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Linking economic analysis to the articulation of a Climate Financing Framework

This article discusses the articulation of a Climate Financing Framework and its linkage with economic analysis. It explores the importance of integrating climate policy in national budgeting processes, optimizing the use of domestic and external finances, and incentivizing private investments for climate-related projects. The article also highlights the elements of a Climate Financing Framework, including identification and integration, implementation, and accountability.

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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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