Mainstreaming CC Adaptation into Planning & Budgeting

Supported By

Glenn Hodes Climate Policy & Finance Specialist

UNDP Bangkok Regional Hub

In cooperation with

Understanding “mainstreaming”

• CC risks and adaptation options are integrally reflected in decision-making and planning processes….

…By leveraging entry points at various levels, stages of policy and planning, and programmatic interventions.

…Thus, neither ad hoc nor stand-alone.

Core Elements of Mainstreaming ProcessCCA strategies

integrally reflected in policies and strategies

Finance Gap & Priority CCA

Actions Costed

Establishing coherent

institutional arrangements

Planning and budgeting systems

integrate CCA actions

Clear results & target indicators

identified and effective M&E

systems in place

“Resource mobilization”

strategies (funding,

knowledge, technologies)

Mainstreaming actions implemented in practice

More effective climate budgeting:

• Budgets are how CC funds are often utilized and are the most important documents to translate policy into action

• National (and local) budgets and finances are critical for the implementation of adaptation plans and objectives, including NAPs

• Better management strongly correlates to more equitable spending

Climate change & financial risk still a relatively new area for government policyLimited understanding of how sectoral plans and programs would be affected by CC.Lack of incentives or political will by functional/line ministries to implement national CC actions. Limited capacity of functional/line ministries to undertake CBA & investment appraisal of programs Insufficient time and resources to devote expertise to managing climate finance in budgetsFew guidelines or incentivizes to integrate CCA into resource mobilization strategies.Weak internal systems and institutional co-ordinationPotentially insufficient information regarding climate spending and financial flows

Challenges

Institutional ImplicationsCC policies and plans are usually prepared by Ministries of Environment.1. Be aligned and feed into national development strategy processes and vice versa: Involve also the

Ministries of Planning.2. Inform and be integrated into sector policies and vice versa. Involve all sector ministries (e.g. agriculture,

public works, water, health, forestry, fisheries etc.).3. Inform and feed into other cross-cutting issues and vice versa. Involve ministries such as women and

children affairs, disaster risk management, social protection agencies etc.4. Inform and be integrated into sub-national policies and vice versa. Involve Ministries of Home

Affairs/Local Government and Sub-national Governments (provinces, districts etc.)5. Be costed and appraised and integrated into a country’s medium and long term fiscal and expenditure

framework. Involve Ministries of Planning, Ministry of Environment , Line Ministries and Ministry of Finance.

6. Translated into concrete allocations in national and sub-national allocations. Involve Ministries of Finance, Ministries of Planning, Ministry of Environment, Ministries of Home Affaires, Sub-national governments and line ministries.

7. Monitored and Evaluated: Involve Ministries of Finance, Ministries of Home Affaires, Sub-national governments and line ministries.

8. Audited and Overseen: Auditor General, Parliament and CSOs.

Climate Public Expenditure and Institutional Reviews (CPEIRs)

• Diagnostic tool• Scope can be national level, provincial, or

local level • Platform for multi-sector dialogue and cross

government co-ordination on CC strategy• Tracking Climate Finance expenditures

from a country perspective• Translating climate change issues into

language for Ministries of Finance• What gets monitored gets managed

CPEIR - II

• A policy and institutional assessment of government’s ability to coordinate and translate climate objectives into the budget

• Review expenditure related to climate change and assesses extent to which budgets are guided by policy and institutional responsibilities.

• Typology used to identify climate change relevant expenditures• Analysis of trends in climate budget allocations / expenditures• An illustration of trends in external funds flows;• Recommendations on institutional reforms for mainstreaming to

improve effectiveness and impact of finance.

CPEIRs – what have we learned?

• 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 use of national systems for planning, execution,

monitoring and reporting.

The Budget Cycle • Budget cycle elements:

– Which elements of the budget cycle need to incorporate CC information?

– What about sequencing?– How and by whom?

• Where to start?• CC budget integration feedback

to policy and planning cycles

Climate Change

Strategic budgeting

Annual budget

formulation

Execution(incl. GFMIS, procurement)

reporting and

monitoring

Budget evaluation

National Development Strategy: Philippines NDS 2011-16. Annual Sector Plans: US Department of Health, Department of Agriculture. MTFF/MTEF: Bangladesh CCF, Proposed Cambodia CCFF. Budget or Stand alone Circular: MoF provide guidelines on CC integration in Budget

Submissions. Philippines: common CC typology and guidelines for tagging CC spending in budget. Able to track and monitor national response based on tagged data for 2015.

Budget Submission: MoAC Thailand in collaboration with BoB, NESDB and ONEP. Technical Budget Hearings: In Philippines on CC to help prioritize CCE and inform

NGAs planning for 2016 budget. Budget Speech. Pakistan, Nepal Annual Budget Policy Statements. Budget Books Annex: Nepal Standalone but legally required CC Budget Reports (US, France…).

Tangible Entry Points for Climate Change Alignment

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• An integrated and strategic framework for governments to better mobilize, manage and target climate finance – recognizing a broad range of financing modalities.

• It supports decision-makers to ensure that national systems and climate finance architectures deliver CF in more equitable, effective, and efficient ways.

• Outlines a reforms road map to strengthen fiscal planning and budgetary decisions, as well as transparency and accountability mechanisms.

What is a CC Financial Framework (CCFF) ?

Download NOW at www.CFADE.org

• Integrate CC into existing techniques• If no organised system for appraisal, then

use CC as an opportunity to encourage

Applying Appraisal Tools to Public Finance

Menu of Appraisal Tools & Methods

Tool/Method General thrust

Cost Effectiveness Analysis (CEA) Measures cost in relation to an isolated outcome. Defines least-cost way to get result. More suitable to CC mitigation.

Cost Benefit Analysis (CBA) Overall economic rationale, weighing both costs and benefit streams and effects on all outcomes.

Climate Change Benefit Analysis (CCBA) Help identify and appraise public investment projects having positive climate change benefits.

Financial Analysis “Bankability” in financial viability terms, i.e., investment return, debt-serviceability, pay-back time

General Equilibrium Analysis (CGE, IAM …)

Macro-economic effects

Multi Criteria Analysis (MCA) Supports decision-making with broad view of impacts, often participatory application

Real Options Analysis CBA with assessment of future flexibility

Robust Decision Making Least likely to fail

1. Climate-responsive budgeting as strategy to achieve better policy choices, institutional co-ordination and a strengthened NAP process.

2. “Bottom up” focus, starting at functional/line ministry level, starting with agriculture while simultaneously engaging Bureau of Budget, ONEP.

3. Appropriate screening guidelines and investment appraisal methods to quantify climate risks and benefits developed that can be applied by sectors.

4. Capacity building through pilot projects and programs: walk key stakeholder through entry points as part of budget cycle.

Case Study : Mainstreaming CCA in Budgeting in Thailand

1. Piloting and Capacity Building on Climate Appraisal/CBA Tools- Preliminary analysis on five adaptation projects under MoAC- Preliminary analysis on two mitigation projects under MoE- In depth analysis of two projects under RID and LDD

2. Developing a Common Framework for Appraising Projects related to Climate change - Guidelines on Climate Change Benefits Analysis (CCBA) developed based on experiences from the piloting and capacity building works as well as Preliminary analysis on the institutional arrangement and coordinating mechanisms

Resources

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Group discussion

• What are the main gaps in linking adaptation priorities to public finance and establishing baselines for CC spend?

• What are the key-challenges with:– Prioritizing programmes for budget allocations– Costing measures and developing realistic financing plans– Assuring the quality of expenditures – Monitoring and reporting

• How much do the most vulnerable people really benefit?

Thanks for your attention