International climate finance is the main means of reconciling equity (developing countries have contributed little to climate change but are extremely vulnerable to its effects) with effectiveness and efficiency (a large share of the required mitigation is required in developing countries if global emissions targets are to be met).
Climate finance also presents a huge opportunity for developing countries to gain from win-win investments in adaptation and mitigation.
Transparency and accountability for climate finance is key to unlocking these gains. The International Budget Partnership recognizes that funds to respond to climate change are likely to be the single largest source of development finance for the foreseeable future and has initiated a program of activities to promote climate finance transparency and accountability.
Recognizing this, ‘climate budgeting’ by governments has developed over the last decade, particularly in the Asia-Pacific region, with the support of development partners such as the UNDP and the World Bank. An important motivation has been to package public investment projects for external financing.
This requires new systems to track government climate-related expenditures because they cut across existing expenditure classification systems – in the same way that gender-related or poverty-reducing expenditures require specially designed tagging systems if a country wishes to identify and report all related spending.
Following the world’s first Climate Budget in Nepal in 2013, climate budget tagging (CBT) systems have been introduced in about 20 countries. Many have published climate budgets parallel to the government’s annual budget using a variety of specially designed CBT methodologies.
While CBT is not costless, the benefits in many countries are likely to far outweigh the costs given the scale of climate finance and the long-term nature of climate change.
However, two things are noteworthy.
First, no country that has published a climate budget to date has disclosed environmentally harmful expenditures. Climate budget reports only cover those expenditures that are intended to be favorable for the environment.
Yet governments around the world continue to spend vast sums on direct subsidies and tax concessions for brown activities while paying lip service to their green credentials.
Second, the nearly 40 countries that have issued sovereign green bonds are contractually committed to transparent project evaluation and selection criteria and to the regular publication of detailed reports on how the funds have been spent, and on their impacts e.g., reductions in greenhouse gases. They provide no such assurances regarding all their other environment-related spending.
This means that countries issuing green bonds are now committed to providing far more transparency on their environmental spending to private investors than they are to their own legislatures, taxpayers, and citizens.
How can this greenwashing be offset?
One approach recently advocated is for in-country civil society organizations to publish their own ‘Green Guide to the Budget’ using publicly available information in existing documents and reports.
In this way, a picture could be built of the volume and allocation of public resources directed both to environmentally favorable and harmful activities, set in the context of the government’s environmental commitments and framed by cross-national benchmark indicators.
A Green Guide to the Budget could also incorporate civil society recommendations on green tax and expenditure policies to improve environmental outcomes and environmental justice, and a push for more transparency. It could be a vehicle to give more voice to women, indigenous peoples, and other marginalized groups that are often the most adversely affected by climate change and would help to offset the inside influence of fossil fuel and other environmentally destructive lobbies.
There are obvious capacity challenges, but a civil society initiative of this type may have the potential to shift the needle in some countries on accountability for environmental stewardship.
In this section, we shine a spotlight on partners who are using budget advocacy to bring transformational change to their communities. This month, we talk with Dr. Sandra Guzmán, founder and global agenda coordinator at the Climate Finance Group for Latin America and the Caribbean.
Q: How did you get involved in the environmental sector and climate change work?
A: I studied international relationships to understand the best ways to collaborate among countries to face a global crisis such as hunger and poverty. However, while I was studying, I identified a significant threat for all of humanity related to the environment: climate change. I understood that climate change was a problem caused by human activities, especially in developed countries. I realized that while developing countries may not be the major emitters of greenhouse gases that caused climate change, these countries are following production patterns and consumption patterns that threaten the environment.
Q: How did you come to realize the importance and intersection of climate change and budget work?
A: After focusing my work on what is necessary to take developing countries down an alternative development path, I realized that the key problem is not always the existence of the necessary policies, but the lack of resources to implement them. This led me to start analyzing public budgets to understand to what extent these budgets were aligned to climate action. I concluded that there will not be a successful transition toward low carbon development if countries do not mainstream climate change in their planning and budgeting processes.
Q: How was the Climate Finance Group for Latin America and the Caribbean started and what are you currently working on?
A: In collaboration with friends and colleagues, we created the Climate Finance Group for Latin America and the Caribbean in 2012. After many years of work, including my doctoral studies, we launched a campaign called “Sustainable Finance for the Future: putting life at the center of investments“and created the Sustainable Finance Index – a tool that tracks budget allocations related to climate change, as well as allocations to activities that are carbon-intense, to identify the gaps that exist between these two. Simultaneously, the tool also measures the type of sustainable revenue that comes to these countries from international sources and those revenues that are also carbon intense.
Q: What are some of the findings you’ve discovered as a result of the Sustainable Finance Index?
A: We applied this index to the 21 major greenhouse gases emitters in Latin America and the Caribbean and found that none of these countries spent more than 1% of their budgets on sustainable matters in 2019. We also learned that they spent 6.5% of their budget in the energy sector, with 60.3% of that budget going to the production of hydrocarbons, while only spending 0.3% on renewable energy. While this is not good news, this information allows us to highlight these gaps and provide recommendations to structurally transform these governments and get them on a path to incorporating climate change in their planning and budgets.
Q: Why should the average citizen care about climate finance?
A: There is no topic more relevant to citizens than public finance. We’re seeking greater public participation related to climate and sustainable finance, including public and private resources. We call on people to engage in this conversation toward transforming the financial system to ensure that present and future investments protect the environment and human rights.
