CHARTING NEW TERRITORY: A STOCK TAKE OF CLIMATE CHANGE

FINANCING FRAMEWORKS IN

ASIA-PACIFIC

Charting New Territory: A Stock Take of Climate Change Financing Frameworks in Asia-Pacific

The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNDP, or the UN Member States.

UNDP Partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain the kind of growth that improves the quality of life for everyone. On the ground in more than 170 countries and territories, we offer global perspective and local insight to help empower lives and build resilient nations.

CHARTING NEW TERRITORY: A STOCK TAKE OF CLIMATE CHANGE

FINANCING FRAMEWORKS IN

ASIA-PACIFIC

Devin

Bubr

iski/U

NDP

UNDP

Bang

lades

hSir

iluck

Chien

gwon

g/UN

DP

Moh

amm

ad Ra

kibul

Hasa

n/UN

DP

Authors

Kit Nicholson, Thomas Beloe (UNDP), Glenn Hodes (UNDP)

Acknowledgements

We would like to express gratitude to the Action on Climate Today (ACT) team and the Governance of Climate Change Finance (GCCF) team Kevork Baboyan, Siriluck Chiengwong, Sujala Plant, Suren Poghosyan, Joan Manda and Thi May Hahn Le for their input and feedback.

Table of Contents

Introduction ...........................................................................................................................................................1

Methodology of this Review ..............................................................................................................................2

Where CCFF’s Have Been Carried Out..............................................................................................................2

Scope and Focus of CCFF Work .........................................................................................................................4

Findings and Next Steps....................................................................................................................................5

Purpose and Objectives .......................................................................................................................................5

Integrating Climate Change into Development Plans ..............................................................................6

Defining and Tracking Climate Finance .........................................................................................................7

Financing Scenarios ..............................................................................................................................................8

Costing and Prioritisation.....................................................................................................................................9

Effectiveness of Climate Change Actions.....................................................................................................10

Coordination and Leadership ..........................................................................................................................11

Institutional Reforms...........................................................................................................................................12

Private Sector ........................................................................................................................................................13

Transparency, Accountability and Civil Society ........................................................................................14

Conclusion ............................................................................................................................................................16

Annex 1: Overview of UNDP’s Governance of Climate Change Finance To Benefit the Poor and Vulnerable Programme ......................................................................................17

Annex 2 CCFF Review Contact Group...........................................................................................................18

i

Abbreviations

ADB Asian Development BankAF Adaptation FundBCR Benefit Cost RatioCAF Compensatory Afforestation FundCBA Cost Benefit AnalysisCC Climate changeCCAP CC Action ProgrammeCCAR CC Annual ReportCCBA CC Benefits AnalysisCCFF CC Financing FrameworksCCSA CC Screening and AppraisalCCSAP CC Strategy and Action PlanCPEIR CC Public Expenditure and Institutional ReviewCSR Corporate Social ResponsibilityCTF Climate Trust FundDRR Disaster Risk ReductioneCBA Extended Cost Benefit AnalysisEIA Environmental Impact AssessmentGCF Green Climate FundGDP Gross Domestic ProductGHG Greenhouse Gas

LAPA Local Adaptation Plan of ActionM&E Monitoring and EvaluationMCA Multi-Criteria AnalysisMm3 MillionMoF Ministry of FinanceMoP Ministry of PlanningMTEF Medium Term Expenditure FrameworkNAF National Adaptation FundNAP National Adaptation PlanNAPA National Adaptation Programme of ActionNCF National Climate FundOBA Objectives Based ApproachODA Official Development AssistancePCCFAF Pacific CC Finance Assessment FrameworkPPP Public Private PartnershipRoI Return on InvestmentSD Sustainable DevelopmentSNA Sub National AuthoritiestCO2e tons carbon dioxide equivalent emissionsUNDP United Nations Development ProgrammeUNEP United Nations Environment Programme

Legend for Institutional Mapping

Generic acronyms for the various government bodies involved in CCFF work are used throughout this report as a means of simplification. The generic acronyms are as follows:

• MoF - The ministry responsible for finance, including for budgeting and public finance. This is normally the Ministry of Finance. • MoP - The body responsible for planning. In some countries this is performed by a commission, rather than a ministry. • MoCC - The ministry with lead technical responsibility for CC. In many cases, this is the Ministry of Environment (MoE). • NCCC - An institution that is created to coordinate across ministries. This is usually a council or commission and often has some high level political authority. Not all countries have an NCCC. • MoA - The ministry responsible for agriculture, which is often the key institution for piloting sectoral work.

The table below provides the actual acronyms for each country under the review.

ABB

REVI

ATIO

NS

MoF MoP MoCC NCCC MoA MoLG NDP CPEIR CCFF CCS

Afghanistan MoF SPC NEPA CCFF NAPA

Bangladesh MoF BPC MoEF NCCC CPEIR CFF BCCSAP

Bhutan MoF GNHC MAF PEER NAPA

Cambodia MEF MoP MoE NCCC NSDP CCFF CCCSP

Indian States DoF varies DEFCC SAPFIN SAPCC

India Central MoF NA MEFCC PMC NAPCC

Indonesia MoF Bapp. DNPI DNPI MFF/GPB RAN-API

Nepal MoF NPC MoPE MoFALD CPEIR CCFF CCP

Pakistan MoF NPC MCC CPEIR CCFF NCCP

Thailand MoF NESDB ONEP MoAC NESDP CPEIR CMP

Vietnam MoF MPI NCCC NCCS

ii

IntroductionClimate Change Financing Frameworks (CCFFs) provide a structured response to climate change by establishing a framework for managing climate finance and gauging the adequacy and effectiveness of climate-related expenditures. This includes a review of options and strategies for financing and delivering climate change (CC) policy and the institutional arrangements needed to integrate climate change effectively in planning and budgeting systems, including the systematic tracking and public reporting of climate spending so that the risks are transparent.

