CLIMATE ACTION AT THE HEART OF COVID-19 RECOVERY PLANS MAY 2020
COVID-19â&#x20AC;&#x2122;s economic impact could push half a billion people into poverty and reverse a decade of poverty reduction. Rarely have countries been compelled to craft and implement policies to address rapidly changing economic and social conditions with such speed and multi-sectoral focus. The global slowdown induced by COVID-19 has also thwarted what was dubbed the Super Year for Climate. The full impact of the pandemic on climate action is already emerging, from dwindling political attention, diversion of financial resources, and reduced national capacity to meet 2020 NDC enhancement deadlines. However, COVID-19 recovery creates an unprecedented opportunity. Extraordinary crisis response stimulus packages are emerging that offer a unique opportunity to design and enact comprehensive measures to mainstream and accelerate climate action. It is the first time since the adoption of the Paris Agreement and Sustainable Development Goals that socio-economic and development needs have so profoundly and naturally aligned with urgent climate needs. Last month, the NDC Partnership surveyed 68 developing countries within its membership to ascertain their plans to move forward NDC implementation, COVID19â&#x20AC;&#x2122;s impact on plans to update NDCs, and how the Partnership can best support recovery efforts. The landmark survey includes input from 54 countries where the Partnership is actively engaged, responses from 32 Ministries of Finance or Planning and 48 Ministries of Environment or Climate Change. Five striking yet instructive messages are emerging from our survey. Foremost is the immediate and projected reduction in climate spending.
CLIMATE SPENDING IN DEVELOPING COUNTRIES IS LIKELY TO BE HIT HARD IN THE SHORT-TERM Countries are taking five primary types of fiscal actions to address the COVID-19 crisis (See Figure 1). COVID-19 response measures go beyond providing liquidity to households and businesses and expanding access to health services. Some countries are supporting job creation to promote economic recovery. The high cost of current COVID-19 responses, alongside capital flight, revenue loss, and increased debt, is exerting tremendous pressure on climate budgets. Seventy-one percent of country respondents expect a negative impact on their national climate budget, including co-financing for projects already agreed with multilateral climate funds. In some cases, unreleased appropriations and unobligated budget allocation for climaterelated projects and programs are being reallocated for immediate needs to respond to the impacts of the pandemic. Estimates for cuts to annual Environment Ministry budgets range from 15-35% in the short term , and up to 50% if COVID-19 restrictions are prolonged. While temporary debt relief announced by some multilaterals will help in the immediate term, this will add to future debt burdens. These macro-economic shocks will have significant impact on NDC costing and subsequent budget allocation for climate actions in the short to medium term.
FIGURE 1. TOP 5 COVID-19 FISCAL RESPONSE BY INSTRUMENTS
QUALITY AND TIMELINE FOR UPDATED NDCS ARE AT RISK Notwithstanding the threats to national climate budgets, some countries appear to still be on track to submit NDCs this year while others are considering postponing until 2021. In any event, the challenges countries are facing will have an impact on the quality and the ambition of submitted NDCs. Most respondents anticipate a delay in NDC enhancement due to COVID-19 induced challenges, including to collect and validate data, maintain fluid communications and decision-making processes, and to convene key stakeholders. Seventy-nine percent of respondents from Environment or Climate Change Ministries indicated they expect the quality and/or ambition of their revised NDC to be undermined by fiscal and human resources pressure caused by the pandemic response. Many countries also specified major limitations caused by their technological capacity and internet connectivity. While efforts are underway to move some convenings online, in-person meetings are important to ensure effective consultation with key parts of government and society, namely legislators, cabinet members, subnational governments, private sector, and civil society.
GOVERNMENTS ARE CONSIDERING NDCS WITHIN THEIR STIMULUS PLANS Effective and comprehensive consultation is key at this time because many countries are interested in using recovery measures and economic stimulus packages to accelerate NDC implementation and raise climate ambition. There is particular interest in seizing the opportunity to scale up work on adaptation and disaster resilience. Most (84%) respondents from Ministries of Finance or Planning will be considering climate action when developing stimulus packages or other covid-19 response spending decisions. The receptivity to leverage COVID-19 recovery packages to drive forward climate ambition presents an enormous, immediate and unique opportunity to promote a â&#x20AC;&#x2DC;green growthâ&#x20AC;&#x2122; agenda in developing countries where limited fiscal space could restrict stimulus packages to one.
