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Linking economic analysis to the articulation of a Climate Financing Framework

This document explores the development of a Climate Financing Framework and highlights the importance of linking economic analysis to the decision-making process. It discusses the baseline situation, CPEIRs in Asia-Pacific, and explores the case of Cambodia in developing a Climate Financing Framework.

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Linking economic analysis to the articulation of a Climate Financing Framework

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  1. Linking economic analysis to the articulation of a Climate Financing Framework Alex Heikens Regional Policy Advisor Climate Change UNDP APRC alex.heikens@undp.org

  2. Contents • Towards a Climate Financing Framework • The baseline situation: Climate Public Expenditure and Institutional Review • CPEIRs in Asia-Pacific: What have we learned so far? • Cambodia’s case

  3. A Climate Financing Framework • link CC priorities with expenditure and taxation decisions through the national budget process • ensure that any external finances are used most effectively alongside domestic resources, • provide a framework to incentivize private investments

  4. Elements of a Climate Financing Framework

  5. 1. Identification & integration Climate policy and measures are: • costed and prioritized • reflected in the planning and budgeting processes • at national and local levels.

  6. 2. Implementation Climate related investments are designed and implemented in ways that contribute to capacities of country systems for: • public financial management (PFM) • procurement • programme management

  7. 3. Accountability An accountability framework is operationalized for monitoring and reporting on: • climate related expenditures • achieved results Build on existing national systems and accountability mechanisms to parliament and citizens

  8. Define your baseline situation first

  9. Climate Public Expenditure and Institutional Review (CPEIR) Objective: To review allocation, management and results of public expenditures related to climate change Key-question: How is climate change reflected in national policies, institutions and public expenditures? Implementation: Led by government through cross government steering group chaired by Finance or Planning

  10. CPEIRs – what have we learned?Policy and institutional recommendations • Link budget to climate policy, so climate is part of budget framework and performance measures • Link climate policy to budget, so climate strategies are prioritized and costed • Coordination by finance & planning ministries with technical input from environment ministries • Large development projects should be made climate resilient • Local government also a key channel for climate finance

  11. CPEIRs – what have we learned?Expenditure recommendations • The budget is key since much climate expenditure is already in budget • Sectoral focus: local government (Bangladesh, Nepal); transport (Cambodia and Samoa); irrigation (Thailand) • Too much focus on ‘extra-budgetary climate funds’ • Local government and social protection expenditures much more significant • Climate budgeting systems should review “dirty expenditures”

  12. CPEIRs – what have we learned?Conclusions & take away messages • CPEIRs help to set a baseline against which future expenditures can be measured and monitored • Economics of adaptation need to be much better understood (costing & prioritizing) • Capacity to deliver needs to be strengthened, and quality of expenditures need to be improved and monitored • International finance should build on domestic finance • Promote the use national systems for planning, execution, monitoring and reporting.

  13. Cambodia’s case • Initial National Communications: 2002 • Second National Communications: under prep • NAPA: 2007 • Cambodia Climate Change Alliance: 2009 • Cambodia CPEIR: 2012 • Around 15% of annual expenditure CC related • In 2011: USD 769 million • Cambodia Climate Change Strategy and Plan: under prep • Sector CCSPs: under prep

  14. Costing the CCSP • Nine sector Climate Change Strategic Plans under prep • visions, goals and strategies in each sector. • About 200 “strategies or actions” have been defined in eight draft sector CCSPs so far available. • None of the sector CCSPs include any costing • Cambodia Climate Financing Framework (CCFF)

  15. Developing the CCFF • Defining and costing strategies • Resources availability • Prioritization • Modalities • Management

  16. Cambodia case Planned Cost Benefit Analysis • About 6 rapid CBAs on a range of CCSP actions • Use available evidence and relying on quick consultation • Focus on main investment actions across the sector CCSPs. • Estimate the total economic benefits of implementing the CCSP. • Identify main weaknesses in data • Inform the formulation of the CCFF

  17. Fitting CBA into a Climate Financing Framework

  18. Thank you

  19. Group discussion • What are the main gaps in understanding the baseline situation in your country? • What are the key-challenges with: • Prioritizing programmes for budget allocations • Implementing programmes • Assuring the quality of expenditures • Monitoring and reporting • How much do the most vulnerable people really benefit?

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