Mitigation - Global Climate Change Alliance

Mitigation - Global Climate Change Alliance

Global Climate Change AllianceSupport FacilityModule 8Mainstreaming climate changein the budgetary processTraining workshops onmainstreaming climate change

2Implications of climate-related policies and measuresfor public revenue and expenditure

Implications of climate changeintegration on the revenue side3+-Taxes oneconomicactivities related toclimate adaptation R& mitigationEmeasuresReduced taxes onactivities thatshrink or fail todevelop as a resultof adaptation ormitigation policiesVENUESForeign grants &other financialtransfers relatedto adaptation &mitigationCarbon tax/ Taxes onhighemissionactivitiesGrowtheffects fromincreasedcompetitive-nessRevenues

Implications of climate changeintegration on the expenditure side4+-Subsidies foradaptation &mitigationrelatedactivitiesReduced subsidiesfor fuelconsumption andother highemissionactivitiesCurrent expendituresin relation toadaptation &mitigation activities R &specific infrastructureEmaintenance VEReduced spending N onhealthUcare,infrastructure Ereplacement S etc. as aresult of successfuladaptation measuresPublic investment(capital expenditure)in adaptation and/ormitigation-relatedinfrastructureExpenditures

5Linking the budget to policyobjectives and expected results

6Linking spending to policy andresults, with a medium-term outlookNational objectives and strategiesMedium-termsector plansMedium-term budget perspectiveor expenditure frameworkAnnual budgetImplementation & service deliveryPerformance monitoring

The medium-term expenditureframework (MTEF)• A forward-looking budgetary planning toolcovering a 3 to 5-year period– systematically links strategic objectives (national/sectoral)and related outputs/outcomes with actions required toachieve them, corresponding expenditures and resources– supports the prioritisation of expenditures and thepredictability of resources– facilitates performance monitoring• Can be established at the national level (inter-sectoralallocations) as well as the sectoral level (intra-sectoralallocations)7

8In practice• MTEFs are rather sophisticated tools, andfew countries have full-fledged MTEFs• The preparation of medium-term projections ofnational and/or sector expenditures is a goodstarting point• The uncertainties associated with projections andforecasts should be recognisedWhat is the practice in yourrespective countries?

Entry points for climate change mainstreaming9

Climate change at the resourceallocation stage• The mainstreaming of climate change requires:– reallocating funding to more vulnerable and/or prioritysectors and regions– providing funding for adaptation- and/or mitigation-specificplans or activities– adding climate change considerations to the criteria forscreening and selecting projects and investments– making room for ‘cross-sectoral’ activities (e.g. DRR)• This process typically involves a mix of top-downand bottom-up processesSource: OECD (2009a)10

Key stages in budget preparationand related entry points (1)11Key stages1. Determination of macroeconomicoutlook2. Multi-year strategic planning:medium-term fiscal strategy,medium-term expenditureframework3. Determination of next year’s:-expected revenues-acceptable level of deficit-global level of expenditures4. Pre-allocation of expendituresamong line ministries, according topolicy prioritiesImpacts of CC on economicactivity & growthKey actorsMin. of Finance/Planning, adaptation/mitigation statistical onoffice, central bankCabinet, Min. of FinanceImpacts of CCeconomic activity & growthExtra costs of adaptation /mitigation measuresExtra resourcesrequired / pledgedMin. of Finance (Budget Dept,Macroeconomic Extra revenues Dept), / cost Cabinetsavings resulting fromadaptation/mitigationCabinet, Re-allocation Min. of of Finance funds (BudgetDept) support of adaptation/mitigation objectives

Key stages in budget preparationand related entry points (2)Key stages5. Preparation/Circulation of budgetcircular & expenditure ceilings6. Costing of sectoral policies,submission of bids7. Review of sectoral bids, testing ofcost estimates, finalisation ofbudget estimates8. Negotiations, followed byendorsement of budget9. Preparation of appropriation billand budgetary documents10. Submission of budget toParliament – Discussion & adoptionKey actorsInstructions on costingadaptation/mitigationpolicies & measuresMin. of Finance (Budget Dept)All ministries Costing && integration government ofagenciesadaptation/mitigation policies & measuresMin. of Finance (Budget Dept),Use of climate riskCabinetscreening proceduresMin. of Finance, otherMinistries/agencies, policies & measures CabinetPrioritisation of adaptation/mitigationMin. of Finance (Budget Dept)Min. of Finance, ParliamentDiscussion of adaptation/mitigationpolicies & measures12

