first four proposals support the agriculture and forestry sector in a synergistic way, with different targeting strategies for the projects’ beneficiaries and focusing on different geographic regions^[17].  

Table 8: Pipeline of current GCF projects submitted and/or under preparation 

          Readiness projects 

A range of readiness support is required including capacity building for the NDA, for potential national accredited entities and to support the development of GCF projects by country stakeholders. Note that readiness projects can be led by Accredited Entities or Delivery Partners. Delivery Partners are entities which can demonstrate they meet the GCF’s fiduciary requirements for readiness activities. Current GCF readiness projects are listed in Table 9 below.  

Table 9: Current GCF readiness projects  

                                                                   REDD+ linkages between readiness support and the Country Programme 

                                      and international commitments (as reflected into the NDC), GCF readiness support is being utilized to 

                                      Approach to Forestry and Land Use’. The forthcoming ‘GCF Programmatic Approach to Forestry and Land 

                                      framework and theory of change for achieving national climate change goals in the sector. Noting the 

            private sector and opportunities for leveraging private finance. The ‘GCF Programmatic Approach to Forestry           and Land Use’ will be integrated into subsequent yearly updates of the Country Programme. 

Figure 7: Example of linkages between readiness support and further development of the Country Programme 

 Accreditation pipeline  

The pipeline of potential national Accredited Entities is provided in Table 10 below.  

Table 10: Potential national accredited entities 

The National Designated Authority is the official communication interface between a country and the Green Climate Fund. The NDA is expected to communicate the country’s strategic priorities for financing lowemission and climate-resilient development across its economy, and ensure the country’s Country Program is aligned with national priorities. Hence, the NDA should have the knowledge and expertise of both mitigation and adaptation efforts and needs in the country.  

Consequently, in Lao PDR, the Department of Climate Change (DCC) within Ministry of National 

Resources and Environment (MoNRE) is the National Designed Authority (NDA). DCC consists of: (i) Division of General Affairs, (ii) Division of Climate Change Education and Awareness, (iii) Division of Climate Change Management Promotion; (iv) Division of GHG Mitigation; (v) Division of Adaptation; and (vi) Division of Disaster Risk Reduction. The Division of General Affair is the NDA Office and leads all communication with the GCF.  The roles and responsibilities of DCC are summarised in Figure 8 below. 

Figure 8: Roles and responsibilities of Department of Climate Change 

The GEF and GCF Committee is a cross-sectoral committee chaired by the Deputy Minister, who is responsible for environment management under MoNRE. The GEF and GCF Committee will approve GCF no objection letters for investment funding proposals and nominating national entities for accreditation to the GCF. 

At the sub-national level, each province is identifying a provincial coordinator for communication and coordination with NDA through Environmental and Climate Change Units of Provincial Department of MonRE (PoNRE). 

The Disaster, Climate Change and Environmental Sub-Working Group is a cross-sectoral sub-working group co-chaired by the Director General of DCC and UNDP. The sub-working group is under the Natural Resources & Environment Working Group of the Round Table Meetings, which take place every year (with High-Level Round Table meetings every five years) to provide inclusive forums to support the design and implementation of Lao PDR’s national development plans. The sub-working group provides a platform for dialogue and coordination between the government with development partners and other key stakeholders working in environmental protection, including climate change adaptation and mitigation and disaster risk management. The sub-working group provides recommendations on policies, strategies and legal frameworks in relation to environmental, climate change and disaster risk management. NDA provides updates on GCF activities at each meeting of the Sub-Working Group, including the status of current GCF readiness and investment projects and the GCF pipeline. 

The National Environment Committee (NEC) is a cross sectoral and non-standing committee, chaired by the Deputy Prime Minister. It is the top body to provide overall policy guidance on natural resources and environment including climate change. Under the guidance of NEC, MoNRE is responsible for natural resources and environmental policies and plans, with the Department of Climate Change under MoNRE carrying out tasks related to climate change. NEC meets on an ad-hoc basis to provide guidance in case an environmental issue arises or there is a need for decision making on a specific task. 

