how to overcome the barriers to successful climate financeit has been coordinated by nils-sjard...

How to Overcome the Barriers

to Successful Climate Finance

Executive Summary

San Salvador / Washington, DC

October 2012

LESSONS FROM EL SALVADOR

Why does climate finance matter to El Salvador?, 4

Overcoming climate finance barriers, 7

Barriers in accessing climate finance, 8

3.1 Domestic challenges in accessing climate finance, 8

3.2 Barriers detected in the international community, 10

Barriers in the management of climate finance, 12

4.1 Domestic challenges in climate finance management, 12


Barriers in accountability for climate change actions, 15

5.1 Domestic challenges in accountability,15


A roadmap for effective climate finance, 17

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3

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6

Contents

Foreword, 2

Acronyms, 19

Bibliography, 20

This study is a contribution of the Ministry of Foreign Affairs of El Salvador to the Inter-Institutional Committee on Climate Finance. It has been coordinated by Nils-Sjard Schulz (MultiPolar) in collaboration with Julio Flores and Bryan Pratt. Design by Whitney Gratton.

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Foreword

Among Central American countries, El Salvador faces a very high vulnerability to the

effects of climate change. The severe impact of the last three climatological events,

which occurred between 2009-2011, caused the death of hundreds of citizens. Tropical

Depression 12E (2011) alone, generated economic damages

totaling near 900 million dollars (USD), equivalent to 4% of the

nominal Gross Domestic Product for 2011.

Despite our sensitive vulnerability and the clear threats

climate change poses on our country, El Salvador is among the

countries that have gained less access to currently available

climate finance.

This deep climate finance gap is currently being addressed

within a limited fiscal leeway, product of the low fiscal

pressure experienced by the country, despite the efforts

undertaken by the current government and the strategic and

historic prioritization of social issues. In practice, this means

that the country is reorienting its public expenditures, often

leaving the line ministries without sufficient resources to meet

the basic needs of the Salvadoran citizens.

The study “How to overcome the barriers to effective climate finance - Lessons from El

Salvador” is a pilot initiative emerging from the First Latin American & Caribbean Dialogue

on Effective Climate Finance, held in May 2012 in Tela, Honduras. During this Dialogue 92

representatives from 26 countries, including practitioners from Ministries of Environment,

Development, Finance, and Foreign Affairs, discussed climate finance from the practice of

the countries.

It is important to highlight that this analysis has been a collective effort of the institutions

that are part of the Inter-Institutional Committee for Climate Finance. This Committee is

BOX 1El Salvador’s position on climate change As one of the world’s most vulnerable countries, the Government of El Salvador has been very actively involved in global and regional negotiations (for example, under the United Nations Framework Convention on Climate Change, and the Central American Integration System). The Government has been recognized for its commitment to defend the need to:

• Ensurethattherearebindingagreementsbasedontheprinciple of common but differentiated responsibilities.

• Make a clear distinction between climate finance andOfficial Development Assistance.

• RequirethatfinancialcontributionstotheGreenClimateFund and the Adaptation Fund are consistent with the international commitments made.

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steered by three key ministries (Environment, Presidency and Foreign Affairs) and gathers

a total of 18 government ministries and institutions. For the national process on climate

finance, the study has become a vital contribution, as it clearly identifies the key challenges

we face when accessing climate finance for our adaptation and mitigation priorities.

In the executive summary we are sharing today, some of the most important conclusions

relate to our institutional capacities and financial architecture which need to become

stronger in order to access and manage climate finance in an effective way. This process

has helped the government to develop a series of priorities to take action in the short and

medium run.

While the key challenges have been analyzed, the study also offers insights into the

important advances our institutions have made over the last years in order to be able

to access and manage climate finance. Here, we need to fully recognize that national

institutions have become empowered, and are now increasingly preparing for large-scale

climate finance.

I am very delighted to share with you this executive summary, which I trust will not only

be an interesting read, but also a tool for future South-South knowledge exchange. We are

confident that we have a lot to learn from each other, and it is time that we come together

around shared processes of capacity development.

Jaime Miranda Deputy Minister for Development Cooperation

Ministry of Foreign Affairs

Foreword

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Since November 2009, El Salvador has suffered the impact of three extreme weather events

causing the death of 244 people and generating economic losses amounting 1,329 million

U.S. dollars (USD), equivalent to 6% of nominal GDP for 2011. Climate variability presents

new patterns that point to the occurrence of more extreme rainfall and droughts (see Figure

1). This high and increasing vulnerability is met with clearly inadequate responses by the

international community. According to government records, external contributions to

post-disaster reconstruction of the three events indicated in Table 1 only reached about

21.6 million USD, approximately 0.016% of the total damage. Within a very narrow fiscal

space, El Salvador faces climate change mainly through a forced reorientation of public

expenditures (‘climate adjustment’). In addition, the government is in a critical situation

where it has to resort to additional big loans from multilateral development banks that

are generating alarming levels of long-term climate debts. Finally, one of the biggest

challenges for El Salvador is to include the increasing climate vulnerability, in particular

the adaptation to climate change, into its development model and, very specifically, the

national fiscal framework.

