A booklet

Financing Schemes

Affording adaptation measures at the local level

IMPRINT ABOUT THE CLIMATE CHANGE COMMISSION The Climate Change Commission, an independent and autonomous body that has the same status as that of a national government agency, is under the Office of the President of the Philippines. It is the lead policy-making body of the government which is tasked to coordinate, monitor and evaluate the programs and action plans of the government relating to climate change pursuant to the provisions of the Republic Act No. 9729 or the Climate Change Act as amended by Republic Act No. 10174 or the People’s Survival Fund.

ADDRESS Room 238 Mabini Hall, Malacañang Compound, San Miguel, Manila, Philippines CONTACT T: (632) 736.1171 | 735.3144 E: info@climate.gov.ph www.climate.gov.ph PUBLISHED BY Climate Change Commission WITH SUPPORT FROM Global Green Growth Institute www.gggi.org ACKNOWLEDGMENT This publication is mainly sourced from the Philippine Climate Public Expenditure and Institutional Review (CPEIR), a study led by the Climate Change Commission and the Department of Budget and Management with support from the World Bank.

PLACE AND DATE OF PUBLICATION Manila, Philippines November 2013

Content Introduction Internal sources of funds • Local level • National level

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External sources

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Introduction

Internal sources

The implementation of climate change actions involve one critical aspect — funding. A study on the financial needs assessment of the Philippines revealed that it has been substantially spending for its own climate related activities.

Majority of the financial resources for climate change adaptation stem primarily from domestic sources through the General Appropriations Act (GAA), Special Purpose Funds (SPFs), and Special Accounts in General.

The finance structure of the Philippines shows that both the national and local government units have several access points in relation to enable financing of climate change actions. As illustrated under the Philippine Climate Public Expenditure and Institutional Review (CPEIR), the Department of Budget and Management (DBM) leads the public expenditure management of the government, both the national agencies and local government units. The local government units have several options financing their local programs, specifically adaptation measures.

Both the brunt of the impacts and the frontliners to climate change actions are at the shoulders of the local government units. Those LGUs most vulnerable have the greatest need for public support, yet have the least capacity to provide support under current revenue-sharing arrangements.

The Local Government Code of 1991 granted authority to LGUs to negotiate and secure grants from foreign contributors directly. For local funds, LGUs will receive an increased share of government revenues based on the LGU Financing Framework developed by the Department of Finance, however, the financing requirements of LGUs were also higher. The Climate Change Act of 2009 requires government financial institutions to provide preferential financial loan packages for local government units.

This booklet provide a summary of sources of climate financing, locally, and internationally.

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Sources of funds at the local level

Sources of funds at the national level

The local government units (LGUs) are the frontline agencies in implementing climate change adaptation at the local level. They primarily operate and implement programs and projects using their Internal Revenue Allotment (IRA). Most programs and projects relate to the delivery of basic services that are affected by climate change such as: agriculture, environment, health and infrastructure. The amount of the IRA is mainly dependent on the total population of the LGU and half comprising of land area and equal sharing. (Department of Interior and Local Government, 1991).

To ensure efficient implementation of climate change adaptation programs, Congress passed Republic Act 10174 which amended certain provisions of R.A. 9729 and created the People Survival Fund (PSF). It is a dedicated source of funding for LGUs and communities for financing adaptation programs and projects. These include adaptation activities, monitoring system for vector borne diseases, forecasting and early warning systems, institutional strengthening and risk guarantee, among others. Although PSF has not yet been operationalized, it serves as a catalyst to local climate financing and thereby prepare the institutions accept international finance from outside sources.

Aside from their IRA, the other potential sources of funding for climate change related activities come from the LGU’s own fund through the Local Disaster Risk Reduction and Management Fund (LDRRMF) to finance activities on disaster prevention activities, which accounts to 5 % of the General Fund. (National Disaster Risk Reduction and Management Council, 2010)

Also, innovative budgeting tools have been introduced that can support local climate financing, in general.

These are the Program Approach Budgeting - Bottom Up Planning and Budgeting (BUB).

Under the DBM, it implemented the Program Budgeting Approach that creates convergence efforts among the national government agencies in achieving the strategic objectives of the government. Strategic programs under the five key results areas (KRAs) of the President’s “Social

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Climate Policy and Climate Finance Environment in the Philippines

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Source: The World Bank, 2013

ACRONYMS

CCC CCCC NEDA

Climate Change Commission Cabinet Cluster on Climate Change National Economic and Development Authority

NDRRMC National Disaster Risk Reduction and Management Council DBM Department of Budget and Management DoF Department of Finance PSFB People’s Survival Fund Board

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Contract” espoused in the Philippine Development Plan were identified and prioritized for funding.

