What needs to be done to meet global climate goals? Achieving the goal and successfully transitioning to a net zero-carbon economy requires a comprehensive response that includes the reorientation of fiscal, financial, monetary, and expenditure decisions. This comes up in new UNDP report titled global climate public finance review.
In the review report, the UNDP says that governments can play an important role in mobilizing and deploying climate finance effectively towards climate change adaptation and mitigation through deploying national policies, plans and budgets.
The review makes use of an adapted version of the ‘green PFM’ framework (IMF, 2021a) for structure and analysis. It says that the effectiveness of climate finance can be enhanced by strategically linking climate change with other relevant policy areas such as gender, disaster risk management, poverty reduction, and the SDGs as a whole.
CLIMATE FINANCE; KEY FINDINGS
- Most countries now have at least one climate change law or policy in place. Cumulatively, there are more than 2,500 climate related laws and policies. 33 countries have a Climate Change Act, 20 countries have an Environment Act, and 2 have a Forests Act which make reference to climate change.
- Climate change and/or environment has been integrated in budget circulars in many countries in Asia-Pacific, Africa, Europe and CIS, and LA. However, fewer countries have attempted to integrate climate change into their public investment management processes.
- Climate Budget Tagging (CBT) is a growing area of interest among countries across all regions. Some countries have integrated CBT in the financial management system; it still is manual in others.
- Green Public Procurement (GPP) is increasing across countries, particularly in the EU and Central Asia, and to some extent in Latin America and Caribbean.
- A limited number of countries publish climate budget reports; however, most only report on Climate budget allocations. Very few countries publish data on actual climate expenditure, even among those countries with CBT systems. However, some countries are developing tools for better transparency & accountability – examples include: Citizen Climate Budgets, Handbook for Parliament, Climate Audits .
- There has been less progress with downstream processes such as budget execution, accounting, reporting, control, and audit. Globally, more countries are adopting carbon pricing instruments which now cover 21.5% of global greenhouse gas (GHG) emissions, an increase from 5% in 2010. However, in most countries, the carbon price is lower than the price recommended to limit global warming to two degree C.
- Developing countries have increasingly adopted national climate change funds. There is wide variability in the scope, mandate, legal basis, institutional arrangements, and financing modalities of related funds.
- More countries are adopting an integrated approach to climate change and other cross sectoral priorities such as disaster risk reduction, gender equality, and more generally, the SDGs.
- Following the onset of the COVID-19 pandemic, countries worldwide adopted stimulus spending measures. However, most stimulus packages will have a net negative environmental impact (Vivid Economics, 2021).
- Gaps in climate macro-economic planning as modelling climate risks is complex
- Lack of publicly available data on climate change revenue and expenditure weakens climate transparency
- In most countries, climate change during legislative scrutiny is still considered as a Ministry of Environment issue, and therefore analysed within this narrow lens.
- Climate change finance should be channelled through the budget process as this ensures the efficient allocation of resources to meet national priorities and intended accountability to the Legislature and ultimately to citizens.