Climate finance ecosystem
PAKISTAN’S climate finance ecosystem is informal and unfolding. It has not been fully operationalised or coordinated, let alone synchronised with climate action. In fact, policymakers are still grappling to define it fully for policy coherence and to systematically catalogue vulnerabilities, priorities, and financial needs for specific climate actions across sectors, provinces, and human settlements.
In a frantic reaction to Pakistan’s desperate fiscal situation, the entire attention of key ministries and departments has moved to access international climate finance. The hope is that, if successful, this can ease the financial squeeze. This newfound priority has debased the national debate that ensued after the 2022 floods, from prioritising community resilience and low carbon development to accessing finances from some under-accessed sources.
The shaking of the apple tree has not stemmed from specific provincial or sectoral estimates of financial needs. Instead, it has sprung from the urgency to plug the financial gaps that are forcing Pakistan to annually restructure its debt. It is clear that the urgency to access climate finance is driven by the present narrow fiscal space, and not the importance to invest in resilient, bottom-up demand. The sincerity of motivation has emerged as a barrier, adding to the long list of chronic obstacles.
This is in spite of the fact that during the last 50 years, Pakistan has developed an elaborate institutional and policy architecture dealing with environment and climate change. The process started with the Pakistan Environment Protection Ordinance in 1983, followed by the approval of the National Conservation Strategy (1992), Environmental Protection Act (1997), National Environment Policy (2005), and a wave of climate policy documents since the 18th Constitutional Amendment of 2010.
The inability to stock-take has impeded the development of the climate finance ecosystem.
None of these policies defined the decision-making tree for policy coordination, resource allocations, or timelines needed for implementation of specific policy initiatives, let alone identifying the structural barriers to their implementation.
While presenting impressive plans, they fell short of identifying key constitutional, legal, or institutional constraints to their environment and climate actions. None of the websites of national and provincial climate-related outfits carry any study on why our policies have failed the implementation test. This inability to stock-take has impeded the development of the climate finance ecosystem.
Specific questions begging clarity on mandates, respective roles and responsibilities between the provinces and the federal government, and between the climate and other sectoral ministries, particularly the planning ministry, remain unaddressed. The planning ministry holds the key to engaging with provincial planning boards in order to embed climate considerations in the public sector development portfolio and provincial annual development plans. Lopsided development has not allowed the climate finance ecosystem to take root.
The ecosystem in our context is a web of intricate interactions reflected by hard and dotted lines, indicating the complexity and richness of the functioning of its parts. The dynamic nature and interdependence of their interactions, as in natural systems, reflects both its fragility and resilience. The backward and forward loops, as in systems theory, will be indicative of its health and ability to protect itself from predators. In the climate change realm, the predators include domestic and international interest groups, and undue outside influences and interferences retarding its functioning.
Therefore, the ecosystem in our context does not only refer to cataloguing the existence of institutions, their mandates, rules, regulations and procedures, or the existence of their policy or strategy documents. Instead, it also encompasses their formal and informal relationships and linkages with each other and their respective constituencies and stakeholders, to protect the interests and well-being of everyone affected by climatic changes as users, consumers, or taxpayers.
How well has this ecosystem evolved in the last 50 years and how well is it working? The response to the following five factors shapes the size and influences the scale of the flow of international finance for climate action:
Institutional and policy landscape: Has the climate ecosystem resolved the key governance and regulatory issues? Or does the tendency persist to evade questions that deal with clearly defining the roles and responsibilities of all national and provincial actors? Introducing a legislative package that mandates climate action across the sectors and tiers of governance can clear the obstructed path to action, instead of adding yet another tier of institutions.
Sectoral integration and action plans: Does the ecosystem include sector-specific action plans for concrete climate measures?
The absence of sectoral action plans that do not include adaptation strategies to build resilience, mitigation measures to curtail greenhouse gas emissions, or protect communities from loss and damage from rapid-onset and slow-onset will impede alignment with the country’s national targets and international obligations. Such plans can help identify opportunities for green growth and low-carbon development within each sector.
Subnational implementation: Does the ecosystem commit to deliver resources at local levels by recognising that climate impacts are always localised?
This would entail setting up local governments and allowing them to function. They can develop and implement their own, locally led action plans to create resilience, build local capacities, and diversify livelihood opportunities. Nothing is more important for climate justice than inclusion and equity for a well-functioning ecosystem.
Stakeholder engagement and partnerships: Has the ecosystem engaged dynamic organisations, academia, small and medium enterprises, women and youth? Has the partnership with the private sector been designed to strengthen local markets and nationally generate revenues and finances? It is imperative to leverage private sector investment in low-carbon or disruptive technologies for climate-resilient infrastructure.
Climate finance mechanisms: Does the ecosystem include instruments for channelling domestic and international climate finance?
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