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Finance ClinicClimate Public Expenditure and Institutional Reviews (CPEIRs)

Rakshya ThapaRegional Technical Specialist

UNDP

LECB Annual Global Meeting25-27 October 2013, Hanoi

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Overview

• CPEIRs – Introduction (20 mins)• Q&A and Discussions (15 mins)• Group Exercise (45 mins)• Reporting on the Group Exercise (10)

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Introduction

Objective: To review allocation, management and results of public expenditures related to climate change

Core aspects: •Assessment of current policy priorities related to climate change•Review of institutional arrangements •Analysis of public expenditure and its relevance to climate change

How to quantify & track climate change related expenditures in the national budgetary system?

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Policy, planning and budgeting cycle

Objective: To review allocation, management & results of public expenditures related to climate change

Key-question: How is climate change reflected in national policies, institutions & public expenditures?

Implementation: Led by government through cross government steering group chaired by Ministry of Finance or Planning

CPEIRs build on WB methodology for PER/PEIR/PEER

Add “climate-relevance” dimensions to analysis

Budgetary process

Policy making process

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• Methodology builds upon the WB Public Expenditure

• The approach :– compilation of relevant documentation derived

from official sources and public documents. – Individual semi-structured interviews with key

informants– research largely at the national level but local

analysis included

• Studied led by a multidisciplinary team of researchers and overseen by cross government steering group

The CPEIR Methodology

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The CPEIR Methodology

The analysis constitutes: •Review of policies, institutional arrangement and public expenditure across the whole of government•Define what constitutes ‘climate relevant’ expenditure•Classify public expenditure into categories of varying levels of climate relevance

– Identify budget line codes with High, Medium and Low relevance to climate change

•Composition of public expenditure may vary from country to country comprising both budgetary and off budget expenditures

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Policy, institutional & expenditure findings

• Link climate policy to budget, so climate strategies are prioritized and costed

• Link budget to climate policy, so climate is part of budget framework

• Coordination by finance & planning ministries with technical input from environment and line ministries

• Large proportion of climate relevant’ expenditure embedded in sectors with other primary objectives

• Local government also a key channel for climate finance

• Between 3-17% of the total budget deemed to be ‘climate relevant’

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Expenditures & sources

Climate relevant expenditures as a proportion of total expenditure & GDP

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Few major players with local channels key

Highest climate relevant spending agencies as proportion of total ‘climate budget’

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Indonesia Case Study Mitigation Fiscal Framework

• Assess the public expenditure to realized GHG reduction target of 26% by 2020

• Reviews expenditure of climate change actions and its cost effectiveness

• Focus sectors such as forestry, peatlands, energy, transport

• Current patterns of expenditure meet only 20% of the national targets

• Therefore, further action and increase in financing required

• Inter-ministerial coordination necessary to institutionalize and manage the MFF

• Considering the development of budget marking and scoring system

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Lessons Learned

• CPEIRs should not be a one off exercise. Periodic review helpful on how response to climate change evolving.

• Need for internationally consistent methodology for defining climate relevant expenditures

• Focus on the “dirty” expenditures which may undermine the national climate response

• Climate Fiscal Framework be developed with Ministries of Finance and Planning – to identify potential sources of funding and how they

can be best accessed, combined and sequenced – Outline role of different sectors of economy

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Conclusions

CPEIRs important tool in public expenditure management

•Set a baseline and budget execution history against which future expenditures can be measured and monitored•Encourage a holistic & comprehensive view of climate expenditures

•Functional markers to climate change expenditures to track more easily over time

•Foundation to establish baseline and MRV framework for financial support for LEDS

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Thank you

For further information please contactrakshya.thapa@undp.org

CPEIRs Methodological note & Asia-Pacific case studies:

www.aideffectiveness/climatechangefinance

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Group Exercise (55 mins)

• Each working group assigns a note-taker/reporter and a timekeeper

• Key questions - 45 mins– How does your country track (or plan to track) climate

finance? What are the challenges you foresee in tracking climate finance?

– What do you think of the suitability of the CPEIR tool for MRV of financial support (is it too granular/high level)?

– Do you think the CPEIR is suited to capturing both public and private sector flows?

• Reporting back – 10 mins