Under the NEC is the Technical Working Group on Climate Change (TWG), a cross-sectoral working group chaired by the Director General of DCC. TWG meets on an ad-hoc basis and facilitates communication, cooperation and coordination between Ministries on climate change and climate finance. TWG supports the formulation and implementation of climate change strategies and action plans, National Communications, adaptation planning, greenhouse gas emissions inventory, and NDC and other climate change commitments to the UNFCCC.  TWG is a body for technical consultation at the national level in relation to the GCF. TWG consists of technical representatives from: 

• Ministry of Energy and Mines  
• Ministry of Science and Technology 
• Ministry of Health  
• Ministry of Industry and Commerce  
• Ministry of Education and Sports 
• Ministry of Agriculture and Forestry    Ministry of Public Works and Transport   Lao Women’s Union. 

There are a number of Accredited Entities to the GCF already active on climate change in Lao PDR and engaged with the NDA; with the potential for additional Accredited Entities to become engaged on GCF projects in Lao PDR. Table 11 summarises the priorities of a selection of Accredited Entities in Lao PDR in relation to the GCF. 

Table 11: Accredited Entities actively engaged with GCF and NDA 

Stakeholder engagement on GCF in Lao PDR is an ongoing process encompassing stakeholder coordination and engagement by the NDA, as well as stakeholder engagement by project developers and line Ministries in relation to GCF project development and implementation. This section set outs stakeholder engagement and coordination activities led by the NDA, highlighting Lao PDR’s commitment to further engage with the private sector, and with a summary of stakeholder engagement undertaken as part of developing the Country Programme. Lao PDR’s GCF Stakeholder Engagement Guidelines sets out the overall approach to stakeholder engagement as part of identifying, developing and implementing GCF projects.  

Stakeholder coordination and engagement  

A range of mechanisms are utilised by the NDA to ensure that key stakeholders are kept informed regarding GCF activities and can give feedback, including in relation to the ongoing development and implementation of the Country Programme, and current GCF readiness and investment projects, concept notes and funding proposals: 

• The Disaster, Climate Change and Environmental Sub-Working Group – the NDA provides updates on GCF activities at each meeting of the Sub-Working Group, including the status of current GCF readiness and investment projects and the GCF pipeline. 
• Annual GCF Update meeting – the NDA will lead an annual open meeting to receive feedback and provide updates regarding current and future GCF for all interested parties, including line Ministries, GCF Accredited Entities, development partners, private sector and civil society. 
• Regular cross-sectoral GCF dialogues with line Ministries, GCF Accredited Entities and Delivery Partners – the scope, format, timing and mandate of these dialogues have yet to be set, but the intention is to have an ongoing forum where GCF project developers and implementers are able to exchange information, provide feedback and receive updates on GCF activities in Lao PDR. 
• Regular thematic GCF meetings with line Ministries, GCF Accredited Entities and Delivery Partners- the scope, format, timing and mandate of these meetings have yet to be set, and will be demand-driven, but the intention is to have an ongoing forum for focussed discussion about specific themes as requested by stakeholders.  
• Monthly GCF email bulletin – the NDA intends to prepare a monthly GCF bulletin for interested stakeholders, which summarise recent country engagement with the GCF, the outcomes of any recent no objection decisions, and the current GCF pipeline, including new concept notes, readiness proposals or investment funding proposals received. 

In addition, the NDA will inform line Ministries and GCF Accredited Entities within 5 working days when any of the following are submitted to the NDA: concept notes, investment funding proposals, project preparation facility requests or requests from national entities for accreditation nomination letters. 

Private sector engagement  

The private sector, particularly the banking sector and small and medium enterprises have an important role in driving the country development, and hence climate change activities.  

Private sector entities were invited to participate in the workshops which inputted into and gave feedback on the Country Programme, and increased proactive engagement with the private sector is a priority for the ongoing development of the Country Programme. Private sector engagement will be prioritised in relation to further developing the GCF project pipeline, readiness proposals and investment proposals. Specifically, Delivery Partners have been requested to integrate private sector engagement into any readiness proposals; an existing readiness proposal submitted to the GCF is focussed on private sector engagement (see section 2.2 for more details).  

Contribution of key stakeholders to the country programme 

The Country Programme was developed as part of an inclusive approach to engaging stakeholders at the national and sub-national level on GCF, as summarised in Table 12. 

