1. Climate Change and National Budgets A relationship that matters
Engaging with Ministries of Finance
Particularly in relation to the budget
Kevork Baboyan
Governance and PFM Specialist

2. Why do we care about the Budget?
Public expenditures represent on average 30 percent of GDP in Emerging Asia (source: IMF).
Ensuring that these public investments and services contribute of national climate change mitigation and adaptation objectives and international commitment under the Paris Agreement is crucial.
International Climate Change Public Finance while important will not be sufficient. (“Fight for It but Do not Depend on It”!)
The fiscal and subsidy policies embedded in the budget are crucial to incentivize private behavior and leverage private sector investments.

3. Main Diagnostic: A Deep Disconnect Between CC Policy Framework and Budgets
CC Planning Landscape in last 15 Years
Medium Term& Annual Budgeting Processes
CC Strategic Plans (CCSPs)
CC Strategic Action Plans (CCSAPs)
National CC Action Plans (NCCAPs)
National Adaptation Plan for Actions (NAPAs)
National Adaptation Plans (NAPs)
Nationally Determined Contributionss
Medium Fiscal Framework (MFF)
Medium Term Budget Framework (MTBF)
Medium Term Expenditure Framework (MTEF)
Annual Budget

4. Reconnecting the Plan and the Budget: Start to Identify and the Climate Spend in the Budget versus the National CC Action Plan
-Involving the Ministry of Finance
-Developing Methodologies to define climate change finance that made sense in the national context
-Design a typology to classify budget allocation and expenditures
-Come up with a CC relevance weighting system for budget expenditures
-Integrate this identification system in the budget process and FMIS
-Publish Climate Budget Reports

5. Monitoring the progress in the implementation of the NCCAP through the national budget: Ex. Of Bangladesh
Integration in FMIS.
Measurement as part of the Budget Process
Climate Budget Report Present to Parliament

6. Assessing Climate Spending Allocation Pattern Alignment with the NCCAP
Assessing Climate Spending Allocation Pattern Alignment with the NCCAP. Ex: Cambodia
In Cambodia, in 2016, 92 percent of what should have been allocated for climate change was allocated at aggregate level. However, there were disparities between the needs as identified in the CCSPs and the actual allocations.
Need vs Allocation Patterns.
Integrating Budget and ODA date
Third Edition of the Climate Budget Report
Source: Ministry of Economy and Finance, CPER 2018

7. Assess the Credibility of Budgeted Climate Change Programs
Help them assess “the rate of absorption” of climate change spending. Example from Indonesia:
Absorption Rate in Indonesia in 2016 (in trillion IDR)
Integration in FMIS.
Measurement as part of the Budget Process
Both allocation and expenditure tagged.
Minisry
Ceiling
Realization
Budget Absorption
Ministry of Environment and Forestry
1.62
1.13
70%
Ministry of Agriculture
4.27
3.15
74%
Ministry of Energy and Mineral Resources
2.17
1.54
71%
Ministry of Transportation
21.00
10.83
52%
Ministry of Industry
0.05
0.03
65%
Ministry of Public Works and Housing
43.23
35.72
83%
Total
72.35
52.41
72%
Source: Analysis Report on Climate Mitigation Budget, MoF

8. Reconnecting the Plan and the Budget: Connecting the Sectoral Planning and the Budget in line with the NCCAP
Sectoral Ministries
Ministry of Economy and Finance
Climate Change Policy Making Body
National Planning Agencies
Long Term and Medium Term National Development Strategy
National CC Action Plan/NDCs
Sectoral Medium and Annual Term Planning and Budgeting
Medium Term Fiscal Framework/Annual Budgets
Dynamic System
Consistency
Information flows
Feedback Loops
We connected NCCAP and the Budget. (Supply-side connection)
Shift to a more comprehensive approach and start building the demand side connections.
Two connections: CC Policy and Planning and Sectoral Policy and Planning
CC Responsive Sectoral Planning and Programming and the Budget

9. 5/4/2019
Planning Appraisal Guidelines,
Planning Templates,
Budget Circulars,
Review budget and lead technical hearings,
Approve budget submissions and allocate funding
Prepare feasibility studies,
Appraise and design projects,
Submit planning documents and budgets
Defend and argue case for budget submissions in hearings
Central Agencies: Planning
Finance
Plan-Budget Connection Processes and Instruments in need of Reform to achieve the NCCAP
Budget Formulation and Negotiation Process
Focus on sector side
Sector Ministries:
Infrastructure
Social

10. With support of Technical Agencies:
5/4/2019
Central Agencies request ministries integrate CC impact in design of investments and submit budgets accordingly.
Provide guidance to help ministries integrate CC and allocation decision take CC factor into account
Central Agencies: Planning
Finance
With support of Technical Agencies:
Ministry of CC
Met Office
NSO
Implementing the CC Mainstreaming Actions
Budget Formulation and Negotiation Process
Design projects that are CC responsive using central guidance
Submit planning templates and budgets that illustrate contribution to CC
Make the case for CC benefits accrued
Working with CSOs, Parliamentarians, and Media
Accountability and transparency for:
Reform
Pro-poor results
More effective management and delivery of climate finance
Sector Ministries:
Infrastructure
Social

