1. Governance Challenge of Climate Change Finance: the Political Economy of Bangladesh
Dr. Krishna Gayen, Joint Secretary, Finance Division, Ministry of Finance, Government of Bangladesh
1 December 2013
Climate Finance Week

2. 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?

3. 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.

4. Development
Technical
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.
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

5. 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.

6. Key Actors in
Climate Change Activity

7. 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.

8. 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?

9. 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.
Highlight here which country systems are being used. For example, in the BCCTF, the sectoral plans and procurmeent plans, and auditing systems are being used.
In the BCCRF, it is a parallel system that is being used.

10. BCCTF vs. BCCRF BCCTF BCCRF All Ministries Development Oriented? YES
Why Standalone?
Fast Track
Fiduciary Risk
Who manage?
MoEF (CCT)
MoEF (WB)
Who Implement?
All Ministries
(Water, Forest, LGED, Agriculture)
(Water, Forest, LGED)
Types/Nature
Grant
Amount
USD 350m
178m
Source of Fund
GoB’s own fund
Multi-donor trust fund
How different from current ADP projects?
Almost Similar
Follow Country Planning System? No
Follow Country Finance System?
Projected in Development Budget?

11. Challenges of the Climate Funds
Lack of a sound and integrated financing system.
Rather than a projectized approach, climate finance needs to be addressed by a funding stream throughout the entire public sector.
Neither fund developed into a costed and prioritized programme embedded into national development planning and budgetary systems.
Lack of coordination between relevant ministries and implementing agencies.
Proliferation and variety of funds makes it difficult to ensure funds complement each other’s investments.

12. Challenges of the Climate Funds (contd.)
Controversy amongst policy, planning, coordination and finance roles as CSOs and the community marginalized
Capacity Gaps in terms of Institutions and human resources
Donor capacity issues – how to spend their money wisely and where climate change fits in with longer running programmes.

13. Recommendations for Coherence
Climate change must be incorporated and recognized as a part of development at all levels
Development of a national Climate Fiscal Framework within which roles of involved parties can be allocated.
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.
Support provided to improve coordination within the Government and between national and local levels.
Coordination within the donor community should be improved Scaling up and innovating. Clearer division of tasks and specialization of development partners.
Recommendations for Coherence

14. 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’

15. THANK YOU! QUESTIONS?