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Tackling Climate Change through Budget Transparency

A version of this blog post also appeared on the Open Government Partnership website.

The urgent imperative of tackling climate change is rarely associated with the dry science of budgeting and fiscal policy—but it should be.

With the conclusion of the Paris Agreement in December, many sizeable countries—including China, India, Mexico and the United States—made significant commitments to reduce greenhouse gas emissions, and countries made progress toward providing $100 billion in climate finance a year by 2020 in order to help poorer nations mitigate and adapt to climate change. Increasing funding for both adaptation and mitigation is crucial to tackling climate change and for promoting low-carbon, climate-resilient development. However, while most of the focus so far has been on increasing the scale of climate finance, less attention has been placed on two important components of adaptation funding—effectiveness and transparency.

Tracking Where the Money Goes

One key aspect of effectiveness concerns systems for managing adaptation finance. Adaptation funds like those promised in the Paris Agreement can help countries invest in climate-smart agriculture, infrastructure to protect land from erosion, alternative income-earning opportunities for the poor, and more. But this increased availability of funds will only be effective if the systems are in place to manage this huge flow of resources in a transparent and accountable manner. Channeling adaptation finance through public budgeting systems is clearly preferable than doing so through parallel mechanisms outside the budget. Participating countries hope this will help them attract larger sums of climate finance for integrating adaptation with other development activities.

If the systems are not in place to manage, channel and monitor these financial flows well, at worst, vulnerable people and countries’ economies will fall victim to the adverse effects of climate change. The absence of effective systems and reliable data creates opportunities for corruption through the deliberate misuse of funds. And weak budgeting systems risk generating losses in efficiency through the misallocation of funds or failure to ensure that budget allocations are used for their intended purpose. This risk is even greater when funds are channeled off-budget as the scope for ensuring transparency and oversight is weaker. WRI has recently partnered with the United Nations Capital Development Fund to develop systems for tracking the resilience benefits of adaptation finance that is channeled on-budget to local communities.

A related challenge lies in ensuring that a massive increase in spending on adaptation measures translates into sustainable investments on the ground. Research by WRI and partners under the Adaptation Finance Accountability Initiative highlights the paucity of data on budget allocations for climate adaptation. Many developing countries lack systems to account for how they’re spending existing adaptation finance, making it difficult to track investments and monitor financial flows at the local level. National budgeting systems are ill-equipped to perform this basic function.

The lack of information on budget flows for adaptation makes it hard for citizens and independent monitoring groups to know whether funds are being used for their intended effect and reaching the populations that need the money most. In Zambia, for example, monitoring groups found that communities were not aware of a planned dam project until it broke ground. The national and local governments had not consulted communities to determine the best use of funding to help them adapt to chronic drought. In the end, the dam caused major disruptions and displacement, and only benefited a very small share of the local population.

Creating More Transparency

Transparency is essential for ensuring accountability in the use of climate finance by making budget information available in the public domain and engaging citizens in budget decisions. Encouragingly, we are starting to learn more about budgeting processes and transparency in countries throughout the world. Independent data initiatives like the Open Budget Survey (OBS), sponsored by the International Budget Partnership (IBP), is the fifth round of a global assessment of budget transparency, public participation and oversight institutions for national governments. While 19 countries score well on budget transparency, the survey finds that a number of governments are backtracking on budget transparency commitments, and that “the large majority of the world’s population does not have sufficient access to budget information.” This finding is especially worrying for those countries that are vulnerable to the effects of climate change.

Opportunities for public participation in the budget process also remain limited. The OBS reports that “meaningful opportunities for the public to engage in the formal budget process simply do not exist in the vast majority of countries.” This is consistent with findings from WRI research in Nepal, Philippines and Uganda concerning the difficulty local NGOs face in accessing budget information on climate finance to track spending commitments on the ground.

The 2015 survey also finds that only a third of countries surveyed actively engage their legislatures in the budget process, and that supreme audit institutions lack oversight of public funds in the majority of countries.

But within these troubling findings lies an opportunity. With the new Paris Agreement, the world will see more climate finance than it ever has before. Efforts to improve budget transparency can help to improve the accountability of governments in the allocation and use of these funds. For example, planned outlays in climate action should be published in government budget statements, and the information made available to the public online. Consultation with local people on investment decisions for adaptation will improve engagement and understanding of these priorities. Without such measures, increased funding will not bring about the positive impact we expect for poor people and less developed countries.

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