Session 6 Strategy formulation and climate change prioritizing areas for climate action and funding, linkages to development priorities including poverty reduction

Rafique Ahmed Siddique Aid Effectiveness Unit, ERD Inclusive Climate Change Planning and Finance in Bangladesh - A Key development strategy towards poverty reduction Acknowledgement: Poverty, Environment and Climate Mainstreaming (PECM) Project, General Economics Division, Planning Commission

Climate Change and Current Spent 3  Government of Bangladesh spends 6% to 7% of its annual combined budget on climate sensitive activity  Climate spend increased in absolute terms over last two years, but slight decline in relative terms  Annual sum of US$1bn or just over 1% of GDP  97% spent on adaptation  Over the period 2009/10 to 2011/12 the funding of climate sensitive budgets has been of the order of 77% from domestic resources and 23% from foreign donor resources  Loan funding increased from 58% to 82% of foreign funds between 2009/10 and 2011/12  Climate Trust funds very small share of total climate expenditure  Social protection for climate vulnerable very large share of finance, but much less attention in the climate policy and programme.

Key Findings: Funding of Climate Actions 4

Key Findings: Climate institutions : types & their activities 5  Complexity  Urgent need for Co-ordination and Better Organisation o Financial (5 Mechanisms) o Institutional (37 Ministries, Plus LG, Plus NGOs, Plus Others) o Policy (Multi layered, Multi sectoral, Unbalanced Influences) o Local Governance Structure (District Administration, Elected Authorities) o Financial (5 Mechanisms) o Institutional (37 Ministries, Plus LG, Plus NGOs, Plus Others) o Policy (Multi layered, Multi sectoral, Unbalanced Influences) o Local Governance Structure (District Administration, Elected Authorities) o Budgets o Policies o Institutions o Programmes o Projects o Budgets o Policies o Institutions o Programmes o Projects  Existing Architecture should be used to Address Climate and Climate Change on an Integrated Basis

The Push! 6  BCCSAP mentions that a US$ 500 million programme will need to be initiated in year 1 and 2 for immediate actions, such as strengthening disaster management, research and knowledge management programs.  BCCSAP identifies 44 programs under its six thematic pillars  First five year’s fund of about US$5 billion will be required  All these requires a robust whole of GoB Climate Fiscal Framework in Bangladesh  The programs identified in 2009 need further revision. Costing of these programs is yet to be done

7 CLIMATE FISCAL FRAMEWORK THE PULL

Towards a Comprehensive CFF 8  Fiscal policy has a critical role to play in adaptation and mitigation of greenhouse gas emissions and raising revenues for climate finance, fiscal consolidation, and other purposes.  The framework is a tool to ensure that CFP is transparent and sustainable in the long run. It is a prerequisite for achieving the policy objectives of climate change policy.  The climate fiscal policy (CFP) framework consists of a number of principles upon which the policy is designed.  The budgetary framework is a key element of CFP. It is used to create better conditions for achieving the overall objectives of CFP without adversely affecting public finances.

Towards a Comprehensive CFF (Contd.) 9  Mitigating and adapting to climate change requires good macroeconomic management, fiscal policy plans, revenue raising alternatives, insurance markets, and long term investment options.  The CFF provides an account of fiscal developments and resource estimates for the short, medium, and long term climate expenditure; and allows to analyze how CC related expenditure is being integrated into national budgetary processes.  The Ministry of Finance needs to manage these challenges by adopting budget priorities, pricing policies, and financial market rules. To this end, country needs to formulate a comprehensive Climate Fiscal Framework (CFF) to study and map out fiscal issues for climate change.

What is CFF 10  CFF may be viewed as a framework which will ensure that external and internal finances are used most effectively to address climate change. o To achieve such a framework Bangladesh is going to (i) identify their existing expenditures and modalities for delivering climate related finance (ii) identify additional expenditure requirements drawing from action plan such as BCCSAP and other sources (iii) identify financing gaps and preferred modalities for delivering further sources of public investment (external & domestic), and (iv) create an enabling environment for private financial flows. Will this include both on and off budget expenditures? o To achieve such a framework Bangladesh is going to (i) identify their existing expenditures and modalities for delivering climate related finance (ii) identify additional expenditure requirements drawing from action plan such as BCCSAP and other sources (iii) identify financing gaps and preferred modalities for delivering further sources of public investment (external & domestic), and (iv) create an enabling environment for private financial flows. Will this include both on and off budget expenditures?

CFF (Contd.) 11  CFF will focus on following features: o CFF is going to suggest policy tool(s) that will mainstream climate change issues in MTBF and the Planning process in line with the guidelines laid out in the BCCSAP o CFF will suggest change in audit related policy and procedures as to incorporate climate change issues in the audit regime o CFF is going to develop a framework for tracking climate change related expenditures like the existing gender-sensitive expenditures o CFF is going to suggest policy tool(s) that will mainstream climate change issues in MTBF and the Planning process in line with the guidelines laid out in the BCCSAP o CFF will suggest change in audit related policy and procedures as to incorporate climate change issues in the audit regime o CFF is going to develop a framework for tracking climate change related expenditures like the existing gender-sensitive expenditures  Focus on strengthening the Annual Development Plan (ADP) and Medium term Budgetary Framework (MTBF) processes as a means to balance and co-ordinate policy.  Focus on balancing sector policies with overall climate strategy  Budget Management Committees of line ministries should be strengthened with expertise in the area of CC activities.

CFF (Contd.) 12  Existing institutional architecture for development strengthened to plan, finance and implement CC programmes.  Parliamentary Standing Committee legally empowered to oversee activities related to Climate Change  Institutions should emphasize vulnerability and climate hot-spots.  Performance Audit of Climate Finance by Auditor General Office.

Key Dimensions of CFF in Bangladesh 13  Demand side issues of the CFF o Existing climate expenditure and modalities o Climate Change Expenditure Tracking Framework o Projecting the future cost of the climate related activities o Linking climate change policy (BCCSAP and others) with planning (SFYP and ADP) and budgeting (MTBF) o Existing climate expenditure and modalities o Climate Change Expenditure Tracking Framework o Projecting the future cost of the climate related activities o Linking climate change policy (BCCSAP and others) with planning (SFYP and ADP) and budgeting (MTBF) Demand and supply side issues of the CFF  Supply side issues of the CFF o Analyze international financing received and obstacles of access to the existing international climate funds and recommendation for their remedy o National Climate fiscal policy options – taxes on natural resources extraction, user charges/fees and subsidy reforms and environment related taxes o Analyze international financing received and obstacles of access to the existing international climate funds and recommendation for their remedy o National Climate fiscal policy options – taxes on natural resources extraction, user charges/fees and subsidy reforms and environment related taxes

Climate investment- banking sectors related issues 14  Institutional and capacity development related issues o Establishment of a Climate Change Financial Unit (at FD) o Suggesting outline of establishment of a climate finance information hub) o Establishment of a Climate Change Financial Unit (at FD) o Suggesting outline of establishment of a climate finance information hub)  Audit and Oversight Issues o Suggested Changes in audit related policy o Climate expenditure and Parliamentary oversight o Suggested Changes in audit related policy o Climate expenditure and Parliamentary oversight

Thank You