Read the Press Release: The Coalition of Finance Ministers for Climate Action to Strengthen its Work for a Sustainable and Green Recovery

HELSINKI, SANTIAGO and WASHINGTON, 10 July 2020 – In April 2019, the Coalition of Finance Ministers for Climate Action began its work by establishing the Helsinki Principles, with the objective of mainstreaming climate in Finance Ministries’ work. In December 2019, the Coalition released the Santiago Action Plan to define concrete actions in all fields of Helsinki Principles. In just one year, the Coalition has united 52 Finance Ministries and gathered a large group of international financial institutions, multilateral organisations and partnerships.

Since the last Ministerial meeting in December, the Coalition has worked in all areas of Helsinki Principles. Following the breakout of the COVID-19 crisis, and the move to a virtual working format in March, the Coalition intensified efforts significantly. A series of meetings at the level of Sherpas were convened and workshops carried out in key work areas covering green budgeting, carbon pricing, public financial management, financial disclosure, financial preparedness against disasters, green taxonomies, and blended finance (more information available on the Coalition website).

The Coalition is releasing today the following three reports, prepared on the basis of some members’ experiences and analytical support of institutional partners. Such works will be used to advance and inform alternative of work of the Coalition:

1. Report on ‘Better Recovery, Better World: Resetting climate action in the aftermath of the COVID-19 pandemic’ provides inputs about different policy options in the field of economic and financial policies. The aim of the work is to support Finance Ministries to obtain net benefits from a green recovery that is inclusive, resilient, and lower in carbon emissions. The work was motivated by the general uncertainty about the implications of the pandemic on climate policies in the deteriorated economic and fiscal circumstances caused by the COVID-19 outbreak. The central message of this report is the need to reflect on comprehensive recovery and stimulus packages that can help restore the path of economic and social progress, while also securing a safer climate in the context of a major economic downturn. Finance Ministers may need to design and introduce longer time horizon policy strategies to restore confidence and drive green investments. In this context, all areas of the Helsinki Principles are relevant.
2. Report on ‘Long-Term Strategies for Climate Change – A Review of Country Cases’ showcases the experiences of a selection of member countries representing different levels of development and climate challenges. The report reviews different country approaches for the construction of long-term strategies to address climate change. Such comparisons provide useful information about the objectives, approaches, challenges and governance of preparatory work. The report concludes that the choices on the best policy instruments are complicated due to fast-changing technologies, the wide range of possible policy options and the need for strong political buy-in. Thorough impact assessments, cooperation with the various stakeholders and clear monitoring and governance structures seem essential in the process too. For developing countries, the inclusion of adaptation and resilience issues is also crucial to complete the policy picture. The work provides a good basis for deepening analysis and broadening examination to other countries and regions with different characteristics.
3. Report on ‘Ministries of Finance and Nationally Determined Contributions – Stepping Up for Climate Action’ highlights the essential role of Ministries of Finance in climate action and explores avenues for Ministries of Finance to engage in the preparation, update, and implementation of NDCs. The case studies show that Ministries of Finance are contributing to the costing, macroeconomic and macro-fiscal assessments, and the mainstreaming of NDCs into public financial management systems. The report also shows that countries have used multiple entry points and are building on existing capacities to gradually bring climate to the core of economic and financial decisions. To achieve faster progress, public finance systems and economic policy tools, including macro-modelling and fiscal planning, should be improved to better capture climate aspects and integrate them in the designing of long-term strategies, in tandem with the work under NDCs.

All three reports complement each other. Finance ministers are increasingly playing a substantive role in responding to the challenges of climate change and designing strategies that are compatible with economic policy realities. The economic fallout from the COVID-19 crisis has forced a comprehensive strategic approach, linking short- and medium-term recovery efforts with longer-term sustainable growth, by signaling future policy directions. Understanding the effect on macroeconomic stability and fiscal constraints is key to dealing financially with climate change, by selecting the right combination of tools and policies at countries’ disposal. Each country’s individual path to a low-carbon, climate resilient society will look different depending on its own unique characteristics, available technical solutions and economic and social structures.