At the sight of these complex challenges, climate finance (see Box 3) is gaining

prominence in the national political agenda. Over the past three years, there has been

progress in national and sector climate change policies, institutional capacities, intra-

governmental coordination, and the design of financial mechanisms and instruments as

pillars of a national climate finance architecture. Among its assets, the country can rely on a

Why Does Climate Finance Matter

to El Salvador?

Impact of Three Climatological Events 2009-2011Name of Climate Event Date Human Loss

(Deaths)Economic Damage

(M of USD)

Support Received

(M of USD)

Tropical Storm E96/Ida Nov 2009 198 315 6.4

Hurricane Agatha May 2010 12 112 0.6

Tropical Depression 12E Oct 2011 34 902 14.6

TOTAL 244 1,329 21.6Source: MARN 2012c and data from SICDES 2012

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TABLE 1

Within a very narrow fiscal space, El Salvador

faces climate change mainly through a forced

reorientation of public expenditures (‘climate

adjustment’).

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significant capital of firm political leadership in various ministries, as well as capable and

highly motivated staff in government institutions. This capital translates into a dynamic

national process, which especially in the early months of 2012 has produced important

results. These include the approval of the National Environment Policy, the launch of

ambitious programs in agriculture, ecosystems and energy, the creation of Climate Change

Unit in the pioneer ministries (Agriculture, Finance, Public Works, and Foreign Affairs),

and the strong push to political and technical coordination through the Climate Change

1. Why Does Climate Finance Matter to El Salvador?

FIGURE 1Extreme Weather Events in El Salvador 1961-2011

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Committee (CCC) and the Inter-Agency Committee on Climate Change Financing (CIFCC,

for its Spanish acronym), respectively (see Box 4).

In this context, the Government engaged in

this study of the barriers El Salvador is facing

when it comes to accessing, managing

and accounting for international climate

financing. This analysis aims to generate a

detailed understanding of the limitations

both at the level of national capacities,

and with regard to the current support schemes of the international community. This

dual perspective helps identify the domestic and external factors that determine the

apparent contradiction between the high and continuing vulnerability of the country, on

the one hand, and the very limited international financial support, on the other.

To assess these factors, this government-led study reviews the barriers in the three basic

phases of the financial cycle (access, management, and accountability), both domestically

and in the international community that is active in El Salvador. Importantly, this study of

barriers is a pilot exercise informing a process of analysis and capacity development that

emerged in the Regional Dialogue that gathered 90 policy makers and practitioners

from 26 countries in Tela, Honduras, in May 2012 (Kreisler / Schulz 2012). This pilot effort

started from a solid base of information available in El Salvador, and largely benefited from

the interest of CIFCC members to embark on this analysis through, among other research

tools, 41 interviews and two national workshops with a total of 96 participants.

Following this study, the Government of El Salvador, through the CCC and CIFCC, is

defining a roadmap to ensure the effectiveness of climate finance (see section 6). Its

priorities include the in-depth analysis of climate-relevant public expenditures and the

adaptation of the national financial system to the challenges of climate change, as key

responses to the increasingly severe impact of climate change on the national economy

and the lives of the Salvadoran people.

1. Why Does Climate Finance Matter to El Salvador?

Following this study, the Government of

El Salvador, through the CCC and CIFCC, is

defining a roadmap to ensure the effectiveness

of climate finance.

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BOX 2So, what is international climate financing? Refers to financial flows from developed countries to developingcountries, in ways that are not reimbursable (or reimbursable at concessional rates, in terms of ODA), and that are designed to finance the incremental costs of mitigation and adaptation to climate change, according to the commitments made under the UNFCCC.

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BOX 3And what is climate finance?Referstoallresources,whetherfromnationalorforeignsources,whether public or private, dedicated to the reduction of emissions of greenhouse gases (‘mitigation’) and the development of social and productive infrastructure resilient to the negative effects of climate change (‘adaptation’). In other words, climate finance includes both international funding (see Box 2) and a country’s own budget allocations and financial instruments.

Overcoming Climate Finance Barriers 2Identifying the principal limitations to securing climate finance effectiveness in El Salvador,

this study analyzed the climate finance cycle in its basic components (see graphic). Inspired

by the principle of common but differentiated responsibilities, the study opts for a double

perspective. It looks into the existing barriers in terms of (a) national capacities, and (b) the

capacities of the international community to support the country in the face of climate

change. The barriers encountered in this study can be overcome in the following ways:

When accessing climate finance…

• The Government should have national and sector programs and plans, that

are costed and budgeted, and planning and pre-investment capacities need to

be improved.

