Accessibility links

LEDS Finance Resource Guide – Using domestic and international public finance


Introduction

The finance needed to achieve LEDS and NDC goals in both mitigation and adaptation will need to come from both public and private sources. It is widely accepted now that the private sector will provide the vast majority of this investment, but public finance has a key role to play in stimulating and leveraging private investment. The specific instruments that are needed to address private finance’s risk and return requirements are covered in the next section on ‘Implementing effective financial instruments’, while this section presents resources on where public finance might come from and how it can be accessed and managed, including both the role of national budgets and international public climate finance.

Featured introductory resources

Planning for NDC implementation: Reference Manual (finance chapter) (CDKN / Ricardo, 2016, 92 pgs total (finance chapter 10 pgs))

CDKN’s NDC implementation Reference Manual (also included in the overall resources in the Introduction section) was produced to support developing countries in implementing their NDCs. Several of the activities identified in the finance chapter (begins on p.68) are relevant to ‘Using public budgets and climate finance’: see activities 5 (assess financing options) and 7 (direct access to international climate funds).

Online version [navigate to the finance chapter]: Access resource here

PDF to download [Guide and Reference Manual combined]: Access resource here

 

Making sense of climate finance: Linking public finance and national climate change policy in the Asia-Pacific region (UNDP, 2013, 32 pgs)

This paper aims to provide central policy decision makers and donors with accessible guidance on how governments can make use of their national budget systems to prioritise a response to climate change. The paper also explores how governments can make complementary use of domestic and international sources of public finance to resource a climate change response. Chapters 3 and 4 provide an introduction to national budgeting processes and how international climate finance can support and complement these.

Access resource here

 

Using public budgets and climate finance – subsections

  • Managing national finance 
    • Resources about the role the national budget system can play in LEDS and NDC finance, in particular presenting UNDP’s CPEIR experience
  • International climate finance 
    • Resources covering the landscape of international climate finance, its possible future direction, and estimates and data on current flows
  • The Green Climate Fund 
    • A selection of resources focused on the most high profile multilateral climate fund, the Green Climate Fund (GCF)
  • Climate finance readiness 
    • Resources on what it means for a country to be ‘ready for climate finance’ and the support available to increase country readiness
  • Direct access
    • Guidance and lessons learned on how countries can secure direct access to climate finance from e.g. the Green Climate Fund

Managing national finance

The full cost of all desired policy interventions will always be greater than the total resources available to government: whether in the field of climate change or health, in a developing or developed country. While this does not lessen the importance of mobilizing additional resources for climate change (for example from the private sector) it does highlight the need to make choices over how government can best achieve its objectives given the resources available. Amongst other things this means effective and efficient management of national public finance. National budget processes provide a framework through which priorities can be balanced and trade-offs understood. There is a growing body of work exploring the integration of climate objectives into national budgets, including the Climate Public Expenditure and Institutional Reviews. [text adapted from UNDP ‘Making sense of climate finance’ report below]

 

Key resources 

Making sense of climate finance: Linking public finance and national climate change policy in the Asia-Pacific region (UNDP, 2013, 32 pgs)

This paper provides central policy decision makers and donors with accessible guidance on how governments can make use of their national budget systems to prioritize a response to climate change. The paper also explores how governments can make complementary use of domestic and international sources of public finance to finance a climate change response. The paper is principally targeted at central policy decision makers. It may also be of interest to researchers and those working with donors who are involved in financing public interventions on climate change in developing countries.

Access resource here

 

Budgeting for climate change: How governments have used national budgets to articulate a response to climate change. Lessons Learned from over twenty Climate Public Expenditure and Institutional Reviews (UNDP, 2015, 56 pgs)

UNDP first developed the Climate Public Expenditure and Institutional Review (CPEIR) methodology in 2011. Since then, over 20 countries around the world have completed or are implementing CPEIRs. This report synthesizes the lessons learned from this growing body of knowledge, organized against three pillars of the CPEIR process: evaluation of national policies; analysis of the institutions involved; and financial review of climate relevant expenditures. Annex 6 contains a general comparative analysis of the different methodological frameworks used to assess public management of climate finance: CPEIR (UNDP), CPEIR (World Bank), Climate Finance Readiness Assessment (GIZ), and PCCFAF.

Access resource here

 

A Methodological Guidebook – Climate Public Expenditure and Institutional Review (CPEIR) (UNDP, 2015, 72 pgs)

This guidebook to the CPEIR approach seeks to equip relevant stakeholders (governments, donors, CPEIR practitioners) with information on a step-by-step process, methodologies and tools to conduct a CPEIR. The guidebook was developed based on experiences and lessons learned from existing CPEIRs implemented by UNDP, World Bank, ODI, and independent CPEIR practitioners. It provides readers with background on context, purpose, process and tools in implementing a CPEIR together with an overview of the key challenges typically faced during the CPEIR implementation.

Access resource here

 

Public spending on climate change in Africa: Experiences from Ethiopia, Ghana, Tanzania and Uganda (ODI, 2016, 147 pgs)

The primary objective of this study is to understand the extent to which public expenditure responds to national climate change policy and the institutional demands required to implement it. The first part introduces the concept of climate change finance and outlines the effectiveness framework used in each of the country studies. The second part provides in-depth country accounts for Ethiopia, Ghana, Tanzania and Uganda, on the level and nature of climate change-relevant public spending, set in the context of each country’s macroeconomic and public finance management systems. The final section concludes by drawing lessons for climate change policy development, institutional strengthening, local delivery of climate change finance and the monitoring of public finance, based on the insights gained from the country studies. This is a very detailed study, and perhaps the lessons present in Part C will be most useful.

Access resource here

 

Country examples

14 Asian country reports on Climate Public Expenditure and Institutional Reviews (CPEIR) and climate fiscal frameworks from UNDP

A CPEIR is a systematic qualitative and quantitative analysis of a country’s public expenditures and how they relate to climate change. It can be a useful tool for national planning and budgeting, especially for identifying and tracking budget allocations that respond to climate change challenges. Since 2011, CPEIRs have been conducted in many countries in Asia-Pacific, this website presents the CPEIR reports and also the climate fiscal framework (also known as climate change financing frameworks) reports for those countries that have completed them. A climate fiscal frameworks is a whole-of-government approach that engages all relevant stakeholders toward the mobilization and management of climate change finance, typically developed following the undertaking of a CPEIR.

Access resource here

 

See also the Ethiopia, Ghana, Tanzania and Uganda country studies in Part B of the ODI report ‘Public spending on climate change in Africa’ above.

International climate finance

The global climate finance architecture is complex and evolving. Funds flow through multilateral channels – both within and outside of UNFCCC financing mechanisms – and increasingly through bilateral, as well as through regional and national climate change channels and funds. A major new fund, the Green Climate Fund, has joined this landscape and a growing range of financial instruments is being used to deliver finance. Limited coordination among these many funds and channels makes this landscape harder to understand, but as volumes of finance grow, and as developing countries need increasing amounts of financial support to implement their NDCs, there is a real need for all involved to understand the climate finance landscape. The resources in this section provide overviews and introductory information about the landscape of climate finance and about specific aspects and funds. (adapted from ODI global climate finance architecture brief below)

 

Key resources

The Global Climate Finance Architecture (ODI/Heinrich Boll Stiftung, November 2016, 5 pgs)

This brief from the Climate Finance Fundamentals series (see below) provides an introduction to climate finance and explains the different channels through which climate finance flows. It briefly describes the main multilateral and bilateral channels and funds, and summarizes the current climate finance architecture in a useful diagram.

Access resource here

 

Climate Finance Fundamentals briefing series (ODI/Heinrich Boll Stiftung, November 2016, 4-8 pgs)

This series of short introductory briefings on various aspects of international climate finance are designed for readers new to this critical area. The briefs outline the principles of public climate finance, the emerging global climate finance architecture, and address the instruments, needs and actual funding amounts in the action areas of adaptation, mitigation and forest protection (reducing emissions from deforestation and forest degradation, REDD+). Several briefs look specifically at the climate funding situation for specific regions of the world.

NB the briefings are available in English, Spanish and French

More information

Access resource here

 

The Future of the Funds: Exploring the Architecture of Multilateral Climate Finance (WRI, 2017, 94 pgs)

This report from WRI looks in detail at the global climate finance architecture and makes recommendations for improving the effectiveness of global climate finance. Part 1 introduces the global context and provides a snapshot of the finance landscape. Part 2 then explores in more detail 7 of the main multilateral climate funds and compares their performance across a number of dimensions. Further useful information about the funds can be found in the Appendix.

Access resource here

 

Climate Finance Landscape (CPI, 2015/16)

Climate Policy Initiative (CPI) produces the most comprehensive inventories of climate change investment available and is committed to improving understanding of climate finance flows at the global, national and local levels. This site presents the key findings from their latest climate finance landscape reports, showing where the money is being spent and how much comes from public vs private sources.

Access resource here

See also the report here

 

Climate Funds Update

Climate Funds Update is an independent website that provides information on the growing number of international climate finance initiatives designed to help developing countries address the challenges of climate change. The site details: Where and by whom climate change funds are being developed; The scale of proposed and actual financing; and what the funds support in terms of focus, regions and particular projects

Access resource here

 

Country examples

The Landscape of REDD+ Aligned Finance in Côte d’Ivoire (CPI, 2017, 48 pgs)

This study identifies the nature and volume of domestic and international public finance that contributed to limiting deforestation and encouraging sustainable land use in Côte d’Ivoire in 2015, and also identifies opportunities to increase finance available for implementation of the National REDD+ Strategy.

Access resource here

The Green Climate Fund

The Green Climate Fund (GCF) is the newest actor and the largest multilateral fund in the climate finance architecture. It became fully operational in 2015.

Its initial resource mobilization led to over 10bn USD being pledged and it is expected to be the principal channel through which climate finance flows from developed to developing countries. As such it is currently of great interest to developing countries as a source of finance for their mitigation and adaptation projects (and this is why it features its own section in this guide, unlike other funds). The resources and links here provide introductory information on how the GCF works.

 

Key resources

The Green Climate Fund: Climate Finance Fundamental Briefing (ODI / Heinrich Boll, November 2016, 8 pgs)

This Climate Finance Fundamental briefing provides a snapshot of the operationalization and functions of the Fund at that point. It provides a useful overview of the fund’s history and a high level overview of some key aspects of how the fund works including its results frameworks, financial instruments used, country ownership, access modalities, accreditation framework, and readiness support. A list of all projects approved at the time of publication is included.

Access resource here

 

Guide to develop a project proposal for the Green Climate Fund (Acclimatise/ IIED / ICCCAD, 2017, 84 pgs)

This toolkit aims to help private sector entities understand the key considerations to take into account and fulfil the GCF’s requirements when developing funding proposals for the GCF. It was developed for Bangladesh but nearly all of the content will be relevant to other countries. The guide covers the essential details of the GCF, the GCF project cycle, the GCF proposal template, key project development requirements and a guide for how to get started.

Access resource here

 

Engaging with the Green Climate Fund: A resource guide for national designated entities and focal points of recipient countries (GCF, 2015, 60 pgs)

This resource guide is designed primarily for GCF National Designated Authorities (NDAs) and Focal Points from recipient countries to assist them in understanding the operational modalities of the Fund. It presents the basic architecture of the Fund and describes the roles and responsibilities of NDAs in relation to their country’s engagement with GCF. The guide also presents the range of activities that Accredited Entities may carry out to develop and submit funding proposals for projects and programes. It also includes a detailed step-by-step explanation of GCF’s project approval process.

Access resource here

 

‘Readiness support’ page on the GCF website

This page describes the GCF’s readiness support program and available funding, and provides links to relevant documents, including the GCF guidebook to ‘Accessing the GCF Readiness and Preparatory Support Programme’ (accessible via the ‘Fine Print’ link).

Access resource here

 

‘Get accredited’ page on the GCF website (2016)

The GCF’s website describes the accreditation process for the GCF (necessary for direct access) and provides links to key guidance documents and the accreditation self-assessment tool which helps organizations understand whether they might be suitable for accreditation.

Access resource here

 

For more on Direct access – see GCF focused resources in the ‘direct access’ sub-section

 

Country examples

GCF project portfolio pages on the GCF website

These pages provide summary information about the focus, impact, funding and key partners of approved GCF projects, as well as providing links to key documents such as the original funding proposals.

Access resource here

 

Climate finance readiness

Climate finance readiness reflects a country’s capacity to plan for, access, and deliver climate finance, as well as monitor and report on expenditures. It is widely recognized that direct access to, for example, the Green Climate Fund will require a level of capacity by governments and other actors involved, in order to prepare national mechanisms to access, allocate, disburse, and report on climate finance. These mechanisms must be compatible not only with the Green Climate Fund’s requirements, but also with the country’s planning, budgeting, programming and monitoring procedures and systems.  In other words, developing countries will need to “get ready” for GCF and other climate financing. This section presents some resources that help countries think about how to assess and improve their level of climate finance readiness. (text adapted from www.gcfreadinessprogramme.org)

 

Key resources

Readiness for Climate Finance: A framework for understanding what it means to be ready to use climate finance (UNDP, 2012, 32 pgs)

The paper presents a framework for understanding what it means to be “ready” to use climate finance in a transformative way at the national level. The intended audience for the paper is policy-makers at both the international level and national level in developing countries. The paper aims to provide a framework to assess and improve the capacity of policy-makers to put in place nationally appropriate systems to manage climate finance. This paper is not intended as a guidebook per se, but rather as an introduction to both the national challenges arising from increasing flows of climate finance and some examples of the routes available for overcoming these challenges.

Access resource here

 

Ready for Climate Finance: GIZ’s Approach to Making Climate Finance Work (GIZ, 2013, 8 pgs)

This brief outlines GIZ’s approach to provision of support in the field of climate finance. The brief describes the services GIZ offers under each of the five modules of their approach, as well as explaining why each module is important. The modules are: strategic planning and developing policies; strengthening institutions and good financial governance; accessing international climate finance; effective and transparent spending and implementation; promoting private sector engagement.

Access resource here

 

‘Readiness support’ page on the GCF website

This page describes the GCF’s readiness support program and available funding, and provides links to relevant documents.

Access resource here

 

Country examples

Enhancing India’s readiness to access and deliver international climate finance (Ricardo EE, 2014, 110 pgs)

The purpose of this report is to identify opportunities for India to strengthen its ability to effectively access and deliver increasingly large volumes of international climate finance. The report examines the climate finance landscape, India’s experience in accessing climate finance, national policies to address climate change, and the effectiveness of India’s institutional management of climate change. The report uses a climate finance ‘Readiness Framework’ which analyses these main topics, in order to make an assessment of the strengths, barriers, and gaps in India’s ability to access international climate finance.

Access resource here

Direct access

Developing countries need significant amounts of finance to help them adapt to the changing climate and follow a path of low carbon development. The international community has set up multilateral funds to help support climate change mitigation and adaptation in these nations. Two of the largest climate funds, the Adaptation Fund and the Green Climate Fund (GCF), have committed to allowing institutions from developing countries so-called ‘direct access’ to finance. Direct access in this context means that national or subnational entities become accredited to receive finance directly from the fund without going through an international intermediary (like the World Bank or a regional development bank). The goal of such direct access is, among other things, to reduce transaction costs and enhance national ownership over available financing. (text from WRI paper on direct access below)

 

Key resources

“Direct Access” to Climate Finance: Lessons Learned by National Institutions (WRI, Nov 2015, 32 pgs)

Developing countries need large amounts of finance to support ambitious climate actions. This paper highlights lessons for developing country institutions seeking access to funding from the multilateral climate funds. This paper explores the experiences to date of national institutions that have been accredited by either of these two funds. It focuses on approaches that these institutions have taken to plan for, access, and use finance received through direct access, as well as early lessons learned in the process. The primary target audience is other institutions who plan to seek direct access to finance from the Adaptation Fund, the GCF, or other relevant funds.

Access resource here

 

Simplified guidebook for Direct Access Accreditation to the Green Climate Fund (UNEP/UNDP/WRI, July 2016, 7 pgs)

Funds from the GCF will flow directly to Accredited Entities (AEs) for project/program implementation. AEs can be subnational, national, regional and international entities which are public, private or non-governmental. This Guidebook is a simplified version of the “Comprehensive Guidebook for Direct Access Accreditation to the Green Climate Fund”. It provides an overview of the key elements of the accreditation process and best practice for completing the process.

Access resource here

 

Comprehensive guidebook for Direct Access Accreditation to the Green Climate Fund (UNEP/UNDP/WRI, July 2016, 27 pgs)

This full version of the simplified Guidebook (above) covers in more detail the key aspects of direct access accreditation, including accreditation requirements, accreditation stakeholders, the accreditation process, and lessons learned.

Access resource here

 

‘Get accredited’ page on the GCF website (2016)

The GCF’s website describes the accreditation process for the GCF (necessary for direct access) and provides links to key guidance documents and the accreditation self-assessment tool which helps organizations understand whether they might be suitable for accreditation.

Access resource here

 

Country examples

See country examples explored in the WRI report ““Direct Access” to Climate Finance: Lessons Learned by National Institutions” above. 15 entities with direct access were interviewed and different aspects of their experience are presented in the report.

 

Return to the LEDS Finance Resource Guide home page

, , , ,

Comments are closed.