Enhancing India’s Readiness to Climate Finance

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Enhancing India’s readiness to access and deliver international climate finance into further institutional development within other DFIs that focus on different sectors and geographies, so that climate finance delivery can spread across a wider sub-section of Indian society. MRV Function Readiness Gap 7 India has limited experience in measuring, reporting, and verifying domestic, private, and international climate finance. Systems for tracking volumes of climate finance have not been systematically applied, and estimates on the impact of climate finance spend are even more limited In most countries (India included), MRV activities have focused on measurement and reporting national GHG emissions levels to the UNFCCC through periodic National Communications. Reporting has also been an important component of donor-funded projects by large international organisations like the World Bank or climate funds like the CTF. In these cases, countries are usually required to report on the implementation of a project, and to determine the emissions reduction impact against a pre-determined baseline level. While many countries like India have a long track-record of conducting project M&E, these type of tracking systems have not been applied on a more systematic scale to the climate finance policy space. This is rapidly changing, as countries are becoming increasingly interested in tracking the total volume of climate finance that they receive (from international and domestic sources) to determine the size of the financing gap needed to implement their national strategies. India has not yet made any coordinated attempt to track the total volume of climate finance it receives, or to estimate the effectiveness of climate finance in helping to deliver priority actions under the NAPCC. Rather, climate finance tracking and effectiveness has been restricted to the individual project-level, and has been driven by donor reporting requirements. Lessons & Options for India Experience from South Africa shows that countries are beginning to develop systematic MRV systems that can track climate finance from international and domestic sources (both public and private sectors), and use this data to estimate the effectiveness of climate finance in meeting national climate priorities. Experience from Indonesia shows that more limited MRV of national budgetary spending on climate-related activities can provide useful input into the coordination and planning of climate finance delivery. The South African government is currently working on the design of a national MRV system that will track all actions (mitigation, adaptation, and financing) under the country’s National Climate Change Response Strategy. The system has been designed to track the volume of climate finance received from a variety of sources – including international funds, the domestic budget, and private sector investors at the national and international levels. To capture this data, a two-tiered data collection system has been outlined. At the top level, data will be collected through channels such as the Ministry of Finance for national expenditure, the OECD/DAC Rio Markers and MDB reporting channels for bilateral and multilateral climate finance, and voluntary channels for the domestic and international private sector. Top-level data will be compared against ‘bottom-up’ data that is generated through reporting on climate change ‘response measures’ – strategies, programmes, policies and projects that target GHG reductions and improve climate resilience in South Africa. Reporting on response measures will capture information on the source of project financing, among other metrics (e.g. GHG emissions reduced, number of people made less vulnerable, etc.), which will be aggregated within a national database. These two sources of climate finance data will be processed by a central Climate Finance Advisory Committee – to determine both the cumulative volume of Ref: Ricardo-AEA/R/ED59216/Final Report 45
Enhancing India’s readiness to access and deliver international climate finance finance and its effectiveness in meeting funding requirements for the National Climate Change Response. 53 In Indonesia, MRV of domestic public sector climate finance was conducted through a Climate Public Expenditure and Institutional Review (CPEIR) study. Specifically, the study tracked the Ministry of Finance’s budget codes at programme and activity level between 2008 and 2011 to identify national expenditure on mitigation actions. The CPEIR assessment found 14 budget lines related to mitigation, and estimated that total expenditure on climate change mitigation amounted to IDR 5.5 trillion (approximately $579 million). Further, the study concluded that budget allocations had increased significantly, by approximately 5%, in nominal and real terms between 2008 and 2011. In Indonesia, CPEIR has been a useful tool, as it has enabled the country to estimate the financing gap for the NCCC’s mitigation actions. In sum, South Africa’s MRV system puts the country in the position of an early leader on climate finance MRV, while Indonesia’s use of CPEIR provides an important base from which the country could develop a more holistic MRV system in the future. India is among the vast majority of countries that haven’t undertaken a systematic approach to climate finance tracking on the scale that South Africa has done. A brief analysis of India’s climate finance performance in Chapter 3 showed that the country receives substantial funding from multilateral, bilateral, and CDM sources. These estimates do not cover the complete range of sources, types, and instruments of finance that would be required to give a holistic overview of India’s climate finance receipt. It would be useful for India to begin developing the skills and knowledge to scale-up this type of analysis – as understanding the scale of the financing gap is an important first step in creating a financing strategy to address major NAPCC priorities. 53 Harries, J., Hunter, R., Mittal, N., Steinbach, D., Sibille, R. (2014) Draft Climate Change Response Monitoring and Evaluation System. Department of Environmental Affairs, Republic of South Africa. Ref: Ricardo-AEA/R/ED59216/Final Report 46
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Enhancing India’s Readiness to Climate Finance

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