Integrating Climate Finance Governance System to National Budget

Climate change is a cross-sectoral cutting issue with serious economic, social and environmental impact. To mitigate climate change and/or adapt to it, countries need to adopt a whole of government approach that seeks to integrate climate change development activities and climate change finance into the national planning and budgeting processes. And this exhibits the importance of climate finance governance.

Climate finance governance system can be developed based on integrating climate financing accounting system into the national planning and budgeting mechanism of governments.  Below are the distinctive success factors, which could help in this process of integration.

  1. Identifying the development priorities of the government from the perspective of climate change mitigation/adaptation aspects. The process of identification of development priorities can also be validated with scenario establishment as well as should be aligned to the Intended Nationally Determined Contributions [INDCs] and its emission and climate resilience targets.
  2. This prioritization process will enable the government in preparing a long and shortlist of appropriate interventions for climate change mitigation and climate resilience measures.
  3. At the stage, a critical gap analysis of the shortlisted development interventions is important, which will provide a detailed analysis on the current capacities of the respective government agencies, who will be directly involved in program designs, implementation and monitoring and evaluations. During this gap analysis, it is also pertinent to evaluate about the current ‘enabling environment’ in the country, which could positively accelerate the development and implementation of the projects. Such evaluation on ‘enabling environment’ will help to develop supportive policies and strategies [for instance, National Adaption Plan, or Policies on Green Economy etc.] which will eventually be used by the national implementing agencies.
  4. It is expected that the gap analysis will provide further clarity on (i). ‘Effectiveness of program planning at national and sub-national level, (ii). Availability of financial resources and its effective use, (iii). Effective delivery of national plans and programs on climate change mitigation and adaptation and (iv). Gaps in institutional development across the sectors and regions of the country.
  5. Based on the outcomes of the gap analysis and selection of prioritized climate change interventions, the government needs to explore for potential source of financing and technical assistance, so that the capacity gaps can be bridged up with appropriate package of technical assistance and climate change interventions can be funded with climate change financing.
  6. Indeed, it is important to transform the selected climate change interventions into bankable projects/programs so that the government can attract investment from both public and private sector. In addition, these bankable projects/programs can also be used for attracting innovative financing sources such as green bonds, result based financing, Nationally Appropriate Mitigation Actions, foreign direct investment etc.
  7. One critical aspect to be considered during the financial allocation and budgeting is that the government needs to coordinate the resource mobilization efforts, particularly the climate finance and ODA. It is also important to integrate itself with the public financial management systems of the government.
  8. The government should develop a pipeline of investable programs and matching funds and available funding instruments with investment needs. There is also a need to complement the existing financing mechanisms such as national development banks etc. to leverage funds and maximise impacts.
  9. There will also be instances of program financing which were not conceived and developed as climate change program, rather such programs are currently in implementation as general development programs. In such case, the government can introduce the climate proofing tools so that the current and next phase of the program can be climate proofed as well as the climate change financing can also be streamlined in the forthcoming phase of the programs.
  10. One critical aspect is also developing appropriate partnerships with international development agencies, government agencies [both at national and sub-national level], civil societies and other relevant stakeholders so that climate change programs are planned and developed with inclusive thinking as well as contributes to the recently endorsed sustainable development goals.
  11. It is also critical to put in place a robust and easy to use monitoring and evaluation system for keeping track on progress of climate change programs as well as utilization of climate change financing. There should be periodic strategic reviews [preferably multi-stakeholder platform] of the programs and climate finance spending in the national budget system.
  12. Indeed, it is ideal to put in place a well-defined fiduciary risk management system as an integral part of the public finance management.

Keshav C Das

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