78798 Getting a Grip… ….on Climate Change in the Philippines Contributing to the foundation and ensuring the future for a low carbon, climate resilient society through the Philippine Climate Public Expenditure and Institutional Review Extended Technical Report i © 2013 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, NW Washington, DC 20433, U.S.A. Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved. June 2013 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522- 2422, e-mail pubrights@worldbank.org. ii Table of Contents ABBREVIATIONS xiv ACKNOWLEDGEMENTS xx EXECUTIVE SUMMARY xxii Climate Change Challenges and Opportunities in the Philippines xxvi The Imperative to Implement Climate Reforms Now xxvii Transforming the Climate Policy Agenda Establishes a Foundation for Sustainable Reform and Action xxviii Insufficient Execution Through Vertical and Horizontal Institutional Coordination Prevent Effective Implementation of the Current Climate Agenda xxxi Public Expenditure: Climate Appropriations at National and Local Levels xxxiii Public Financial Management xxxviii Recommendations: The Way Forward xxxix Pillar 1: Strengthening the Planning Execution, and Financing Framework for Climate Change xxxx Pillar 2: Enhancing Leadership and Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities xliii Pillar 3: Building Capacity and Managing Change xlv INTRODUCTION 1 PART I: SCIENTIFIC AND SOCIOECONOMIC REVIEW 4 Climate Change Impacts 6 Physical Exposure to Climate Change in the Philippines 6 Non-Climatic Factors Exacerbating Climate Vulnerability 9 Climate Vulnerability of the Philippines 10 Social and Economic Impacts of Climate Change 11 Contribution to Global Warming 14 Opportunities in a Changing Climate: Building Climate Resilience and a Low-Carbon Economy 19 Building Climate Resilience 20 Building a Low-Carbon Economy 24 The Imperative to Implement Climate Reforms Now 28 References 30 PART II: POLICY AND INSTITUTIONAL REVIEW 36 CHAPTER 1: POLICY REVIEW 39 One of the Few Countries with a Comprehensive Climate Change Policy 40 iii The National Climate Change Action Plan 2011–2028 is the Government’s Road Map for Climate Action 44 People’s Survival Fund Signals Government Prioritization of Adaptation at Local Level 47 The Climate Change and DRRM Frameworks Clearly Reflect a Convergence Agenda 48 GHG Emissions Reductions and Low Carbon/Green Growth Initiatives Need Joint and Coordinated Framework of Actions 49 Synergies between National/Sector/Local Policies are Key 52 Philippines Development Plan: Partially Aligned with NCCAP, Scope for Further Alignment 52 Sector Policies and Reforms are the Key to Implement the NCCAP, yet, Alignment at Goal Level is Partial and Does not Translate into Work Programs and Main Final Outputs. 57 Local Policies: Local Governments Empowered to Act but Without Adequate Capacity 61 Mainstreaming Climate Change into CLUP and CDP: the example of Albay Province 62 Mainstreaming Climate Change into CLUP and CDP: the example of Makati city 62 Complementary Local Initiatives Strengthen Climate Change and DRRM Mainstreaming 64 CHAPTER 2: INSTITUTIONAL REVIEW 66 The New Institutional Structure Adds Value and is Being Operationalized 67 Identification of the Institutional Entry Points to Mainstreaming of the Climate Agenda is Key 73 Climate Institutions Need to Set Joint and Consistent Strategic Directions 74 An Important Role of the National Oversight Agencies 74 Effective Translation at Subnational Institutional Level is also Key 75 Coordination on Climate Resilience between CCC and NDRRMC 75 Coordination on Low Carbon/Green Growth 76 Planning and Prioritizing is the Next Big Challenge 76 Important Planning and Prioritization Work is Needed at Sector and Local Levels 76 Vulnerability Assessment (VA) 77 Climate Screening Tool (CST) 77 Poverty and Social Impact Assessment (PSIA) 78 Adaptation Prioritization Tool 78 Climate Impact Assessment (CIA) 78 Institutional Structure of Climate Financing Needs to Complement Planning and Prioritization 80 Governance of Climate Financing 80 iv Incentivizing Private Sector Engagement is a Requirement to be Transformative at Scale. 81 The New Institutional Set Up Needs to Now Focus on Execution 82 Organizational Flexibility is Essential for Effective Sector Level Execution 82 Vertical Coordination is Essential for Effective Execution at the Local Level 82 Effective Monitoring and Reporting is the Other Required Next Step 85 Civil Society: Important for Checking Reforms are on Track but also to Increase Pressure to Continue Reform 87 Building Capacity across Government Essential to Mobilize for Action 88 To Complement Capacity Building, a Priority Needs to be on Knowledge Generation and Management 89 PART III: PUBLIC EXPENDITURE AND FINANCIAL MANAGEMENT REVIEW 93 CHAPTER 1: FINANCING CLIMATE CHANGE PAPS AT THE NATIONAL LEVEL 96 Climate Appropriations Levels Vary Threefold by Classification 97 NCCAP: Main Reference for Climate Appropriations in CPEIR 99 KRA-5: PAPs Tagged Under KRA-5 have Been Subject to Several Revisions 101 Departments’ Work program s: Departments Reviewed in CPEIR Account for most of the Climate Appropriations Tagged in the Department’s Work programs 103 MDB Climate Finance Methodology Suggests Climate Appropriations are Underestimated 105 Climate Appropriations by Department rising Faster than Department Budgets 106 Climate Appropriations are Adaptation Focused but Mitigation is Rising Faster 109 Adaptation Appropriations Concentrated in DPWH followed by DENR and DA 110 Mitigation Appropriations Concentrated in DENR, followed by DA and DOE and rising rapidly 112 PAPs Supporting both Adaptation and Mitigation: win-wins in DENR and DA 113 Climate Appropriations by NCCAP Priority Area 114 Food Security: Spread Thin Across PAPs but Concentrated in Three Agencies 115 Water Sufficiency: Largest Appropriation Despite less than Comprehensive Coverage 117 Ecosystem and Environmental Stability: Concentrated on Forest Management (NGP) and Land Management 119 Sustainable Energy: Concentrated on Energy Efficiency 121 Human Security: Focused on Response and Recovery Rehabilitation Activities not Disaster Prevention 123 Climate-Smart Industries and Services: Small Appropriations Mostly at Initial Stage of Development 124 Knowledge and Capacity Development: Partially Funded 126 v Budget Execution: Utilization has been a Challenge but has been Improving 127 Sources of Financing 129 Domestic Funding: Primary Source for Climate Appropriations 129 Special Purpose Funds and Special Accounts: Greater Flexibility but Weaker Accountability 130 Development Partner Aid: Increased Coordination and Programmatic Linkage to Government Reform Agenda can Increase Effectiveness 133 Financing Gap for Climate PAPs in Selected Sectors 135 Agriculture and Fishery Sector: Assessment Difficult; Some Underfunding 135 Water Sector: Financing Short fall for Small Scale PAPs, but Flood Protection Funded 136 Environment and Natural Resource Sector: NGP and Medium Scale PAPs Adequately Funded 137 Energy Sector: Funding Secured for Only One of Three Major PAPs 138 CHAPTER 2: FINANCING CLIMATE CHANGE PAPS AT THE SUBNATIONAL LEVEL 146 Case Study: Province of Albay -- successfully leveraging external financing for adaptation 147 Case Study: Makati city – using own resources for climate adaptation and mitigation 152 Fiscal Capacity of LGUs 155 General Fund Income of LGUs 155 Sources of Financing 159 LDRRMF: Provides the Base of Support for CCA 160 LDF: Could Provide Supplementary but Need to Compete 160 Categorical Grants 161 Performance Challenge Fund (PCF): Incentive Based Matching Fund 161 Priority Development Assistance Fund (PDAF): Good Supplement but Difficult to Predict 162 Appropriations Lodged in Budgets of National Government Agencies: 162 Bottom-up Budgeting (BUB): Targets Poor Communities Often also the Most Vulnerable 162 People’s Survival Fund (PSF): Significant New Source that Needs to be Operationalized 163 Direct Spending on Devolved Functions and Activities by NGAs: Potential Source but Depends on NGA 164 CHAPTER 3: CRITICAL PUBLIC FINANCE MANAGEMENT ISSUES 165 vi Unlocking the Budget Process to Mobilize Climate Finance 166 Public Finance Reforms: Opportunities for Improving Planning, Prioritization, Execution and Monitoring of climate change PAPs 171 Instruments of Reform: Budget Procedures 172 Program Approach: Potential for Convergence, Design critical for Effectiveness 172 Bottom-up Budgeting: Improved Targeting of the Most Vulnerable 174 Budget Formulation 175 National Plans, Sector Strategies, and Local Development Plans: not Fully in Sync 175 A Medium-Term Perspective to Budget Planning: Great Potential for Prioritizing Climate Change but Limited Use 177 Budget Tools: Powerful but Underutilized 178 Budget Transparency: Efficiency can be Improved through Greater Transparency 178 Budget Accountability: Key to increase public support and mobilizing resources 179 Common M&E Challenges: numerous reporting requirements 179 Integrated or Separate M&E systems for Climate PAPs 180 PART IV: RECOMMENDATIONS AND STRATEGIC ACTION PLAN 182 Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change 185 Objective 1.1 Strengthen the Budget Planning and Execution Framework for Managing Climate Programs, Activities, and Projects 185 Objective 1.2 Align Plans and Strengthen Implementation to Achieve Climate Change Goals 187 Objective 1.3 Rationalize and Harmonize Climate Financing Instruments 193 Pillar 2: Enhancing Accountability through Monitoring, Evaluation and Review 195 Objective 2.1 Enhance CCC’s role in reviewing and communicating climate change performance 195 Objective 2.2 Strengthen Coordination