07/22/2024 | News release | Distributed by Public on 07/22/2024 09:28
The unprecedented challenges posed by climate change demand immediate and effective action by governments and finance ministries to address the challenges of mitigation and adaptation.
Addressing the climate crisis will require aligning between 7% and 19% of annual GDP, which will represent spending between $470 billion and $1.3 trillion in infrastructure and social spending by 2030, with a view to achieving sustainable, resilient and decarbonized development goals. In addition, an IDB study found that pursuing decarbonization actions in the region could bring $2.7 trillion (million billion) net benefits by 2050. Luckily, part of this effort will consist of redirecting existing flows, and the benefit of this redirection will far exceed its cost by avoiding the worst impacts of climate change and generating economic, social, fiscal, and environmental benefits.
In this context, climate public expenditure assessment becomes a fundamental tool to ensure that public funds are used efficiently and effectively to address this challenge.
What is climate public expenditure assessment?
Climate public expenditure assessment involves a detailed analysis of how public resources are being allocated and used to address climate change. This assessment goes beyond simply tracking how much is spent on climate initiatives. It involves analyzing the extent to which national public budgets invest in the decarbonization and climate resilience goals set by each country and under the Paris Agreement, as well as assessing their effectiveness and efficiency, i.e., whether expenditures achieve their objectives, whether they are optimized to deliver the desired outputs, and whether they are allocated to the areas with the highest priority and most significant benefits.
In Latin America and the Caribbean, several countries such as Paraguay, Argentina, Costa Rica and the Dominican Republic have worked on identifying their climate expenditure through budget classifiers under the IDB's Conceptual Framework for the Classification of Public Expenditure on Climate Change. However, to date, no country in the region has begun to systematically evaluate its public climate expenditure.
Why is it essential to evaluate public climate spending in the region?
How could we evaluate public climate spending?
To address these challenges, the countries of Latin America and the Caribbean, together with the Inter-American Development Bank (IDB), within the framework of the Regional Climate Change Platform of Ministries of Economy and Finance, are currently developing methodological guidelines for the evaluation of public budget expenditures, which are pioneers of their kind. This framework is based on a three-level stepwise approach that facilitates a comprehensive and detailed analysis.
The evaluation of public climate expenditure is not only a technical tool, but a strategic necessity for the countries of Latin America and the Caribbean. It allows governments to optimize the use of their resources, comply with their international commitments, and, above all, ensure that their investments generate a positive and long-lasting impact in the fight against climate change. In addition, one of the fundamental principles of the methodological guidelines is their flexibility, recognizing that each country faces unique challenges and has different resources and capacities, which implies that the implementation of these guidelines may vary significantly according to the local context.
Therefore, implementing the methodological guidelines proposed by the region's Ministries of Finance and the IDB is a crucial step towards a more sustainable and resilient future. Through rigorous and transparent evaluation, governments can ensure that every investment made effectively contributes to building a more resilient and equitable world.