Adaptation measures can also be financed by capitalizing on the BUB approach especially because this looks into the LGUs vis-à-vis programs of the national government agencies. The BUB is conceptualized to ensure the “inclusion of the funding requirements for the development needs of at least 300 of the 609 selected focus local government units” that have been identified under the Human Development and Poverty Reduction Council. It is another approach wherein the budget proposals of the agencies considered the development needs of the poor LGUs based on the local poverty reduction plan which mainstreamed, among others, climate change adaptation strategies. The identified priority projects can be financed either by the LGU itself through its Annual Investment Plan or for consideration of the national agencies vis-à-vis the national agencies’ proposed budgets. (Department of Budget and Management, 2012).

Majority of the financial resources for climate change adaptation at the national level is sourced through the General Appropriations Act, Special Purpose Funds and Special Account in General Funds. Although a great part of the aforementioned funds support flood control and management-related programs and projects (The World

Bank, 2013), the LGU can also tap direct funding from the appropriate agency especially for climate change actions that were previously implemented by the said national government agency.

The Performance Challenge Fund (PCF), although developmental in nature, is another facility that is made available to finance local development projects that is supportive to the achievement of the Millennium Development Goals. It is an incentive fund available to low income class municipalities through counterpart funding of local development projects identified in the LGU’s Annual Investment Plan. It puts a premium on the performance of the LGU and uses this to avail of financial support for local economic development initiatives for poverty reduction, which may be an adaptation measure.

(Department of Interior and Local Government, 2011).

At the country level, the platform for donors and national agencies to coordinate on efforts to climate change was created through the Philippine Development Forum (PDF) – Climate Change Working Group. It serves a process to develop consensus as well as get commitments from stakeholders towards the achievement of the government’s agenda. (Philippines Development Forum).

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Summary of the Local Sources for Climate Financing in the Philippines Source: The World Bank, 2013

Required Cost Sharing

Eligibility

Partial

None

Non-restrictive

Poverty-based

• • •

• • •

PCF (50%) BUB (5-30%) Direct spending by NGAs (10-70%)

LDRRMF LDF PSF

Adaptation and DRRM Purpose

•

• • •

• •

PDAF LDF (not applicable) LDRRMF (not applicable)

PDAF (poor LGUs; 4th to 6th class) BUB (609 poorest municipalities)

Adaptation only •

PSF

Multiple factors • •

General development (including adaptation) • • • • •

LDRRMF

PCF (based on Performance Assessment and poverty rate) Direct spending (Qualify if help deliver sectoral priorities)

LDF PCF PDAF BUB Direct spending by NGA

ACRONYMS

BUB NGA LDF LDRRMF

Bottom-Up Planning and Budgeting National Government Agency Local Development Fund Local Disaster Risk Reduction and Management Fund

PCF PDAF PSFB

Performance Challenge Fund Priority Development Assistance Fund People’s Survival Fund Board

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External sources

External funding options for adaptation in the Philippines Source: UNFCCC

At the global level, there are a number of currently available funding mechanisms for climate change adaptation. Twelve adaptation funding options are available for the Philippines that vary from grants, loans and technical assistance and focus on different sectors such as food security, agriculture, forestry, fisheries, water, population, DRR, oceans and coastal, water and terrestrial ecosystems. (United Nations Framework Convention on Climate Change).

Name

Sectoral Focus

Description

Benefit-sharing Fund of the International Treaty on Plant Genetic Resources for Food and Agriculture

• Food security • Agriculture • Forestry • Fisheries

Shared responsibilities between government and private / business sector

Cool Earth Partnership

• Food security, agriculture, forestry and fisheries • Water • Population and human settlements

The Cool Earth Partnership is funded by the Government of Japan.

Assistance will be provided to developing countries, which are vulnerable to the adverse effects of climate change (e.g., African and Pacific island counties), to take adaptive measures.

Cooperation Fund for the Water Sector (CFWS)

• Water

The CFWS is funded by the Asian Development Bank (ADB). It finances a coherent program of activities designed to promote effective water management policies and practices in Asia-Pacific.