between CCC and Oversight Agencies and Departments 196 Objective 2.3 Strengthen Monitoring in the Departments and LGUs 198 Pillar 3: Building Capacity and Managing Change 199 Objective 3.2 Build Skills and Knowledge-base on Climate Change 199 Objective 3.2 Raise Public Awareness of Climate Change 201 PART V: ANNEXES 216 vii ANNEX 1: UNABRIDGED SELECT KEY MESSAGES 217 ANNEX 2: SUMMARY OF FINDINGS UNDERPINNING RECOMMENDATIONS 229 ANNEX 3: THREE YEAR WORK PLAN 248 ANNEX 4: FRAMEWORK FOR ANALYSIS 259 Overall Approach 260 Policy Review 261 Institutional Review 262 viii List of Figures Figure 1. Scientific Agreement on Temperature Changes 6 Figure 2. Projected Extreme Events in the Philippines, 2020 and 2050 7 Figure 3. Climate Change Vulnerability Map 9 Figure 4. Greenhouse Gas Emissions in the Philippines 14 Figure 5. Greenhouse Gas Emissions of Selected Southeast Asian Countries, 2008 (excluding and use changes and forestry) 15 Figure 6. Philippines’ Energy Sector 15 Figure 7. Urban Population of Selected Southeast Asian Countries, 1950-2050 17 Figure 8. Linkage Between Climate Change Adaptation and Disaster Risk Reduction and Management 22 Figure 9. Abatement Cost and Cumulative Abatement Potential for Power and Transport Sectors, 2008-2030 24 Figure 10. From Fragmented to Comprehensive Laws/Policies 41 Figure 11. The National Framework Strategy for Climate Change 2010 43 Figure 12. NCCAP Priority Areas and Outcomes 2011-2028 44 Figure 13. Linkages between Climate Adaptation Actions and DRRM 49 Figure 14. Institutional Structure on Climate Change 68 Figure 15. Institutional Responsibilities by Functional Stream Designated by the Climate Change Act 69 Figure 16. Entry Points for Mainstreaming Climate Change in the Implementation Cycle Figure 17. CBMS Information Cycle 87 Figure 18. Climate Appropriations by Classification, 2008-2013 99 Figure 19. Evolution of Climate Appropriations Based on the NCCAP Classification, 2008- 2013 100 Figure 20. Budget Appropriations by KRA, 2011-2013 101 Figure 21. Budget Appropriations Attributed to KRA-5 by Department and Agency, 2013 102 Figure 22. Departments’ work programs 2011-20161 and GAA Appropriations for 2011– 2016 Departments covered in CPEIR 105 Figure 23. Trends of Climate Appropriations by Department/Agency, 2008–2013 107 Figure 24. Growth Rates of Department/Agency’s Climate Appropriations and Total Budget Appropriations, 2008–2013 109 Figure 25. Climate Appropriations by PAPs Addressing Adaptation, Mitigation, or Both, 2008–2013 110 Figure 26. Climate Appropriations for PAPs Supporting Adaptation only by Department, 2008–2013 112 Figure 27. Climate Appropriations for PAPs Supporting Mitigation only by Department, 2008–2013 113 Figure 28. Departments’ Climate Appropriations by PAPs Contributing to Mitigation and Adaptation, 2008–2013 114 Figure 29. Composition of Expenditures and Appropriations by NCCAP Priority Area, 2008– 2013 115 Figure 30. Climate Appropriations by the DA’s Sector Strategies of its Sector Goal on Climate Change and Respective Projects, 2009–2012 116 Figure 31. Composition of Agriculture Climate Appropriations by Sector Strategy, 2009–2012 117 ix Figure 32. Climate Expenditures and Appropriations Supporting the NCCAP’s Strategic Priority on Water Sufficiency, 2008–2013 119 Figure 33. Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Ecosystem and Environmental Stability, 2008–2013 120 Figure 34. Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Energy Sufficiency, 2008–2013 122 Figure 35. Composition of Energy Expenditures and Appropriations by NCCAP Strategic Priorities, 2008–2013 123 Figure 36. The Philippine Budget Cycle 167 Figure A.1. Selection Criteria for the Departments and attached Agencies 269 Figure A.2. Tagged Departments and attached agencies under KRA-5 and CPEIR 270 Figure A.3. Consolidation of Climate Expenditures by Classification 274 x List of Tables Table 1. Provinces at-risk to Climate and Weather-related Hazards 10 Table 2. Cumulative Greenhouse Gas Emissions and Total Investments in Power and Transport Sectors by Scenario, 2008-2030 17 Table 3. Greenhouse Gas emissions of Selected Countries with Climate Change-related Legislation 19 Table 4. Capacity Installation Targets for Renewable Energy in the Philippines 26 Table 5. Coverage of NCCAP Outcomes in the PDP 2011-2016 55 Table 6. Sectoral Goals and Main Final Outputs of Select Departments 60 Table 7. Potential entry points for CCC engagement with the NEDA Board Table 8. EIA and Climate Change 82 Table 9. Comparison Selected Major PAPs by Different Tracking Initiatives 98 Table 10. Climate Appropriations by Department Based on the Climate Finance System Developed by Several MDBs, 2008-2013 106 Table 11. Climate Appropriations as a Share of Total Departments and Agencies Budget Appropriations 2008-2013, based on NCCAP classification 106 Table 12. National Budget Composition by Department/Agency, 2008–2013 108 Table 13. Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Ecosystem and Environmental Stability, 2008–2013 121 Table 14. NCCAP Strategic Priority on Human Security by Outcome, Activity, and Government Agency 124 Table 15. NCCAP Strategic Priority on Climate-smart Industries and Services by Outcome, Activity, and Government Agency 125 Table 16. NCCAP Strategic Priority on Knowledge and Capacity Building by Outcome, Activity, and Government Agency 127 Table 17. Climate change PAPs utilization rates of selected CPEIR Departments/Agencies Appropriations/Allotments versus obligations, 2008–2011 129 Table 18. Sources of Financing for Climate Expenditure by Department/Agency and year Table 19. Agriculture & Fishery sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 140 Table 20. Water Sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 141 Table 21. Environment and Natural Resource Sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 (on appropriation basis, in Php million) 142 Table 22. Energy sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 144 Table 23. Per Capita Income of LGUs in Albay for 2009 148 Table 24. Appropriations for climate change/DRRM Initiatives of the Province of Albay, 2008–2012 150 Table 25. Funding Assistance to the Provincial Government of Albay for Climate Change related Programs, 2008–2012 151 Table 26. Per Capita LGU Income of Makati vis-à-vis Other Cities, 2009 152 Table 27. Spending on CCA and DRRM Programs and Projects of Makati City, 2008–2012 Table 28. General Fund Income of LGUs, 2008–2011 155 Table 29. Per Capita LGU Income by Level of LGU, 2009 156 xi Table 30. Per Capita LGU Income of City Governments Ranked According to Poverty Incidence, by Source, 2009 156 Table 31. Per capita income of provincial and municipal governments by poverty incidence for 2009 157 Table 32. Per capita LGU income of provincial and municipal governments ranked according to various hydrometeorological risk, 2009 158 Table 33. Key Characteristics of Local Sources of Climate Financing 159 Table 34. Projects funded under PCF, 2011 162 Table 35. Summary of Some of DENR’s Main Reporting Requirements 180 Table 36. Strategic Action Plan 202 Table A.1. Instruments used in the Institutional Review 265 Table A.2 Selection Criteria for LGUs 268 xii List of Boxes Box 1. Coal fired Power Generation in the Philippines 16 Box 2. Adaptation co-benefits in agriculture 20 Box 3. Climate change adaptation reducing disaster risk 23 Box 4. UK’s Experience in Climate Change Planning 53 Box 5. Secondary Tagging – Lessons from Uganda’s Virtual Poverty Fund 170 Box 6. Strategic Action Plan 184 Box A.1. Climate Change and DRM tagging initiatives conducted by the Government 273 Box A.2. Criteria to identify adaptation and mitigation contributions of an activity 275 xiii Abbreviations ABM Agency Budget Matrix ADB Asian Development Bank ADSDPP Ancestral Domain Sustainable Development and Protection Plan AIP Annual Investment Program AO Appropriations Ordinance APSEMO Albay Safety and Emergency Management Office ARP Agency Release Program ATI Agriculture Training Institute AUSAID Australian Agency for International Development BAFPS Bureau of Agriculture & Fisheries Product Standards BAR Bureau of Agricultural Research BARs Budget Accountability Reports BEDs Budget Execution Documents BLGF Bureau of Local Government Finance BMU Bundesministerium für Umwelt, Naturschutz Und Reaktorsicherheit BRT Bus Rapid Transit BSWM Bureau of Soils and Water Management BTR Bureau of Treasury BUB Bottom-Up Budgeting CAT DDO Catastrophic Deferred Drawdown Option CBMP community-based monitoring program CBMS Community-based Monitoring System CC Climate Change CCA Climate Change Adaptation CCC Climate Change Commission CCCC Cabinet Cluster on Climate Change CCO Climate Change Office CCWG Climate Change Working Group CDC Cash Disbursement Ceiling CDM Clean Development Mechanism CDP comprehensive development plan CDS Carbon Development Strategy CEONC Comprehensive Emergency Obstetric and Newborn Care CFG Climate Finance Group CFS Climate Field School CHED Commission on Higher Education CIP country investment plan CIRCA Center for Initiatives and Research on Climate Adaptation CLUP comprehensive land use plan C/MDPs City / Municipality Development Plan COA Commission on Audit CPEIR Climate Public Expenditure and Institutional Review xiv CRMP Coastal Resources Management Plan CRP Cash Release Program CSOs Civil Society Organizations CTF Clean Technology Fund DA Department of Agriculture DAR Department of Agrarian Reform DARA Development Assistance Research Associates DBCC Development Budget Coordination Committee (of NEDA) DBM Department of Budget and Management DENR Department of Environment and Natural Resources DepED Department of