While there is no “standard” approach to CCFF work yet, depending on country circumstances, a variety of related components have served as the building blocks of a CCFF. Each component requires, in its own unique way, both technical analysis and functional or capacity assessments of current institutional responsibilities and the potential for improving the management of the work. The key components are:

• Thepotentiallossanddamage(L&D)arisingfromCC(i.e.vulnerability)• TheeffectivenessofclimatefinanceinreducingL&DandGHGemissions• ClassificationofexpenditureaccordingtothedegreeofCCrelevance• Pastexpenditurepatterns,coveringbudgetandoff-budgetsources• Financingscenariosforallsourcesofclimatefinance• FinancialallocationsforfutureCCrelevantactions• AggregateimpactofCCfinanceinreducingL&DandGHGemissions

This paper provides a summary of a comparative stock take of work related to CCFFs in the Asia-Pacific Region. UNDP’s Governance of Climate Change Finance Programme (GCCF) led the Review (see Annex I for more information on GCCF). For a complete list of questions and findings from the first brief Stock Take, please contact GCCF at www.cfade.org.

This Review provides a brief overview of CCFF work to date (Section 2). The Review then provides a summary of the Stock Take’s key findings (Section 3) and lists the main achievements, challenges and priorities of CCFFs by specific countries (Section 4).

INTR

OD

UC

TIO

N

1

Silke

von B

rock

haus

en/U

NDP

UNDP

-PAK

-201

0-Flo

od

Methodology of this Review

This Stock Take is the first of four outputs from a wider CCFF Review, which will also include a Conceptual Model and a Guidance Note as well as an internal strategy document for UNDP. The work is being guided by a Contact Group of representatives from key institutions, as described in Annex 2.

The Stock Take has been based on three main sources of evidence: • ThereportsproducedbytheCCFFrelatedworkitself • Asemi-structuredconsultationprocess • Thepersonalexperienceofafewkeyexpertsandadvisersinvolvedinthework

The consultation was based on 10 key questions. A Consultation Note, including these questions, was sent to 35 key officials and experts, selected as the people who were most closely involved in each of the countries concerned. Responses were received from 13 of these officials and experts.

Where CCFF’s Have Been Carried Out

CCFF work has been completed, or is underway, in seven countries (Bangladesh, Cambodia, Indonesia, Nepal, Afghanistan, Pakistan and in several Indian States). Other countries have also undertaken work on some of the elements of a CCFF (Bhutan, Philippines, Thailand, Vietnam and several Pacific Island States).

MET

HO

DO

LOG

Y O

F TH

IS R

EVIE

W

876121

4

133

5

10

99

11

2

Other Initiatives, including CPEIRs and CCFAFs

7. NEP Nepal CPEIR (2011); budget coding (ongoing, started in 2013); and planned CCFF (2016)8. BHU Bhutan Public Environment Expenditure Review (PEER) published in (2014)9. PAC Pacific countries have undertaken Climate Change Finance Assessment Frameworks (CCFAFs) since 2013 and CPEIRs in Samoa and Vanuatu10. PHP Philippines CPEIR (2012)11. VTN Vietnam CPEIR (2015)12. CHN China national CPEIR (2015) and in 2016 in Hubei Province13. THL Thailand work on CCBA in 2014/15, CPEIR in 2012

CCFFS and related work

1. AFG Afghanistan CCFF, underway in 20162. BNG Bangladesh CCFF, published in 20143. CAM Cambodia CCFF published in 2014, plus related follow-up work with selected line ministries in 2015 and 20164. IND In India, during 2015 and 2016, work on: State Action Plan (SAP) Financing Frameworks (referred to as SAPFIN) in Assam, Bihar, Chhattisgarh and Kerala; and work on the effectiveness of SAP actions in Maharashtra5. IDS In Indonesia, work on: budget coding, ongoing and starting in 2013; a Mitigation Fiscal Framework (MFF) published in 2014; a Green Planning and Budgeting (GPB) Strategy, published in 2015; and a Provincial CPEIR for ‘Babel’ and NTT provinces done in 20156. PAK Pakistan CPEIR (2015), planned national and provincial CCFFs (2016 and 2017)

2

Most, but not all, of the countries have begun by doing a Climate Change Public Expenditure and Institutional Review (CPEIR) and then moved to on to CCFF work. CCFFs have, so far, been limited to the countries covered by this review, but many other countries have completed CPEIRs.

CCFF work has been taking place for the past three years, mainly in South and South East Asia. The table and map below describe the location and focus of CCFF work.

WH

ERE

CCFF

’S H

AVE

BEEN

CA

RRIE

D O

UT

3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SOUTHEAST ASIA

Cambodia

Indonesia

Philippines

Thailand

Vietnam

SOUTH ASIA (EXCL. INDIA)

Afghanistan

Bangladesh

Bhutan

Nepal

Pakistan

INDIA

Central

Assam

Bihar

Chhattisgarh

Kerala

Maharashtra

Odisha

PACIFIC

Fiji

Kiribati

Marshall Islands

Nauru

Samoa

Solomon Islands

Tonga

Vanuatu

NAPA CCSAP CPEIR CCFF CCSA NAP Coding Local CPEIR

Scope and Focus of CCFF Work

CCFF work is typically undertaken in a series of phases. In most cases, this has started with an overview and then proceeds to a more detailed focus on one or more of the compo-nents. Some countries have moved straight to specific components before developing an overview framework.