• The international community should ensure transparency with respect to

the availability of funds and harmonize procedures for effective access by

national institutions.

In the management of climate finance…

• The Government should include climate change in public finances and could

diversify the menu of financial instruments, adapting the national financial

architecture in line with the national climate change strategy, which is still to

be finalized.

• The international community should use country systems and instruments to

channel financing and engage in a continued dialogue with the Government.

When accounting for climate finance…

• TheGovernment shouldensure results-based

management, ideally within existing country

mechanisms and institutions.

• The international community should improve

the accountability of its actions and engage

in mutual accountability, avoiding parallel

mechanisms.

GRAPHICThe climate finance cycle

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Barriers in Accessing Climate Finance3Access to climate finance has become a high priority for the Government of El Salvador. To

date, there have been significant advances in public policies, capacity development, and

financial instruments. In the short term, the Government needs to strengthen financial

planning for its programs, while the international community should ensure sufficient

transparency in the possibilities and procedures for accessing external financing.

Domestic challenges in accessing climate finance

El Salvador is advancing in a dynamic manner with anchoring climate change in its public

policies, such as the Fifteen Year Development Plan 2009-2014 (Plan Quinquenal de

Desarrollo 2009-2014) and the National Environment Policy (Política Nacional del Medio

Ambiente), passed in June of 2012. The increasingly clear climate vulnerability of the country

has penetrated national politics in El Salvador, with firm ministerial leadership, building

consensus around the upcoming National Climate Change Strategy and its Action Plan.

At the sector level, there are several important initiatives. The Ecosystem and Landscape

RestorationProgram(Programa de Restauración de Ecosistemas y Paisajes, PREP), launched

in May of 2012, will incentive collaboration among the distinct state sectors, with a projected

budget of 180millionUSD for the next five years.The PREP has originated innovative

work plans and inter-institutional agreements with key ministries, including Environment,

Finance, Public Works, and Agriculture. In early 2012, the Agriculture Ministry (Ministerio

de Agricultura y Ganaderia, MAG) created its Environmental Strategy for Climate Change

Adaptation and Mitigation in the Farming and Livestock Sector (Estrategia Ambiental de

Adaptación y Mitigación al Cambio Climático del Sector Agropecuario). Since early 2011,

MARNhaspromotedaprocessofinstitutionalre-engineeringandcapacitystrengthening

for the Environmental Fund of El Salvador (Fondo Ambiental de El Salvador, FONAES) in order

to convert FONAES into a powerful financial instrument for implementing the National

EnvironmentPolicy.MARNhasalsodesignatedtheFundas theNational Implementing

Entity that is in the process of accreditation for the UNFCCC’s Adaptation Fund. In May of

2012, the National Energy Council (Consejo Nacional de Energia, CNE) presented its Master

3.1

The increasingly clear climate vulnerability

of the country has penetrated national

politics in El Salvador, with firm ministerial leadership, building

consensus around the upcoming National

Climate Change Strategy and its Action Plan.

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PlanforRenewableEnergy(Plan Maestro de Energía Renovables), which is part of the

National Energy Policy for 2010-2024. The Ministries of Education (MINED) and Public

Works (Obras Publicas, MOP) have initiated climate planning processes. Finally, the

RegionalClimateChangeStrategy (Estrategia Regional de Cambio Climático, ERCC,

November 2010) of the SICA is also very relevant for El Salvador, as it opens regional,

national, and local perspectives on climate finance.

However, as a primary challenge, these public policies still need to include the

identification of investment needs, results-based management, and financial

programming, in order to attract, channel,

and account for external climate financing.

Specifically, the costing and budgeting

of plans and programs with a focus

in adaptation and/or mitigation, as a

basic element for access to large-scale

financing, is a pending task that depends

in large part on different ministries and

autonomous institutions developing

capacities for adequate financial planning.

There have been substantial advances in

the creation of Climate Change Units in

certain ‘vanguard’ ministries, among them

the Ministry of Environment and National

Resources (Ministerio de Ambiente y

Recursos Naturales,MARN),MAG,Finance

(Ministerio de Hacienda, MH), MOP, and

Foreign Affairs (Ministerio de Relaciones

Exteriores,RREE),inadditiontofocalpoints

in 13 other government institutions.

BOX 4Coordination, a key to successThe Government of El Salvador has created two coordination mechanisms to handle climate change and its financing. Created in August of 2012, the Climate Change Committee (Comité de Cambio Climático, CCC) gathers the ministersofthevanguardinstitutions(MARN,MAG,MH,MOP,andsoonRREE).It is part of the National Environment System (Sistema Nacional de Medio Ambiente, SINAMA) and seeks to articulate the political efforts around climate change. Since May of 2011, 18 ministries and autonomous institutions are meeting in the Inter-institutional Committee for Climate Finance (Comité Inter-Institucional para el Financiamiento Climático, CIFCC), under the leadership of MARN,RREE,andSTP.Asan informalspace,CIFCCgathers institutional focalpoints for climate finance. Among other issues, the CIFCC focuses on:

• capacitydevelopment,• operationalandtechnicalconcepts,• financingneedsandoptions,and• analyticalwork,includingthisstudyonbarriers.