Education DFA Department of Foreign Affairs DILG Department of the Interior and Local Government DND Department of National Defense DOE Department of Energy DOF Department of Finance DOH Department of Health DOLE Department of Labor & Employment DOST Department of Science and Technology DOTC Department of Transportation and Communication DP Development Partner DPWH Department of Public Works and Highways DREAM Disaster Risk Exposure and Assessment for Mitigation DRR Disaster Risk Reduction DRRM Disaster Risk Reduction Management DRRMA Disaster Risk Reduction Management Act DRRMF Disaster Risk Reduction Management Framework DRRMP Disaster Risk Reduction Management Plan DSWD Department of Social Welfare and Development DTI Department of Trade & Industry ECA Environmental Critical Area EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EIS Environmental Impact Statement EMB Environment Management Bureau EMP Environmental Management Plan ENR Environment and Natural Resources ENSO El Niño/Southern Oscillation EO Executive Order FLUP Forest Land Use Plan FMB Forest Management Bureau FMP Forest Management Plan FPRDI Forest Products Research and Development Institute GAA General Appropriations Act GAB Generational Appropriation Bill xv GAS General Administrative Services GDP Gross Domestic Product GEF Global Environmental Facility GFDRR Global Facility for Disaster Risk Reduction GGCC Good Governance Corruption Cluster GHG Greenhouse Gas GII Geographic Information Infrastructure GIS Geographic Information System GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (German Society for International Cooperation) formerly GTZ GTZ see GIZ GUICADALE Guinobatan-Camalig-Daraga-Legaspi GWh Gigawatt hour HDPRC Human Development and Poverty Reduction Cluster HLURB Housing and Land Use Regulatory Board ICC Investment Coordinating Committee (of NEDA) IEC information, education, and communication IEM Integrated Ecosystem Management ILO International Labor Organization InfraCOM Infrastructure Committee (of NEDA) IPCC Intergovernmental Panel on Climate Change IRA Internal Revenue Allotment IRR Implementing Rules and Regulations IWMP Integrated Watershed Management Plan JICA Japan International Corporation Agency JMC Joint Memorandum/Circular KRA Key Results Area LCCAP Local Climate Change Action Plan LCDT Low Carbon Development Tool LCF Local Calamity Fund LCP League of Cities of the Philippines LDF Local Development Fund LDIPs Local Development Investment Program LDP Local Development Plan LDRRM Local Disaster Risk Reduction Management LDRRMC Local Disaster Risk Reduction and Management Council LDRRMF Local Disaster Risk Reduction and Management Fund LDRRMP Local Disaster Risk Reduction and Management Plan LEDS Low Emission Development Strategies LGC Local Government Code LGPMS Local Government Performance Management System LGU Local Government Unit LiDAR Light Detection and Ranging LMP League of Municipalities of the Philippines xvi LRT Light Rail Transit MC Memorandum Circular MDB Multilateral Development Bank MDGs Millennium Development Goals MDG-F Millennium Development Goal Fund M&E Monitoring and Evaluation MFO Major Final Output MGB Mines and Geo-science Bureau MMDA Metropolitan Manila Development Authority MOOE Maintenance & Other Operating Expenditures MOU Memorandum of Understanding MRV Measurable, Reportable, and Verifiable MSME Micro, Small, and Medium Enterprises MtCO2e Metric Tons of Carbon Dioxide Equivalent MTEF Medium-Term Expenditure Framework MTPDP Medium-Term Philippine Development Plan (also PDP) MTPIP Medium-Term Philippine Investment Plan MTRDIP Medium-Term Regional Development Implementation Plan MW Megawatt NAMA Nationally Appropriate Mitigation Strategy NAMRIA National Mapping & Resource Information Authority NCA Notice of Cash Allocation NCAA Non-Cash Availment Authority NCCAP National Climate Change Action Plan NCF National Calamity Fund NCR National Capital Region NDRRF National Disaster Risk Reduction Fund NDRRMC National Disaster Risk Reduction and Management Council NDRRMF National Disaster Risk Reduction and Management Act framework NDRRMP National Disaster Risk Reduction and Management Act action plan NEA National Electrification Administration NEDA National Economic Development Authority NEECP National Energy Efficiency and Conservation Program NEEDS National Environmental, Economic and Development Study NEP National Expenditure Program NFPP National Framework for Physical Planning NFSCC National Framework Strategy on Climate Change NGAs national government agencies NGOs nongovernmental organizations NGP National Greening Program NHA National Housing Authority NIA National Irrigation Administration NLUC National Land Use Committee NAMA National Appropriated Mitigation Actions NOAH Nationwide Operational Assessment of Hazards xvii NREP National Renewable Energy Program NRP National Rice Program NRPS National REDD Plus Strategy NSCB National Statistical Coordination Board OCD Office of Civilian Defense ODA Official Development Assistance OEO Other Executive Office OPIF Organizational Performance Indicator Framework OSEC Office of the Secretary o/w of which PAMP Protected Area Management Plan PAGASA Philippine Atmospheric, Geophysical and Astronomical Services PAPs Programs, Activities, and Projects PAs Protected Areas PAWB Protected Area and Wildlife Bureau PCAARRD Philippine Council for Agriculture, Aquatic and Natural Resources Research and Development PCAMRD Philippine Council for Aquatic and Marine Research and Development PCCARD Philippine Council for Agriculture, Forestry and Natural Resources Research and Development PCF Performance Challenge Fund PCHRD Philippine Council for Health Research and Development PCIC Philippines Crop Insurance Corporation PCIERD Philippine Council for Industry and Energy Research and Development PCSD Philippine Council for Sustainable Development PDAF Priority Development Assistance Fund PDCC Provincial Disaster Coordination Council PDF Philippine Development Forum PDP Philippines Development Plan PDPFP Provincial Development and Physical Framework Plan PDRRMC Provincial Disaster Risk Reduction Management Council PEENRA Philippine Economic-Environmental and Natural Resources Accounting PEEP Philippine Energy Efficiency Project PEPP Philippine Environmental Partnership Program PEFA Public Expenditure and Financial Accountability PER Public Expenditure Review PFM Public Financial Management PhilCCAP Philippines Climate Change Adaptation Project PhilRice Philippine Rice Research Institute PHILVOCS Philippine Institute for Volcanology and Seismology PhP Philippine peso PIA Philippines Information Agency PIP Public Investment Program PIVS Philippine Institute for Volcanology and Seismology PNRPS Philippine National REDD Plus Strategy xviii PPP Public-private Partnership PRRI Philippine Rice Research Institute PSCCA Philippine Strategy on Climate Change Adaptation PSF People’s Survival Fund PSFB People’s Survival Fund Board PSIA poverty and social institutional analysis PSTACC Philippine Science & Technology Agenda on Climate Change PTFCC President Task Force on Climate Change QRF Quick Response Fund RA Republic Act R&D Research and Development RDC Regional Development Council RDCom Regional Development Committee (of NEDA) REMM Results, Evaluation, and Monitoring matrix RFU Regional Field Unit RPFP Regional Physical Framework Plan RWCSs Rain Water Collection Systems SAFDZ Strategic Agriculture and Fisheries Development Zone SAROs Special Allotment Release Orders SCP Sustainable Consumption and Production SDC Social Development Committee (of NEDA) SEARCA Southeast Asian Regional Center for Graduate Study and Research in Agriculture SEER Sectoral Effectiveness and Efficiency Review SIADP Sustainable Integrated Area Development Plan SLGR State of Local Governance Report SME Small and Medium Enterprise SP Sangguniang Panlalawigan (provincial legislative body) SPF Special Purpose Fund S&T Science and Technology TBH Technical Budget Hearing UACS Unified Account Code Structure UNDP United Nations Development Program UNEP United Nations Environment Program UNFCCC United Nations Framework Convention on Climate Change USAID U.S. Agency for International Development VA Vulnerability Assessment WB World Bank (International Bank for Reconstruction and Development) WHO World Health Organization WMC Watershed Management Council ZBB Zero-Based Budgeting xix Acknowledgements The report, Getting a Grip on Climate Change in the Philippines results from a Climate Public Expenditure and Institutional Review conducted by the World Bank, the DBM, and the CCC. This report benefited from extensive discussions with the Office of the Presidential Assistant on Climate Change, the DA, the DENR, the DOE, the DOF, the DOST (PAGASA, PCIEERD, PCAARRD, PCHRD), the DPWH, the NEDA, the HLURB, the Cabinet Cluster on Climate Change, the NDRRMC and the City of Makati and the Province of Albay. This report was written by a World Bank team co-led by Christophe Crepin, Practice Leader; and Josefo Tuyor, Senior Operations Officer, under the supervision of Motoo Konishi, Country Director for the Philippines; John Roome, Sector Director, Sustainable Development, East Asia and the Pacific; Ousmane Dione, Sector Manager, Sustainable Development, Philippines; and Iain Shuker, Sector Manager, Environment, Social and Rural Development. The team included Maria Consuelo Sy, Ruth Maturan Cruz, Ashraf El-Arini, Isao Endo, Carolina V. Figueroa- Geron, Eduardo Gonzalez, Connie Pabalan, Julie Paran, Ching Jorge, Dave Llorito, Ngozi Malife, Rosario Manasan, Sara Trab Nielsen, Reinaluz Ona, Kiran Pandey, Nenette Santero, Catherine Vidar, Sylke von Thadden, and