Phase 4: Funding Strategies and Mobilizing Resources

30 Jan - 19 Feb 2017
Go back to Nationally Determined Contributions (NDCs) and Implementation of the Paris Agreement
  • What progress has your country made in thinking through how the implementation of your NDC will be funded (e.g., from national public budgets, private investment, international funds)? Is your country developing a funding strategy to articulate how different components will/may be funded (including conditional components that require international support)?
  • How does your country intend to estimate costs of NDC implementation, identify potential funding sources (public, private, international), and mainstream costs in the future?
  • Has your country begun analyzing current public and private resources being spent on climate change, or future investment flows and financial needs related to NDCs? How can countries re-orient financial flows and planned investments toward greener activities in the context of achieving NDCs?
  • What will need to happen at the national level to mobilize resources for NDC implementation in a comprehensive way (e.g., coordination with national budgetary processes; engagement of national assemblies and private sector; creation of enabling environments for private investment; development of bankable proposals; etc.)?
  • What will be the role of other ministries or institutions in this process (e.g., the role of national assemblies or finance ministries in allocating funds, etc.)? What will be the role of federal governments in creating enabling environments for private investment in mitigation and adaptation actions?
  • What challenges does your country expect to face in the process of developing an NDC funding strategy and mobilizing resources for NDC implementation? Based on your country’s experiences to date, what recommendations would you offer other countries?
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Comments (9)

Biafra (not verified)

That is very interesting although need extra revision

Biafra (not verified)

We unanimously could implement preferable project, we tend to be lever at unanimity

Emelia Holdaway (not verified)

 Ricardo and CDKN have developed a ‘Quick-Start Guide to NDC implementation’ (online here http://www.cdkn.org/ndc-guide/, and attached below) to help countries identify the steps to implement their NDCs. The Quick Start Guide includes a detailed reference manual, with a specific module on financing NDCs. The finance module is based on our experience supporting countries to access climate finance, setting out ten activities that countries may wish to follow:

1) Review current climate finance landscape

2) Establish institutional arrangements for the oversight and coordination of climate finance activities

3) Compile an overall costing for the NDC

4) Identify funding gaps and needs

5) Assess public and private financing options (including the potential for further domestic fiscal support, the eligibility of NDC implementation actions against bilateral and multilateral funding sources, and assessing options for private sector investment)

6) Develop a country climate investment plan which sets out the programme of investments required to implement the NDC and a strategy for meeting those financing needs

7) Secure direct access to international climate funds for national and subnational institutions

8) Develop a project pipeline and financing propositions that can be put forward to different financing sources

9) Increase private sector engagement and overcome barriers to investment

10) Design and implement a climate finance MRV system, including tracking and reporting climate-related spending across all relevant finance flows.

 

We’ve been working with a number of countries over the past year to implement the above and develop the financing component of their NDC implementation plans, including identifying financing options for both the conditional and unconditional components of their NDCs. While the overall goal is to finance NDC implementation, we’re finding this process can also support efforts to mainstream climate change into planning- especially where there is engagement with sectoral Ministries to support them to access climate finance for their priority NDC actions.

Raouf Dabbas (not verified)

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Glenn Hodes (not verified)

Susanne and Alexandra:

Greetings from Bangkok Regional Hub.

As a development-focused organization, UNDP's support to NDCs might well focus on how the Paris Agreement and its accompanying constituent NDC targets could work to enable or hinder the achievement of the SDGs, including SDG #13. Since financing climate action is integral to financing the SDGs overall, an integrated approach and financing frameworks will be required. This requires political leadership, sound enabling environments, and new architectures for the tracking and MRV of results and resources. In this respect, NDCs can be viewed as a key vehicle for building all of these important elements.

More fundamentally, there generally exists a large disconnect between climate policy and NDC targets and realistic, sustained levels of finance. In most countries, demand for climate finance will always vastly exceed supply. Therefore, unless more transparent, integrated frameworks are designed, climate finance will exist in a parallel universe, with a risk of low accountability and impact. By better leveraging national planning and budgeting processes and systems to align to NDC goals and actions, specific financing strategies and budgetary resource envelopes can be used to address this critical "implementation gap".

UNDP has developed and piloted several climate financing and budget management tools and strategic frameworks over the last few years. These include: a Climate Change Financing Framework; Climate Budget Tagging; Climate Public Expenditure and Institutional Reviews (CPEIRs); Climate Change Benefits Approach (CCBA) Guideline for Screening and Appraisal of Public Investments; and a Climate Change Budget Integration Index.