In the future, the CIFCC will be formalized under the CCC as the principal avenue for coordinating capacity development, agreeing on climate finance guidelines, and ensuring division of labor among entities responsible for climate finance-related country systems and procedures. damage. Within a very narrow fiscal space, El Salvador faces climate change mainly through a forced reorientation of public expenditures (‘climate adjustment’).

3. Barriers in Accessing Climate Finance

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This construction of institutional capacityhasalsobeeninfluencedbytheconditionalities

of a recent Inter-American Development Bank (IDB) loan, dubbed ‘Fiscal Sustainability and

Climate Change Adaptation Program in El Salvador’ (Programa de Sostenibilidad Fiscal

y Adaptación al Cambio Climático en El Salvador). Valued at 200 million USD, this loan is

specifically directed toward institution strengthening in climate change themes. Taking

into account the fact that many institutions have expressed operational difficulties, it

will be essential to keep investing in human resources, procedures, expertise, and pre-

investment capacities. Here, vanguard institutions could gradually advance in financial

planning for climate change plans and programs.

A second challenge is direct access to large-scale external finance, avoiding multilateral

intermediaries that tend to incur high transaction costs. The Government is pushing for

the re-engineering of the FONAES with a view towards its accreditation for the Adaptation

Fund (AF). At the same time, this could become relevant for a future accreditation for

the Green Climate Fund (GCF) and other international climate finance windows. In

addition to this effort, the Government is working in complementary ways to diversify

its instruments for large-scale external finance, based on the country’s successful

experiences in accessing and managing Official Development Assistance (ODA). This

might include sector-wide approaches, such as the PREP, general budget support, and

special financial vehicles of the National Development Bank (Banco Nacional del Desarrollo,

BANDESAL), created in early 2012.

Barriers detected in the international community

The international community supports institutional development, but it does so in an

uncoordinated manner. Consequently, the Government is concerned with a lack of

harmonization, particularly with respect to requirements and procedures and articulation

with the ongoing national process. Despite the fact there are interesting experiences with

support to capacity development, such as through the IDB loan or Japanese cooperation


3.2

The Government is working in

complementary ways to diversify its instruments for large-scale external

finance, based on the country’s successful

experiences in accessing and managing Official

Development Assistance.

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with MOP, these initiatives do not maximize their potential due to scarce coordination

among international agencies and limited dialogue between these entities and the

Government, particularly in the coordination of technical assistance. It is also vital to

deepen possible synergies between conventional development cooperation, on the one

hand, and South-South knowledge exchange, on the other, as a replicable model for the

climate finance management cycle.

The case of El Salvador clearly reflects an extensive deficiency and dispersion of

information regarding the possibilities, conditions, and procedures for climate finance

that Government institutions highlight as one of the principal barriers to accessing these

funds. The very limited transparency and scarce relevance, usefulness, and clarity

of information make adequate access more difficult for Salvadoran institutions, with

reduced institutional resources and specialized teams for investigating, systematizing,

and following up with a confusing labyrinth of external financing. The dialogue with

international representatives isweak, due to the insufficient flow of information from

the Governments and headquarters of the agencies and organisms present in the

country. However, first steps are underway for generating a relevant and updated menu

of opportunities for external cooperation around climate change. In the second half

of 2011, the Vice Ministry of International Development Cooperation (Viceministerio de

Cooperación Internacional para el Desarrollo, VMCD) led an exercise to map and analyze

the opportunities for external financing, including more than 60 external sources, which

could become part of the Development Cooperation Information System of El Salvador

(Sistema de Información sobre la Cooperación para el Desarrollo de El Salvador, SICDES). The

international community present in the country is not yet supporting this effort to identify

and/or clarify the opportunities available for El Salvador. At the same time, however, these

external players voice their concern that it remains very difficult to allocate their resources

in the country, indicating a clear mismatch between climate finance demand and supply.

Also in-house information management of different international agencies constitutes a

barrier, as representatives of the international community in El Salvador appear to have, in


A national policy for limiting and conditioning climate debt levels should be consulted and coordinated with the international community in order to achieve a minimum consensus.

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many cases, a partial knowledge of the broader climate finance initiatives led by their own

governments or headquarters.

As a responsibility shared with the Government, the task remains to generate spaces for

dialogue and consultation around key issues. At least two areas require a deeper dialogue

in order to advance in political alignment. The first is that the Government gives priority

to adaptation, while the international community primarily supports mitigation. The

second is the increasing concern in the Government regarding levels of ‘climate debts,’

generated, on many occasions, by the necessity to rely on loans in post-disaster situations.