George Wood. We acknowledge with gratitude Secretary Mary Ann Lucille Sering of the CCC and Secretary Florencio Abad of the DBM for their guidance all throughout the process, and Undersecretary Laura Pascua and Director Rolando Toledo of the DBM and Assistant Secretary Joy Goco and Maria Ayn Jella Villanueva of the CCC for their leadership and coordination role. We are grateful to Secretary Elisea Gozun from the Office of the President, Secretary Proceso Alcala (DA), Secretary Ramon Paje (DENR), Secretary Manuel Roxas II (DILG), Secretary Jericho Petilla (DOE), Former Secretary Jose Rene Almendras (DOE), Secretary Cesar Purisima (DOF), Secretary Mario Montejo (DOST), Secretary Rogelio Singson (DPWH), and Socio-Economic Planning Secretary Arsenio Balisacan (NEDA). A special thanks to Commissioner Naderev Sañofrom the CCC, Undersecretary Mario Relampagos of the DBM, Assistant Secretary for Operations Luz Cantor, Assistant Secretary Gil Montalbo, Director Ricalinda Adriatico, Director Estrellita Bangsal, Director Soledad Doloiras, Director Ruby Esteban and Director Teresita Salud from the DBM, Undersecretary Segfredo Serrano, Director Agnes Miranda and Director Silvino Tejada from the DA, Undersecretary of the DENR and Chief of Staff Analiza Teh, Director Neria Andin, Director Angelito Fontanilla, Director Eriberto Argete and Lilia Raflores from the DENR, Undersecretary Austere Panadero from the DILG, former Undersecretary Josefina Patricia Asirit, Director Carmencita Bariso, Director Mario Marasigan, and Director Jesus Tamang from the DOE, Treasurer of the Philippines and Undersecretary Rosalia De Leon, Assistant Secretary Maria Edita Tan, Director Stella Laureano and Officer-in-Charge of the Bilateral Assistance Division John Narag from the DOF, Assistant Secretary Robert Dizon and Director Bernie Justimbaste from the DOST, Director Melvin Navarro and Director Aristeo Reyes from the DPWH, OIC-Director Sheila Marie M. Encabo, Director Mercedita Sombilla, Director Jonathan Uy, Deputy Director General Emmanuel Esguerra, Deputy Director General Rolando Tungpalan and Senior Economic Development Specialist Kathleen Capiroso from the NEDA, Acting Deputy Administrator xx Flaviniana Hilario from PAGASA, and Presidential Adviser on Environmental Protection Secretary Nereus Acosta. We are appreciative of the support from the Provincial Government of Albay and their Governor Joey Salceda, as well as the City Government of Makati and their Mayor Jun Binay, Senior Advisor to the Mayor Attorney Violeta Seva and her staff. We are thankful for the input made by Development Partners in the Philippines. We thank Luc Le Cabellac from AFD, Anne Orquiza and Geoff King from AusAid, Bernd-Markus Liss and Agnes Balota from GIZ, Megumi Muto from JICA, and Amelia Supetran from UNDP for their support. We also thank Mr. Melvin Purzuelo and Aksyon Klima, and the Council of Asian Liberals and Democrats, Mr. Red Constantino and the Institute for Climate and Sustainable Cities, and Ms. Leonor Briones and Social Watch Philippines for their involvement in the course of the study and for their support. The report benefited greatly from its reviewers. We would like to thank Philippe Ambrosi, Milan Brahmbhatt, Jane Ebinger, Adrian Fozzard, Kirk Hamilton, Motoky Hayakawa, Kai-Alexander Kaiser, Jolanta Kryspin-Watson, and Andrea Liverani. Valuable comments were provided by Laura Altinger, Christopher C. Ancheta, Yolanda J. Azarcon, Victor Dato, Kathryn Hollifield, Chiyo Kanda, Tony La Viña, Lilanie Magdamo, Hans Shrader, Lawrence Tang, Alan Townsend, Ajay Kumar, Rogier van den Brink, Felizardo Virtucio Jr., Samuel G. Wedderburn, and Mark Woodward. A sincere thanks to the editing and design team from ICF International, led by Brad Hurley and Fatima Amon. xxi Executive Summary xxii Overall Select Key Messages Philippines currently experience and will continue to face significant impacts from climate change. To ensure climate resilience, build a low-carbon economy, and increase its role in the global climate change dialogue, the Philippine government has launched strong climate policy and institutional and financing reforms, supported by a clear rationale for no-regrets action. However, transformative progress toward a more climate resilient society and low carbon economy remains limited. Carried out at mid-term of the first phase of the National Climate Change Action Plan, the Philippine Development Plan (2011-2016) and the current Administration, this review is an opportunity, and comes early enough, to ensure that first phase reforms are finalized and the groundwork for the second and third phases put in place. x There is little disagreement that global climate change is happening and will gain strength in the coming decades with the potential of a 4°C+ increase in global mean temperature before the end of this century. The Philippines is especially vulnerable to climate-risks due to geographical, and a variety of social and environmental factors that aggravate climate impacts. Technology and innovations are available to build resilience, reduce greenhouse gas emissions, and can be implemented by fast-growing developing economies like the Philippines to attain immediate benefits, and ensure a sustainable development growth pat. x Comprehensive policy reforms aimed at integrating climate change in policy formulation and development plans build a solid foundation for climate-resilient, low-carbon growth, yet discrepancies remain in terms of how to align and mainstream priorities and themes define climate action; and execute agreed-upon goals across oversight agencies, sectors, and at the local level. x Climate change institutions have been reformed to include specific centralized national institutions aimed at coordinating climate policy and financing horizontally and vertically. Despite the changes, successful execution and integration of climate change across Departments and between the national and local levels remains limited. x Overall, climate appropriations show a significant upward trend across all Departments, Agencies, and in the two selected Local Government Units. Most of the increases come from higher allocations to a few major Projects/Activities/Programs. Climate appropriations outpaced the annual average increase in the national budget from 2008 and 2013 by four-fold, but continue to account only for a small part of the national budget (1.9 percent in 2012). Several financing gaps remain in allocating and operationalizing funding. x The bulk of funding for climate activities for most Departments that are part of the CPEIR comes from domestic resources, including special purpose funds, except for the Department of Public Works and Highways where on average a third of funding for flood control stems from donor aid over the period 2008- 2013. At the local level, the primary sources of funding are the Local Disaster Risk Reduction and Management Fund and the Local Development Fund, the latter which derives its budget from Local Government Unit’s income causing in the funding capacity. x Recommendations consolidate the strategic direction of the NCCAP and set the stage for scaling up action over the next two phases.. Specific activities are proposed to support eight objectives organized around three pillars. 1. Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change 1.1. Strengthen the Budget and Accounting Framework for Managing Climate PAPs 1.2. Align and Strengthen Plans to Achieve Climate Change Goals 1.3. Rationalize and Harmonize Climate Financing Instruments 2. Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities 2.1. Enhance CCC's role in reviewing and communicating climate change performance 2.2. Strengthen Coordination between CCC and Oversight Agencies and Departments 2.3. Strengthen Monitoring in the Departments 3. Pillar 3: Building Capacity and Managing Change 3.1. Raise Public Awareness of Climate Change 3.2. Build Skills and Knowledge-base on Climate Change 1 For a full set of key messages, see Annex 1 xxiii Global climate change, present and future, is a key development issue that has severe consequences throughout the world, with the majority of human and economic impacts occurring in developing countries. Scientists across the globe agree that human-induced climate change is already occurring, with impacts being observed worldwide. Global mean temperature and sea levels have increased gradually since pre- industrial times, with the largest changes occurring in the past few decades. The frequency of heavy precipitation events has increased over most land areas, along with more intense and longer droughts, leading to severe impacts on human lives as well as global, regional, and local economies. By the year 2100, the global mean temperature is projected to rise by 2–4°C compared with the 1980–1999 baseline, and could reach such levels as early as 2060. Models show that there are technically and economically feasible emissions pathways to hold warming below 2°C. However, doing so will require a commitment by all governments to set their countries on a low-carbon green-growth development path while still building resilience against inevitable impacts of climate change. The Philippines is highly vulnerable to existing climate risks and future climate change. This vulnerability, combined with non-climatic risk factors, creates a high certainty of near- and long-term impacts to the economy, sustainable development, social equity, and national security, throughout the country, in all sectors. Due to its current and future exposure to climate-related risks, compounded by rapid degradation of the environment and unsustainable development practices, the Philippines