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Governance Challenge of Climate Change Finance:the Political Economy of

BangladeshDr. Krishna Gayen, Joint Secretary, Finance Division, Ministry of

Finance, Government of Bangladesh

1 December 2013Climate Finance Week

Political Economy Questions

Climate Change: Is it an environmental issue? Or a Development issue?

Role Controversies: Policy, Planning, Institutional, finance, technical and implementation role?

Climate Finance: Different Modalities/ or Country System?

Issue Controversy

In talks, many people (including expert) define climate change as a development issue, but in reality there is a tendency to treat the issue of climate risk as a very technical issue.

The segregation of scientific and management aspects often undermined rather overlapped.

The ‘technical’ viewpoint is dominating the ‘development’ viewpoint.

Generally, the issue is recognized as ‘development’ issue but the main development actors are yet to be included in the overall platform of climate change in Bangladesh.

Technical Development

• Generally derived from the “Environment”, “Geography”, “Water Resource” and “Flood” Practice areas• See the problem of ‘climate change’ mostly from ‘hazard’ dimension, and mostly focused on the “cause” and “impacts” dimensions of the climate change.• Strongly believe that the issue is very ‘technical’ in nature and most people do not understand. • Generally undermine the “social” and “economic” dimensions.• Claim that “climate change” is the issue they established internationally and nationally as a critical issue. Therefore, claim the leadership of the climate change programme. • Heavily focused on the “environment’ ministry role

• Generally derived from the “Development”, “Economics”, “Social Science”, “Disaster Management”, and “Poverty and Livelihood” practice areas• See the problem of “climate change” mostly from “vulnerability’ dimension and generally more focused on “vulnerability reduction” and “management aspects”. • Believe that “climate change’ is largely an issue of ‘risk’ factors in development gain. This is not very tough to deal.• Do not value the “technical” dimensions much due to difficulties of the lexicon in the development vocabulary.• Claim that ‘climate change’ is one of the aspect of ‘development challenges’. Need to deal integrated way and claim leadership of climate programme.• Heavily focus on the role of “planning” and finance.

Governmental Climate Finance

The government’s two climate funding mechanisms are: Bangladesh Climate Change Trust Fund (BCCTF) – allocations

from the national non-development budget. Created to initiate immediate action on BCCSAP rather than wait for

international aid. Bangladesh Climate Change Resilience Fund (BCCRF) – funds

principally by DFID, Denmark, Sweden, the EU and Switzerland. Created in response to incoming international aid.

Both funds incorporate all six themes in the BCCSAP.

Key Actors in Climate Change Activity

Role Controversy

At present, Policy, Planning, Coordination, Finance roles are being performed by the Ministry of Environment and Forest.

Implementation role is played by sectoral ministries.

The role of Ministry of Planning and Ministry of Finance is gradually becoming mature.

The role of CSOs and Community are marginalized

The donors role are heavy in shaping climate agenda in Bangladesh.

Finance Dilemma?

Using Country System vs. Special arrangement?

Gradual pressure to use country system for climate finance.

Standalone finance? Or Integrated Budget Support?

Centralized or Decentralized?

Big dilemma how to channel CC finance to LG level?

Monitoring and Auditing of Climate Funds

BCCTF Project budgets are submitted by grant-seeking agencies and finalized

with the assistance of the Climate Change Unit, on the basis of the government’s procurement and sectoral implementation plans.

The office of the Controller and Auditor General of Bangladesh audits “on-budget” activities. The Board of Trustees has the authority to assign an independent audit of projects.

BCCRF Project grants are approved for government agencies accroding to a

legal Grant Agreement with the WB as Trustee. WB will provide the donors with an annual report on the financial and

physical progress of activities, and an annual single audit.

BCCTF vs. BCCRF

BCCTF BCCRF

Development Oriented? YES YES

Why Standalone? Fast Track Fiduciary Risk

Who manage? MoEF (CCT) MoEF (WB)

Who Implement? All Ministries(Water, Forest, LGED, Agriculture)

All Ministries(Water, Forest, LGED)

Types/Nature Grant Grant

Amount USD 350m 178m

Source of Fund GoB’s own fund Multi-donor trust fund

How different from current ADP projects?

Almost Similar Almost Similar

Follow Country Planning System? No No

Follow Country Finance System? No No

Projected in Development Budget? No No

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1. Lack of a sound and integrated financing system.

2. Rather than a projectized approach, climate finance needs to be addressed by a funding stream throughout the entire public sector.

3. Neither fund developed into a costed and prioritized programme embedded into national development planning and budgetary systems.

4. Lack of coordination between relevant ministries and implementing agencies.

5. Proliferation and variety of funds makes it difficult to ensure funds complement each other’s investments.

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6. Controversy amongst policy, planning, coordination and finance roles as CSOs and the community marginalized

7. Capacity Gaps in terms of Institutions and human resources

8. Donor capacity issues – how to spend their money wisely and where climate change fits in with longer running programmes.

Recommendations for Coherence

1. Climate change must be incorporated and recognized as a part of development at all levels

2. Development of a national Climate Fiscal Framework within which roles of involved parties can be allocated.

3. Strengthening key relationships and coordination processes with focus on:

Addressing the transaction of strategy to implementation via sector policy

The communication of CC strategy to Line Ministry level with adequate reflection within Ministry Budget Frameworks.

4. Support provided to improve coordination within the Government and between national and local levels.

5. Coordination within the donor community should be improved Scaling up and innovating. Clearer division of tasks and specialization of development partners.

Incentives and Grievances

Leadership, good will, discriminatory decision making power and social influence were major incentives for “Special” funding modalities.

Contract, media exposure and project facilities were less priority incentives for “Special” funding provisions.

International leadership and participation in COP also a vital incentives played behind such exceptionalism of ‘climate funds’

Proximity to policy makers, exploitation of asymmetric access to information

Political interference in the bureaucracy has provided incentives for ‘expert-bureaucrats’ in bypassing the country planning and finance process. Virtually created grievances amongst other ministries.

Media and CSOs appeared as highly active ‘critical’ mass in expressing grievances regarding ‘use of climate funds’

THANK YOU!

QUESTIONS?