Occasionally, rapid overview CCFF are undertaken, which are completed within three months. However, the first phase normally takes place over more than six months. If significant consultation with line ministries or capacity building work is involved, these first phases can take much as 12 months.

Most CCFF work to date has focused on adaptation, but has covered both adaptation (i.e. reducingL&DstemmingfromCC)andmitigation(i.e.reducingGHGemissionsthatcontrib-ute to CC). The Review found that there is no correlation between a country’s level of climate vulnerability and its progress on CCFF work, mainly due to the fact that all countries covered have high levels of climate vulnerability.

While most CCFFs have focused on central government processes, some countries like India, Indonesia and Pakistan have piloted work at State/Provincial level and Nepal is planning a sectoral CCFF. Most CCFF work has aimed to cover all types of climate finance, but, in practice, there has been only limited coverage of private sector adaptation/mitigation or of policies involving incentives and regulations that may have implication for revenue. There has also been no coverage of maladaptation or activities that may increase GHG emissions.

From 2013 onward Pacific Island States have adopted their own more streamlined approach to CCFFs known as PCCFAFs. These mainly focus on the following components: a) establishing the most effective and efficient institutional practices for managing climate finance; b) tracking climate finance; c) defining scenarios of future climate finance; and d) integrating CC into development planning.

SCO

PE A

ND

FO

CU

S O

F CC

FF W

ORK

4

Findings and Next Steps

The following findings are structured around the key consultation questions. They draw upon data and evidence both from the consultations and a review of relevant documents. These findings suggest some level of consistency throughout the region and some emerging trends with regard to common priorities, needs and challenges for the evolution of CCFF work moving forward. Each section concludes with suggested priorities and appropriate next steps.

Purpose and Objectives

Obtaining clear answers as to a hierarchy of objectives within CCFFs was not always easy. In many cases, the formulation of CCFFs was driven by the immediate objective of improving access to international climate funds and influencing international climate negotiations. In some cases, they responded to an immediate objective of influencing institutional reforms and raising political awareness.

Most stakeholders are well aware of the connections between objectives and that different institutions have different interests. Thus, most stakeholders stated that the wider objective was to protect people from loss and damage associated with CC. Interest in protecting biodiversity also plays a role, but this is usually amongst a narrower group of environmental institutions. However, these were considered as contextual overarching objectives and the more specific operational objectives were more varied.

Some governments were motivated by a desire to improve the overall efficiency of public expenditure (Cambodia, Maharashtra, Philippines, Thailand). Related to this is a desire to promote institutional reforms, including revised budget procedures that would require improved programme design from line ministries (Maharashtra, Thailand).

In most countries, the possibility of raising new funds was a clear motivating factor (Afghanistan, Nepal, Pakistan, many Pacific Island States). This came from either MoCCs or MoFs, depending largely on which institutions are expected to take the lead in any future national fund, or in acting as NIE for international funds. Some MoCCs had the objective of developing recommendations for how to establish national climate funds (Afghanistan, Bangladesh, Cambodia).

FIN

DIN

GS

AN

D N

EXT

STEP

S

5

Tom

Chea

tham

, Apr

il 201

3

INTE

GRA

TIN

G C

LIM

ATE

CH

AN

GE

INTO

DEV

ELO

PMEN

T PL

AN

S

In some cases, the specific objectives included an interest in the adaptation gap, or the extent towhichexistingandplannedadaptationactionswilladdressL&D(Afghanistan,Cambodia,some Indian States and Indonesia). This analysis is relatively technical and it is not yet clear whether governments and civil society are fully convinced by the arguments.

In theory, CCFF work could help countries with international climate diplomacy, including in relationships with UNFCCC institutions and international climate funds. Although some countries are interest in this (India), there is no evidence yet that CCFF work has been used directly for this purpose.

InAfghanistan,therewasanadditionalobjective,ofshowinghowprotectionfromL&Dcanhelp to consolidate progress with improved security.

› Next Steps: Government interest should be promoted by using the CCFF to demonstrate that adaptation and mitigation will protect growth, and will not take resources away from growth. This may require analysis to show that, although the more dramatic impact of CC takes place in the mid to long term, there are also significant impacts in the short term. Highlighting recent trends in loss and damage related to CC may also be useful.

CCFF work should aim to help countries engage better with international CC negotiations, including in the UNFCCC Standing Committee on Finance (SCF), Adaptation Committee, Warsaw International Mechanism for Loss and Damage, and in the Green Climate Fund (GCF). One country (India) has begun to consider options on this and another (Bangladesh) has been using the CCFF in negotiations over climate justice and access to increased climate funding. International institutions (e.g. OECD, SCF, GCF) should promote this by welcoming information and funding applications that are guided by a national framework.

Integrating Climate Change into Development Plans

While all countries have a CC Strategy, these have had a limited impact on wider development strategies, except in Bangladesh, Nepal and the Philippines. CCFF work is raising awareness on how achieving CC targets and strategies can promote broader sustainable development goals and how development gains can be eroded as a result of CC, especially among a core group and when line ministry working groups have been involved.

In most cases, climate change strategies have assisted in moving countries beyond their NAPA. Many countries are also now actively developing National Adaptation Plans to consolidate adaptation targets (Cambodia, India, Nepal, Pakistan, Thailand, Vietnam); this could serve to further strengthen both the strategic direction of CC actions at sector level and the integration of CC into planning and budgeting.

