Climate Change Finance and Local Governance

Asia-Pacific is one of the world’s most vulnerable regions to the effects of climate change and the expected impacts are likely to intensify in the future. The region is also a large emitter of greenhouse gases (GHGs), and unless urgent action is taken to curb emissions, this trend will exacerbate in the future. It is widely acknowledged that a significant increase in public and private financial resources from national and international sources will be required to meet these adaptation and mitigation challenges.

While existing literature on ‘climate finance’  calls for attention to the local aspects of climate change, so far the voices of local level practitioners have been less audible in the international and national climate change discourse. The local dimension of climate finance is important not only because of the intrinsically local nature of CC vulnerability, but also because of the benefits of pursuing local-level mitigation activities. The financing of localized responses to climate change also deserves specific attention because of the critical role of local practitioners as key agents in achieving effective results on the ground. A localized response can draw from local knowledge and include the participation of those most vulnerable to the impacts of climate change.

Based on a regional consultation in Bangkok in late 2012, a framework was agreed on for shaping effective responses to climate change at the local level. The four pillars, which also guide the discussion in this paper, can be summarized as follows:

• An enabling institutional environment for climate finance:

  The autonomy and authority that sub-national governments have to respond to climate change will, to a large extent, be determined by a country’s approaches to political, administrative and fiscal decentralization. An understanding of the latter is particularly critical in ensuring that finance to address climate change is aligned to the established expenditure responsibilities of national, regional and local governments.

• Improved delivery of climate finance:

  Local administrations will have greater scope to respond to specific local vulnerabilities where they have the necessary financial means and discretion to use those resources. Typically, the responsibilities of sub-national governments will be greater than their ability to raise taxes and as such they will be reliant on transfers from central or regional governments (intergovernmental transfers). Climate change will potentially have impacts both on the size of transfers required and also their regional distribution. Further, the structure of transfers can impact the discretion over which local governments have to address climate change. While providing transfers specifically targeted for climate change projects may be a useful short-term strategy to raise the profile of climate change at a local government level, mainstreaming climate change concerns into ongoing expenditures in relevant areas (i.e. rural development programs, water and sanitation, and agriculture) may bring greater long-term benefits.

• More effective and equitable planning and budgeting for climate initiatives:

  Responses to climate change at the local level will involve different stakeholders: local government, line departments, and CSOs. Similarly, there is a role for national institutions to provide policy guidance. Given multiple stakeholders, institutional coordination will be particularly critical in ensuring coherent planning and effective budgeting. Central ministries can support effective and equitable planning and budgeting for climate initiatives by establishing clear processes and procedures for the incorporation of climate change considerations in those processes. Ensuring the participation of communities in the planning process can make them more responsive to the needs of those communities, and is a core aspect of political decentralisation. Transparent and comprehensive budgets will have a key role to play in enabling participation.

• Monitoring and evaluating the local impact of climate finance:

  Monitoring and evaluation frameworks that assess the impact of local interventions on climate change can serve as a basis to judge the effectiveness and efficiency of climate related expenditures. They can also be used to assess the impact of climate finance on the most climate vulnerable groups. Importantly, the establishment of a good monitoring and evaluation framework and creating a process where the information is shared with the public can be an effective way of holding local governments to account in the use of public resources and the results that they have contributed to. Given the overlap

Taken together, these four pillars are intended as an overarching framework that can be used to inform a suitable approach to ensure that finance is channelled and used effectively to address climate change at the local level.