While the decision to sign loans is in the hands of the Government, a national policy for

limiting and conditioning climate debt levels should be consulted and coordinated with

the international community in order to achieve a minimum consensus, especially with a

view to emergency situations.


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Barriers in the Management

of Climate Finance

National capacities to manage climate finance are dynamically debated within the

Government. Current national barriers include the need to improve operational capacities

in key institutions, to diversify the menu of financial instruments, and to adapt the

national financial architecture in order to integrate climate change in the management

of public expenditures. On the part of the international community, there is a need for

more credible support via the use of country systems, mechanisms, and instruments, in

addition to a concerted effort among these, in line with the ongoing national process.

Domestic challenges in climate finance management

El Salvador needs to deepen its commitment with a financial architecture that is capable

of channeling large-scale climate financing with instruments, such as national funds, the

national development bank, program-based approaches, and general budget support.

Structural limits for adequately reflecting, channeling, and absorbing climate finance

still persist. However, various Salvadoran institutions are already experimenting with

operational frameworks and instruments adapted for climate finance. Key examples are

FONAES,PREP,theMAGEnvironmentalStrategy,andtheCNEMasterPlan.Furthermore,

the private sector is looking for BANDESAL to play a stronger role, in line with innovations

pioneered by such countries as Brazil, Colombia, and Mexico in the area of special

financial vehicles and windows, in which multilateral development banks are particularly

interested. On the other hand, in the last two years, the Government of El Salvador has

made substantial progress in the use of budget support and programmatic approaches

to channel and manage ODA, which could potentially be used in the context of climate

finance. A concrete example is the Technical Secretariat of External Financing (Secretaría

Técnica del Financiamiento Externo, SETEFE), which administers substantial ODA funds

through national systems.

There has been progress in capacities for financial management in certain pioneer

institutions,whichhaveorwillsoonhaveClimateChangeUnits(MAG,MARN,MH,MOP,

4

4.1

In the future, a clear climate finance framework should be developed in order to clarify guidelines, instruments, and procedures within the overall national public finance.

“

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andRREE).However,mostnationalentitiesstill lackthebasiccapacitiestochanneland

execute large-scale external finance. For this reason, the country needs a strong investment

in specific operational instruments and models for climate finance, which should be

integrated into the operations of the respective responsible teams and units. In the future,

a clear climate finance framework should be developed in order to clarify guidelines,

instruments, and procedures within the

overall national public finance. Creating

this administrative-financial framework

could respond to an increasing demand

from different Salvadoran institutions that

are beginning to seek large-scale external

climate financing. As a first step in this area,

there is a perceived immediate need to clarify

the respective competencies of MH (as the

entityresponsibleforpublicfinances),MARN

(as the entity of reference for environmental

plans and policies), the Technical Secretariat of the Presidency – Secretaría Técnica de la

Presidencia, STP – (as the entity responsible for development planning and results-based

management),andRREE(astheliaisonwithinternationaldevelopmentcooperation).

The integration of climate finance management in national public finances remains

a pending task. Up until now the Government has only used general budget lines and

codes for the environment, which do not capture the specific climate-relevant costs and

expenditures across sectors. In various institutions, including the Ministry of Finance (MH),

conscience of the technical necessity to move in this direction is increasing. The goal is

to be able to reflect the national climate vulnerability in national budgets and permit

adequate budgetary programming and execution within existing plans and programs.

In this vein, a Climate Public Expenditure and Institutional Review (CPEIR)might be

conducted, a methodology designed by the UNDP and the World Bank (CDDE 2011, Schulz

4. Barriers in the Management of Climate Finance

15

4.2

2012a)thateightcountriesinAsiaandthePacificarealreadyapplying.TheCPEIRwould

bear essential findings regarding the weight of climate change in public expenditures,

both those coming from budgetary allocations and those financed by external financing.


The international community has promoted capacity development, particularly through

the IDB loan, which among other aspects, implies a more determined role for the MH in

climate finance. International actors, such as UNDP and JICA, perform an important role

in the construction of capacities, such as in FONAES and MOP, respectively. However, this

support is still not adequately coordinated with Government efforts, in particular the CIFCC,

with respect to the development of institutional and operational capacities. On the other

hand, external support usually lacks a specific focus in climate finance management,

even though the international community recognizes the clear necessity to increase the

options for efficient and sustainable allocations of external financing, both loans and

grants, through stronger national institutions, systems, and instruments.

In spite of institutional and operational advances underway, external support tends to be

managed outside the systems of the Government, where international agencies tend

to perform the functions of executing funds through Parallel Implementation Units (PIU)

that compromise domestic capacity development. The proliferation of PIU demonstrates

the double dilemma that the international community faces in El Salvador. On the one

hand, the vivid government dynamism with climate finance still contrasts with currently

weak management capacities. On the other hand, the international agencies struggle to

reconcile their role as ‘temporary’ subsidiaries with medium and long term commitments

to national capacity development. Resolving these contradictions will require solid

coordination between the Government and the international agencies with respect to

shared objectives for effectiveness and sustainability of management and implementation

at both the technical and financial levels.


