Transcript Public Environmental Expenditure Review (PEER)

Module 7
Mainstreaming in the budgetary
process
Country-led environmental and climate
change mainstreaming
Implications of environment- and climaterelated policies and measures for public
revenue and expenditure
2
Implications of integration on the
revenue side
Environmental Fiscal Reform
Payment for Environmental Services
+
-
Carbon
taxes /
taxed on
polluting
and highemission
activities
Taxes on economic
Foreign grants &
activities related
other financial
to environmental
R transfers related
and climate
to environment
E
adaptation &
V
and climate
mitigation
E
change
N
measures
U
Reduced taxes on E
activities that shrink S
or fail to develop as
a result of
environmental
and/or climate
change policies
Growth effects
from increased
competitiveness
Revenues
3
Implications of integration on the
expenditure side
+
-
Subsidies for
environmentally
-sound and
adaptation &
mitigationrelated
activities
Reduced
subsidies for
fuel
consumption
and other highemission
activities
Current
expenditures in
relation to
environmental
and climate
change R
E
(adaptation/mitig
V
E
ation) measures
N
U
Elimination onE
perverse S
subsidies that
promote
environmentally
damaging
activities
Public investment
(capital
expenditure) in
environmental
and/or climate
change
(adaptation/
mitigation) related
infrastructure
Expenditures
Reduced spending
on health care,
infrastructure
replacement etc.
as a result of
successful
adaptation and
environmental
measures
4
Linking the budget to policy
objectives and expected results
5
Linking spending to policy and
results, with a medium-term outlook
National objectives and
strategies
Medium-term
sector plans
Medium-term budget
perspective or expenditure
framework
Annual budget
Implementation & service delivery
Performance monitoring
6
The medium-term expenditure
framework (MTEF)
• A forward-looking budgetary planning tool
covering a 3 to 5-year period
• systematically links strategic objectives (national/sectoral)
and related outputs/outcomes with actions required to
achieve them, corresponding expenditures and resources
• supports the prioritisation of expenditures and the
predictability of resources
• facilitates performance monitoring
• Can be established at the national level (intersectoral allocations) as well as the sectoral level
(intra-sectoral allocations)
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In practice
• MTEFs are rather sophisticated tools, and
few countries have full-fledged MTEFs
• The preparation of medium-term projections of
national and/or sector expenditures is a good
starting point
• The uncertainties associated with projections and
forecasts should be recognised
What is the practice in your
respective countries?
8
Entry points for environmental and
climate change mainstreaming
9
Basic conditions for influencing the budget
• Understanding the budgeting process and finding
the appropriate entry points
• Coordinating with related policy processes
- engaging with the actors who drive the budget
• Mobilising civil society
• Coordinating with donors
- potential under General Budget Support
• Advocacy of appropriate financing to sector and
subnational bodies
10
Environment and climate change at the
resource allocation stage
• Mainstreaming environment/climate change requires:
- reallocating funding to more vulnerable and/or priority
sectors and regions
- providing funding to environmental measures
- providing funding for adaptation- and/or mitigation-specific
plans or activities
- adding environmental and climate change considerations to
the criteria for screening and selecting projects and
investments
- making room for ‘cross-sectoral’ activities (e.g. DRR)
• This process typically involves a mix of top-down and
bottom-up processes
Source: OECD (2009a)
11
Key stages in budget preparation
and related entry points
(1)
Impacts of enhancing
Impacts of CC on
economic activity &
growth; Value of
ecosystem services
Key stages
state of environment +
CC adaptation/mitigation
on economic activity &
