Principle 6: Ministries of Finance and Nationally Determined Contributions - Stepping Up for Climate Action
The Coalition of Finance Ministers for Climate Action is a group of fifty-two finance ministers engaged in efforts to address climate change through economic and financial policies according to the Helsinki Principles. Peer learning and knowledge exchange plays a strong part in the Coalition’s success.
As part of the core mandate of Ministries of Finance (MOFs), which is the design and implementation of sound macro-economic policies and public finances, the economic and social impacts of climate change are becoming increasingly relevant for the wellbeing of our societies. This report ("Report") is a first step in the Coalition’s work to support its Member Countries to design their Nationally Determined Contributions (NDCs) by strengthening the Finance Ministries’ involvement in the preparatory process. This work is closely related to the Helsinki Principle 1 on aligning policies and practices with the Paris Agreement commitments and Principle 2 on sharing experience and expertise in order to provide mutual encouragement and promote a collective understanding of policies and practices for climate action.
Countries are expected to update or communicate their NDC targets by the end of 2020 (as per the UNFCCC Decision 1/CP.21 paragraph 23 and paragraph 24).
In this context, the economic policy tools of climate change are also being developed. In line with this, the involvement of Finance Ministries in the NDC process is still evolving in most countries. This report approaches the topic through experiences from Member Countries, drawing from practical challenges and ways to overcome them.
The report ("Report") will provide a useful overview to the Coalition members and Institutional Partners working on NDC updates. It will also provide the basis for future work priorities of the Coalition in all areas of the Helsinki Principles as well as promote horizontal efforts nationally and globally.
Strategic relevance and mandate
The Helsinki Principles set out the strategic objectives for the Coalition. They 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 6 sets out the strategic basis of the Coalition’s objectives for engaging actively in the domestic preparation and implementation of NDCs submitted under the Paris Agreement. Helsinki Principle 2 states that the Coalition’s members share experience and expertise with each other in order to provide mutual encouragement and promote the collective understanding of policies and practices for climate action.
The Santiago Action Plan agreed upon by Finance Ministers on 9 December 2019 sets out specific actions on preparation and implementation of the NDCs under Helsinki Principle 6. It underlines that the efforts under Principle 6 build on the work programs of all other Helsinki Principles and aim to help members improve their ability to evaluate the macro-fiscal impacts of NDCs and long-term climate strategies and provide effective guidance to the NDC development process.
Key actions include:
- Identifying a list of economic-fiscal guidelines and requirements that Finance Ministries could issue to sector ministries and agencies for the NDC development process in the future, as well as increasing the
- awareness of tools, resources, and support available to assess the macro-fiscal impacts of NDC and Long-Term Strategy implementation.
- Providing opportunities for peer exchange informed by related institutions on good practices and instruments that members can use to support other ministries in the NDC implementation and validation process.
- Facilitating access to networks for information, resource sharing, and visibility of success stories.
This report draws together the experience of a selection of the Coalition’s member countries updating and implementing the NDCs as part of their climate strategies. It has been prepared based on the Coalition’s Action Plan and benefited from feedback of the Coalition members and the Institutional Partners in the Sherpa meetings. The preparation of the work has been led by Jamaica and Uganda and supported by Institutional Partners the NDC Partnership Support Unit and the World Bank. The report is a joint effort of the Working Group 6 of the Coalition of Finance Ministers in close cooperation with the four country members Chile, Colombia, Ireland, and Philippines.
With these efforts and contributions, progress towards the objectives of the Helsinki Principles and Santiago Action Plan is taking place through this report.
The report describes the involvement of Finance Ministries in the NDC work and draws general lessons on the review of approaches, experiences, challenges, policy instruments utilized, as well as the management of the practical process of preparing the NDCs.
This report is a working document. Opinions or points of view 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. The report serves as a contribution to further policy considerations and planning in the Coalition’s work.
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 and implementing NDCs and longer-term strategies. In the on-going work of the Coalition, this report is intended as a background paper on ministerial level discussions. The report should benefit other ministries and institutions involved in the NDC work, and especially those in lead roles at the national and international levels.
Pekka Morén Lorena Palomo
Co-Chairs of Sherpas, Coalition of Finance Ministers for Climate Action