What is a Political Economy Analysis, and what is its value for Climate Change Finance? Thomas Tanner Institute of Development Studies, UK

My own political economy journey My own experience from LSE student, thru DFID, MoEF, thru IDS Bulletin Seen view from student, donor, government implementation, Dominant view: Cc as global problem requiring global solutions But in-country politics and conditions dominate the reality Too many international initiatives assuming a blueprint approach Political economy as a route to smart use of climate finance Tinyurl.com/pecc2011

Challenging Assumptions Climate change is a largely technical challenge Climate change governance requires capacity building Climate change finance is an extension of ODA political Climate change is a largely technical challenge Climate change governance requires capacity building negotiating institutions, interests and ideologies Climate change finance is an extension of ODA implies transfers based on equity and responsibility

What is political economy? Political economy variously interpreted as: Production, distribution and accumulation of economic surplus within a class-divided society (Marx) Relationship between the state and the market (‘Regulation’) Process governing, and distribution of, power and wealth between groups (OECD) Dominant role of power and ideology in affecting decision making processes and resource allocation (Clapp and Devergne; Tanner and Allouche) Or could just use the OECD-DAC definition of PEA: Political economy analysis is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time

What is political economy analysis? Political economy analysis seeks to understand: Interests and Incentives Norms and Institutions (formal and informal) Values, Culture, Ideas, and Ideologies ...and how these shape political action and development outcomes Interests and Incentives (e.g. off-budget environment ministries securing projects; national leaders as international champions) Norms and Institutions (formal and informal) (not following donor agendas; deals at the club; use of the project vehicle by which Minister) Values, Culture, Ideas, and Ideologies (Markets versus the state; Water engineers in determining adaptation; )

What is political economy analysis? Political economy analysis seeks to understand: Interests and Incentives ...and how these shape political action and development outcomes Interests and Incentives (e.g. off-budget environment ministries securing projects; national leaders as international champions) Norms and Institutions (formal and informal) (not following donor agendas; deals at the club; use of the project vehicle by which Minister) Values, Culture, Ideas, and Ideologies (Markets versus the state; Water engineers in determining adaptation; )

What is political economy analysis? Political economy analysis deals with: Interests and Incentives Norms and Institutions (formal and informal) ...and how these shape political action and development outcomes Interests and Incentives (e.g. off-budget environment ministries securing projects; national leaders as international champions) Norms and Institutions (formal and informal) (not following donor agendas; deals at the club; use of the project vehicle by which Minister) Values, Culture, Ideas, and Ideologies (Water engineers in determining adaptation; )

What is political economy analysis? Market-liberals: Forests, markets and economic growth Institutionalists: Forests and governance Bio-environmentalist: The ecological value of forests Social greens: Humans and ecology inseparable Visions of REDD+ Political economy analysis deals with: Interests and Incentives Norms and Institutions (formal and informal) Values, Culture, Ideas, and Ideologies ...and how these shape political action and development outcomes Values, Culture, Ideas, and Ideologies (e.g. Water engineers in Bangladesh determining a techno-managerial approach to tackling adaptation problems; different visions of REDD+ playing out internationally and nationally (e.g. Brazil regions))

CorePEA Methods Actor network mapping Interviews and informal conversation (shadow networks) Workshops, games, scenario exercises and trade-off analysis

Why is PEA useful for climate finance Improved effectiveness Baselines of actors, formal institutions and flows Understand how change happens, what is feasible Widen participation, improve accountability Match different possible finance options to national conditions Understand donor political economy too...

PEA Risks and challenges Vested interests can resist and block change Incentives range from cultural norms to illegal acts Time-consuming: Trade-off urgency and effectiveness Opening processes to wider voices can lead to contestation and conflict BUT... Surely some PEA is better than making false assumptions?

tinyurl.com/tannerhorn Thank you More on political economy of climate change at: tinyurl.com/PECC2013 Summary article at: tinyurl.com/Incheon2013 NEW! Climate Change and Development Book tinyurl.com/tannerhorn