Ministries of Environment and Climate Change suggested multiple areas for NDC to support economic stimulus or health sector responses: • 63% highlighted climate resilience, including public health and disaster risk management (e.g. COVID-19 could provide insight into how to address future climate-related public health crises). • 25% identified GHG mitigation opportunities aligned with improvements in public health (e.g. new ambient air quality policies and MRV systems that account for economic costs of respiratory disease linked to climate pollutants). • 19% highlighted the importance of reinforcing public health through sectors particularly vulnerable to natural disasters (e.g. waste management, water and sanitation). • 19% identified food insecurity in developing countries as widely impacted by COVID-19. Greater emphasis is needed on climate smart agriculture in revised NDCs and recovery mechanisms. Additional examples highlighted by countries included using nature-based solutions as a recovery measure or using the recovery to build green tourism in coastal areas. Other country representatives recognized opportunities to align health care resiliency measures with energy efficiency and accessibility. Costa Rica highlighted the importance of nature-based solutions as a recovery measure, as well as, the potential for increasing the availability and reliability of renewable power supply for the operation of ventilators at hospitals, clinics, and other buildings used for medical purposes.
FIGURE 2. RESPONSES ALIGNED TO NDCS
THERE IS URGENT NEED FOR TECHNICAL ASSISTANCE TO DELIVER ON SOCIO-ECONOMIC PRIORITIES WHILE ADDRESSING CLIMATE CHANGE While many countries intend to align their recovery efforts with national climate priorities, governments need, and have identified specific forms of, support to act. Sixty-six percent of Ministry of Finance or Planning respondents need support to conduct macro impact assessments of COVID-19 on national climate ambition; 51% for strategies to trigger green growth through economic stimulus packages; and 54% for adjusting costing of updated NDCs considering changed economic circumstances and the governmentâ&#x20AC;&#x2122;s fiscal position. Other requests for technical support were largely aimed at evaluating the large-scale impact of COVID-19 on national climate ambition and building resilience in impacted sectors. Some ministerial representatives are keen to strengthen in-house capacity on economic crisis management. Enhanced economic crisis management capacity includes conducting Climate Stress Tests Scenarios to mitigate against future uncertainties and Green Bonds and/or COVID-19 Bonds. Other requests centered on accounting for reallocation of national budgets, guidance in economic or climate impact assessments and for the development of a long-term resource mobilization framework.
FIGURE 3. AREAS OF TECHNICAL SUPPORT REQUESTED
All Ministry of Finance or Planning respondents indicated their governments would benefit from an embedded economic advisor for support across priority technical areas. Additional requests for support included economic advisors to integrate climate change into Public Financial Management and COVID-19 response measures. These measures are intended to develop stimulus packages that can generate green growth and enable robust macroeconomic assessments of COVID-19â&#x20AC;&#x2122;s impact on climate ambition. The integrated approach to COVID-19 economic recovery planning also aims to demonstrate the value of green recovery and support resource mobilization.
COUNTRIES ARE EAGER TO LEARN FROM EACH OTHER Countries are eager to learn from each other to effectively deploy stimulus packages. Most (77%) Ministry of Finance or Planning respondents indicated an interest in peerlearning, especial from countries within their region or with similar economic characteristics. Countries are primarily interested in recovery plans and strategies for deploying economic stimulus instruments in alignment with climate objectives. Emblematically, countries frequently mention a need for green finance, green bonds, Climate Stress Testing, and the identification of international sources of finance.
PROPOSED RECOVERY SUPPORT Countries will face unique challenges in aligning their climate action with health and economic priorities. In response to this immediate and unprecedented challenge, the NDC Partnership is exploring to embed national economic advisors, complemented by virtual expertise from the Partnership, based on requests from member countries. Tailored support offers dual benefits. It simultaneously helps to mitigate the impact of new macro-economic responses on the climate agenda and promotes measures to stimulate green growth. Specifically, tailored support that employs NDCs as a tool to incorporate low-carbon shovel-ready projects into economic stimulus plans could stimulate green growth. The Partnershipâ&#x20AC;&#x2122;s proposal is envisioned to complement its current operational model: a country-driven provision of fast and flexible support to all members. The Partnership is committed to ensuring that its activities support countries without distracting from their urgent response to the pandemic. Our support to members will follow close coordination with existing policies and initiatives in countries and in cooperation other initiatives, including the Coalition of Finance Ministers.
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