Keeping track of climate-relatedexpenditures• During budget preparation, implementation,monitoring and reporting, ‘keep track’ of main climaterelatedpublic expenditures– Adapt the budget classification– ‘Flag’ incremental climate-related expenditures embedded in‘non-climate’ programmes• This is important for:– monitoring the implementation of climate-related measuresin national and sector strategies– reporting to the UNFCCC (national communications)– securing eligibility for funding from specific climateadaptation/mitigation funds13

Monitoring climate-related finance:climate markers• Statistical codes developed by the OECD(DAC) to monitor the amount of aid resourcestargeted at adaptation and mitigation• Could be adapted for application to the nationalbudgets of OECD and non-OECD countriesSource: OECD-DAC (2011)14

Climate markers: eligibilitycriteria – Adaptation• An objective of adaptation to CC is explicitlymentioned in the intervention documentation; and• The intervention contains specific measurestargeting the following definition:Adaptation intends to reduce the vulnerability of human or naturalsystems to the impacts of climate change and climate-related risks, bymaintaining or increasing adaptive capacity and resilience. Thisencompasses a range of activities from information and knowledgegeneration, to capacity development, planning and the implementation ofclimate change adaptation actions.15

Climate markers: eligibilitycriteria – Mitigation• The intervention contributes to:– the mitigation of climate change by limiting anthropogenicemissions of GHGs, including gases regulated by the MontrealProtocol; or– the protection and/or enhancement of GHG sinks andreservoirs; or– the integration of climate change concerns with the recipientcountries’ development objectives through institution building,capacity development, strengthening the regulatory and policyframework, or research; or– developing countries’ efforts to meet their obligations underthe Convention.16

17Climate markers: decision treeDo any of the intervention’s stated objectives match “criteria for eligibility”of Rio Markers?YesWould the activity have been undertakenwithout this objective?NoNoYes2CC = principalobjective1CC = significantobjective0CCnot targeted

Public expenditure reviews (PERs)18

Public expenditure reviews (PERs)• A tool for analysing how budget resources areplanned, allocated and actually spent acrosscompeting claims, objectives and priorities• PERs can be used as a tool for supporting themainstreaming of climate change– Track adaptation- and mitigation-related expenditures– But also, importantly: focus on public expenditure’s overallcontribution to climate-resilient, low-emission developmentoutcomes19

Entry points for mainstreamingclimate-related aspects in a PERAspectBudget planningprocessExpenditure trendsand categoriesBudget financingIssues to considerRole of climate-related considerations in allocationdecisionsActual spending on vs. allocations to:* adaptation- and mitigation-friendly measures* development programmes with a focus on climate riskmanagement, climate-resilient / low-emission developmentAvailability of recurrent funding vs. capital investment forclimate risk monitoring and managementLevel of and trends in allocations to climate-relevant sectorsand agenciesOrigin of such allocations (internal vs. external funding)Possibility of increasing resources for climate-resilientdevelopmentSources: UNDP-UNEP (2011), World Bank (n.d.) GN420

Discussion and action planning21

Turning words into action• Mainstreaming climate change in thebudgetary process• Using Public Expenditure ReviewsWhat can be done and what arethe institutional and capacityneeds in your organisation?22

23External resourcesMain sources:, UNDP-UNEP (2011)

Main sources of externalfinancing (1)24Source of fundingDevelopment cooperation programmesLeast Developed Countries FundSpecial Climate Change FundGEF Trust Fund’s climate change focalareaAdaptation FundGreen Climate Fund(operations not yet started)Clean Technology FundStrategic Climate Fund (SCF) - PilotProgram for Climate ResilienceActivities supportedAdaptation and mitigation with a focus on dvptPreparation and implementation of NAPAs)Adaptation (priority objective), technologytransfers, mitigation in high-potential sectorsMitigation projects, adaptation demonstrationprojects and ‘enabling activities’Projects and programmes that reduce thevulnerability of communities and sectors to CCChannel for future multilateral funding foradaptation and mitigationDemonstration, deployment and transfer of lowemissiontechnologiesClimate risk and resilience mainstreaming indevelopment planning

Main sources of externalfinancing (2)25Source of fundingSCF- Forest Investment ProgramSCF - Program for Scaling UpRenewable Energy in Low-IncomeCountriesFast Start FinanceREDD+ (various streams of funding incl.UN-REDD, which promotes themainstreaming of REDD strategies innational development)Prototype Carbon FundBioCarbon FundActivities supportedREDD- related activities, sustainable forestmanagementDeployment of renewable energy sourcesAdaptation and mitigation measures indeveloping countriesPreparation, pilot implementation anddeployment of national strategies for reducingemissions from deforestation/forest degradationPioneering approaches to mitigation thatcontribute to sustainable developmentCarbon sequestration projects in forests andagro-ecosystems