Taken together, these can support countries to both implement and finance their NDCs—especially those actions and targets that are unconditional on additional external finance. 

A growing number of countries like Cambodia, Bangladesh, Indonesia, Nepal, and Pakistan are starting to erect such Climate Change Financing Frameworks. These have the potential to serve as a pillar of UNDP's support for taking forward sustainable, country-led and owned NDCs in at least three key ways:

  • by developing strategic financing frameworks and building the confidence of external actors to better manage and track climate finance, so as to mobilize more resources from all sources;
  • by enhancing planning and budget decision-making to ensure existing resources are spent more rationally based on climate risk and cost-effectiveness factors as well as the evidence of impact and effectiveness;
  • by targeting the benefits from climate finance to reach the poorest and most vulnerable and in a more integrated way to reach national SDG targets.

Moreover, while government leadership and public resources are essential, CCFFs recognize that these must be backed up by the engagement and support from the private sector, civil society, and other accountability actors, including Parliaments and the media. That is why the reforms to public economic and financial management that CCFFs address also serve to identify entry points to leverage public finance and catalyze households and the private sector to scale up climate-friendly investments.

Additional detail on these tools follows:

A CCFF outlines a reforms road map to enhance macro-fiscal planning and budget management by systematically integrating climate change into PFM systems and improving inter-ministerial coordination mechanisms. It has several different elements and serves different functions that, taken together, support decision-makers to strengthen the capacity of country systems to deliver climate finance in more effective, equitable, and accountable ways.  Currently about 47% of developing countries have both unconditional and conditional targets according to a recent Germanwatch brief. And around 20 countries have also aready committed their intention to finance NDC actions from the national budget. The CCFF can thus evidently provide a supportive foundation for NDC finance, particularly for domestic financial sources.

A CPEIR gathers evidence on the scope and allocation of climate change related expenditures in domestic public budgets. Building from an analysis of existing policy, institutions and budget data, the CPEIRs formulate recommendations on how to strengthen the budget process to better monitor climate change expenditures. CPEIRs have now been undertaken with UNDP support in more than 15 countries. A number of countries have included CPEIR data as an input to their INDCs, Biennual Update Reports (BURs), National Climate Change Communications and climate finance proposals to the GCF and other vertical funds under the UNFCCC.

Climate budget coding or tagging and systematic expenditure tracking systems have also been put in place across public and private flows of finance for climate change. This is a critical step to linking results of climate finance to actual funding flows. Many countries have proceeded with this work after having first completed a CPEIR. For example, linked to the CCFF, Cambodia was the first developing country in the world to autonomously produce a climate public expenditure report. This is particularly relevant to supporting and strengthening systems to respond to the eventual transparency framework of the Paris Agreement and climate finance MRV frameworks. In the medium to long-long run, budget system reforms enabled by budget coding/tagging is the cheapest and most effective option. Integration into PFM systems also incentivizes climate change to be a key criterion in the allocation of public investment and encourages efforts to climate-proof critical infrastructure to avert future losses and damages and to extract full value for money.

The Climate Change Budget Integration Index (CCBII) is a diagnostic tool countries can use to support climate budgeting and related governance. Created by UNDP in 2015, it measures the extent to which, and how well countries are integrating the issue in their PFM systems. It is an easy-to-use tool whose results are particularly useful for identifying strengths and weaknesses and designing responses to address gaps. Many components are assessed along different dimensions: policies, systems, accountability, and development partner adoption. Nepal and Pakistan have implemented the index over a couple of years.

The Climate Change Benefits Approach is a tool that Ministries of Finance, line ministries and budget officials can use to guide the screening and investment appraisal of public investments and routine programme delivery. It was piloted in Thailand and used to frame budget proposals in the annual process—including the design of a mega-project on flood protection that will serve to safeguard millions of people who live along the Chao Phraya river basin. The CCBA tool enhances traditional cost-benefit analyses and demonstrates how wiser spending today can cushion against the effects of climate-related disasters tomorrow. It also demonstrates a potential flow-chart for how line ministries can effectively filter and prioritize projects and programmes appropriate for more in-depth climate risk screening and appraisal. 

Additional resources including a country database of CPEIRs can be found on the website: www.CFADE.org

With appreciation for the opportunity to contribute to the online discussion,

Glenn Hodes on behalf of the Governance of Climate Change Finance team