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Using CBA/EbA appraisal outcomes in programmedesign and budget proposals
With Case Study of Chao Phraya River Basin Flood Management Infrastructure Program
Glenn Stuart Hodes, Climate Policy & Finance Specialist UNDP Bangkok Regional Hub
For example, designing a flood management system or reducing emission of methane in rice paddy require planners & economists to design and implement new measures
Key Challenge for Thailand
Policy direction, plan, and strategy at both national and sectoral levels are in place
BUT…..
“How can we actually mainstream the climate change objectives into sectoral programmes and projects?”
Key Challenges for Thailand
Few programmes are dedicated solely for Climate Change; Climate Change is usually a second consideration!!
How to Approach: key stages
1. Develop policy and strategy (e.g. CCSPA II)
2. Develop priority actions (e.g., apply MCA)
3. Design/Retool programmes and projects using appraisal methods (e.g., CCBA, CBA, eBA, CEA)
4. Develop budget and financial proposals (ongoing)
5. Develop M&E Frameworks
6. Field Test
7. Adjust overall plans with ‘reality check’
• Vulnerability Assessment & Adaptation Plans
• Applied Valuation & Cost Benefit Case Studies
• Monitoring practices to measure impact
• Training
National Level
LocalLevel
• Stock take of planning & budgeting processes
• Identifying entry points
• Methods (e.g., MCA, ebA, CCBA)
• Case studies
• Lessons learned applied to sector adaptation plan & guidance
• Training
Supporting Thailand to Integrate Agricultural Sectors into National Adaptation Plans (NAPs) - Implementation Logic
Feedback
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Start
2
การอนุมตังิบประมาณ (Budget Adoption)
1
การจดัท างบประมาณ(Budget Preparation)
3
การบรหิารงบประมาณ(Budget Execution)
4
การควบคุมและตดิตามประเมนิผล(Budget Control &
Evaluation)
กระบวนการงบประมาณ (Review of Budget Cycle)
จาก CCA -> การจดัท าค าของบประมาณปี 2560
7มูลนิธสิถาบนัวจิยันโยบายเศรษฐกจิการคลงั
Bottom-Up Approach to Climate Budgeting
MoAC
Budget Submission
Planning Agencies
Budget/Finance Agencies
Climate Change Focal Point
Key Line Departments
The reveal
The reforms
The integration
Budget tagging, budget guidelines and call circulars Improving how to
allocate, track and justify budget resources
UNDP Supported Actions to Date
1. Capacity building on CC-CBA, and walking stakeholders through mainstreaming entry points as part of budget cycle. NAP-AG supported stock take found only 1 dept in MOAC was systematically using CBA.
2. Multi-Criteria Analysis (MCA) indicators and a database being set up as a tool for screening and prioritizing the action plan and programmatic areas.
3. Strengthening project design and appraisal processes to integrate CC into budgeting guidelines.
Climate budget reforms in Thailand – bigger context
10
1. ความสอดคลอ้งกบันโยบายรฐับาล
2. ประชาชนไดป้ระโยชนจ์ากโครงการ
3. เหมาะสมตามแผนบูรณาการ 3 มติิ
4. วเิคราะหค์วามเหมาะสมของโครงการ
- เหมาะสมเป็นพนัธกจิของหน่วยงาน
- สอดคลอ้งกบัศกัยภาพของหน่วยงาน
- วเิคราะหค์วามครอบคลุมงบประมาณ
- วเิคราะหปั์ญหา อปุสรรค และขอ้สงัเกต
5. ความพรอ้มในการด าเนินการของโครงการ
CCA Guideline
จาก CCA -> คูม่อืการจดัท าค าของบประมาณ
มูลนิธสิถาบนัวจิยันโยบายเศรษฐกจิการคลงั
Extracting Results from CBA to Proposals
• Indicate whether and what kind of analysis done to justify project formulation/go-ahead. Is it worth cost of full FS? What are alternative options/land-use choices?
• Use in project proforma for investment projects✓ outline set of activities undertaken to achieve predetermined
objectives within set timeframe.