There is growing interest in local climate change strategies, but these have only been developed in some countries. Some countries are producing LAPAs (Nepal) and working towards integrating climate change into local development plans, however these initiatives are not yet well embedded. Most CCFFs identified limited capacity at the level above the village to be a key constraint. At the village level, planning is done according to immediate priorities. The level above this needs to provide the village level with technical awareness and guidance about CC. However, CCFF work also found that, although there may be limited formal technical

6

DEF

ININ

G A

ND

TRA

CKI

NG

CLI

MAT

E FI

NA

NC

E

capacity at the lowest levels of government, they are usually well aware of recent CC and are already taking this into account. As recent CC usually involves less predictable rainfall, and this is also the most important feature of future CC projections, local government planning is often addressing CC issues quite effectively.

Some National Development Plans or equivalent (NDPs) and sector strategies include references to CC. Sometimes these are becoming more substantial (Cambodia, Nepal, Thailand), but they are more often brief (Afghanistan, Pakistan, Thailand). Very few CC strategies cross reference the NDPs, perhaps partly because of challenges in matching schedules since most of these plans take several years to prepare and are refreshed every three to five years.

› Next Steps: CC Strategies and Action Plans (CCSAPs) should provide clear guidance on how they relate to NDPs. This would make it easier for later versions of the NDP to include CC. The integration should be based on an assessment of the inter-relationship between adaptation/mitigation and development.

CCSAPs and NDPs are often broad and inclusive, which can dilute their value in guiding prioriti-sation. Thus, CCFFs can be useful in going beyond qualitative referencing and demonstrating that financing plans for CCSAPs are consistent with the financing arrangements for NDPs. This should show which CC actions are already accommodated within the NDP and which require new funding. CCSAPs should also propose the institutional arrangements for ensuring that CCSAPs and NDPs are managed in a coordinated way.

The integration of CC into local development plans requires a different approach and should focus on recent trends in climate risks. These are usually well understood by local governments and CCFF work needs to make local leaders aware that recent trends are likely to continue.

Defining and Tracking Climate Finance

Defining: Most countries have worked to define and classify CC expenditure although some key countries (India) have no systematic definition of climate expenditure. There are generally two main approaches to defining climate change relevant spending: (i) the objectives-based method (Bangladesh, Nepal CPEIR, Pakistan, Philippines and Thailand CPEIR); and (ii) the benefits-based method (Afghanistan, Cambodia, Indian States, Indonesia and Thailand CCBA).

Both techniques provide a structured method that facilitates monitoring expenditure trends. While the objectives-based method is simpler to apply, it is inherently more subjective and vulnerable to ‘greenwashing’ (i.e. inflating claims in order to improve access to climate finance). The benefits-based method is more objective, because it relates to work on valuing benefits, but requires greater capacity and a deeper understanding of CC risks and impacts. The CC relevancy (CC%s) of one type of action compared to another are similar in both approaches, but the objectives-based method typically can produce percentage weights that are about three times higher than the benefits-based method.

A few countries (Philippines) have limited themselves to a simple yes/no tag that determines whether an expenditure item has any CC relevance. In other cases, different studies have defined it based on whether something is supported by climate funds or whether there is a declared climate change objective.

7

FIN

AN

CIN

G S

CEN

ARI

OS

Tracking: Most countries have done, or are doing, a review of CC related public expenditure—both on and off budget—using one of the methods as described above. Some countries are piloting the use of CC relevance scores to track public expenditure (Nepal, Indonesia). Some countries are actively interested in strengthening the work on defining climate expenditure and CC relevance (Indonesia, Nepal, Thailand, Vietnam) and others reported on the importance of doing this.

In order to track CC expenditure, it is necessary for public financial management (PFM) systems to provide information at a relatively detailed level, usually at several levels below that of a ministry. While the quality of PFM systems did not pose a serious constraint for basic monitoring in most countries, it did pose serious constraints in Cambodia. However, although PFM systems may generally have provided past expenditure and/or budget data in a form that allows classification, the ability to produce up-to-date PFM data is much more limited, which means that integrating CC into real-time budget negotiation is very constrained. The budget scoring systems being piloted in Nepal and Indonesia aim to address this.

› Next Steps: A lack of international consensus or standards on how to define climate finance is a serious constraint to CCFF work and government commitment. In several countries, the perceived divergence between approaches to classifying climate expenditure is delaying institutional reforms. This needs to be resolved as quickly as possible and a single standard approach needs to be established, or, at least, an approach that explicitly recognises appropriate roles for the two approaches and defines a method for mapping the results from one approach to the other.

Governments need to continue to make progress with current initiatives to pilot systems to include CC scoring in public financial management. This would enable tables of ‘virtual CC expenditure’ to be produced rapidly and transparently.

Financing Scenarios

Climate financing scenarios (i.e. projecting expected volumes and sources of future climate finance) have been prepared in all countries that have undertaken CCFFs (Afghanistan, Bangladesh, Cambodia, Indian States, Indonesia) and some preliminary work has been completed in Pakistan. In most cases, this includes estimates of likely future financing from the budget, including on-budget development assistance and assistance from international and national climate funds. In most cases, the scenarios simply include projected levels for budget expenditure (e.g. 5% real growth in a low scenario and 10% in a high scenario). Some have included scenarios of private sector CC finance, but work on this is still at an early stage.

In one CCFF (Cambodia), the projections of funding under Official Development Assistance were supported by consultation with development partners, which made the projections more reliable and encouraged the engagement of international partners.

