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

2. 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:
CF Ready Climate Finance Webinar: Political Economy

3. CF Ready – Publications
GIZ (2017) Political economy – the biggest stumbling block for national climate finance?, Bonn, Germany.
Available at:
en-climate-finance-political-economy.pdf
CF Ready Climate Finance Webinar: Political Economy

4. 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
CF Ready Climate Finance Webinar: Political Economy

5. 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
CF Ready Climate Finance Webinar: Political Economy

6. 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
CF Ready Climate Finance Webinar: Political Economy

7. 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.
CF Ready Climate Finance Webinar: Political Economy

8. 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
CF Ready Climate Finance Webinar: Political Economy

9. 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
CF Ready Climate Finance Webinar: Political Economy

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

11. 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
CF Ready Climate Finance Webinar: Political Economy

12. 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
CF Ready Climate Finance Webinar: Political Economy

13. 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
CF Ready Climate Finance Webinar: Political Economy

14. 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
CF Ready Climate Finance Webinar: Political Economy

15. 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
CF Ready Climate Finance Webinar: Political Economy

16. 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
CF Ready Climate Finance Webinar: Political Economy

17. 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
CF Ready Climate Finance Webinar: Political Economy

18. 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
CF Ready Climate Finance Webinar: Political Economy

19. 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.
CF Ready Climate Finance Webinar: Political Economy

20. CF Ready – Publications
GIZ (2017) Political economy – the biggest stumbling block for national climate finance?, Bonn, Germany.
Available at:
en-climate-finance-political-economy.pdf
CF Ready Climate Finance Webinar: Political Economy

21. CF Ready Climate Finance Webinar: Political Economy
Thank you!
To find out more about the GIZ Climate Finance Readiness Programme (CF Ready) visit: or get in touch:
CF Ready Climate Finance Webinar: Political Economy

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