Towards a coalition for capacity on climate action for finance ministries

In 2022 alone, exceptional floods in Pakistan, heat waves in South Asia, an unprecedented winter drought in Europe and the impact of increasingly regular extreme weather events on small island states around the world have brought the potential impact of climate change on human lives into sharp focus.  The effects of climate change are overlapping with an unprecedented series of interlinked crises in the form of rising debt, challenges in recovering from COVID-19, food price inflation and geoeconomic fragmentation. This calls for a revamping of the way we plan economic, energy and environmental policies, putting climate action at the core of policy strategies.

To implement the Paris Agreement, countries are developing Nationally Determined Contributions (NDCs) and Long Term Strategies to which offer a vision of emission reduction pathways with different time horizons. Quite often, the ministry of environment is responsible for these plans and their regular updates, although not necessarily with a close coordination with finance ministries. As finance ministries oversee revenues and expenditures of all government departments, they shape through these decisions the concrete feasibility of any long-term strategy or investment plan.  They are managing the inevitable resulting trade-offs without necessarily having the full analytical capability at hand.

Finance ministers are well aware of climate change, its impacts, and of mitigation and adaptation solutions. The Coalition of Finance Ministers for Climate Action, initially created in 2018 with 39 countries, now regularly assembles more than 80 finance ministers on climate-related topics. The current Coalition  represents more than 66 percent of global GDP and 40 percent of global carbon emissions.  It offers a global vector of coordination of finance ministries on climate action, both in terms of domestic enhancement of capabilities, and international support for action.

However, the knowledge of finance ministries on climate matters remains unevenly disseminated across countries and within each finance ministry. And it is not always well coordinated with line ministries such as ministries of environment, transport, or planning. When asked about climate change impacts and policies, finance ministers tell us that they have patchy and inadequate access to tools and analytical capabilities for the quantitative assessment of climate risks or the opportunities in addressing climate change mitigation and adaptation.  In addition to this, they mention peer learning between finance ministries as an essential enabler of raising ambition and action.

A new Coalition for Capacity on Climate Action (C3A) convenes finance ministries and their ecosystem to provide integrated and common solutions for implementing climate-aligned development strategies. The program aims at filling gaps in knowledge and dissemination, in close coordination between the World Bank and the Coalition of Finance Ministers. What sets the C3A program apart is that it is a demand-driven initiative.  As country specific socio-economic conditions differ, the program will pay particular attention to an initial needs assessment that will be conducted as part of the key activities. Regional and thematic hubs play an essential role in connecting specific capacity-building needs to a wide range of knowledge providers across regions. This approach of C3A will not only build capacity to better equip finance ministries to tackle the problems at hand. By bringing together diverse perspectives, leveraging local knowledge, promoting ownership, C3A will contribute to the long-term sustainability and effectiveness of policy making.

The Summit for a New Global Financial Pact will soon be held in Paris in June 22-23, 2023. It aims to redefine a global financial architecture for addressing climate change and nature loss mitigation, as well as development challenges.  This global agenda deeply converges with the C3A approach. If policies are the sails of a ship, guiding its course, it is the crew's skill and dedication that determine whether it reaches its destination. This is the role that C3A has set for itself.