growth
Key actors
1. Determination of
macroeconomic outlook
Min. of Finance/Planning, statistical
office, central bank
2. Multi-year strategic planning:
Green
medium-term
fiscal strategy,
accounting
medium-term expenditure
framework
3. Determination of next year’s:
-expected revenues
-acceptable level of deficit
-global level of expenditures
Cabinet, Min. of Finance
Extra costs of measures
Extra resources
required
Min. of Finance (Budget
Dept,/
Macroeconomic Dept), pledged
Cabinet
Extra revenues / cost
savings
4. Pre-allocation of expenditures
Cabinet, Min. of Finance (Budget
among line ministries, according to Dept)
Re-allocation of funds in
policy priorities
support of environmental
and adaptation/mitigation
objectives
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Key stages in budget preparation
and related entry points (2)
Key stages
5. Preparation/Circulation of
budget circular & expenditure
ceilings
6. Costing of sectoral policies,
submission of bids
Instructions on costing
Key actorsenvironmental and cc
policies
Min. of (adaptation/mitigation)
Finance (Budget Dept)
& measures
Costing & integration of environmental
Alland
ministries
& government
climate change
policies &
agencies measures
7. Review of sectoral bids, testing
of cost estimates, finalisation of
budget estimates
Min. of Finance
(Budget Dept),
Use of environmental
Cabinet and climate risk
8. Negotiations, followed by
endorsement of budget
Min. of Finance, other
Prioritisation of environmental and
Ministries/agencies,
Cabinet
climate change policies & measures
9. Preparation of appropriation bill
and budgetary documents
screening procedures
Min. of Finance (Budget Dept)
10. Submission of budget to
Min. of Finance, Parliament
Parliament – Discussion & adoption
Discussion of environmental and
climate change policies & measures
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Keeping track of environment- and
climate-related expenditures
• During budget preparation, implementation,
monitoring and reporting, ‘keep track’ of main
environment- and climate-related public
expenditures
- Adapt the budget classification
- ‘Flag’ incremental environment- and climate-related
expenditures embedded in ‘non-environment’ and ‘nonclimate’ programmes
• This is important for:
- monitoring the implementation of environment- and
climate-related measures in national and sector strategies
- reporting to the UNFCCC (national communications)
- securing eligibility for funding from specific climate
adaptation/mitigation and environmental funds
14
Monitoring environment and climate
finance: environment and climate markers
• Statistical codes developed by the OECD
(DAC) to monitor the amount of aid resources
targeted at environment and climate change
• Could be adapted for application to the national
budgets of OECD and non-OECD countries
• e.g. Kenya is introducing an Electronic Projects
Monitoring System (e-PROMIS) for capturing more
‘comprehensive and structures project information’ that
will make it easier to identify climate change finance
Sources: OECD-DAC (2011); Norrington-Davies and Thornton (2011)
15
Public Expenditure Review (PER)
Public Environmental Expenditure Review (PEER)
Climate Public Expenditure and Institutional Review
(CPEIR)
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Public expenditure reviews (PERs)
• A tool for analysing how budget resources are
planned, allocated and actually spent across
competing claims, objectives and priorities
• PERs can be used as a tool for supporting the
mainstreaming of climate change
- Track adaptation- and mitigation-related expenditures
- But also, importantly: focus on public expenditure’s
overall contribution to climate-resilient, low-emission
development outcomes
• For environmental spending, it can take the form of
a Public Environmental Expenditure Review (PEER)
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Public Environmental Expenditure
Review (PEER) A way of systematically assessing the equity, efficiency
and effectiveness of public environmental spending.
