CF Ready Climate Finance Webinar: “Political economy – the biggest stumbling block for national climate finance?” Marius Kaiser, Advisor – CF Ready, G320 Bonn, 30.08.2017 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

GIZ Climate Finance Readiness Programme (CF Ready) Established in 2013 Support +15 countries on climate finance readiness Joint Programme with Financed by: Readiness and preparatory support delivery partner for: 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready – Publications GIZ (2017) Political economy – the biggest stumbling block for national climate finance?, Bonn, Germany. Available at: https://www.giz.de/fachexpertise/downloads/giz2 017-en-climate-finance-political-economy.pdf 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy Content Background What is the political economy of climate finance? The challenge Main national climate finance actors and their interests Addressing political economy challenges 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy Background Cost of Nationally Determined Contribution (NDC) implementation: up to USD 4.4 trillion Variety of funding sources required (national, international, public and private) To effectively use national public funding a national planning framework is required 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

What is the political economy of climate finance? Here political economy is made up of: Interests (Dis)incentives Power structures … of national climate finance stakeholders Political economy factors can impede an integrated and effective national approach to climate finance 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy The challenge (I) For national funding: Mainstreaming of CC in planning and budgeting is key for national climate action but: considered donor partner topic managed by less-powerful environment ministry competing policy priorities (e.g. poverty reduction, health) Additional CC resources are rarely allocated. 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy The challenge (II) For international funding - example Green Climate Fund: Funding decisions can affect fiscal policy (e.g. loans) (currently still limited impact) National institution (National Designated Authority – NDA) and processes (e.g. No-Objection Procedure) need to be adapted and/or established Only non-binding good practice guidelines from GCF National accountability institutions (e.g. parliament, supreme audit institutions) are not always aware of climate finance flows Risk of insufficient stakeholder consultation and agreement 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Key Actors: Ministry of Environment (MoE) Responsibilities incl.: developing environment/ CC policies; representation at UNFCCC climate summits Interests incl.: Implementation of policy; use of international role for national influence (Dis)Incentives incl.: take on NDA-role to influence prioritization of GCF funding Power structure: less powerful than other ministries (e.g. finance), less calling power, lack public finance expertise but technical expertise 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Example: Status Quo of GCF NDA Distribution 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Key Actors: Ministry of Finance (MoF) Responsibilities incl.: managing the nations finances; represented at key UNFCCC summits Interests incl.: 1) maximize the national budget, 2) control fiscal risks (e.g. rising debt levels) (Dis)Incentives incl.: to engage in climate funding processes; take on NDA-role Power structure: comparatively powerful ministry; can lack awareness and technical expertise on CC 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Key Actors: Ministry of Planning (MoP) Responsibilities incl.: mid-/long-term development planning and investment plans; Monitoring and Evaluation Interests incl.: control/ approve investment budget; ensure coherence of investments and plans (Dis)Incentives incl.: strengthen and influence relations with MoF Power structure: exposed to competing interests by different ministries 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Key Actors: Line Ministries Responsibilities incl.: implementing specific, sectoral development priorities Interests incl.: maximize national and international funding to achieve objectives (Dis)Incentives incl.: may mobilize climate funding independently, or may be resistant to CC prioritisation Power structure: can be more powerful than MoE, possibly less willing to report to and coordinate 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Other National Stakeholders Including parliament, supreme audit institutions, civil society: Ensure accountability, raise awareness, assess policy implementation and use of funding Private sector: Key for implementation of activities, important stakeholder during consultations 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Addressing the political economy challenges (I) Strengthen ownership at the highest political level Government commitment impacts on country’s development priorities and effectiveness of climate change policies Early decision at high political level on division of tasks and responsibilities strengthens and empowers the institutions Broaden ownership Diverse actors need to be engaged and coordinated to ensure coherent approach Actors landscape analyses and capacity assessments can help inform 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Addressing the political economy challenges (II) Facilitate the integration of climate change into planning and budgeting procedures Sector ministries need to be aware of significance of CC Strong leadership from committed and high-ranking institutions Institutional capacity building on climate change issues needed Get ministries of finance involved in climate finance Internationally financed programmes will have fiscal policy implications for the national budget Mobilisation of national state budget resources for mid- to long-term operation and maintenance costs of sustainable climate investments 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Addressing the political economy challenges (III) Support the coordination efforts of the MoE Capacity strengthening for coordinating and monitoring cross- sectoral processes and technical support on climate-related matters Consider the political economy when setting up processes and procedures Active engagement of MoF and MoP when establishing processes, e.g. the N-OP Clear definition of division of labour, coordination and control and monitoring responsibilities 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Addressing the political economy challenges (IV) Apply accountability mechanisms and broaden national participation Parliament, supreme audit institutions and civil society need to be made aware of the significance of CC to scrutinize finance flows Private sector, academia and NGO need to be involved to generate the support and impetus required to promote and implement CC actions 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy Conclusion To plan and spend national and international climate finance effectively … formulating new policies & establishing required mechanisms alone is not sufficient. interests, (dis)incentives and power structures need to be anticipated and considered to overcome barriers. 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready – Publications GIZ (2017) Political economy – the biggest stumbling block for national climate finance?, Bonn, Germany. Available at: https://www.giz.de/fachexpertise/downloads/giz2 017-en-climate-finance-political-economy.pdf 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

CF Ready Climate Finance Webinar: Political Economy Thank you! To find out more about the GIZ Climate Finance Readiness Programme (CF Ready) visit: https://www.giz.de/expertise/html/19694.html or get in touch: Marius.Kaiser@giz.de 15.11.2018 CF Ready Climate Finance Webinar: Political Economy

Upcoming CF Ready Climate Finance Webinars Date Topic Moderator Wednesday, 20.09.2017, 1pm CEST Guidebook: Writing a Green Climate Fund Funding Proposal – Lessons Learned so far and guidance for project development Felix Fallasch Wednesday, 04.10.2017, Anti-Corruption in national climate finance processes – Perspectives of the Green Climate Fund Susann Mende Wednesday, 25.10.2017, The Potential of Green Bonds – A Climate Finance Instrument for the Implementation of Nationally Determined Contributions? David Goodman/ Andrea Staudhammer 15.11.2018 CF Ready Climate Finance Webinar: Political Economy