"While we continue to concentrate our efforts on mitigating the effects of the pandemic on households and firms, we must also prepare for the recovery that follows. Work by the Coalition and its institutional partners provides concrete policy options towards integrating climate action in the recovery to come.” Quote from Finance Minister Ignacio Briones, Chile, Co-Chair of the Coalition of Finance Ministers for Climate Action

“These reports underline the importance of long-term strategies and horizontal approaches in designing climate policies. The Coalition of Finance Ministers has started to deliver useful policy considerations. This reflects the enhanced involvement of Finance Ministers in addressing climate change. I look forward to discussing the priorities with my colleagues in October.” Quote from Finance Minister Matti Vanhanen, Finland, Co-Chair of the Coalition of Finance Ministers for Climate Action

Finance ministers will discuss these reports in October 14 based on further preparatory work. Ministers will provide policy guidance on mainstreaming climate issues in economic and financial policies, as well as on the implications of COVID-19 in the recovery packages and climate policies. In that context, the Coalition will also define further work priorities for period 2020-2021 and strengthen its governance arrangements.

About the Coalition of Finance Ministers for Climate Action:
The Coalition, launched in April 2019, is a group of Finance Ministries that work on a voluntary basis, to share experiences and best practices to integrate climate change in the economic and financial policies. The Coalition currently brings together 52 countries from all regions, each representing different levels of development and climate change challenge. Member countries represent about 16 percent of global CO2 emissions and 30 percent of global GDP (2017).

Further information about the Coalition is available at: www.financeministersforclimate.org

Inquiries:

Co-chairs of Sherpas, Coalition of Finance Ministers for Climate Action

Pekka Morén, Ministry of Finance, Finland
pekka.moren@vm.fi 

Lorena Palomo, Ministry of Finance, Chile
lpalomo@hacienda.gov.cl

Read the Report: Better Recovery, Better World: Resetting Climate Action in the Aftermath of the COVID-19 Pandemic

The Coalition of Finance Ministers for Climate Action (“the Coalition”) is a group of fifty-two finance ministers, engaged in efforts to address climate change through economic and financial policies according to the six Helsinki Principles. Peer learning and knowledge exchange plays a fundamental part in the Coalition’s success.

As part of the core mandate of Ministries of Finance, which is the design and implementation of sound macro-economic, fiscal and financial policies, the economic and social impacts of climate change are becoming increasingly relevant for the wellbeing of our society. This report examines the implications of the COVID-19 pandemic crisis on climate policies from the angle of economic policies and offers a set of policy options for Finance Ministers.

The COVID-19 pandemic has unleashed suffering and economic crises of historic proportions, adding to the urgent existing need for accelerated transitions to low-carbon economies. Concerns were raised about how the economic fallout from COVID-19 would affect climate action. Following immediate action to manage the crisis, policy-makers need to design and implement recovery strategies that support sustainable growth over the medium and long term. The need for sound analysis, in line with the Helsinki Principles, is all the more critical given the challenging financial and economic circumstances.

This Report is a working document. Opinions or points of view expressed are those of the authors and do not necessarily reflect the views of the Coalition or its members. The main findings of the Report will be presented to Finance Ministers at a later stage, after further preparatory work, with a view to gaining political guidance as well as direction for the Coalition’s further work priorities.

The primary audience for this report is policymakers at Ministries of Finance and Economy that are responsible for economic policy and cross-sector coordination. The report will also be of great interest to other ministries, institutions and academia working to support strong, inclusive, and sustainable recoveries that will help address climate change.

Pekka Morén               Lorena Palomo

Co-Chairs of Sherpas, Coalition of Finance Ministers for Climate Action

Read the Report: Long-Term Strategies for Climate Change -  A Review of Country Cases

The Coalition of Finance Ministers for Climate Action (“Coalition”) is a group of fifty-two finance ministers, as of June 2020, engaged in efforts to address climate change through fiscal and economic policy. Peer learning and knowledge exchange play a strong part in the Coalition’s success.

