Tackling Climate Change Through Budget Transparency
The urgent imperative of tackling climate change is rarely associated with the dry science of budgeting and fiscal policy. Yet this could dramatically change if the current climate negotiations in Paris that will conclude this week produce a groundbreaking deal. Many sizeable countries, including China, India, Mexico and the US, made significant commitments to reducing greenhouse gas emissions in advance of the talks. National commitments are likely be matched by a further increase in financial resources to help poorer countries reduce emissions (mitigation) and tackle the adverse effects of climate change (adaptation) to reach $100 billion a year. Comprising both public and private finance, this is equivalent to 75 percent of the $135 billion spent on official aid flows in 2014.
Increasing funding for both adaptation and mitigation is crucial to tackling climate change and for promoting low-carbon, climate-resilient development. Most of the focus so far has been on increasing the scale of climate finance. However, scant attention has been placed on the effectiveness of this climate finance. This is a massive oversight. Mobilizing finance is arguably easier than ensuring that it addresses the challenges of the most vulnerable (who are often the least powerful politically), and supports the rapid transformation we need to see in energy, cities, agriculture and economic systems.
Adaptation is the main focus of the less developed countries in the climate talks and they want to see a significant share of new climate finance allocated for this purpose. Investments in adaptation are vital for protecting the livelihoods and resources of poor people in developing countries who are most at risk from the effects of climate change. They enable countries to invest in climate proofing agriculture production, small-scale infrastructure to protect land from sea erosion and desertification, and support alternative income-earning opportunities for the poor.
Channeling adaptation finance through public budgeting systems is clearly preferable than doing so through parallel mechanisms outside the budget. But the increased availability of funds will only be effective in helping countries address climate change if the systems are in place to manage this huge flow of resources in a transparent and accountable manner. Budget transparency and mechanisms to ensure citizens’ participation and oversight of climate funds are critical to this endeavor. The risk is that large increase in financial flows will not be channeled through national budgeting systems and their allocation and impact will be hard to monitor.
A big opportunity to tackle climate change in poorer countries could be squandered if the systems are not in place to manage, channel and monitor these financial flows well. At worst, vulnerable people will not be able to adapt to the effects of climate change and suffer adverse consequences, as could the economies of these countries. 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.
A related challenge lies in ensuring that a massive increase in spending on adaptation measures translates into sustainable investments on the ground. Research by the World Resources Institute (WRI) and its 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 existing spend on adaptation, making it difficult to track investments in climate adaptation 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 poor people. In Zambia, for example, monitoring groups found that communities were not aware of the dam project planned in their locality as an adaptation investment until this broke ground. They had not been consulted to determine what the best use of the funding should be to help them adapt to climate change. In the end, the dam that was built caused major disruptions and relocation, and only benefited a very small share of the local population. Lack of comparative data and information also makes it difficult to monitor budget allocations and spending for adaptation across countries.
However, there are now ways to address these challenges. The effectiveness of public expenditures depends heavily on transparency, citizen participation and oversight mechanisms. Independent data initiatives like the Open Budget Survey sponsored by the International Budget Partnership (IBP) can play a critical role in pursuing this goal. Covering 102 countries, the 2015 Open Budget Survey (OBS) 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. The 2015 survey results reveal 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 in this grouping that are vulnerable to the effects of climate change and citizens in those countries that are unable to access information related to adaptation spending.
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 the finding from WRI research in Nepal, Philippines and Uganda concerning the difficulty local NGOs face in accessing budget information on climate finance to enable them to track spending commitments on the ground.
The third theme in the OBS relates to legislative oversight and the role of supreme audit institutions in providing oversight on the budget process. The 2015 survey finds that only a third of countries surveyed actively engage their legislatures in the budget process. Weaknesses were also observed in how far supreme audit institutions are able to scrutinize public funds in the majority of countries.
The limitations identified in the OBS survey are a serious cause for concern as the Paris climate talks head to their conclusion with an expected hike in financial flows for poor countries to tackle climate change. Efforts to improve budget transparency can help to improve the accountability of governments in the allocation and use of climate funds. The climate change community needs to care deeply about open budgets. Without this, increased funding will not bring about the positive impact we expect for poor people and less developed countries.