Climate finance and country systems: methodology for review CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Climate finance and country systems: methodology for review Neil Bird Research Fellow Climate and Environment Programme Using country systems to manage climate change finance: a Global Forum 2 December2013, Sheraton Incheon Hotel, Republic of Korea

CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Purpose of study To review whether country systems are being used to manage domestic and international climate change finance across a range of countries To identify ways to strengthen country systems to manage domestic and international climate change finance

Sources of climate finance CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Sources of climate finance For all countries: National revenues Domestic private sector Foreign private flows There are two additional sources for non-Annex 1 countries : International climate funds Donor funds (bilateral and multilateral)

Why is using country systems important? CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Country ownership is considered central to effective development, and use of country systems is seen as a key driver of ownership. Well-functioning government institutions are vital for successful development to occur. Aligning international funding better with government priorities, and working more closely with government entities, has the potential to make obtaining better results more likely, not least because it allows for more cohesive planning processes and a whole-of-government approach. Country systems influence access options for international climate finance.

Definitions: using country systems CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Country – while ‘country ownership’ is often seen as going beyond the national government, there is consenus that ‘country systems’ means state institutions and processes. Systems – going beyond public finance management and procurement processes. Methodology encompasses 4 categories of system: National policy processes Financial management systems Implementation procedures Accountability systems

Background to methodological framework CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC A broad definition of ‘country systems’ (i.e. beyond financial systems) is used. A country-led understanding of what ‘climate finance’ should cover (but excluding private sources for now). Assess measures related to country system strengthening. Existing assessments of the strength and use of country systems are likely to be adequate for the analysis we are carrying out/new measures are unlikely to be better. Gender-sensitivity of methodology.

Criteria for use of Country Systems by climate finance (CSCF) CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Country Systems for Climate Finance (CSCF) Criterion Questions for global stock-take 1 Public climate change finance is focused on results that meet country priorities Do major climate change-related funded programmes appear as priority actions within national climate change strategies and national development plans? 2 Public climate change finance is predictable over the budget year Is the credibility of the central government budget improving with respect to climate finance? 3 Countries PFM and procurement systems are strengthened for the delivery of climate finance Does the national budget link to climate change policy priorities, with systems in place to ensure timely implementation and reporting?

Criteria for use of Country Systems by climate finance (CSCF) CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Country Systems for Climate Finance (CSCF) Criterion Questions for global stock-take 4 Public climate change finance is on-budget that is subject to scrutiny by the national legislature Does the legislature and its relevant committees scrutinise government financial performance, including performance against climate change-related objectives? 5 Information on public climate change finance is publicly available Do mechanisms and modalities that promote transparency of climate finance exist?  

Criteria for use of Country Systems by climate finance (CSCF) CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Country Systems for Climate Finance (CSCF) Criterion Questions for global stock-take 6 Gender equality and women’s empowerment is a consideration in public climate change finance delivery Is the planning and prioritization process for the major climate change related programmes gender aware? 7 Civil society and the private sector operate within an environment which maximises their engagement in and contribution to climate compatible development Do policy platforms provide opportunities for all stakeholders to contribute to the process? Country Systems for Climate Finance (CSCF) Criterion Driving questions for global stock-take Countries systems are strengthened Does the national budget link to climate change policy priorities, with systems in place to ensure timely implementation and reporting? Gender equality and women’s empowerment is a consideration in public climate change finance delivery Is the planning and prioritization process for the major climate change related programmes gender aware? Civil society and the private sector operate within an environment which maximises their engagement in and contribution to climate compatible development Do policy platforms provide opportunities for all stakeholders to contribute to the process?

Country reviews CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Early reviews to test this methodology are now being carried out in five countries: Colombia Germany Indonesia Uganda United States of America

Country assessments – the context Annual CO2 emissions (kt) CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC

Country assessments – the context GAIN index on vulnerability to climate change (rank out of 176 countries) CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Germany – 8 USA – 15 Colombia – 57 Indonesia – 88 Uganda - 134 Increasing vulnerability

Spending on Climate Change in Uganda CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Over the 4-year period, 2008/9 to 2011/12, available evidence does not show significant levels of funding to have come from international climate funds.

Criterion 1: Public climate change finance is focused on results that meet country priorities CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Climate change is a new policy concern that has matured in the last five years.

Public climate change finance is predictable over the budget year Criterion 2: Public climate change finance is predictable over the budget year CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC   Budgeted expenditure (bn Shs) Outturn expenditure (bn Shs) Outturn vs. budget as a percentage 2008/09 96.9 41.5 57.2 2009/10 203.4 53.2 73.9 2010/11 153.6 66.5 56.7 2011/12 136.0 71.8 47.2 Annual predictability of donor funding is also low, with less than half of relevant committed funds disbursed each year since 2008 .

Information on public climate change finance is publicly available Criterion 5: Information on public climate change finance is publicly available CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Policy Area and Output Reporting Period Budget Expenditure Weather, Climate and Climate Change July 2012 to June 2013 The total budget for 2012/13 was Shs 33.0 million funded from central government. By the end of June 2013 Shs 12.7 million had been spent. Source: www.budget.go.ug The challenge is that many climate change relevant expenditures have not yet been identified within the national budget documentation.

Climate finance and country systems CAPACITY DEVELOPMENT FOR DEVELOPMENT EFFECTIVENESS FACILITY FOR ASIA AND PACIFIC Studies of how both domestic and international climate finance uses country systems have just begun. Evidence on use and strength of country systems is urgently needed to inform national and international policy on climate finance Countries will benefit from being able to exchange lessons and innovation in this regard Country assessment and methodology development should be completed in January 2014

Overseas Development Institute 203 Blackfriars Road, London, SE1 8NJ Thank you Neil Bird Overseas Development Institute 203 Blackfriars Road, London, SE1 8NJ n.bird@odi.org.uk