ranks third among the world’s countries most vulnerable to weather-related risk. The country’s greenhouse gas emission intensity (emissions per unit of economic output) is currently low, but is expected to rise in the coming decades with rising incomes and consumption, rapid urbanization, and motorization. Responding to these risks and trends creates opportunities that can benefit the Philippine economy and society. Many of the measures that could be taken to adapt to climate impacts are also good development practices, increasing the resilience of communities and vulnerable populations to current weather– related disasters and bringing significant benefits to agriculture and urban and coastal areas. Similarly, the prospect of growth in the transport and energy sectors could create opportunities for the development of renewable energy and the implementation of energy efficient technologies, which can increase energy independence and reduce costs. Recognizing the challenges posed and opportunities created by climate change, and seeking to be a global player in climate change dialogues, the Philippines Government has engaged in a comprehensive and strategic climate reform agenda. The climate agenda spans three 6-year phases from 2011–2028, consistent with the terms of government administrations. The first phase focuses on creating an enabling environment and readiness, with climate change recognized as one of five key results areas in the Government social contract. Through the Climate Change Act, the country has enacted a set of climate-specific laws complemented by the creation of climate- specific institutions. These institutions aim to integrate and coordinate climate change at all levels of government—national, regional, and local—to improve financing, prioritization, and planning. The Philippines has made considerable progress in implementing the reforms, but important elements are still missing. xxiv To speed implementation of the climate agenda, the Department of Budget and Management and the Climate Change Commission sought technical assistance to carry out a Climate Public Expenditure and Institutional Review (CPEIR). The CPEIR builds on methods used in traditional and environmental Public Expenditure Reviews to identify: a. Innovations in policy, institutions, and financing of climate action; b. The achievements, limitations, and disconnects in the current approaches in addressing climate issues; and c. Policy and process reforms to more effectively deliver desired climate results and enhance quality of the decision making process. The CPEIR consists of a qualitative and quantitative examination of factors that determine the ability of public institutions, policies, processes, and financing to translate the climate agenda into desired results. It is used to identify ways to increase the efficiency and effectiveness of implementation and determine a starting point for longer-term Government-led stakeholder dialogues on climate change. The CPEIR uses a policy-based approach to identifying climate expenditures, focusing on budget and institutional practices of five government Departments and their attached Agencies as well as two local government units. It provides a rich set of findings and analysis to inform the climate change dialogue in the Philippines and should be useful for carrying out similar exercises in other countries. (The complete CPEIR methodology can be found in Annex 3 of the main report.) The CPEIR is timely given the current political, social, and environmental context of the Philippines. The review is being carried out at the mid-term of the current administration, which coincides with the mid-term of the first 6-year phase of the National Climate Change Action Plan (NCCAP) as well as the Philippine Development Plan. It has occurred early enough to provide recommendations for finalizing the first phase of the NCCAP, and creates a firm baseline of results for the second phase of the NCCAP. It offers specific recommendations to make the reforms more effective; to facilitate and develop a coherent, transparent, and effective system for mobilizing and utilizing climate finance; and to better align policies, institutions, and public spending with the country’s climate change agenda. As agreed in the 2011 Busan Forum, such a system is essential for accessing the new international resources that are expected to be mobilized in the coming decade. The CPEIR Extended Technical Report has six Parts: 1. Analyzing the physical science and underlying socioeconomic basis of the challenges and opportunities posed by climate change to the Philippines. xxv 2. Assessing the national, sectoral, and local policy environment relevant to the climate agenda and reviewing the institutional arrangements for effective and efficient implementation of the political and financial agenda. 3. Providing a snapshot of the country’s public expenditure on climate change, including the strategic allocation of resources to the country’s climate agenda and priorities at the national, departmental, and local levels. 4. Providing a set of recommendations for development of strategic action plan 5. Annexes providing unabridged select key messages, summary of the findings underpinning the recommendations, a three-year work plan, and the framework for the analysis. The review’s findings and the recommendations are summarized below. 6. Technical annexes consisting of a detailed list of Program, Activities and Projects as well as a set of detailed statistical tables. Climate Change Challenges and Opportunities in the Philippines Globally, there is no disagreement that climate change is happening and that the next few decades could see increases in the global mean temperature of up to 4°C by 2100, assuming present greenhouse gas emissions trends. The global mean temperature has increased 0.8°C above pre-industrial levels, with most warming taking place since 1970; the 10 warmest years occurred in the past 12 years, indicating that temperatures are rising at a greater pace. Gradual changes in global temperature lead to impacts worldwide, many of which can be severe. Since 1950, oceans have warmed by 0.09°C, and sea levels have risen by 15 to 20 cm since pre-industrial times, with the rate in the past decade being nearly double that in the past century (PICIR and Climate Analytics, 2012). Changes in extreme weather events have been observed worldwide, with increases in prolonged droughts, intense rains, and flooding, and intensifying and more deadly storms. The impacts of such events will be detrimental to global, regional, and local economies, particularly in developing countries with larger proportions of poor populations. As one of the most highly vulnerable countries in Southeast Asia to climate-related risks, the Philippines can expect severe impacts country-wide and throughout its economy, with the greatest effects on urban and coastal areas, fisheries, and agriculture. Regionally, 16 provinces of the Philippines are considered among the top 50 most vulnerable regions in Southeast Asia (Yusuf & Francisco 2010), and four cities (San Jose Manila, Roxas, and Cataboato) were listed among the top 10 most vulnerable cities to climate-related impacts (Dasgupta et al. 2009). Sea-level rise in Southeast Asia, which has the largest coastline in the world, is projected to reach half a meter by the 2050s (Climate Analytics, 2013). Even if warming is stabilized at 2°C, 42 percent of the coastal population would still be directly affected by sea-level rise by 2100. In addition, the coastal population, which highly relies on fisheries, may see up to a 50 percent decrease in fish stocks by 2050 due to fish migration caused by ocean acidification, warming, and coral reef degradation (Climate Analytics, 2013). In the agriculture sector, xxvi prolonged droughts and intense storms will decrease productivity and could lead to rice yield losses amounting to 50–75 percent of total rice yields by 2100. When Imbodu, a category 4 cyclone, hit the Philippines in 2003, crop losses as a proportion of annual farm household income were 24 percent for bananas, 64 percent for corn, and 27 percent for rice (Climate Analytics, 2013). Public and private investments in development practices to increase climate resilience protect against present risks and provide socio-economic and environmental benefits while offsetting future impacts. Increasing resilience to impacts of climate change through climate adaptation are no-regrets measures as they also protect against current extreme weather–induced disaster risks and can bring significant benefits, specifically in urban and coastal areas, agriculture, and fisheries. For example, improving climate resilience through agricultural practices also alleviates food insecurity and malnutrition and preserves water resources. Activities include improving irrigation systems and their efficiency, as well as adjusting crop selections and application of fertilizers and pesticides in accordance with changing environmental conditions. Similarly enhancing flood control, storm protection, and resilience of infrastructure in local communities reduce climate-related mortality, economic losses, and disruption of natural ecology. Investing in low carbon growth may increase the competitive advantage of the Philippines and set the country on a more sustainable green growth path. The potential to reduce greenhouse gas emissions at low or negative abatement cost can be used to leverage financing in the energy and transport sectors. Though not a carbon- intensive economy, the Philippines ranks in the top 25th percentile of low- and middle- income countries in terms of greenhouse