These scenarios are indicative, especially when dealing with international climate funds. Countries with state institutions that have already achieved NIE status with GCF, or are making progress in applying for NIE status, are seeking more clarity (Thailand). Even within countries with NIEs approved for GCF delivery, there is still much uncertainty about GCF flows.

8

CO

STIN

G A

ND

PRI

ORI

TISA

TIO

N

› Next Steps: Work on financing scenarios needs to be strengthened. This will include improved consultation with development partners and with climate funds. It also needs to cover the medium term expenditure plans of key line ministries. Coverage

Costing and Prioritisation

The Review examined whether countries had estimated the cost of implementing their climate change strategies and action plans and whether these were compared with the future financing scenarios outlined above.

Governments are realising that costing work for adaptation has been inadequate. Work on costing Climate Action Plans has mostly been carried out before CCFFs began and thus most (but not all) CCFFs had little impact on refining this costing. Some efforts and costings assessments in NAPAs and Climate Change Action Plans happened in the process of CCFF development, although this was missing in some states (Pakistan, Philippines).

To date, most costing work has been undertaken from a fundraising perspective, rather than from a resource optimisation perspective. In almost all cases, these have been prepared on a ‘bottom-up’ basis, unconstrained by any ceiling. One exception was Cambodia, where the CC Action Plan was prepared in parallel with the CCFF and so was informed by the financing scenarios and there was some prioritisation between sectors.

Whilst the selection of activities in Action Plans has typically involved structured prioritisation (often using Multi-Criteria Analysis) the allocation of costs to these actions has been less structured and there has been little structured top-down overview of the most appropriate allocation between sectors (e.g. most Indian States).

Most countries have produced estimates of mitigation costs. In some cases, these were done some years ago (Indonesia) while in other cases, they were prepared for the INDC (Thailand).

› Next Steps: Whilst CC Strategies do provide important background orientation, they tend to be inclusive and the operational implications of any prioritisation are often limited. In practice, prioritisation happens through decisions on the scale and phasing of financial allocations to CC actions. Future CCFF work needs to strengthen the way in which costings are done, using two related methods.

• Firstly,itshouldprovidesectoralceilingssothatlineministriescanensurecostingsareconsistent with expected resources.

• Secondly, it should be used to help lineministries demonstrate that financial allocations proposed for CC actions are justified by the expected benefits, in terms of reduced L&D. This approach is beginning in some CCFFs (Afghanistan, Assam, Bihar, Chhattisgarh, Maharashtra and Thailand).

Governments need to develop clearer central guidance and incentives for line ministries engaged in this work.

9

Effectiveness of Climate Change Actions

Roughly half the countries surveyed had undertaken work on assessing the effectiveness of climate actions. In a few cases this was at the core of CCFF work. More often, it was included through case studies and pilot work with line ministries.

All of the surveyed countries have completed work on vulnerability either officially (Philippines, Pacific) or though research activities (India, Indonesia).

Estimates of the impact of CC on economic growth have also been carried out in Indonesia, Nepal and Thailand –in addition to the regional work conducted on this by ADB for South Asia and South East Asia. However, prior to the CCFFs, there was very little analysis of the effectiveness of adaptation programmes in reducing vulnerability.

A few countries have evaluated the effectiveness of adaptation measures, either across a range of sectors (Cambodia, Indonesia, Maharashtra) or in pilot sectors (Nepal, Thailand). In all cases, these examined a range of between five and 14 case studies. This has been completed fairly recently in the context of CCFF related work and has not yet been undertaken as a formal requirement or fed into CC strategies and action plans.

Several countries and states are working on building CCSA capacity (Assam, Bangladesh, Cambodia, Indonesia, Kerala, Maharashtra and Thailand). Most of these have already undertaken some case study analysis and those that have not (Assam, Kerala) are planning to start shortly.

The review found that there is a need to improve the range of experts that are familiar with CCSA. Even where there is good experience (Cambodia, Indonesia, Maharashtra), this is limited to one or two experts.

Countries have experimented with numerous approaches to assessing effectiveness - occasionally adjusting the complexity of assessments based on the scale of the action (Thailand). Much of the work has attempted to use a Cost Benefit Analysis (CBA) approach to both be objective and to speak in a language understood by MoFs. Most countries have found the CBA approach to be difficult to apply in practice, either because of the skills, experience and time required to conduct CBA or because of the experience needed to interpret results (Cambodia).

A number of international guidelines on CCSA now exist, including those produced by UNDP and by the Action on Climate Today (ACT) programme (unpublished), and the climate screening guidelines produced by the World Bank and a guide produced by ADB, which are available online. These will be referenced in the subsequent Guidance Note on CCFFs.

› Next Steps: The development and promotion of practical applied methods to assess the implications of CC for the performance of public policies needs to be continued. Analysis needs to be presented in an open manner, with transparent reference to evidence sources, so that a library of experience is established that will gradually improve the evidence base. Technical annexes to CCFF work should clearly explain the assessment on effectiveness to allow other work in the country, or in other countries, to determine how much of the evidence can be used.

EFFE

CTI

VEN

ESS

OF

CLI

MAT

E C

HA

NG

E A

CTI

ON

S

10

Coordination and Leadership

There was a wide range of experience with institutional leadership but in most countries one institution took leadership. This was usually either the MoF (Afghanistan, Bhutan, Indonesia, Nepal, Pakistan) or the MoCCs acting either as primary lead (Indian States) or as secretariat to the NCCC (Cambodia).