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Name

Sectoral Focus

Description

Development Market Place (DM)

• Disaster risk reduction • Education and training

The Development Marketplace is a competitive grant program administered by the World Bank. The 2009 global competition focuses on climate adaptation.

Global Facility for Disaster Reduction and Recovery (GFDRR)

• Terrestrial ecosystems • Disaster risk reduction • Education and training • Food security, agriculture, forestry and fisheries • Health • Oceans and coastal areas • Population & human settlements • Science, assessment, monitoring and early warning • Tourism • Water

The GFDRR is funded by the World Bank. It provides technical and financial assistance to low and middle income countries to mainstream disaster risk reduction into their national plans.

Sectoral Focus

Description

International Climate Initiative

Name

• Water • Food security, agriculture, forestry and fisheries • Disaster risk reduction • Health • Population & human settlements • Terrestrial ecosystems

The International Climate Initiative is a key element of the government of Germany in the implementation of faststart financing.

MDG Achievement Fund (MDG-F)

• Food security, agriculture, forestry and fisheries • Water • Terrestrial ecosystems • Disaster risk reduction • Health • Oceans and coastal areas • Population & human settlements • Science, assessment, monitoring and early warning • Education and training • Tourism

The MDG Achievement Fund (MDG-F) is funded by the Spanish government and is implemented through agencies such as UNDP, UNICEF and FAO. One of its funding areas is environment and climate change related activities.

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Name Program on Forests (PROFOR)

Small Grants Programme (SGP)

Sectoral Focus • Food security, agriculture, forestry and fisheries

• Terrestrial ecosystems • Water • Population and human settlements • Food security, agriculture, forestry and fisheries

Description

Name

Sectoral Focus

The PROFOR is funded by the World Bank. It funds projects at all levels that are typically less than two years in length and fall in any of the following thematic areas: forest governance, sustainable forest management, crosssectoral cooperation and livelihood approach to poverty reduction.

Special Climate Change Fund (SCCF)

• Food security, agriculture, forestry and fisheries • Terrestrial ecosystems • Oceans and coastal areas • Health

The SCCF is funded through the GEF. It assists developing countries in implementing adaptation measures that reduce the vulnerability and increase the adaptive capacity of countries.

Strategic Climate Fund (SCF)

• Terrestrial ecosystems • Disaster risk reduction • Education and training • Food security, agriculture, forestry and fisheries • Health • Oceans and coastal areas • Population & human settlements • Science, assessment, monitoring and early warning • Tourism

The SCF is funded by the Word Bank, the African Development Bank (AfDB), the Asian Development Bank (ADB), The European Bank for Reconstruction and Development (EBRD), and the InterAmerican Development Bank (IDB). It provides financing to pilot new or scale up existing activities on specific climate change challenges.

The SGP is funded through the GEF, and is implemented through UNDP. It aims to deliver global environmental benefits in areas, including biodiversity conservation and protection of international waters through communitybased approaches.

Description

ABOUT THE CLIMATE CHANGE COMMISSION The Climate Change Commission, an independent and autonomous body that has the same status as that of a national government agency, is under the Office of the President of the Philippines. It is the lead policy-making body of the government which is tasked to coordinate, monitor and evaluate the programs and action plans of the government relating to climate change pursuant to the provisions of the Republic Act No. 9729 or the Climate Change Act as amended by Republic Act No. 10174 or the People’s Survival Fund.

ADDRESS Room 238 Mabini Hall, Malacañang Compound, San Miguel, Manila, Philippines CONTACT T: +63.2.735.3069 | 736.3144 E: info@climate.gov.ph www.climate.gov.ph

ABOUT THE GLOBAL GREEN GROWTH INSTITUTE (GGGI) GGGI is a new kind of international organization — interdisciplinary, multi-stakeholder and driven by the needs of emerging and developing countries. It has been established by several forwardthinking governments to maximize the opportunity for “bottom up” (i.e., country- and businessled) progress on climate change and environmental challenges within core economic policy and business strategies. GGGI is dedicated to pioneering and diffusing a new model of economic growth in developing and emerging countries, known as “green growth,” that simultaneously targets key aspects of economic performance, such as poverty reduction, job creation and social inclusion, and those of environmental sustainability, such as mitigation of climate change and biodiversity loss and security of access to clean energy and water.

ADDRESS 19F Jeongdong Building, 15-5 Jeong-dong, Jung-gu Seoul 100-784, Republic of Korea CONTACT T: +82-2-2096-9991 F: +82-2-2096-9990 www.gggi.org