gas emissions, with emissions intensity planned to increase as incomes rise and as urbanization and motorization expand. Implementation of energy-efficient technologies and practices would improve the competitiveness and profitability of Philippine industries by lowering their energy costs, which are currently second highest in the region. The Imperative to Implement Climate Reforms Now With the already high level of vulnerability in the Philippines, it is critical that the country implements the adequate measures needed to protect against ever- increasing climate change and variability. Through the PDP the Philippines aims to accelerate annual economic growth to 7-8 percent toward meeting its MDG goal of halving the poverty rate by 2015 and creating one million new jobs annually through large investments in infrastructure in roads, water and energy as well as in productive sectors (agriculture). Philippines has a lot to lose by not acting to address climate change expeditiously. While it is evident from recent typhoons such as Ondoy, a single climate- event can result in damages 2 to 3 percent of GDP wiping out much of the economic gains with significant impacts on the poor, addressing slow onset events is just as important. Land use plans can be set to provide proper incentives to locate people and assets away from high risk areas at low cost but will be costly to protect or relocate in the future once harsher climate materializes. Building capacity and institutions to enact and implement reforms are inherently slow processes and failure to act now can lead to xxvii urbanization processes that are much more vulnerable to climate risks. Additionally, in the case of flood protection, they can provide a false sense of security incentivizing the location of population and assets in more hazardous areas Implementing the Government’s climate reform program contributes to the broad development goals through several channels For example, the reform supports the development of the workforce that understands and is able to quickly respond to climate events whether it is slow onset or fast moving. Further, the reforms support improved targeting of resources towards the poor and the most vulnerable through its reliance of evidence-based decision making. The climate change agenda and these reforms should go hand-in-hand to ensure the development agenda takes into consideration the present and future impacts of climate change, and vice versa. Climate action, especially in the fields of agriculture, infrastructure and energy, can create employment opportunities. This will help satisfy the Government’s priority to create opportunities for inclusive growth to increase the quality and quantity of jobs coupled with addressing climate change and disaster risk. Institutional changes that redirect climate resilience financing and its prioritization at the local level towards the most vulnerable areas and people could generate programs that are more participatory and labor-intensive in nature, thereby facilitating job creation. For instance, Small-scale sustainable and climate-proofed farming and forest management have great potential to create jobs globally. While there is a lack of publicly available official statistics regarding the number of jobs to be created in the Philippines, the shift from traditional chemical-based farming to organic agriculture is likely to have a positive impact on the country’s employment because of its labor-intensive nature. Similarly, enhancing flood control and storm protection and retrofitting infrastructure and buildings would provide significant job opportunities. Large-scale investments in multi-hazard retrofitting and reconstruction enhance the capacity of the engineering and construction industries and create local jobs. In addition, scaling up of the renewable energy market, expanding energy efficiency programs including retrofitting buildings would create new jobs Clean technology development is still an expanding market with plenty of opportunities for training engineers, building managers and a host of other alternative livelihoods to those that may be lost because of climate change. Transforming the Climate Policy Agenda Establishes a Foundation for Sustainable Reform and Action Given the present and future risks imposed by climate change and the opportunities it creates, the Philippines has launched climate reforms that convert its climate policies into a comprehensive national climate agenda, increasing their scope and visibility, and creating a foundation for building resilience and low-carbon growth. In 2009, the Philippines enacted the Climate Change Act—one of the few adopted in the world—which requires the systematic integration of climate change in policy formulation, development plans, and other development tools and approaches by all Departments and Agencies of the Government. The Climate Change Act further called for the creation of the National Framework Strategy on Climate Change and the NCCAP. Six of the seven NCCAP thematic priorities contribute to resilience, highlighting the xxviii importance of adaptation. The NCCAP envisions that mitigation activities will be undertaken by the private sector, with the public sector providing the enabling environment. The broadened scope of the NCCAP, encompassing all Agencies of the Government at national and local levels, has increased its visibility and has focused the attention of the oversight Agencies on integrating climate into the development planning processes. The NCCAP sets out a climate agenda in three phases, each spanning six years and coinciding with the terms of the Philippines administrations and the Philippine Development Plan. The primary focus of the first phase is to create an enabling environment and ensure overall readiness for implementing the agenda, with scaling up of critical sectoral reform and activities during the second and third phases. The first phase corresponds to the broader public-sector reforms launched by the current administration, providing a positive dynamic for a solid climate reform agenda. The public sector reforms promoted through the NCCAP include the enactment of a land-use bill, creation of a water regulatory commission, guidelines for implementing Integrated Water Resources Management, adoption of new floodplain management rules, the development of a sustainable renewable energy roadmap, guidelines on developing the renewable energy market, and the development of incentives for mass transport fleet. Climate change is being incorporated into the work programs of all Departments as they are being revised, but not in a systematic fashion. This creates a lack of consistency with the NCCAP. Differences in perspectives across Departments on the definition of a climate action make it difficult for Departments to determine how to alter their work programs and assume leadership. Each NCCAP priority contains a detailed list of outcomes and a set of time-bound activities, but the activities are not linked to targets and thus do not guide the extent to which activities are expected to be carried out or how to prioritize among them. Furthermore, the effectiveness of Departments in implementing NCCAP outputs depends on the degree of complementarity and alignment of NCCAP outcomes with the Department’s goals and major final outputs under the government’s Organizational Performance Indicator Framework. Though indicators have been proposed for each NCCAP output area, they have not been finalized and specific targets have not been established, impeding consistency between outputs and goals. As such, the NCCAP does not provide the needed basis for determining the size or scope of these programs. The translation of the reforms across sector programs is largely pending for two additional reasons: (1) the current administration has appropriately focused on reforms at the oversight level, and (2) there is a need for coordination and convergence in planning among sectorally organized Departments and Agencies in implementing the thematic priorities of NCCAP. At the national level, NCCAP and the PDP are only partially aligned. Even though the Philippine Development Plan 2011–2016 was launched as the NCCAP was still being developed, five chapters in the PDP include extensive discussions on climate change, particularly in relation to adaptation and disaster risk reduction and management. In turn, some immediate NCCAP outcomes are excluded from the PDP while others lack detailed articulation of supporting activities. Since both plans are scheduled for updates in mid- 2013, an opportunity exists for improved alignment. xxix NCCAP outcomes are not fully aligned against those of Key Results Area 5 (KRA- 5). Some PDP outcomes are mapped to KRA-5 and also correspond to similar NCCAP outcomes on increasing sector resilience, hence establishing a potential link from NCCAP to KRA-5. The alignment breaks down for key sectors such as infrastructure (energy, water, transport), which only include intermediate outcomes and indicators for infrastructure quality, adequacy, and accessibility, but not on climate resilience. At the local level, a lack of technical capacity and guidelines transforming national policies to local policies has resulted in limited integration of climate change activities into local development plans. The Climate Change Act mandates Local Government Units to formulate and implement Local Climate Change Action Plans and Local Disaster Risk Reduction Management Action Plans; these are to be integrated into their development plans (Comprehensive Development Plans and Comprehensive Land- Use Plans). In practice, few Local Government Units have