Table 12: Overview of stakeholder consultation process 

Ensuring synergies and coherence across the various sources of environmental and climate change related funding is key to financing and delivering green growth in Lao PDR.  Lao PDR is developing a plan to maximise coherence and synergies between the two biggest public environmental and climate change funds, the GCF and Global Environment Facility (GEF).  

In parallel, the GCF and GEF are seeking to pilot a ‘coordinated engagement’ approach, whereby countries synergise the programming of GCF and GEF resources, leading to enhance delivery of financing. This coordinated engagement can be undertaken by piloting innovative projects, aligning capacity building and readiness support, or scaling up successful mechanisms or interventions. As part of this, GCF and GEF undertook a coordinated dialogue in Lao PDR in February 2019. 

The main areas being targeted for coherence and coordination between GCF and GEF in Lao PDR are: 

• Steering and oversight 
• Planning to identify future GCF and GEF investments  GCF-GEF investments. 

Steering and oversight 

Instead of having separate steering committees for the two funds, a combined GEF and GCF steering committee is being created for approving GCF and GEF funding proposals. Merging the two committees will strengthen coordination and the identification of synergies between GCF and GEF activities in Lao PDR. This will also streamline the overall administrative burden for approving GCF and GEF projects and enhance the knowledge of key decision-makers on the Committee regarding the opportunities presented by both funds. 

Planning to identify future GCF and GEF investments – NAP process 

GCF and GEF readiness support could be combined to further develop climate change policy frameworks and identify future GCF and GEF projects. This could include the NDC and National Adaptation Plan (NAP) processes. 

For example, GEF support (Least Developed Countries Fund) has been approved for the project ‘Building the Capacity of the Lao PDR Government to Advance the NAP Process’. GCF NAP support could build upon the GEF project by identifying key investments that could be co-financed by GCF and the LDCF. This is summarised in Figure 9 below. 

Figure 9: Example of how GEF and GCF support could support the NAP 

GCF-GEF investments   

There is substantial potential for GCF and GEF to develop and co-finance future climate change projects. This will require coordinated programming and identification of financing priorities, identifying the areas of mutual interest to GCF and GEF in Lao PDR. Figure 10 provides an example of how potential investment approval arrangements could be coordinated between the GCF and GEF. The two options, GEF leveraging GCF resources for scaling up or replicating projects is illustrated as option 1 and GCF/GEF co-financing investment as option 2. 

Figure 10: Example of how GCF/GEF investment approval arrangements  

For example, under Option 2 (co-financing) the proposed ‘Lao PDR Landscape and Livelihoods Project’ will provide the integrated programmatic, multi-sector approach and large-scale financing needed to address natural resources issues such as decreasing forest coverage, loss of biodiversity and climate risks, which historically tend to be fragmented spatially and financially. In this context, the World Bank is planning to mobilize World Bank, GEF, GCF and potentially also private sector resources. 

3.5          KEY IMPLEMENTATION MECHANISM: ENVIRONMENT PROTECTION FUND 

There are a number of capable institutions in Lao PDR who are already participating in GCF readiness projects, identifying potential GCF projects and preparing GCF funding proposals. Among these institutions, the Environment Protection Fund (EPF) is unique since it has over 13 years of experience in managing grant funding windows, with a strong network of national and sub-national project developers and project beneficiaries.  

EPF was established in 2005, with the aims of strengthening environmental protection, sustainable natural resources management, biodiversity conservation and community development. EPF is an autonomous national entity, both financially and administratively.  EPF channels financial resources from World Bank, UNDP and domestic sources through five grant windows:  

• Window 1: Policy implementation and capacity enhancement   Window 2: Biodiversity and community investment   Window 3: Pollution Control.  
• Window 4: Water Resources Management.   
• Window 5: Sustainable Land Resources Management. 

EPF has an important role at the national level in relation to the GCF, including realising synergies between the GEF and GCF, GCF project implementation and as a potential national Accredited Entity to the GCF:  

• Realising synergies between the GEF and GCF 

-       EPF is Lao PDR’s focal point to the GEF Fund and works closely with DCC to identify GCF-GEF synergies.  

-       EPF is Secretariat for the GEF and GCF Committee, which approves the GCF no objection letters for Lao PDR.  

-       EPF is well-placed to pilot complementary activities between the GCF and GEF, including identifying co-financing opportunities for GCF and GEF projects. 