The international agencies struggle to reconcile their role as ‘temporary’ subsidiaries with medium and long term commitments to national capacity development.

“

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The dialogue regarding climate finance and its management continues to be principally

bilateral and fragmented among different government institutions, making it more

difficult to achieve synergies and an adequate division of labor among the international

funds, mechanisms, and agencies. In view of the strong commitment of the Salvadoran

Government to improving its capacities for accessing and managing financing, the scarcity

of joint action by the international community continues to be a central preoccupation

of national actors. Even though there have been certain initial advances, such as the

ConsultativeReconstructionGroup(Grupo Consultivo para la Reconstrucción) created after

Tropical Depression 12E of October 2011, the international community is not yet directly

involved in the national process generated around the CIFCC and the CCC. Here, the lessons

learned in the ODA management, such as through the National Plan for Aid Effectiveness

in El Salvador (Plan Nacional de Eficacia de Cooperación en El Salvador), an effort led by

the VMCD (2012a), could provide ideas of how to establish ‘rules of the game’ in order to

secure the effectiveness of external climate financing.


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The attention to accountability, which closes the cycle of effective financial management,

is still incipient in El Salvador. This still poses challenges to the implementation of a

systemofMeasurement,Reporting,andVerification(MRV).1 Creating basic conditions, the

Government should secure results-based management and promote accountability on

climate finance, ideally within the existing mechanisms and the institutional setting that

has advanced substantially in the last few years. For its part, the international community

should commit to mutual accountability, avoiding and reducing the proliferation of

parallel mechanisms.

Domestic challenges in accountability

El Salvador is entering with more clarity into results-based management and accountability

to design and adapt existing mechanisms. As a point of departure, El Salvador does not

have specific tools nor frameworks for results-based management and accountability

on climate change. It is imperative to finalize the National Climate Change Strategy and

Plan in order to design baselines, goals, and indicators under an umbrella shared by all

national institutions. However, there have been substantial advances in certain aspects,

including theprogrammingof PREPor thesystematized monitoring and observation

of the environment. On the other hand, there is still a need for greater clarification of

competencies and capacities in the institutional arrangements for accountability on

climate change. This institutionality should be increasingly directed toward Measurement,

Reporting,andVerification(MRV),intheframeworkofre-launchedSINAMA,withoutcasting

aside the imminent obligation that falls to the international community to support these

processes. A central challenge consists of integrating climate change goals and indicators,

of great complexity, in a system currently concerned with concrete environmental policies

only and primarily articulated in specific sectors.

1Insimpleterms,MRVreferstothetechnicalandinstitutionalcapacitiestogenerateanddisseminatedataandinformation regarding the fight against climate change. It is a central concept currently being debated in the context of the United Nations Framework Convention on Climate Change (UNFCCC).

Barriers in Accountability

for Climate Change Actions 5

5.1

A central challenge consists of integrating climate change goals and indicators, of great complexity, in a system currently concerned with concrete environmental policies only.

“

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With a view toward rapidly responding to these challenges, climate change could be

integrated as a pillar in the National Planning System (Sistema Nacional de Planificación,

SNP) led by the STP. Moreover, it will be important to secure an adequate management of

these finances through the national budget, with increased parliamentary supervision and

coordination with the Environment and Climate Change Commission (Comisión de Medio

Ambiente y Cambio Climático) of the Legislative Assembly of El Salvador. The Government

can also take advantage of lessons learned in ODA management, such as SICDES or the

Communities in Solidarity Program (Programa Comunidades Solidarias, see STP 2010),

oriented toward conditional cash transfers to populations with scarce resources. These

experiences could inform a systemic push for accountability in climate finance, under the

National Climate Change Plan and SINAMA.


The international community has still not articulated with the Government with respect

to climate change accountability, despite its own needs for analyzing and verifying

advances achieved with the resources provided. It is especially concerning that there is

no push for a stronger ‘results culture’ in the execution of large-scale loans. Some agencies

and organisms have established quasi-parallel accountability mechanisms that function

outside the circuits of the Government and hinder mutual accountability between the

Government and the international community. In other cases, accountability is decidedly

unilateral, directed exclusively toward the interior of the respective agencies, organisms,

and funds, without reporting to the country about actions taken nor the results obtained

by those actions. In general terms, El Salvador is confronted by a complex framework

of requirements and procedures of monitoring and evaluation that vary by agency and

international organism and are very difficult to comply with for Salvadoran institutions.