In four countries (Bangladesh, Nepal, Philippines, Thailand) there was a clear ‘whole of government’ approach with leadership spread across MoFs, MoPs and MoCCs. Line ministries other than MoCCs are also often involved, though they rarely take a leadership role (except in Thailand).

Personal championship of the work was often an important factor in the success of CCFFs.

Unsurprisingly, the countries with strong government leadership were also moving more quickly to introduce the institutional reforms proposed through CCFF work (Bangladesh, Indonesia, Nepal, Thailand). Where national leadership is more recent, the driver for the CCFF work has often been to build awareness, both of the significance of CC and for the way in which governments can respond (Afghanistan, India, Pakistan).

However, the relationship between early government leadership and the pace of reforms was not always clear. There are examples of countries with strong national leadership that have found it difficult to implement reforms, often due to complexities in institutional roles such as in Indonesia. There are also examples of countries which despite patchy early leadership have succeeded in moving quite rapidly towards piloting implementation, for example, Cambodia.

Through the review, several countries stressed the importance of sub-national bodies for CC, including at both Provincial/State levels (India, Indonesia, Pakistan) and village or commune levels (Cambodia, Nepal, Philippines). However, local bodies, or their national representatives, rarely play a leadership role (except for the cases of Nepal and India).

› Next Steps: It is clear that CCFF work requires coordination and leadership from institutions that lead government work on CC, planning and finance. CCFF work has involved a wide range of related activities, both technical and institutional. A work programme that considers the activities as a menu and defines which activities should receive attention in what periods and when it is necessary to focus on some activities in more detail. In most cases, it will be useful to have some degree of overview at an early stage, even if this is done very rapidly.

CO

ORD

INAT

ION

AN

D L

EAD

ERSH

IP

11

Institutional Reforms

Roughly half of the countries reviewed had or were undertaking institutional reforms in line with CCFF recommendations to integrate climate change planning and budgeting, though mostly in a pilot phase.

Options for institutional reforms typically proposed through CCFF work include those affecting the budget circular, programme design and appraisal, budget submissions, budget tagging/coding and annual reporting.

Other reforms include: financial mobilisation strategies; National Climate Funds; transfers to sub-national authorities; and engagement with civil society. The focus, sequence and pace at which these are addressed mainly depended on local circumstances.

Within Budgets: Most CCFFs aim to influence the budget process. As such, various proposals and budget reform pilots have been introduced, including: budget tagging (done in Indonesia, Nepal and Philippines and planned in Pakistan); budget strategy papers (Cambodia, Pakistan); budget submission guidelines (Cambodia, Philippines, Thailand); and a CC Annual Report (done in Cambodia and planned in Pakistan).

Few of these initiatives are fully integrated into budget processes in a manner that will be sustained beyond the life of the initial CCFF work, although work to formalise practices in some countries (Cambodia, Nepal, Thailand) is ongoing.

Sector Piloting: Several countries and states are working with pilot sectors to strengthen and embed new practices for programme design and appraisal and budget submissions including Cambodia, Kerala, Maharashtra, Nepal and Thailand.

Climate Legislation: In most countries, passing legislation relating to CC is considered to be important progress and Cambodia’s CCFF directly led to legislative reforms. However, there are some mixed views about the value of CC legislation and at least one stakeholder saw it as problematic, because laws that relate to sectoral responsibilities can undermine cross-sectoral collaboration.

Local Government Transfers: CCFFs are taking local government transfers into account when outlining financing scenarios and considering institutional reform with some countries having policies to determine how much climate finance should be directed to the local level (80% in Nepal).

Complexity: The nature of CCFF work is complex, both technically and institutionally, although the complexity can be exaggerated. This creates problems with ownership and clarity over reforms (Cambodia, Indian States, Philippines). The language and terminology used in public finance, development economics and CC policy contain specific meanings that are not immediately obvious to newcomers. There are also differences in professional conventions, such as the extent to which estimates can be made on the basis of limited evidence. Inter-disciplinary work always requires additional time, and CCFF work has often been done on a relatively rapid schedule, at least the first phases. Most CCFFs have proposed to address this simply by building capacity. There is some experience of combining capacity building with simple steps to pilot changing institutional practices (Thailand).

INST

ITU

TIO

NA

L RE

FORM

S

12

› Next Steps: The experience with CCFFs suggests that sustained changes to planning and budgeting processes (i.e. transformational change) are likely to require at least 10 years. This change typically proceeds as follows.

• Strategy Phase (2-4 years) Countries prepare strategies and action plans covering adaptation and mitigation. This may include some estimates of the costs of actions, but without consideration of resource scenarios. All countries in South Asia have already been through this phase.

• Awareness Phase (3-5 years) Line ministries become aware of the seriousness of CC for their activities and MoF/MoP understand the economic risks. Most countries in South Asia are in this phase.

• Piloting Phase (2-3 years) Testing some changes in practices in pilot line ministries. This is done voluntarily, with the prospect that they may help the ministry in improving services and/or securing funding. Some countries in South Asia are in this phase.

• Regulatory Phase (1-2 years) MoF/MoP introduce new practices that are mandatory. No countries have yet reached this phase.

• Implementation Phase (3-5 years) Adoption of the new regulations, which may happen first in the most affected line ministries.

Private Sector

CCFF work has predominately been focused on the public sector with little engagement of the private sector. There has been interest from larger enterprises in the private sector in mitigation opportunities (primarily self-financing energy efficiency projects), however private sector interest in adaptation is limited.