• OUTPUTS/DELIVERABLES KEY LINK CBA to BUDGET✓ Think/value additional cost and benefits in terms of these:
# of farmers, fishermen receiving extension service; # of ha with additional irrigation, # of new drought resistant seeds; # m3 of additional biogas, etc.
• Three Key Metrics BOB wants to see (at least 1)✓NPV (must be positive in absolute value)✓BCR (must be > 1.0 to be convincing)✓IRR (most important when comparing alternatives)
• BOB will also want to see detailed costing and investment estimates
Climate Change Appraisal
Adaptation/mitigation costs
and benefits
Benefit-Cost Ratio
without Climate Change
Benefit-Cost Ratio with
climate change
Climate Change Risks
CBA for Climate Appraisal: Key Steps
© UNDP, 2015. “Climate Change Benefit Analysis Guidelines for Thailand”
Mitigation vs. Adaptation
• The basic principles of CC appraisal are the same, but …
• Mitigation. Planning and budgeting driven by Marginal Abatement Cost or Cost Effective Analysis that shows the cheapest way of delivering on GHG reduction goals. Sometimes are directly productive projects that pay for themselves over time, for example, kWs of energy savings
Mitigation II• Marginal Abatement Costs look at incremental net
costs (i.e., costs – benefits of incremental unit) divided by the total reduction in GHG emissions
• MAC Curve used to decide the ‘pass rate’ for achieving a set target emissions reduction
• Great care in units (eg tC or tCO2e)
• Costs should include all supporting costs, including all public and private and all managing institutions
• Costs and benefits are discounted, but GHG emissions are not (an odd convention, when early emission reduction should be prioritised)
Adaptation: forward planning• Adaptation. Are activities going to be affected by gradual
CC (ie temp, flood, drought, seasonality, sea-level)? • Most adaptation investment is capital development spending,
just with changing priorities/design/geographical targeting. Benefits are often broadly accrued (e.g. irrigation & water resource management)
• Some supporting activities may be solely dedicated (i.e. climate-smart seed research, institutional CB). These should probably not take more than 20% of sectoral CC resources.
✓ CBA would be particularly important to justify these as non-revenue generating investments i.e., not self-financing! CC happens slowly, so routine public services will adjust naturally, reflecting changed experience in recent years
• Climate Related Appraisal is for those policies/investments that have longer term implications …• Infrastructure with long term ‘locked-in’ features• Research that takes years and then longer to apply• Institution building – often underestimated
Model CBA Tree to Value Impacts and Costs
Example of Chao PrayaIrrigation Project
Context
1975 1983 1995 2002 20061942 20112010
8 yrs 12 yrs 7 yrs 4 yrs 4 yrs 1 yr33 yrs
Flood events in Chao Phraya river basin
25 river basins
The Great Chao Phraya river basin
Total area: 2.03 Mha
Flood risk:-Moderate [4-5 times/9yrs]
0.16 Mha (8% of total area)
- High [> 5times/9yrs]0.13 Mha (6.6% of total area)
พืน้ที่เสีย่งภยัน ้ำท่วม
เสีย่งต ่า (น า้ทว่ม1-3ในรอบ10ปี)
เสีย่งปานกลาง (น า้ทว่ม4-5ในรอบ10ปี)
เสีย่งสงู (น า้ทว่ม6-10ในรอบ10ปี)
Low risk
Moderate risk
High risk
Flood Risk Area
Economic areas: Industrial estates mainly in Ayutthaya, Saraburi
Urban areas: Bangkok, Nonthaburi, Pathumtani, SamutPrakarn
Town: Nakornsawan, Ayutthaya, Nonthaburi
Township
Agricultural area65%
City & Industrial
area28%
Others7%
Land use
Flood Diversion Scheme
1
2
3
Expansion of existing Chainat -Pasak Canals
Construction of new Rama VI diversion dams
Construction of new flood drainage canal
Installation of SCADA and telemetery
1
2
3
CBA – Baseline Situation
Metric Figure
Cost $ 3,257 Million
Benefit $ 410 Million / yr(from reduced/avoided loss and/or damage)
EIRR 14.52 %
NPV $ 404 Million
Benefit-to-Cost Ration 1.22
CBA – With CC
Climate Change
Data
• Is there any relationship between previous floods and CC?