actually developed such plans, mainly because they lack the technical capacity to do so. Recognizing this limitation, the Climate Change Act requires the national government to extend technical and financial assistance to Local Government Units for the accomplishment of their Local Climate Change Action Plans. Clear guidelines on how to translate the NCCAP to a Local Climate Change Action Plan for incorporation into Comprehensive Development Plans and Comprehensive Land-Use Plans are not yet available. Despite the emerging policy convergence between the Climate Change Act and Disaster Risk Reduction Management Act, implementation of supporting activities has been difficult to bridge with implications at the local level. The Climate Change Act includes disaster prevention as part of climate change adaptation. The Disaster Risk Reduction Management Act sees adaptation as a mechanism for disaster prevention and includes a paradigmatic shift in the way disasters are managed, from a reactive approach focused on disaster rehabilitation and recovery to a preventive approach focused on disaster risk reduction through prevention and preparedness. The Disaster Risk Reduction Management Act recognizes climate change adaptation as a key and appropriate means for addressing climate disaster prevention. However, in practice, at the local level, Local Government Units still focus primarily on risk recovery and rehabilitation rather than prevention and preparedness, due to financial and technical capacity constraints. One major piece missing from the climate policy agenda is a comprehensive strategy on low carbon/green growth, which so far has been handled on a fragmented basis by different Departments and Agencies, and to a certain extent by the private sector. The Climate Change Commission has been leading several capacity-building initiatives focused on low emissions development in specific sectors, complementing prior initiatives by National Economic Development Authority and the Department of Environment and Natural Resources. Additionally, following deregulation, restructuring, and privatization of government companies and Agencies in the energy sector, the private sector has become involved in the development of clean energy resources. However, the piecemeal approach by which these programs have been developed and their xxx fragmentation across sectors has made it difficult to prioritize activities. A more comprehensive approach, backed by a common policy, would not only facilitate prioritization and sequencing of different programs to reach the goals of the Philippine Energy Plan such as triple renewable energy capacity, increase energy efficiency by 10 percent or increase the share of public utility vehicles on alternative fuel to 30 percent, but also provide the necessary signals to promote private sector engagement with a focus on the best wins in terms of abatement costs. Insufficient Execution Through Vertical and Horizontal Institutional Coordination Prevent Effective Implementation of the Current Climate Agenda To complement its climate policy reforms, the Philippines has established a new institutional structure that includes climate-specific national institutions aimed at coordinating and integrating the climate agenda horizontally and vertically; however, collaboration between Agencies remains inconsistent. The Climate Change Commission is the lead policymaking body tasked to coordinate, monitor, and evaluate the climate change agenda. It has effectively formulated the National Framework Strategy on Climate Change as well as the NCCAP, and led the preparation of the People’s Survival Fund. It covers a broad array of responsibilities to be carried out with counterpart Government Agencies and Departments, including implementing regional and local actions, building local adaptation capacity with the Department of Interior and Local Government, mainstreaming climate into development and planning processes with the National Economic Development Authority, integrating disaster risk reduction and management and climate change adaptation with National Disaster Risk Reduction and Management Council, and operationalization of the People’s Survival Fund with the People’s Survival Fund Board. Formalizing the specific roles of the Climate Change Commission in relation to the other Agencies would increase efficiency in integrating the climate agenda. Though there is a general agreement on shared responsibility between institutions, no frameworks have been operationalized to ensure integration of the climate agenda and implementation of actions. The NCCAP has not yet gained enough traction among the CCCC Department members, as they focus primarily on KRA-5. Departments’ performance is measured and monitored against their Major Final Outputs using the Organizational Performance Indicator Framework indicators, which have been mapped to the KRAs. In addition, they have been asked to develop a work program on climate change after the introduction of the KRAs by the CCCC, and to annually identify PAPs that contribute to the KRAs by the DBM. No such reporting has been required in terms of the NCCAP. As such, Department members are held accountable for delivering on KRA-5 results, but do not have incentives to update their programs to support the NCCAP. To ensure execution of the new policy agenda, it is necessary to integrate climate change in development and disaster risk reduction and management, and to raise the profile of green growth. Improved collaboration between institutions is necessary. At the national level, National Economic Development Authority’s board committees represent entry points for integrating climate change into infrastructure development, national land use, and social development as well as opening an avenue for better coordination vertically through the Regional Development Committee. The xxxi convergence agenda to build partnerships between local communities, Local Government Units, and government Agencies will improve vertical integration, ensuring that all development interventions are based on the communities’ needs and aspirations. Coordination on green growth may prove more challenging, as no institution is currently responsible for the green growth agenda. Horizontal and vertical coordination between Departments and Agencies as well as Local Government Units is hampered by a lack in institutional capacity, in terms of both human capacity and in knowledge generation and management. There is a significant lack in staffing capacity, especially at the Local Government Unit level but also at the Department level, due to limited expertise and knowledge on climate change. The ongoing rationalization plans, which aim to reorganize and refocus Departments and Agencies on their core mission and revitalize their organizational structures, could be an entry point for strengthening institutional capacity. However, implementation of these plans has been slow and has created a static workforce that has not been responsive to the capacity needs required to support the policy reforms. Similarly, knowledge gaps and lack of access to timely information have been key barriers in integrating climate action into Departments and Local Government Units; the key challenge has been the availability of localized knowledge. Several academic institutions, specialized Agencies, and civil society organizations specialize in specific climate-related issues and produce a vast amount of research and data. Unfortunately, this knowledge is often kept within the Agency that generates it. The generation of knowledge and the ability to access key information and data are both essential in ensuring successful implementation of NCCAP. Operationalization of the People’s Survival Fund provides an opportunity for the People’s Survival Fund Board to lead by example to reducing fragmentation in climate financing. The People’s Survival Fund Board has been established to provide overall guidance in managing the PSF, approve projects for funding, and identify additional sources of funding, but remains to be operationalized pending approval of the Implementing Rules and Regulations. Given the size and visibility of the PSF, the PSF Board could lead by example. Clear easily understandable rules and procedures that other sources of local climate financing could also follow results in greater transparency and harmonization. For instance, a clear simple approach approved by the PSF Board for identifying adaptation actions when adopted by the other sources of local climate finance would simplify climate financing for LGUs. Increased transparency in the decision making process can also be achieved through a rationalization of other rules such as on scope, eligibility criteria and sources of co-financing. While new institutions are being mobilized to fill the existing institutional gaps in strategic climate financing oversight and coordination, significant gaps remain before the Philippines becomes climate finance ready. Operationalizing the PSF provides an opportunity to develop the institutions and policies to make the Philippines climate finance ready. This entails developing national and local institutions that can meet fiduciary standards at the project and the portfolio levels and can effectively plan, prioritize, and implement climate activities. The primary focus of the PSF Board is oversight and coordination of climate financing for adaptation at the local level. xxxii Institutional gaps remain at the sectoral and national levels for overall climate finance coordination including mobilization of additional resources, and adoption of appropriate market and non-market based financing