In most countries, there is strong government interest in engaging with the private sector, but progress remains limited. In Thailand and Vietnam a ‘Private Sector CPEIR’ is being prepared. In the Indonesia MFF, there was strong interest in the possible role of innovative instruments that improve the leveraging of private finance (e.g. through fiscal incentives and regulations). This was focused on mitigation. In India, there was considerable interest in the possible role of private sector Corporate Social Responsibility (CSR) funds, since new regulations make some CSR allocations mandatory. This could include both adaptation and mitigation. In Thailand, there is interest in new carbon market opportunities, along with other innovative instruments for engaging private banks in mitigation.

Most CCFFs have highlighted the importance of public financial leveraging of private funding. Yet only in Bangladesh and Indonesia has there been much attention to the fiscal impact of future policy options. This reflects that most private sector policy is still at an early stage and so policy options require significant investment of specialist skills in policy formulation. CCFF work is therefore limited to incorporating within the framework any existing work on private sector policy.

PRIV

ATE

SEC

TOR

13

› Next Steps: This is an emerging area of work and next steps are still being explored. As government policies regarding incentives and regulations become clear, they should be accommodated in CCFF work. Some pilot work should also be done to understand the scale and growth of current ‘auto-adaptation’, that is taking place regardless of government policy.

› Next Steps: This is an emerging area of work and the focus of next steps is still being explored. Some piloting is likely to be required to build experience.

Transparency, Accountability and Civil Society

One area of reform that has received little attention in CCFF work is how to enhance transparency and accountability.

Civil Society: There has been some engagement by civil society in climate change planning, especially at local levels in Thailand and CSOs are often involved in consultations in Cambodia, including CCFF consultations. Civil society engagement in Nepal is very strong at the local level, although this has limited influence on national level budget processes. CSOs are also strong in the Philippines and help to raise awareness and promote transparency. The PCCFAF work in Nauru and Tonga mentioned the importance of stronger engagement by civil society.

Government Audit: There has been very little attention to government audit functions and how this might be used to review the scale and performance of climate expenditure. Only a couple of areas of CCFF work relate to this:

• AllCCFFsuseasystemofbudgetscoringandpartofthejustificationforthisistoallow public accounts to include tables that show trends in CC expenditure, provided as part of the quarterly and annual accounts (as well as being provided, ideally, in ‘real time’ during budget negotiations).

• Most CCFFs include recommendations for CC annual reporting and this is typically expected to include the latest data on expenditure trends, but also the latest evidence on expectedL&DandtheeffectivenessofexpenditureinreducingthisL&D.

The above initiatives provide a basis for monitoring, but do not directly address the function of government audit. It seems likely that this lack of attention has largely been due to time constraints in the early phases of CCFF work, when the priority is to gather the basic evidence. However, it may also reflect a view that, because all CC expenditure (apart from dedicated awareness, capacity building and studies) is development expenditure, there is no need for separate accountability measures for CC expenditure. If these views have led to auditing issues being neglected, then they have done so implicitly, as the issue has not been discussed explicitly in CCFF work. Further work is needed on whether some dedicated attention to CC by government audit would be valuable.

TRA

NSP

ARE

NC

Y, A

CC

OU

NTA

BILI

TY A

ND

CIV

IL S

OC

IETY

14

TRA

NSP

ARE

NC

Y, A

CC

OU

NTA

BILI

TY A

ND

CIV

IL S

OC

IETY

Achievements

• Cambodia: Budget guidelines established; climate change integrated into the National Development Plan and Climate Change Action Plans in key ministries.

• India: Political attention focused on national approaches to climate change strategies and action plans. Six Indian States taking tailored approaches to the CCFF process.

• Indonesia: Pro-active lead taken by MoF in climate change policy, the MFF and GPB Strategy.

• Pakistan: Significant progress on a national-level CPEIR, budget tagging and CC policy/action plan implementation at decentralized levels.

• Thailand: Awareness and capacity raised both at the national level and some ministries via the CPEIR and CCBA work. CC integrated into key development strategies by the NESDB. Increased interest in CC scenarios supported by NAP process.

Challenges

• Afghanistan and Pakistan are motivated mainly by peace and security concerns. However, there is recent interest in the link between security and resilient livelihoods in Afghanistan.

• Afghanistan: There remains a poor understanding of the link between CC and livelihoods given that security is the predominant focus of government attention.

• Cambodia: There is a limited understanding of how climate change may limit economic growth, given that this is the current overriding priority. Also PFM systems include very limited programme details.

• India: Interest in CC is still limited to a small number of officials, especially in line departments. Furthermore, implementation capacity is weak and there is limited engagement of Departments of  Finance.

• Nepal: There is a concern that PFM reforms are complex and require technical solutions that are difficult to implement.

• Pakistan. Weak coordination, line ministries’ capacity and developing consistent approaches represent significant challenges in Pakistan.

• Thailand: Limited understanding of how CC benefits occur and how to turn these benefits into monetary terms is a challenge. There is also concern that the PFM system doesn’t allow CC related programmes to be identified.

Priorities

• Afghanistan: Improve awareness and introduce incentives to take CC into account in project design and management.

• Cambodia: Major capacity building to mainstream CC into all government planning systems, not just through CC Action Plans, including screening tools and budget processes. Integrate CC into sectors that have pooled budget support.

• India: Strengthening of leadership from MoF on the integration of CC into budgeting.

• Nepal: Integrating CC into sectoral PFM processes, including improved investment appraisal.

• Thailand: A single reform package consolidating progress and initiatives to date. Updated or additional sub-national CPEIRs are needed to monitor trends. Adoption of CCBA approach in budget formulation criteria is a priority along with increasing the focus given to CC in the NDP.