This report ("Report") is a first step in the Coalition’s work to helping its member countries to design their long-term strategies. Such strategies are currently being developed. This is a very challenging task, requiring competencies, commitments, tools and governance structures to manage horizontal requirements of the work. Finance ministers are becoming more and more involved in the preparation of such strategies as economic implications of climate change and policy actions become visible. This Report approaches the topic through countries experiences, drawing from practical challenges and ways to overcome them.

The Report will provide a useful overview to the Coalition members and institutional partners working on transition aspects. It will also provide the basis for future work priorities of the Coalition, and especially on areas to deepen the analysis and broaden it to new country cases.

Strategic relevance and Mandate

Helsinki Principles set out the strategic objectives for the Coalition. Helsinki Principles recognize climate change as an opportunity, and that taking action can generate substantial benefits for our societies by stimulating technological innovation, improving human well-being, and accelerating economic growth. Helsinki Principles state that finance ministers are in a unique position to help accelerate a just transition to a low-carbon and climate-resilient economy through their economic policy tools. Finance ministers have a common purpose and can benefit from sharing experiences and facilitating the adoption of best practices and policies for low-carbon and climate-resilient growth. The Principles also acknowledge that such policies and actions will support global collective action on climate change under the Paris Agreement.

The Helsinki Principle 1 sets out the strategic basis of Coalition’s objectives for aligning our policies and practices with the Paris Agreement commitments; Helsinki Principle 2 states that the Coalition Members Share experience and expertise with each other in order to provide mutual encouragement and promote collective understanding of policies and practices for climate action.

The Santiago Action Plan agreed by finance ministers on 9 December 2019 states that achieving low carbon and climate resilient economies by mid-century requires structural economic changes. Finance Ministries wield fiscal, economic, financial and planning instruments to facilitate a smooth trajectory of transition and are well positioned to play a lead role in the development of long-term transition strategies. Ministers agree that key actions and deliverables under Helsinki Principle 1 include:

• Reviewing the existing body of long-term transition strategies in selected countries, providing comparative analysis of related challenges and opportunities, and delivering country case studies.
• Examining transition implications more broadly to cover the economic impacts and opportunities on citizens, businesses, and economies in order to help inform policy actions. The effort will benefit from ongoing work of institutional partners in mapping out the various policy instruments for decarbonization and adaptation that are relevant to Ministries of Finance.

Execution
 

This Report draws together the experience of a selection of Coalition’s member countries implementing long-term climate strategies. It has been prepared on the basis of Coalition’s Action Plan and benefited from feedback of the Coalition members and the institutional partners in the Sherpa meetings. Sitra has compiled the Report with support of the World Bank acting also as the secretariat for the Coalition.

Status

The Report describes the long-term strategies and draws general lessons on the review of approaches, identifies bottlenecks and challenges, identified policy instruments utilized to meet the objectives, management of the practical work and process of preparations of the long-term strategies.

This Report is a working document of the Coalition. Opinions and point of views expressed in this Report are those of the authors and do not necessarily reflect the views of the Coalition or its members. The main findings of the Report will be presented to Finance Ministers. It serves as contribution to the further policy considerations and planning of the Coalition’s further work.

Audience

The primary audience for this report is policy makers at the Ministries of Finance and Economy that are typically responsible for cross-sector economic coordination, public finance, and fiscal policy, all of which are needed in formulating long-term strategies. This Report is intended to complement existing body of work that provide step-by-step methodologies for preparing low emission plans for the long-term.

The Report should benefit other ministries, institutions and academia involved in the work on long-tern strategies, and especially those in the lead-roles at national and international levels. In the on-going work of the Coalition this Report is intended as background paper on ministerial level discussions.

Pekka Morén                Lorena Palomo
Co-Chairs of Sherpas, Coalition of Finance Ministers for Climate Action