• GCF project implementation 

-       EPF is expected to become increasingly active in relation to the GCF as a potential disbursement channel for grants.  

-       It is anticipated that EPF will create a climate change-specific funding window to facilitate these activities.

• Potential national Accredited Entity to the GCF  

-       EPF is in the process of preparing its application as an Accredited Entity to the GCF. 

The NDA has nominated EPF to become a national accredited entity and allocated 488,000 USD to support EPF during the accreditation process. During this process, the GCF secretariat and the GCF Accreditation panel will assess the compliance of the EPF with GCF requirements and request adjustments as needed. Despite EPF’s substantial experience and track record, adjustments will be needed and the process is expected to take 1.5 to 2 years. 

As an Accredited Entity to the GCF, EPF will be as able to scale up its involvement in GCF project development and implementation, as well as enhance its ability to realise synergies between the GEF and GCF. 

4. MONITORING AND EVALUATION 

The Country Programme is a living document and will be updated over time to reflect new developments including updated climate change adaptation and mitigation priorities, progress in developing GCF readiness and investment projects, and other climate finance developments.  

A framework for monitoring and evaluating the Country Programme will be prepared. It is expected that the framework will encompass periodic reviews of the Country Programme in response to updating the NDC and other policy cycles such as updating the Five-Year Socioeconomic Development Plan. The review will assess factors such as the relevance, effectiveness and impact of the Country Programme, and stocktake lessons learned for the NDA and relevant stakeholders. Performance indicators to be considered include:  

• Number of adaptation and mitigation proposals submitted to the GCF Secretariat 
• Volume of investment project funding approved and disbursed by project  
• For adaptation projects, number of beneficiaries relative to total population, disaggregated by sex 
• For mitigation projects, volume of greenhouse gas emissions reduced or avoided. 

5. IMPLEMENTATION PLAN  

The Country Programme is a living document that sets out priorities and summarises GCF-related activity in Lao PDR. 

Next steps to implement the Country Programme are set out in Table 13f below. 

Table 13: Country Programme implementation plan 

ANNEXES 

24

17 January meeting 2019 with NAFRI, Ministry of Agriculture and Forestry 

31

18 January 2019 meeting with Department of Planning and Cooperation Division, Ministry of Agriculture and Forestry 

32

 22 January 2019 meeting with FAO 

Note: The sectors above reflect the mitigation priorities and 5 adaptation sectors highlighted in the NDC. This correlates to the sector coverage set out in the NCCS of agriculture and food security, forestry and land use change, water resources, energy and transport, industry, urban development and public health. 

ANNEX 3: GCF INVESTMENT CRITERIA 

Investment criteria 

Impact potential: Potential of the programme/project to contribute to the achievement of the Fund’s objectives and result areas 

Paradigm shift potential: Degree to which the proposed activity can catalyse impact beyond a one-off project or programme investment 

Sustainable development potential: Wider benefits and priorities 

Needs of the recipient: Vulnerability and financing needs of the beneficiary country and population 

Country ownership: Beneficiary country ownership of, and capacity to implement, a funded project or programme (policies, climate strategies and institutions) 

Efficiency and effectiveness: Economic and, if appropriate, financial soundness of 

the programme/project 

Scope of criteria 

Mitigation impact 

Adaptation impact 

Potential for scaling up and replication, and its overall contribution to global low-carbon development pathways being consistent with a temperature increase of less than 2 degrees Celsius (mitigation only) 

Potential for knowledge and learning 

Contribution to the creation of an enabling environment 

Contribution to the regulatory framework and policies Overall contribution to climate-resilient development pathways consistent with a country’s climate change adaptation strategies and plans (adaptation only) 

Environmental co-benefits 

Social co-benefits 

Economic co-benefits 

Gender-sensitive development impact 

Vulnerability of the country (adaptation only) 

Vulnerable groups and gender aspects (adaptation only) Economic and social development level of the country and the affected population 

Absence of alternative sources of financing Need for strengthening institutions and implementation capacity 

Existence of a national climate strategy 

Coherence with existing policies 

Capacity of accredited entities or executing entities to deliver Engagement with civil society organizations and other relevant stakeholders 

Cost-effectiveness and efficiency regarding financial and nonfinancial aspects 

Amount of cofinancing 

Programme/project financial viability and other financial indicators 

Industry best practices 

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