Timor Leste is a least developed country with a growing population that remains largely dependent upon subsistence agriculture; it has one of the lowest HDI scores/ratings among ASEAN countries. The main climate change related threats are the increasing incidence of dry periods, together with a higher variability with less frequent but more intense rainfall. Despite projected increases in average annual rainfall, the projected further increase in rainfall variability, with most added rainfall falling in the present wet season, will progressively stress ecosystem functions in water provisioning and flood protection. Increasing occurrence of bush fires and the migration of invasive species, as also likely consequences of increasing mean temperatures, will further increase soil erosion and the incidence of landslides and flash-flood events. Small scale infrastructure is particularly vulnerable to extreme rainfall events, causing erosion, landslides and flash floods as a result of the physical context and non-climate resilient designs, poor construction, and limited investment in operation and maintenance. Communities frequently become isolated when roads and bridges are damaged by localized extreme events and in the water sector many rural communities are dependent on unprotected wells or springs, as well as other surface water features such as rivers, lakes and streams. The three focus districts selected, Baucau, Liquiça and Ermera represent the diversity of key climate variability risks and vulnerabilities, which the project aims to address. They combine relatively high population densities with relatively poor areas, vulnerable flood-prone coastal conditions and landfallprone vulnerable mountainous terrain and areas with a projected increased drought period with areas of high groundwater vulnerability. The vast majority of the population in the selected districts depends on unprotected gravity-fed water sources which it uses for both domestic use and important subsistence and in some cases cash crop production (paddy rice and market vegetables).  Climate induced threats are further affected by the slowly decreasing protective and water storage functions of ecosystems, caused by drivers such as over-exploitation of forest and coastal areas resulting in rapid deforestation. The combination of climate variability-related pressures and other drivers means that village water supply systems dry out more often, and that baseline physical infrastructure, which is not protected from irregular and intense water flows, is degrading more rapidly.  Underlying causes contributing to this situation include basic geological and geographical factors (soil type, bedrock type, topography and land use practices), poor application of infrastructure construction standards and maintenance practices, and a social and institutional context that increases the vulnerability of the poor and women to climate risks. The desired situation that the project seeks to bring about is that the genuine needs of communities vulnerable to climate variability and change are fully reflected in local planning and budget processes so that the development prospects of these communities are secured in face of increasing climate risks. 

Barriers to achieving this situation include weaknesses in climate risk analysis, knowledge management and planning at sub-national level, financial constraints in resourcing the additional costs of building greater redundancy into rural infrastructure, a silo approach to local planning whereby ecosystem functions and services are not taken into account, and the limited incentives that exist to encourage local officials and decision makers to address climate related risks. LDCF funds will be used by the Government of Timor Leste to address these barriers through 3 components. Component 1 will support the capture and dissemination of evidence on local climate risks and vulnerabilities for national policy influencing, the development of an overarching climate change policy framework and the establishment of a multi-stakeholder knowledge exchange platform. Component 2 will support the development of climate variability risk and vulnerability assessment tools and the integration of climate risks in local planning, budgeting, infrastructure design, construction and maintenance.

This will be accompanied by substantial capacity development measures to strengthen the capacity of Local Administrations and service providers on climate resilient local planning/budgeting processes and infrastructure engineering and implementation. Component 3 will provide incentives for implementation of climate resilient local plans via investment grants for climate resilient small scale infrastructure and ecosystem services, which will directly benefit over 100,000 people.   Environmental sustainability and project integration will be achieved through measures to protect ecosystem functions in the immediate vicinity of physical infrastructure covering 50,000 hectares, and by providing bio-engineering within infrastructure designs to improve climate resilience, thereby ensuring greater technical and financial viability and social impact overall.