Some of society’s most pressing challenges don’t fit neatly into a box. Take persistent gender inequality. For over three decades, governments, international institutions, civil society organizations and affected women, themselves, have worked to address the structural, policy and cultural factors that perpetuate gender-based discrimination, exclusion, oppression and violence.
The drivers and manifestations of gender inequality are multiple and intersecting with other socio-economic factors and broader challenges of equity, inclusivity and sustainability. Any remedies invariably must cut across government ministries and sectors. Effective government responses require planning, policy making and public finance systems that (1) assess the problem in all its complexity, (2) design and adequately finance responses, (3) execute the relevant programs and activities and (4) assess outcomes and impacts. To support solutions that effectively “mainstream” gender equality considerations across the public sector, governments and civil society organizations have been using gender-responsive budgeting (GRB) approaches for over 25 years. These approaches support awareness raising; management and public accountability purposes, including identifying and tracking gender-related spending; impact evaluation, and ultimately improvements to planning and implementation.
Learning from GRB to ensure climate-responsive public budgets
Like gender inequality, climate change poses extremely complex and intersecting challenges and addressing them requires significant government intervention and coordination. In addition to the cross-cutting nature of an effective response, efforts to address climate breakdown are often components of a larger program or project, raising huge definitional and operational challenges.
Within the last decade, as governments in climate-vulnerable countries have sought to improve their public finance systems and practices to respond to climate change, several have turned to GRB for its possible lessons on developing and implementing climate change-responsive budget reforms. Climate-responsive budgeting has taken various forms, including climate tagging of budget lines, the use of environmental cost-benefit analysis for decision making and carbon pricing. To date at least 30 countries have conducted Climate Public Expenditure and Institutional Reviews (CPEIRs), which review legislation and public expenditure contributions to national climate goals and seek to identify specific public expenditure policy and management challenges. In addition, at least 19 countries have established some form of climate budget tagging according to estimates in a new report from the World Bank.
Gender equity in the face of climate breakdown
Climate breakdown exacerbates existing inequalities, including those of gender. Women and girls, particularly those who are living in poverty, are often more severely impacted by climate-related extreme weather events. Their ability to respond to climate hazards can be limited by barriers to asset accumulation; unequal access to property, natural resources or financial services like credit; and inadequate support to lessen their traditional care burdens from public services like education, health care, and disaster recovery support.
Moreover, women, especially those at the frontlines of climate change impacts, have few or no opportunities to participate in decision-making processes. Yet, given their relevant experience, knowledge and skills, this exclusion undermines effective responses to the climate crisis.
Clearly, gender-responsiveness, including the agency and leadership of women, must be at the center of the response to the climate crisis, if we are to have sustainable, equitable, low-emission and climate-resilient societies and economies. And public finance management sits at the center of any integrated government response to gender inequality and climate change that recognizes and responds to the dynamic relationship between them. Arguably, there needs to be “double mainstreaming” of both climate and gender. Governments need to take the next step of making their climate-responsive budgets also gender-responsive and vice versa.
New study looks at the state of gender-responsive climate change budgeting
To help accelerate progress toward more effective integration of gender and climate in public financial management, we studied existing practices, approaches, and opportunities—in search of guiding principles for gender-responsive climate change budgeting (GR-CCB). Beyond a broad scoping of interesting nascent efforts around the world, we dug more deeply into the experience of two countries—Mexico and Bangladesh—that face significant risks of negative impacts from climate change but represent different climate change policy and public financial management (PFM) contexts; each has engaged in gender- and/or climate change-responsive budgeting at the national and subnational level.
In the country assessments, we identify the policy models used and analyze key components of the different approaches, implementation considerations and impacts on decision making and outcomes. We also tried to analyze the budgets of two key sector ministries in each country to determine what portion of the respective ministry budget allocated in support of climate change actions was also gender responsive. One key assumption was that, as both Mexico and Bangladesh have established components of both GRB and climate change budgeting, we would be able to use publicly available budget data to calculate the “overlap” between the two—or the GR-CCB.
Our assumption about access to basic allocation data was too optimistic. While we were able to come up with some broad, indicative estimates of the GR-CCB of the ministries, not enough detailed data were available to support more accurate estimates. Through the attempt, though, we were able to identify gaps and offer recommendations on what is needed to move forward:
National leadership that clarifies mandates, roles, and responsibilities for various actors and supports transparency and consistency,
Training of key staff across sectors to ensure they understand, internalize, and incorporate the principles of gender equality and climate change,
Strong budget reporting methodologies that include data disaggregated by cross-cutting priorities, such as climate and gender, and by programs of work,
Deep multistakeholder engagement in planning, policy-making and oversight processes and
Adequate financial resources for these and other recommended activities.
While not arriving to the clear answers we hoped for, nonetheless this exploratory exercise can inform current discussions on the need to move beyond a partial and segmented integration of either gender or climate considerations to an integrated response on existing financial needs assessments, allocation and budgeting and expenditures practices. Only through this kind of integrated approach can the twin challenges of gender and climate be properly addressed.
*Dr. Sandra Guzmán, Grupo de Financiamiento Climático para América Latina y el Caribe; Tanjir Hossain, ActionAid Bangladesh; Delaine McCullough, International Budget Partnership; Sejal Patel, International Institute for Environment and Development (IIED); Liane Schalatek, Heinrich Böll Stiftung, Washington, DC; and Paul Steele, IIED.
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The Open Budgets Blog features content related to transparency, participation, and accountability in government budgeting; civil society budget analysis and advocacy; and public finance management.
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