Finance Ministries hold the keys to unlocking the transformative potential of new national climate plans according to global finance leaders and the United Nations*

With escalating climate impacts taking place around the world, we are increasingly facing the devastating consequences of the climate crisis, impacting our economies, livelihoods and ecosystems. The results of the first Global Stocktake clearly show that the world is not on track to achieve the critical climate goals  as set out in the Paris Agreement. We must therefore urgently curb greenhouse gas emissions, take ambitious adaptation measures, and direct economic development towards more sustainable pathways.

Over the next year, countries have the opportunity to turn the tide of the climate crisis through the submission of their new Nationally Determined Contributions (NDCs), countries’ national climate plans under the Paris Agreement framework, to the United Nations Climate Change Secretariat in 2025. As we are presented with this unique moment to define the 2035 climate targets, the next round of NDCs must be ambitious, follow a whole-of-society approach, be informed by the Global Stocktake from COP28,  and re-align global efforts with the goals set out in the Paris Climate Agreement. The window of opportunity is rapidly closing, and we cannot afford to miss it. Therefore, all stakeholders need to step up, including the finance community with Finance Ministers as important champions.

Well-designed NDCs will not just enhance climate resilience and help countries protect their citizens from the worst effects of climate change. They provide a strategic avenue for countries to improve the livelihoods of people, families and local communities. A low-carbon economy can contribute to eradicate poverty and eliminate hunger while promoting good health and wellbeing. NDCs provide significant benefits and opportunities to countries and to the economic and fiscal objectives of Finance Ministries. For future generations, the social, environmental, and financial cost of delayed inaction will far outweigh the costs of bold actions required today.

Finance Ministries hold the keys to unlocking the potential of NDCs, thereby safeguarding and improving the wellbeing of their citizens. At the heart of successful NDCs, lie robust financing and investment plans. As key coordinators of the economic, fiscal and financial policies, Finance Ministries have a critical role to play in designing these plans to ensure that NDCs are ambitious, realistic, and economically viable. Finance Ministries are crucial in mobilizing public and private financial resources, allocating investment and expenditures, providing guidance on effective costing practices, developing sound macroeconomic forecasts, designing measures to mitigate potentially adverse distributional impacts of climate policies, and aligning NDC planning with national development planning and budget cycle.

As a Coalition of Finance Ministers for Climate Action with over 90 members from all regions of the world facing distinct but shared challenges, we recently launched a dedicated NDC support initiative together with the NDC Partnership at COP28. This support initiative assists Finance Ministries in developing, financing, and implementing NDCs for strengthened climate action, benefiting from the support, experience and expertise of the Partnership’s over 220 members.

With the 2025 NDC deadline rapidly approaching, we are calling on Finance Ministries to rise to the occasion by proactively engaging with the development of their country’s new NDCs. Finance Ministries can particularly focus on their pivotal role in steering climate action through the strategic elimination of harmful financial incentives for carbon-intensive activities, mobilizing fiscal space, attracting private sector investment, and enhancing coordination with other government ministries. The Coalition network stands ready to support this effort, including through strengthening climate capacities of Finance Ministries, sharing knowledge, best practices and country experiences, as well as connecting members’ needs with Institutional Partners.

We are also calling on Ministries of Environment and Climate Change, generally the leading coordinators for NDCs, to proactively engage Finance Ministries from an early stage to develop robust NDC financing plans and support their implementation. We look forward to promoting a joint dialogue to keep the drumbeat going for concerted climate action on the road to 2025.

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*At the 11th Ministerial Meeting of the Coalition of Finance Ministers for Climate Action on 17 April 2024 in Washington DC, building on the momentum generated by its fifth anniversary, the Co-Chairs of the Coalition of Finance Ministers for Climate Action (Minister of Finance of the Netherlands, Steven van Weyenberg, and Minister of Finance of Indonesia, Sri Mulyani Indrawati),the Co-Chairs of the NDC Partnership (Minister of Public Investment and Resource Mobilization of Rwanda, Jeanine Munyeshuli, Minister of Environment of Rwanda, Jeanne d’Arc Mujawamariya, Minister of Development Cooperation and Global Climate Policy of Denmark, Dan Jørgensen, and Minister of Finance of Denmark, Nicolai Wammen), and high-level representatives of the UN system (UNFCCC Executive Secretary Simon Stiell and UNDP Administrator Achim Steiner) made a joint call to actively involve and engage as Finance Ministries in developing, implementing and financing the new Nationally Determined Contributions (NDCs) under the Paris Agreement ahead of the 2025 submission deadline at COP30.

View/Download the Joint Call to Action here

The Hague, February 1, 2024

Ministries of Finance from 92 countries work together for climate action

The Coalition of Finance Ministers for Climate Action met on February 1-2 in The Hague, the Netherlands. The Coalition offers a platform for ministers and ministries of Finance from 92 countries and several international organizations to discuss the financial aspects of climate change. Co-chairs Ralien Bekkers (the Netherlands) and Masyita Crystallin (Indonesia) sat down to discuss their goals and hopes for the meeting.

Bridging the gap between countries is part of the Coalition’s core. This is also reflected in its structure. Masyita: ‘The co-chair position by design is filled by one advanced economy, and one emerging or developing economy. Because countries come with different initial conditions, financial situations, emission accumulation, and overall stage of development.’ Countries take the position of co-chair for at least two years, with two possible one-year extensions. Indonesia will soon enter its final year; the Netherlands started as co-chair last year.