On the whole, national stakeholders perceive an urgent necessity to articulate the

international community around all phases of the climate finance cycle and with a clear

5. Barriers in Accountability for Climate Change Actions

5.2

Some agencies and organisms have

established quasi-parallel accountability

mechanisms that function outside

the circuits of the Government and hinder

mutual accountability.

“

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5. Barriers in Accountability for Climate Change Actions

focus on harmonizing and aligning the procedures for design, execution, accountability,

andMRV.Currently,thereareinherentweaknessesgiventhattransparencyofdataon

current and potential external climate financing is deficient. This in turn impedes the

articulation of the international community’s efforts with the process of generating and

strengthening national capacities and systems. The agencies and organisms present

in El Salvador should engage in a deeper reflection on their will and capacity to

support and use national systems and procedures, both the existing and emerging,

with a view toward the capacity to channel large-scale climate finance under a logic

and orientation toward results.

20

A Roadmap for Effective

Climate Finance6Basedontheanalysisreflectedinthisstudy,theGovernmentofElSalvadorisdesigning

a roadmap (see Aguilar Garza 2012). Among its key objective, the roadmap will include

a coordinated approach to institutional capacity development, the adaptation of the

national financial system, an impulse to coordinated support by the international

community and the increased involvement of national actors beyond the executive,

particularly parliament and specialized civil society, as well as private sector actors

investing and providing services in climate-relevant areas.

21

6. A Roadmap for Effective Climate Finance

By early 2013, the roadmap is expected to develop into a full-fledged program

approach, which might entail the following six elements:

• Fine-tuning public policies and planning: The National Climate Change

Strategy and Plan will be finalized and further impetus to the sector strategies

ensured, in line with the updated analysis of climate variability and climate

change in El Salvador and the Central American region.

• Adapting the national financial architecture: An analysis of public

expenditures will be conducted, while national financial instruments will

bediversified,forexamplebyconvertinginthePREPintoapilotforclimate

change program approaches.

• Developing national capacities: Based on a thorough mapping of institutional

and operational capabilities, a National Capacity Development Program will

be designed and implemented to develop capacities in the climate finance

access, management and accountability.

• Deepening inter-institutional coordination: Further political and technical

synergies between the CCC and CIFCC will be sought, while a results-based

work plan will guide the activities of the CIFCC.

• Improving coordination with the international community: Enhancing the

dialogue, the government will seek for support to the road map and develop

a strategy and mechanisms for accessing external climate financing.

• Positioning the country in the regional and global arenas: El Salvador’s

lessons learned in climate finance will be shared in the context of SICA and

during the Conference of Parties (COP) in Qatar.

22

Acronyms

Adaptation Fund

National Development Bank (Banco Nacional de Desarrollo)

Climate Change Committee (Comité de Cambio Climático)

Capacity Development for Development Effectiveness Facility (UNDP Asia-Pacific)

Inter-Institutional Committee for Climate Finance (Comité Interinstitucional de Financiamiento para el

Cambio Climático)

National Energy Council (Consejo Nacional de Energía)

ClimatePublicExpenditureandInstitutionalReview

RegionalClimateChangeStrategy(Estrategia Regional de Cambio Climático)

Environment Fund of El Salvador (Fondo Ambiental de El Salvador)

Green Climate Fund

Inter-American Development Bank

Japanese International Cooperation Agency

Ministry of Agriculture (Ministerio de Agricultura y Ganadería)

MinistryofEnvironmentandNaturalResources(Ministerio de Ambiente y Recursos Naturales)

Ministry of Finance (Ministerio de Hacienda)

Ministry of Public Works (Ministerio de Obras Públicas)

Measurement,Reporting,andVerification

Official Development Assistance

Parallel Implementation Units

National Environment Policy (Política Nacional del Medio Ambiente)

EcosystemandLandscapeRestorationProgram(Programa de Restauración de Ecosistemas y Paisajes)

Ministry of Foreign Affairs (Ministerio de Relaciones Exteriores)

Technical Secretariat of External Financing (Secretaria Técnica del Financiamiento Externo)

Central American Integration System (Sistema de Integración Centroamericana)

Development Cooperation Information System of El Salvador (Sistema de Información sobre la Cooperación

para el Desarrollo de El Salvador)

National Environment System (Sistema Nacional de Medio Ambiente)

National Planning System (Sistema Nacional de Planificación)

TechnicalSecretariatofthePresidencyoftheRepublic(Secretaría Técnica de la Presidencia de la República)

Tropical Depression 12E

United Nations Development Programme

United Nations Framework Convention on Climate Change

United States Dollars

Vice Ministry of Development Cooperation (Viceministerio de Cooperación para el Desarrollo, de RREE)

AF

BANDESAL

CCC

CDDE

CIFCC

CNE

CPEIR

ERCC

FONAES

GCF

IDB

JICA

MAG

MARN

MH

MOP

MRV

ODA

PIU

PNMA

PREP

RREE

SETEFE

SICA

SICDES

SINAMA

SNP

STP

TD12E

UNDP

UNFCCC

USD

VMCD

23

Bibliography

Public Policies, Plans, and Programs

CCAD (2010): Estrategia Regional de Cambio Climático, Central American Integration System.