(Markandya et al, 2006)
• Common aspects addressed:
1. Levels and trends in environmental expenditure
2. Disaggregation of environmental expenditure by type of activity
3. Distribution of environmental expenditures in relation to env’tl
priorities
4. Efficiency and effectiveness of environmental expenditures
5. Government capacity for budget execution
6. Fiscal decentralisation
7. Sustainability of the environmental budget
8. Ratios: current/capital expenditures & salary/non-salary
expenditures
9. Links between funding sources and environmental expenditures,
and potential for increasing revenues
10. Institutional capacity for environmental planning and
18
management
Source: Markandya et al (2006)
PEER example: Rwanda
• 2009 PEER:
• Identified low degree of environmental
expenditures
• Recommended MINECOFIN increase resource
allocation to ENR sector
• 2013 Public Expenditure Review for Environment
and Climate Change 2008-2012
• Since 2004 expenditure on environment and cc
increased from 0.4% to 2.5%
• MINECOFIN reintroduced annex on environment
and cc in National Budget Call Circular
Climate Public Expenditure and
Institutional Review (CPEIR)
• UNDP tool currently piloted in AsiaPacific countries
• Review:
- how national climate change policy aims
were reflected in public expenditures
- how institutions might be adjusted to
ensure that financing a response to
climate change is delivered in a coherent
way across government
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Domestic public environmental
expenditure as % of GDP (2006-09)
Source: OECD (2011)
Government allocations to Min. Environment
budget compared to other sectors, % budget
(avg. 2005-09)
Source: OECD
(2011)
Public environmental expenditure in
EECCA
• PEE generally increasing in absolute terms, but
very low as share of GDP and on per capita basis
• Almost negligible compared to other social
sectors
• Most public expenditure (2009) to water and
nature protection conservation
Entry points for mainstreaming
climate-related aspects in a PER
Aspect
Issues to consider
Budget planning
process
Role of climate-related considerations in allocation
decisions
Expenditure trends
and categories
Actual spending on vs. allocations to:
* adaptation- and mitigation-friendly measures
* development programmes with a focus on climate risk
management, climate-resilient / low-emission development
Availability of recurrent funding vs. capital investment for
climate risk monitoring and management
Budget financing
Level of and trends in allocations to climate-relevant sectors
and agencies
Origin of such allocations (internal vs. external funding)
Possibility of increasing resources for climate-resilient
development
Sources: UNDP-UNEP (2011), World Bank (n.d.) GN4
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Complementing with awareness raising
tools
• Findings of public expenditure reviews (PERs,
PEERs, CPEIRs) can be complemented with
‘awareness raising’ tools to inform budgeting, e.g.
- Economic analyses
- Communication and advocacy strategy and work plan
25
Beyond-GDP and environmental
accounting
• Indicators available
• e.g. Adjusted Net Savings, Sustainable
Development Indicators, Green Growth Indicators,
Human Development Index
Source:
http://ec.europa.eu/environment/beyond_
System of Integrated Environmental
and Economic Accounting (SEEA)
• SEEA Central Framework - international standard
by UNSC (2012)
• Records:
• Flows of raw materials from the environment to the
economy
• Exchanges of these materials within the economy
• Returns of wastes and pollutants to the environment
• WAVES (Wealth Accounting and the Valuation of
Ecosystem Services)
• WB-facilitated global partnership to mainstream natural
capital accounting into national accounting system and
development planning
Turning words into action
 Mainstreaming environment and climate change
in the budgetary process
 Using Public Expenditure Reviews (PER), Public
Environmental Expenditure Reviews (PEER) and
Climate Public Expenditure and Institutional
Reviews (CPEIR)
What can be done and what
are the institutional and
capacity needs in your
organisation?
28
External resources for environment and
climate change financing
Main sources: www.climatefundsupdate.org, UNDP-UNEP (2011)
29
Main sources of external
financing for climate change (1)
Source of funding
Activities supported
Development cooperation
programmes
Adaptation and mitigation with a focus on dvpt
Least Developed Countries Fund
Preparation and implementation of NAPAs
Special Climate Change Fund
Adaptation (priority objective), technology
transfers, mitigation in high-potential sectors
GEF Trust Fund’s climate change
focal area
Mitigation projects, adaptation demonstration
projects and ‘enabling activities’
Adaptation Fund
Projects and programmes that reduce the
vulnerability of communities and sectors to CC
Green Climate Fund
(operations not yet started)
Channel for future multilateral funding for
adaptation and mitigation
Clean Technology Fund
Demonstration, deployment and transfer of
low-emission technologies
Strategic Climate Fund (SCF) - Pilot
Program for Climate Resilience
Climate risk and resilience mainstreaming in
development planning
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Main sources of external
financing for climate change (2)
Source of funding
Activities supported
SCF- Forest Investment Program
REDD- related activities, sustainable
forest management
Deployment of renewable energy sources
SCF - Program for Scaling Up
Renewable Energy in Low-Income
Countries
Fast Start Finance (finished
2012)
Adaptation and mitigation measures in
developing countries
REDD+ (various streams of
funding incl. UN-REDD, which