Main sources of externalfinancing (3)26Source of fundingForest Carbon Partnership FacilityCarbon Partnership FacilityGlobal Energy Efficiency andRenewable Energy FundGlobal Climate Change AllianceMDG Achievement Fund, ‘environmentand climate change’ thematic areaClean Development MechanismVoluntary carbon marketsActivities supportedPreparation of national REDD strategies, pilotfinancial transfers based on verified emissionreductions from REDDLong-term, post-2012 mitigation projectsEnergy efficiency and renewable energy projectsMainstreaming of CC in poverty reduction andnational development strategiesAdaptation, DRR, participation in REDD/CDMMainstreaming of environmental issues innational and sub-national policies, planning andinvestment frameworksMitigation projects in developing countriesMitigation projects

Sources of information on climaterelatedfinance•• www.carbonfinance.org27

Budget support• The transfer of financial resources of anexternal financing agency to the National Treasury• Provides extra resources for the national budget– either grants (e.g. EC) or loans (e.g. World Bank)• National procedures apply to the commitment anddisbursement of funds– implementation via the national Public FinancialManagement system => reduced transaction costs,increased ownership28

Overview of EC budgetsupport modalities (1)• Budget support is provided in the form of:– sector budget support -> support for a sector policy/programme– general budget support -> support for an overalldevelopment, poverty reduction or reform strategy• Joint budget support operations are conducted withother donors where such initiatives exist• Usually 3-4 year programmes with annualdisbursements29

Overview of EC budgetsupport modalities (2)30• General eligibility conditions:1) Existence of a well-articulated national orsectoral policy/strategy to which the budgettransfer will contribute2) Reasonably stable macroeconomic framework3) Reliable or improving public financialmanagement

Overview of EC budgetsupport modalities (3)• Annual disbursements include two types of‘tranches’– fixed tranche: paid in full as long as eligibility conditionsare maintained• provides an element of predictability– variable tranche: paid in full or in part based on actualperformance against an agreed set of criteria and targets(as long as eligibility conditions are maintained)• criteria/targets in principle taken from the PAF associated with thesupported policy or strategy• provides a results-oriented performance incentive31

Climate change-related budgetsupport in Asia• Japan:– ‘Fast Start Finance’ -> covers all of Japan's activities relating toclimate change, and involves several agencies across both public andprivate sectors• China:• Assists developing countries, especially those making efforts to reduce GHGemission as well as those being particularly vulnerable to climate change.– ‘Grassland Protection Subsidy Program’ -> subsidy and rewardprogram for herdsmen to reverse and prevent damage fromCC.• Bangladesh:– ‘Bangladesh Climate Change Resilience Fund’ -> Directedtowards mitigating CC disasters such as regular dredging ofrivers and canals, strengthening embankments and establishingadequate number of cyclone shelters in coastal areas. 32

Bangladesh Climate Change Resilience FundMulti Donor Trust Fund including GCCA• Supports implementation of the Bangladesh ClimateChange Strategy and Action Plan.• Covers Adaptation, Mitigation and DRR• World Bank (Administrator of the Trust Fund),Ministry of Environment and Forests• Total value: €112.3 M• (GCCA: €8.5 M; EU (country programming: €20 M;UK: €69.7 M; Sweden: €10.2 M; Switzerland: €2.6M; and Denmark €1.3 M)• 2011 to 201533

National climate funds• Several countries have now established a‘national climate fund’ (trust fund) to:– channel and manage external funding related to CC– leverage existing funds and initiatives (incl. those financedwith national resources)– support the mainstreaming of climate-related programmesand projects into national development strategies• Expected benefits:– Alignment of external funding with national priorities– Building of national capacities and institutions– Scaling up of the response to climate change34

Discussion and action planning35

Turning words into action• Accessing external resources to support climatechange mainstreaming• Using budget supportWhat can be done and what arethe institutional and capacityneeds in your organisation?36

37References• Carbon Finance website of the World Bank:• Climate Funds Update:• OECD (2009a) Integrating Climate Change Adaptation into Development Co-operation: Policyguidance. OECD Publishing, Paris. [Read-only, browse-it edition] Available from:• OECD-DAC (2011) Handbook on the OECD-DAC Climate Markers. Organisation for EconomicCooperation and Development, Paris. Available from:• UNDP-UNEP (2011) Mainstreaming Adaptation to Climate Change into Development Planning: AGuide for Practitioners. UNDP-UNEP Poverty-Environment Initiative. Available from:• World Bank (n.d.) Mainstreaming Adaptation to Climate Change in Agriculture and NaturalResources Management Projects. World Bank, Washington, DC. Guidance Note #4 – DevelopingReadiness for Institutional Capacity Development and an Enabling Policy Framework. [Online]Available from:

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