15

ConclusionThis Stock Take Report is the first of four outputs from a wider CCFF Review, and the key findings will be discussed with stakeholders and the set of common challenges and priorities incorporated into a subsequent CCFF Conceptual Model and a Guidance Note in order to respond to country needs.

An international Contact Group including representatives from key institutions (Annex 2) will continue to support the evolution of this guidance and the harmonisation of approaches and good practices.

Additional data on the results of CPEIRs in the region can be found on the following website: https://www.climatefinance-developmenteffectiveness.org/CPEIR-Database

CON

CLU

SIO

N

16

UNDP

Pakis

tan

Tom

Chea

tham

, Apr

il 201

3

AN

NEX

1

Annex 1: Overview of UNDP’s Governance of Climate Change Finance to Benefit the Poor and Vulnerable Programme

Through the Governance of Climate Change Finance (GCCF) programme, UNDP is working with national governments and civil society organisations throughout the Asia-Pacific region to improve how they plan, budget and manage climate related funds.

Since 2012 GCCF has been working closely with six core countries of Bangladesh, Cambodia, Indonesia, Nepal, Pakistan and Thailand and offering assistance to other countries throughout the region.

GCCF’s work:With a diverse team of specialists the GCCF programme is providing tools and advice to support cohesive, whole of government responses to climate change.

The programme focuses on national budgets, working with partner governments to effectively account for climate related plans.

Budgeting for existing national climate plans is critical in transforming these plans from concepts to reality and can also be useful in identifying financing.

Specifically, GCCF projects work to assist countries:

• Identifyallclimate-relatedpublicexpenditure;

• Identifyallclimaterelatedinflowsandbudgetrevenue(asagreedbyallstakeholders);

• Identifyadditionalfundingrequirementsandfinancinggaps;

• Identifydomesticandinternationalfundingopportunities(ifrequired);

• Identifymethodsofbringingpublicsourcesofclimatefinance(bothdomesticandinternational) into national budgeting;

• Ensureaccountabilityofclimatefinanceforthepublic,beneficiaries,andparticularly the poor and vulnerable;

• Conductresearchonthehowclimatechangemayaffectthecostofinvestments;

• Conductresearchandanalysistoillustratetheimpactofclimateresourcesonthepoorandvulnerable;

• Provideknowledgeproducts,South-SouthExchanges,peerexchangesandmethodologicaladvice throughout the region through workshops, trainings and a regional repository of information.

Related benefits of GCCF’s work:

GCCF’s efforts to create integrated climate budgets have a number of related benefits.

• Assistsgovernmentstomakemoreinformedandeffectiveplanningandbudget decisions related to climate change;

• Providestaggingmethodstomoreeffectivelyundertakeclimatefinancetracking to identify available resources;

• Ourresearchandanalysisprovidesclearbudgets,datasetsandevidencetomakethecase for additional financing (if necessary);

• Attractsforeigninvestmentthroughbetterbudgetingandgreatertransparency;

• Increasesthetransparencyofspending,providinggreateraccountabilityoflineministries;

• Promotesinternationaltrustinacountry’suseofclimatefinance.

GCCF continues to work with countries throughout the Asia-Pacific and is expanding its scope and package of services.

For more information please visit www.cfade.org

17

UNDP

Pakis

tan

Annex 2: CCFF Review Contact GroupAlex Heikens, UNICEF, Senior Advisor, Climate and Environment

Anne Ohloff, UNEP DTU, Head of Programme, Climate Resilient Development

Barbara Buchner, CPI, Senior Director

Binu Parthan, GCF, Asia Adviser

Cassie Flynn, UNDP, Climate Policy Specialist, Climate Policy Team

Daniel Klassander, Embassy of Sweden in Thailand

Jairo Acuna-Alfaro, UNDP, BPPS/Governance

JonathanBeynon,UK-DFID,Climate&EnvironmentDepartment

Scott Hook, Pacific Islands Forum Secretariat, Economic Infrastructure Advisor

Smita Nakhooda, ODI, Research Fellow, Climate Finance

Sum Thy, Royal Government of Cambodia, Director Dept Climate Change

Tsegaye Lemma, UNDP, BERA

YolandoVelasco,UNFCCC,Manager,ClimateFinance&CapacityBuildingSub-Programme

AN

NEX

2

18

1 1

810 4

10 3

7

9

6

5

2

1. Mohammad Rakibul Hasan/UNDP

2. UNDP Bangladesh

3. Siriluck Chiengwong/UNDP

4. UNDP Bangladesh / GMB Akash

5. UNDP Bangladesh / Momena begum

6. Tom Cheatham, April 2013

7. Devin Bubriski/UNDP

8. Eskinder Debebe/UN Photo

9. UNDP Bangladesh / Momena begum

10. UNDP Bangladesh

Published by the UNDP Bangkok Regional Hub (BRH)

United Nations Development Programme

Bangkok, ThailandDesign by Inís Communication – www.iniscommunication.com

Copyright:

© UNDP 2016

All rights reserved

Manufactured in Thailand

Cover Photos:

United Nations Development ProgrammeBangkok Regional Hub3rd Floor United Nations Service BuildingRajdamnern Nok Avenue Bangkok 10200Tel: +66 (0) 2 304-9100Fax: +66 (0)2 280-2700Email: registry.th@undp.orghttp://www.asia-pacific.undp.org/ l https://www.climatefinance-developmenteffectiveness.org/

The Governance of Climate Change Finance Team for Asia-Pacifi c is supported by: