Selecting effective financial instruments to support action on climate change
This low emission development strategies (LEDS) Finance Resource Guide presents a curated selection of resources on a range of topics around finance for LEDS and Nationally Determined Contributions (NDCs). It is designed to help LEDS practitioners find high-quality resources that meet their specific needs, avoiding time-consuming searches on the internet. It will be useful to individuals working on, or interested in, LEDS and NDC finance in both developed and developing countries.
- 1. Understanding the situation
- 1.1 Understanding current flows
- 1.2 Assessing financing needs
- 1.3 Assessing capacity
- 1.4 Identifying and overcoming barriers
- 2. Planning and coordinating
- 2.1 Institutions and governance
- 2.2 National finance strategies
- 2.3 Investment plans
- 2.4 National climate funds
- 2.5 Green investment banks
- 4. Using public finance
- 4.1 Managing national finance
- 4.2 International climate finance
- 4.3 Climate finance readiness
- 4.4 The Green Climate Fund
- 4.5 Direct access
- 5. Designing financial instruments
- 5.1 General resources
- 5.2 Sources of private finance
- 5.3 Risk mitigation
- 5.4 Guarantees
- 5.5 Feed-in tariffs and auctions
- 5.6 Taxes and tax incentives
- 5.7 Carbon pricing
4.1 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. (Adapted from Making sense of climate finance: Linking public finance and national climate change policy in the Asia-Pacific region, UNDP, 2013.)
Chapter 11 of this report, ‘Lessons for institutional strengthening’, is on lessons learnt from the four study countries that point the way towards institutional pathways for effective climate change finance delivery in Africa. Six cross-cutting lessons were identified from the institutional analysis made in each of the country studies: 1) reforming the institutional framework in response to climate change; 2) establishing clarity over institutional mandates; 3) strengthening the programming of climate change actions; 4) ensuring adequate allocation of human resources; 5) delineating environmental and climate change programs; and 6) recognizing the central role of finance ministries in climate change finance delivery.
This guidebook seeks to equip relevant stakeholders (governments, donors, CPEIR practitioners) with information on methodologies and tools to conduct a CPEIR, the objectives of which include tracking of climate finance and quantification of climate related expenditures in the budgetary system. The publication was developed based on experiences and lessons learned from existing CPEIRs. 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 CPEIR implementation. Section 6.3 of the guidebook provides guidance on tracking public climate expenditure.
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 first developed the 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 the Pacific Climate Change Finance Assessment Framework.
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. For further information see 4.1.
Sixteen Asian country reports on climate public expenditure and institutional reviews (CPEIRs) and climate fiscal frameworks
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 the Asia-Pacific region. This website presents the CPEIR reports along with the climate fiscal framework (also known as climate change financing framework) 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.