Climate Finance Governance in Nepal

The note was presented in CBA10 (21-28 April 2016) in Bangladesh

Climate Finance in Nepal

The government of Nepal has shown commitment of bringing upto 80% climate marked budget to local climate vulnerable communities especially poor, women and dalit groups through formulating Climate Change Policy.

National Planning Commission produced Climate Public Expenditure Institutional Review (CPEIR) Report in 2013. The report was found instrumental to understand government’s commitment for addressing climate change issues particularly budget allocation as against the climate change policy, 2011 of bringing upto 80% climate change budget at local level. Moreover, the report acted as a baseline on climate change adaptation budget allocated by public sectors in Nepal.   

The CEPIR lead to produce National Climate Change Budget Code. National budget allocation to climate change related activities increased from 6.74% (Rs. 27,282,629,000 - approx. US$264m) in 2012 to 10.3% in 2013 (Rs. 3,482,516,000 - approx. US$33.7m) and 19.45 % (Rs. 159,346,729,000 – approx. US$1,533m) in 2014. In addition, in line with the CPEIR Report, the Ministry of Federal Affairs and Local Development (MoFALD) through Local Climate Change Adaptive Living (LoCAL) has implemented performance based climate change resilience grant in Dhading and Rupandehi Districts of Nepal since 2014.

Local Climate Adaptive Living Facility (LoCAL) in Nepal

To ease tracking the climate change budget at local level, UNCDF in collaboration with UNEP and UNDP is developing a local climate change adaptation financing mechanism, the LoCAL, for Local Bodies (LB) in Nepal. The LoCAL is part of the global LoCAL facility of UNCDF. In LoCAL Nepal has been integrated in the successful Local Governance and Community Development Programme (LGCDP) phase II and under the Poverty and Environment Initiative of UNEP/UNDP. The PEI’s main objective is to promote Nepal’s transition towards Environmental Friendly Local Governance and climate resilient development. The LoCAL has been a complementary by strengthening Local Bodies for climate change resilience through mainstreaming Climate Finance in intergovernmental Fiscal Transfers System and the local planning and budgeting process. The key characteristics of LoCAL in Nepal are as follows:

·         The Local Climate Adaptive Living Facility (LoCAL) provides a mechanism to integrate climate change adaptation into local governments’ planning and budgeting systems, increase awareness and response to climate change at the local level, and increase the amount of finance available to local governments for climate change adaptation.

·         LoCAL makes use of performance-based grants for climate resilience, providing incentives through financial top-ups, helping build stronger and more transparent government financial systems.

·         LoCAL promotes the integration of climate change adaptation into local development planning, supporting the actual implementation of national-level climate change and decentralization strategies.

·         LoCAL ensures the voices of the communities and the poorest are captured in local development plans and investments, so that climate finance reaches the ones who most need it.

·         LoCAL offers a proven mechanism for the international community to channel climate change finance to the most remote and vulnerable regions and populations of the world, ensuring traceability and performance monitoring and reporting.

LoCAL has been piloted in two districts (Dhading & Rupandehi) and 6 Village Development Committees (VDCs) – three each in Dhading and Rupandehi Nepal since April 2014. Key results delivered during the pilot include: i) increased CC awareness and citizen empowerment to employ adaptation/resilience building responses; ii) increased capacity of Local Bodies to mainstream CC resilience in local planning and to steer public climate finance to those most in need; iii) improved local public expenditure management and accountability; iv) and arrangements for tracking and reporting on CC adaptation expenditures at local level designed and tested.

Outcomes:

Dhading District Development plan has the policy of replicating LoCAL initiatives in non-piloting village development committees, Ministry of Federal Affair and Local Development has used the LoCAL financial mechanism in Environment Friendly Local Governance Program that is being implemented in 14 districts, 54 municipalities and 60 village development committees. Discussion is being evolved whether the mechanism now could help accessing Global Climate Fund.    

Issues:

Inadequate climate resilience indicators in the existing Minimum Condition and Performance Measure (MCPM) guidelines and administration of performance based climate resilient grant, inadequate capacity of local service providers particularly human resources for proper and timely reporting are the key issues for successful implementation of the LoCAL.

  

Way Forward:

·         Continuing piloting and developing the LoCAL mechanism in the selected pilot DDCs and VDCs.

·         Scaling-up of the LoCAL mechanism as the Government’s EFLG mechanism, which will over time become nationwide

·         Strengthening the EFLG system so it will be approved for accessing climate funding, including the Green Climate Fund.

·         Provides capacity development and quality assurance support.