promotes the mainstreaming of
REDD strategies in national
development)
Preparation, pilot implementation and
deployment of national strategies for
reducing emissions from
deforestation/forest degradation
Prototype Carbon Fund
Pioneering approaches to mitigation that
contribute to sustainable development
BioCarbon Fund
Carbon sequestration projects in forests
and agro-ecosystems
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Main sources of external
financing for climate change (3)
Source of funding
Activities supported
Forest Carbon Partnership Facility
Preparation of national REDD strategies,
pilot financial transfers based on verified
emission reductions from REDD
Carbon Partnership Facility
Long-term, post-2012 mitigation projects
Global Energy Efficiency and
Renewable Energy Fund
Energy efficiency and renewable energy
projects
Global Climate Change Alliance
Mainstreaming of CC in poverty reduction
and national development strategies
Adaptation, DRR, participation in
REDD/CDM
MDG Achievement Fund,
‘environment and climate
change’ thematic area
Mainstreaming of environmental issues in
national and sub-national policies,
planning and investment frameworks
Clean Development Mechanism
Mitigation projects in developing
countries
Voluntary carbon markets
Mitigation projects
32
Voluntary carbon market
• Prices currently higher in the voluntary than in the
mandatory market
• Different certification options, e.g.
35
Transactions in the voluntary market
file:///.file/id=6571367.26
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Fuente: Forest Trends (2015)
Sources of external
financing for environment (1)
Source of funding
Activities supported
ACP-EU Water Facility
Supply of water and basic
sanitation
EU blending mechanisms: EU-Africa
Infrastructure Trust Fund (ITF);
Neighbourhood Investment Facility (NIF); Latin
America Investment Facility (LAIF);
Investment Facility for Central Asia (IFCA);
Asia Investment Facility (AIF), Investment
Facility for Caribbean; Investment Facility for
Pacific
Environmental infrastructure, e.g.
water and sanitation, renewable
energy, sustainable transport
Global Environment Facility (GEF)
Biodiversity, climate change,
international waters, land
degradation, the ozone layer,
POPs
Multilateral Fund for the Implementation of the
Montreal Protocol (MLF)
Activities under the Montreal
Protocol on ozone-depleting
substances, including industrial
conversion, technical assistance,
training and capacity building 37
Sources of external financing for
environment (2)
Source of funding
Activities supported
Nagoya Protocol Implementation Fund
Activities under the Nagoya
Protocol on Access to Genetic
Resources and the Fair and
Equitable Sharing of Benefits
Arising from their Utilization (to
the CBD)
Nordic Environmental Development Fund
(NMF)
Cleaner production
investments, energy-efficiency,
environmental investments on
farms
Other environmental trust funds
38
Sources of information on climaterelated finance
• www.climatefundsupdate.org
• www.carbonfinance.org
39
Budget support
• The transfer of financial resources of an
external financing agency to the National
Treasury
• Provides extra resources for the national budget
• either grants (e.g. EC) or loans (e.g. World Bank)
• National procedures apply to the commitment
and disbursement of funds
• implementation via the national Public Financial
Management system => reduced transaction costs,
increased ownership
40
Budget support and mainstreaming
opportunities
• General eligibility conditions:
Environmentally
sustainable and
climate-resilient
1
Existence of a well-articulated national
or sectoral policy/strategy to which the
budget transfer will contribute
2
Reasonably stable macroeconomic
framework
3
Reliable or improving public financial
management
4
Transparency and oversight of budget
Potential
use of SEA
PER, PEER,
CPEIR
41
Budget support and mainstreaming
opportunities
• Inclusion of key environmental and/or climate
change indicators for disbursement of:
• fixed tranche
• (paid in full as long as eligibility conditions are
maintained)
• variable tranche
• (paid in full or in part based on actual performance
against an agreed set of criteria and targets)
• criteria/targets in principle taken from the PAF associated
with the supported policy or strategy
• provides a results-oriented performance incentive
42
Performance assessment indicators
on climate change in Bhutan
• Under GCCA a Renewable Natural Resources –
Climate Change Adaptation Action Plan
mainstreamed into 11th 5-year Plan (2013-2018)
• Activities include budgeting exercise for cc adaptation
actions
• Conditions for release of variable tranche include on
‘climate change adaptation readiness’ of RNR sector’s
monitoring and evaluation system and improvement of
RNR statistical systems to allow for reliable collection of
climate-related data
National climate and environment funds
• Several countries have established a ‘national
climate fund’ and/or an environment trust fund’ to:
- channel and manage external funding related to CC and
environment
- leverage existing funds and initiatives (incl. those financed
with national resources)
- Support mainstreaming into national development strategies
• Expected benefits:
- Alignment of external funding with national priorities
- Building of national capacities and institutions
- Scaling up of the response to climate change and
environmental challenges
44
Turning words into action
 Promote mainstreaming through national
budgetary processes
 Using (EC) budget support to leverage for
mainstreaming
What can be done and what are
the institutional and capacity
needs in your country/sector of
responsibility?