11. Incorporating Climate Change Risks into Planning and Budget Formulation
On Sector Ministries Side:
Step 1: Screening relevant PIPs using selection criteria (amount of project, location, relative size to the ministry portfolio, impact on vulnerable population, expert judgement…) for CC appraisal
Step 2: Analyze risks to and from the project using a various instruments: CC scenarios, CV assessment, CC adjusted cost-benefit-analysis, Multi-criteria analysis, any other Instruments for risk informed planning etc.
Step 3: Adjust the design of PIP and budget submission as per findings of CC analysis and in particular costs and benefits arising from CC impact.
Highlight any need for climate proofing.
On Central and Technical Agencies Side:
Step 1: Develop a common framework to appraise PIPs for climate change systematically across sectors.
Step 2: Adopt the framework formally and integrate it to the planning and or/budgeting circulars.
Cambodia
Thailand
Training and CBA support to integrate into budget proposals
Negotiations over the budget: MPWT in Cambodia
Caribbean example
Step 4: Develop a common framework to appraise PIPs for climate change systematically across sectors.
Step 5: Adopt the framework formally and integrate it to the planning and or/budgeting circulars.

12. CC Risk informed Public Investments
Country
Ministries
Amount (USD Million)
Percentage of Ministry Budget
Objective
Fiji
Ministry of Rural and Maritime Development
3.4 17
Risk-Informing Development Projects
Pakistan
Ministry of Water Resources
241 38
Climate-resilient water infrastructure
Nepal
Ministry of Agriculture and Livestock Development
10.2 4
Stronger Integration of Climate Into the Programs
Tonga
Ministry of Agriculture Fisheries and Forestry
0.7 10
CC Risk informed Public Investments

13. Climate Change Financing Framework: A Whole of Government Approach
to heal the Plan-Budget Disconnect on CC
We looked at SS side and demand side.
This brings us to a framework that brings all these elements together.
CC Responsive: Macroeconomic Framework
Project Appraisal Guidelines
Sector Work Plans
Budget Circular
Budget Submissions
Budget Negotiations
Budget Allocations
Budget Hearings
Budget Policy Statement
and Enactment
Green and Climate Change Compatible
Procurement Law and Guidelines
Climate change tags and weights in budget and accounting systems (FMIS…)
Progress reports versus CC Plans,
Climate change expenditure reports
CC Performance Audits

14. What is the CC Financing/Fiscal Framework medication doing?
A framework to reconcile the planning and financing aspects of climate change.
How?
Involves All the Big Players: National Planner, CC Policy Maker, the Treasurer and the sector policy implementers around the same CC objectives.
Identifies the strategic entry points for each player as per their responsibilities as well as the interconnections.
Identifies the CC mainstreaming actions that should be undertaken taken throughout the policy, planning and budgeting cycles and how these are interlinked and should come together.
Quantifies the CC financing needs, the financing supply, the gap and proposed measures to fill it.

15. Climate Change Financing Frameworks

16. Assessing the financing gap for NDCs.

17. Filling the Gap…
Helps them assess the financing gap for NDCs and initiate a Climate Policy Road Map on how to fill it.
Mobilize International Climate Finance:
India
Indonesia
China
Vietnam
Bangladesh
Issue Green Bonds/Sukuks for USD1.25billion Indonesia (2018)
Ecological Taxation
Fiji (2015), Colombia (2018)
India
Indonesia
China
Vietnam
Bangladesh

18. Towards a Steer for a Comprehensive National Climate Finance Policy
Helps them assess the financing gap for NDCs and initiate a Climate Policy Road Map on how to fill it.
What role could private sector play in adaptation?
Insurance?
Including Micro-finance?
Fiscal incentives?
Green Banking with Central Bank: lower fees, discount rates, guarantees.
Review and Remove Fossil Fuel Subsidies? Negative Agric Subsidies?
India
Indonesia
China
Vietnam
Bangladesh

19. Thank You!
Biofin
Lecb
GEF
GCF?

20. CCSP CCSAP NCCAP NAPAs NDCs
Main Diagnostic. A Deep Disconnect Between CC Policies, Sector Plans and Budgets
CC Planning Landscape
Medium Term National Development & Sectoral Panning
Medium Term& Annual Budgeting Processes
CCSP
CCSAP
NCCAP
NAPAs
NDCs
NDS
Agric/Water
Energy
Forestry
PW/Transport
Rural Dvpt
Macroeconomic Framework
Fiscal Framework
Budget Framework
Annual Budget