CNE (2011): Plan Maestro para el Desarrollo de la Energía Renovable en El Salvador, San Salvador.

General Assembly (2012): Moción sobre la Reforma de la Ley Nacional de Medio Ambiente, Comisión de Medio

Ambiente y Cambio Climático, San Salvador.

Government of El Salvador (2000): Resumen Ejecutivo de la Primera Comunicación Nacional sobre Cambio

Climático: República de El Salvador, las Naciones Unidas y el Ministerio de Medio Ambiente y Recursos Naturales, San

Salvador.

IDB (2012): Programa Integral de Sostenibilidad Fiscal y Adaptación al Cambio Climático para El Salvador, Loan

Contract No 2710/OC-ES, San Salvador/Washington DC.

Ley de Medio Ambiente (1998),DiarioOficialdelaRepúblicadeElSalvador,SanSalvador.

MAG (2012): Estrategia Ambiental de Adaptación y Mitigación al Cambio Climático del sector Agropecuario, Forestal

y Acuícola, San Salvador.

MARN(2012a):Política Nacional de Medio Ambiente 2012, San Salvador.

MARN(2012b):Programa Nacional de Restauración de Ecosistemas y Paisajes (PREP), San Salvador.

MARN(2012c):Financiamiento Climático – Contexto global y nacional,PresentationbyMinisterRosainanational

workshop on the 15th of August, 2012, San Salvador.

REDD(2010):Plan de Trabajo 2010 – 2013,ElSalvadorREDDProgramCCAD–GTZ,CCAD,SICA,GTZ.

STP (2010): Código de Conducta entre las Instituciones de Gobierno y los Socios para el Desarrollo que apoyan el

programa Comunidades Solidarias 2010-2014, Secretaria Técnica de la Presidencia.

STP (2012): Cartera de Programas de Recuperación de la Infraestructura Afectada por la Depresión Tropical 12E,

Secretaria Técnica de la Presidencia.

VMCD (2012a): Plan Nacional para la Eficacia de la Cooperación en El Salvador,MinisteriodeRelacionesExteriores,

San Salvador.

24

Studies and Analyses

Aguilar Garza, Claudia (2012): El Salvador draws its roadmap towards effective climate finance, climatefinance.info.

Buchner, Barbara, Angela Falconer, Morgan Hervé-Mignucci, Chiara Trabacchi, and Marcel Brinkman (2011), The

Landscape of Climate Finance: Executive Summary, Climate Policy Initiative, Venice.

CDDE (2011): Climate Public Expenditure and Institutional Review (CPEIR): A methodology to review climate policy,

institutions and expenditure, Capacity Development for Development Effectiveness Facility, UNDP Asia-Pacific,

Bangkok.

Forstater,Maya,andRachelRank(2012).Towards Climate Finance Transparency, aid info, London.

Kreisler, Isabel, and Nils-Sjard Schulz (2012): Effective Climate Finance Sharing the experiences and innovations

of Latin American and Caribbean countries,TelaRegionalDialogue,WBIandUNDP,Tegucigalpa/NewYork/

Washington DC

PRISMA(2012):Informe sobre el Estado y Calidad de las Políticas Públicas sobre Cambio Climático y Desarrollo en El

Salvador, Programa Salvadoreño de Investigación sobre Desarrollo y Medio Ambiente, San Salvador.

Schulz, Nils-Sjard (2012a): How to play in the big leagues – Overcoming climate finance barriers in El Salvador,

climatefinance.info.

Schulz, Nils-Sjard, in collaboration with Bryan Pratt (2012b), Towards Effective Climate Finance – Country

experiences and innovations in Latin America and the Caribbean, Tegucigalpa/Washington DC.

TNC (2012): Climate Finance Readiness. Lessons Learned in Developing Countries, The Nature Conservancy,

Washington DC.

UNDP (2010): El ABC de cambio climático en El Salvador,HumanDevelopmentReport2007-2008,ElSalvador.

UNDP (2011): Blending Climate Finance through National Climate Fund: A Guidebook for the Design and

Establishment of National Funds to Achieve Climate Change Priorities, New York, 2011.

UNDP (2012): Readiness for Climate Finance: A framework for understanding what it means to be ready to use

climate finance, New York.

VMCD (2010): Informe de Rendición de Cuentas 2009-2010,RREE.SanSalvador.

VMCD (2012b): Estudio de Costo de Oportunidad de El Salvador para el Financiamiento para el Cambio Climático,

RREE,SanSalvador.

WRI(2012):Monitoring the Receipt of International Climate Finance by Developing Countries,WorldResource

Institute, Washington DC.

Bibliography (cont.)

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