Transition financing plans: discussing international experience

Context

Financing plans are a critical tool for governments to achieve climate objectives. Such plans support the operationalisation of Nationally Determined Contributions – NDCs and long-term climate strategies by providing answers to key questions such as: how much will the transition cost? what will be the respective roles of the public and the private sector? which domestic and international sources of funding can be mobilized to fulfil additional spending needs?

So far, few countries have such plans at hand. Designing them requires a clear understanding in the Ministry of finance and/or planning of how national climate goals translate into investment needs. It also requires broad discussion with line Ministries, project promoters, and national and international investors and donors. Yet, examples such as France’s show the value of such a work, and how they reduce the cost of climate action in the long run. In particular,

• They reconcile climate and development goals in a whole-of-economy approach. This integrated perspective guarantees issues related to e.g. the just transition will be given due attention.
• They indicate the government’s short and medium-term public spending priorities. This gives a clear signal to the private sector as to where public efforts should be supplemented or completed.
• They limit the risks of a disorderly transition. This reduces significantly the costs of e.g. stranded or maladapted assets.
• They make it easier to attract and channel funding to where it is both needed and achievable. This in turn helps governments to focus their own resources on harder-to-fund priorities.

Objectives

This project aims to

• Support awareness among Ministries of Finance, and in particular Budget Offices, of the importance of backing long-term climate strategies with short- and medium-term trajectories for state expenditure.
• Review existing experience with financial planning for climate transition. In this way, we hope to understand what the French experience can offer on an international scale and, conversely, identify lessons learned from international experiences that could benefit ongoing French developments.
• Stimulate and facilitate peer-to-peer exchange on the issue. As such financing plans are still relatively nascent practices with limited experience to draw from, we feel that this conversation is necessary to rapidly and collectively gain expertise on what will be in the near future one of the fundamental conditions for the success, or failure, of transition plans.
• Support the emergence of similar tools and dynamics, adapted to country-specific contexts, with a limited number of local partners outside France.