• What is the probability of a major flood occurrence? What is its frequency?
FS
• What will be CBA when CC is incorporated into existing FS?
Indirect benefit
assessment
• What are indirect benefits?
• Why do we need to consider these?
Existing FS Baseline
Values of water Costs of water
Ecosystem service value
Non-market value to human capital
Net benefits from indirect use
Net benefits from return flows
Value to water users
Eco
logi
cal E
con
om
ic V
alu
e
Eco
no
mic
Val
ue
Mar
ket
Val
ue
Diminishment of Ecosystem Services
Economic Externalities
Opportunity Cost of Water
Capital Charges
O&M
Eco
logi
cal E
con
om
ic C
ost
Eco
no
mic
Co
st
Sup
ply
C
ost
Quantifying Other Benefit Streams
1. Direct benefits from avoided a loss and damage as a result of the drainage canal/flood diversion in East.
• Property damage, accidents, road blockages, etc.
• FS uses data from consulting firm.
2. Indirect health benefits• Reduced stress/trauma from psychological effects
• Contingent Valuation Method (CVM) used, not the actual market value. Surveys used to indicate WTP.
Modeling: Flood Risk Analysis
Streamflow simulation (IMPACT-T data)Near Future (2040-2059) vs. Far Future (2080 – 2099)
at station C.2, Nakhon Sawan
Representative Concentration PathwaysRCP 4.5 and RCP 8.5
Flood risk: Result (base year = 1995)- considered Return Period as index
Return Period without CC
Return Period with CC
43 years
3-7 years
CBA – With CC
Flood Damage and Loss (M USD)
Flood Area (Ha)
Without Climate Change
734 265,774
With Climate Change (Changes of ReturnPeriod)
1,826 341,938
Direct Benefits: Damages and Losses
Indirect Benefits: Anxiety & Stress reduction
43 years
3-7 years
Damage
Contingent Valuation
Method (CVM)
Before & After
Metric Figure
Cost 63,180 Million Baht
Benefit 77,307 Million Baht
EIRR 14.52%
NPV 14,126 Million Baht
B/C ratio 1.22
Shorter Investment Return Period
Damages & Losses
Anxiety & Stress
Baseline With CC
Metric Figure
Cost 63,180 Million Baht
Benefit 294,973 Million Baht
EIRR 43.91%
NPV 231,793 Million Baht
BCA 4.67
Broad Conclusions & General Lessons1. Climate-related appraisal methods and budget guidelines are evolving in
Thailand. Watch this space! MoAC leadership is appreciated. Piloting work that UNDP, GiZ and MOAC/RID/DWR have done provide a model way forward.
2. Mainstreaming CC in appraisals will lead to better policy choices, institutional co-ordination (because of cross/multi-sectoral reality of CC impacts) and a qualitatively strengthened NAP & NDC process.
3. Mainstreaming needs champions and pilot programs at sector and line department level. Good practice to engage Bureau of Budget early on in the budget formulation processes.
4. Co-benefits in terms of CC adaptation/GHG mitigation can be addressed in budgeting process as part of routine appraisal of programs.
• CC Appraisal for programmes and investment decisions should build upon existing techniques. It should not be a major analytical burden to MOAC/RID/DWR/MONRE
• Important to do it during project/programme design, so that it can influence design, even if more qualitative
• Estimating Costs Far Easier than Benefits
• Knowing and being clear about how CC would generally affect a project is as important as estimating the values
• Accept that some estimates will be rough and will act as indicators for monitoring/management. Timeframe key.
• Some key rules of thumb provide a good starting point (e.g. a doubling of flood/drought return periods)
• Use a combination of techniques and attempt to also ‘triangulate’ results with various studies
Disaster
Drought
Thank you / ขอขอบคณุ