45
Recap – Key messages
• Environment- and climate-related policies and measures
can impact the national budget in multiple ways
• There are entry points for mainstreaming environment
and climate change at practically all stages of the
budgetary process – including at the stage of ex post
evaluation (PERs, PEERs and CPEIR)
• It is recommended to set up systems to keep track of
environment- and climate change-related expenditures
• Multiple sources of funding exist to support environment
and climate change – focus on eligibility and objectives
• Where conditions are met, budget support is a suitable
modality for supporting CC mainstreaming efforts
46
Key references
• Petkova N. (2009) Integrating Public Environmental
Expenditure within Multi-year Budgetary Frameworks.
OECD Environment Working Papers no. 7. OECD Publishing,
Paris
• Carbon Finance website of the World Bank:
www.carbonfinance.org
• Climate Funds Update: http://www.climatefundsupdate.org/
• Markandya, A; Hamilton, K and Sanchez-Triana, E (2006)
Getting the Most for the Money – How Public Environmental
Expenditure Reviews Can Help. World Bank Environment
Strategy Notes No. 16, September 2006.
• Climate Public Expenditure and Institutional Review:
http://www.aideffectiveness.org/CPEIR
47
References
•
Carbon Finance website of the World Bank: www.carbonfinance.org
•
Climate Funds Update: http://www.climatefundsupdate.org/
•
Forest Trends (2013) Maneuvering the Mosaic, State of the Voluntary
Carbon Markets 2013. Ecosystem Marketplace & Bloomberg New Energy
Finance: Washington and New York.
•
OECD (2009a) Integrating Climate Change Adaptation into Development
Co-operation: Policy guidance. OECD Publishing, Paris. [Read-only,
browse-it edition] Available from:
http://browse.oecdbookshop.org/oecd/pdfs/browseit/4309171E.PDF
•
OECD-DAC (2011) Handbook on the OECD-DAC Climate Markers.
Organisation for Economic Cooperation and Development, Paris.
Available from: http://www.oecd.org/dataoecd/56/18/48785310.pdf
•
UNDP-UNEP (2011) Mainstreaming Adaptation to Climate Change into
Development Planning: A Guide for Practitioners. UNDP-UNEP PovertyEnvironment Initiative. Available from:
http://www.unpei.org/knowledge-resources/publications.html
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References
•
Norrington-Davies, G and Thornton, N (2011) Climate change financing
and aid effectiveness, Kenya case study. OECD, ADB.
•
OECD (2011) Greening public budgets in Eastern Europe, Caucasus and
Central Asia.
•
Swanson, A and Lundethors, L (2003) Public Environmental Expenditure
Reviews (PEERS), Experience and Emerging Practice. World Bank
Environment Strategy Papers No. 7.
•
World Bank (n.d.) Mainstreaming Adaptation to Climate Change in
Agriculture and Natural Resources Management Projects. World Bank,
Washington, DC. Guidance Note #4 – Developing Readiness for
Institutional Capacity Development and an Enabling Policy Framework.
[Online] Available from:
http://climatechange.worldbank.org/climatechange/content/mainstream
ing-adaptation-climate-change-agriculture-and-natural-resourcesmanagement-project
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