Honest conversation

The Coalition offers a platform for members to speak plainly. Masyita: ‘We have created a safe space for members to discuss things that are important for climate action but not yet implemented in their own country, or even are still politically sensitive.’ This puts the Coalition in a unique position. ‘We are not making formal decisions, but that also has a positive side’, Ralien adds. ‘Because it is not a formal process, there is room for honest conversation about what is actually working or not.’ She hopes these efforts will find their way into policy. ‘We would like to have more and more Ministers of Finance to take what’s discussed within the Coalition to a G20, to the COP, to other global fora – and of course to their own countries to advance implementation of actions on the ground.’

Peer network

But it is about more than just convening and speaking. Being able to call upon already proven ideas and ways of implementing climate action as ministries of Finance is an invaluable resource for members, despite the differences between countries. Ralien: ‘Policy instruments – practical implementation – are one of our key focuses as co-chairs. To collectively grow our understanding of what we can do in our own countries and how to do it. To achieve that, we are working to strengthen the peer network and facilitate the exchange of experiences through the Coalition.’

Growth

This year marks the fifth anniversary for the Coalition. In that time they have grown substantially, which provides both opportunities and challenges, Masyita states: ‘At the size we’re at right now, you run into the risk of becoming too big. You need a better mechanism to be able to hear everyone’s voice, so we really want to activate our members’ involvement in the Coalition.’ Ralien adds: ‘We want our members to become leaders and champions in their own regions, activating others. Our current chairmanship term will end in 2025, which coincides with an important UN Conference of Parties (COP) and a deadline for the next round of national climate plans. The Coalition advocates for ministries of finance to be more involved in those.’

Impact

There are, understandably, some that ask why the ministry of finance is involved in handling climate issues. Masyita: ‘Ministries of Finance are often outside of climate conversations. For example at the COP, Ministries of Finance are generally not part of the “parties” that represent their governments in the negotiations. But the involvement of our ministries helps move climate policy forward. This is part of why the Coalition was formed.’ The climate issues are also often so complex that they touch on many political and societal aspects. Ralien: ‘Climate is becoming part of our core business. It impacts fiscal affairs, it impacts costs; it impacts finance.’

Dubai, 4th December 2023 

Meeting at the UN Climate Change Conference COP28 in Dubai, Finance Ministers attended the Ministerial Meeting on "The role of Finance Ministers in mobilizing public and private climate finance" organized by the Coalition of Finance Ministers for Climate Action. The Ministerial Meeting was convened under the leadership of Sri Mulyani Indrawati, Minister of Finance of Indonesia and Sigrid Kaag, Minister of Finance of the Netherlands, Co-Chairs of the Coalition.  

“Effective climate action, right decisions and prioritization rest on the shoulders of Ministers of Finance” said Sigrid Kaag, Co-Chair of the Coalition, in her opening remarks. 

Opening remarks were further provided by Kristalina Georgieva, Managing Director of the International Monetary Fund, Axel von Trotsenburg, Senior Managing Director of the World Bank, Ambassador Majid Al Suwaid, COP28 Director General, and Simon Stiell, Executive Secretary, UNFCCC. 

The Ministerial Meeting took place as countries discuss the Global Stocktake which shows that the world faces substantial gaps in achieving the goals of the Paris Agreement. Responding to the challenges faced by Ministries of Finance, Lord Nicholas Stern and Vera Songwe of the London School of Economics Grantham Research Institute on Climate Change and the Environment, presented the Coalition’s flagship report "A Climate Finance Framework: Decisive action to deliver on the Paris Agreement". Key recommendations to Finance Ministries include prioritizing subsidies, focusing on carbon pricing and mobilizing private sector finance. 

A panel discussion followed by Tatiana Rosito, Deputy Secretary for Sustainable Finance, Ministry of Finance, Brazil, Benjamin Diokno, Secretary of the Department of Finance, Ministry of Finance, Philippines, Charlotte Vere, Parliamentary Secretary, HM Treasury, United Kingdom. 

Building on the publication of its first Climate Action Statement at the 10th Ministerial Meeting during the Annual Meetings in Marrakech, the Ministerial Meeting invited Finance Ministers to share the impact of the policies they are implementing to unlock investment opportunities and mobilize climate finance, as well as share best practices, lessons learned and experiences. 

In response, Mihaly Varga, Minister of Finance, Hungary, Azucena Arbeleche, Minister of Economy and Finance, Uruguay, Achim Steiner, Administrator, UNDP, and Werner Hoyer, President, EIB, Wale Edun, Minister of Finance, Nigeria, Mohamed Maait, Minister of Finance, Egypt, Alexia Latortue, Assistant Secretary for International Trade and Development, US, Daniella Stoffel, State Secretary for International Finance, Switzerland, Jennifer Carroll MacNeill, Minister of State Department of Finance, Ireland, Magnus Brunner, Minister of Finance, Austria, Jeppe Bruus, Minister of Taxation, Denmark, Francesca Utili, Director General for International Financial Relations, Italy, Thierry Watrin, Green Economy Advisor, Ministry of Finance, Rwanda made interventions highlighting the role of Finance Ministries in offering the scale, speed and effectiveness of climate action. 

In her closing remarks, Sri Mulyani Indrawati, Co-Chair of the Coalition, highlighted the task as well as opportunities ahead for Ministers of Finance to develop and implement ambitious climate action. Sri Mulyani Indrawati also announced the collaboration with the NDC Partnership to provide targeted resources and expertise for Ministries of Finance to actively engage in the development of NDCs and LT-LEDS.