instruments. Coordination between DOF, CCC, DBM, and NEDA is essential to address the gap. Traditional tools are in use by Departments to facilitate better integration of the climate change agenda, but they could be scaled up and developed alongside new tools to improve climate change considerations in policy and financial management. The application of standardized climate screening tools is an effective way to systematically identify the key climate-related issues that may need to be addressed during the early stages of project design. Vulnerability assessments and Environmental Impact Assessments are standard tools already in use by some Departments and Local Government Units; however, both are limited due to various shortcomings. While vulnerability assessments are effective in introducing climate risk in development priorities and help set key strategies at all levels of government, some are too technical for use by Agency technical personnel or Local Government Units. The Department of Environment and Natural Resources is already implementing processes to mainstream climate change in Environmental Impact Assessments, but these often fall short in quality and timing as they are implemented late in the project planning cycle. Finally, the lack of an M&E system makes it impossible to track outcomes, outputs, and objectives at the national and local levels, as well as across sectors. Though the NCCAP includes a results matrix, it does not have any corresponding indicators to measure results. The National Economic Development Authority’s Results, Evaluation, and Monitoring Matrix is the only comprehensive M&E framework that includes climate change initiatives, whereas Organizational Performance Indicator Framework integrates climate change directly into its logical framework. There are also various mitigation- based M&E systems in some of the Departments, such as for greenhouse gas monitoring. Similarly, vulnerability and risk assessments across sectoral Agencies could be used to establish a baseline. The Government had begun to introduce a unified and integrated Results-Based Performance Management System across all Departments and agencies within the Executive Branch that utilizes, the Organizational Performance Indicators Framework of the Department of Budget and Management and the Philippine Development Plan-Results Matrix of the National Economic Development Authority as underlying frameworks to better support the five Key Results Areas. While one component of the system, the Performance Based Incentive System, became operational in 2012, the remainder is to be put in place in Fiscal Year 2013. Public Expenditure: Climate Appropriations at National and Local Levels The lack of a common classification system that can be used to define activities that support the climate agenda leads to variations in climate appropriations, depending on which classification is used. Climate appropriations refer to funding authorized by the legislature to be spent on a particular program or line item related to climate change activities. The CPEIR identified climate Programs, Activities, Projects based on several Government initiatives -- KRA5 for 2011–2013 and the Departments’ work programs for 2011–2016 – as well as a climate finance classification system developed by several xxxiii Multilateral Development Banks. For the purposes of this review, a list of Programs, Activities and Projects in alignment with the NCCAP was established based on a review of NCCAP strategic outcomes, outputs, and activities against Programs, Activities, and Projects listed in KRA5, the Departments’ work programs, and the budget. While some overlap exists across these approaches, the significant variations in the level of climate appropriations across the approaches used complicates the prioritization and monitoring of climate activities by Departments and oversight Agencies. Figure 1. Climate Appropriations by Classification, 2008 to 2013 (in Php billion)1 60 50 MDBs Climate Finance 40 Classification System NCCAP 30 Department Work Programs 20 KRA-5 10 0 2008 2009 2010 2011 2012 2013 1 2013 NCCAP decline is due to unavailability of 2013 the Department of Agriculture data and not because of an actual decline. The overall trend shows that climate appropriations have increased significantly over the past five years across all Departments and Agencies, with most of the increase attributed to a few major Programs, Activities and Projects. Climate appropriations (based on the NCCAP) have almost tripled over the past five years in absolute levels, and doubled as a share of the national budget from 0.9 percent in 2008 to 1.9 percent in 2012. The real average annual increase in climate appropriations (26 percent) outpaced the real average annual increase in the national budget (5 percent). Most of the increases are attributed to a few Programs, Activities, and Projects, namely flood control protection (managed by the Department of Public Works and Highways), the National Greening Program managed by the Department of Environment and Natural Resources), the promotion and development of organic agriculture (managed by the Department of Agriculture), and the recent e-trike project (managed by the Department of Energy). Despite the upward trend, reflecting the Government’s increased commitment to address climate change, climate appropriations still represent only a small share of the national budget. xxxiv While climate appropriations make up a varying share of total budget appropriations by Department between 2008–2013, climate appropriations have grown both in absolute and relative terms for all Departments/Agencies (with the exception of Department of Energy). As a share of their budget, climate appropriations range from less than 10 percent for the Department of Public Works and Highways and the Department of Agriculture to more than 48 percent for the Department of Environment and Natural Resources and the Philippine Atmospheric, Geophysical and Astronomical Services Administration. With the exception of the Department of Energy, climate appropriations have grown both in absolute and relative terms across all Departments and Agencies over the observed period. Nearly three-fourths of climate appropriations are directed toward adaptation. These appropriations are directed primarily to flood protection and complemented by smaller-scale Programs, Activities, and Projects managed by the Department of Environment and Natural Resources, the Department of Agriculture, and the Philippine Atmospheric, Geophysical and Astronomical Services Administration. The Department of Public Works and Highways and the Department of Environment and Natural Resources implement the largest shares of climate appropriations in favor of adaptation (52 percent and 32 percent respectively), mainly due to managing the biggest Programs, Activities, and Projects related to flood control and the NGP. Mitigation accounts for about one-fifth of the climate appropriations, but it has grown at a faster pace than adaptation-related appropriations owing to the rapid expansion of the NGP, the PhilRice program, the Tamang Abono programs, and the recently launched e-trike project (replacing petrol-fuelled tricycles with electric models). The majority of financing for NCCAP priority areas is directed to water sufficiency, followed by ecosystem and environmental stability, and food security. Most of the funding under the water priority area is directed to water governance (notably flood protection managed by the Department of Public Works and Highways). For ecosystem and environmental sustainability, the majority of funding supports forest management (notably the NGP) and land management activities, accounting for 84 percent of total appropriations. This suggests a priority toward high-scale investments and raises questions about sufficient funding in capacity building, research, and broader ecosystem management. Funding for food security has more than doubled since 2011, which coincides with the Department of Agriculture’s efforts in 2011 and 2012 to mainstream climate change aspects in budget planning. While a few climate Programs, Activities, and Projects account for the bulk of the sectors’ climate appropriations, the remaining budget is spread thinly across more than 80 small activities, and opportunities to scale up several key activities, which have not yet been pursued. Climate expenditures and appropriations supporting NCCAP strategic priority on sustainable energy fluctuated over the past five years, but more than tripled between 2012 and 2013 due to funding of the e- trike project. For three of the NCCAP priority areas (human security, climate-smart industries, and knowledge and capacity development), climate appropriations could either not be identified for the respective NCCAP activities or are negligible (Figure 2). Appropriations identified through the NCCAP priority areas cannot always be identified in the budget, given that the budget line items do not correspond to xxxv specific NCCAP priorities. While some are easy to identify (e.g., renewable energy, flood control protection), many activities are embedded as an activities within a Program/Activity/Project (e.g., policy formulations, research and training) or are included under General Administrative Services. For other NCCAP priorities, the CPEIR scope limits the assessment (e.g., a range of activities related to water security are managed by Agencies that are outside the CPEIR scope). Figure 2. Composition of Expenditures and Appropriations by NCCAP Strategic Priority Area, 2008-2013 (on obligation and appropriation basis, in %) 100% 90% 80% 70% 60% Knowledge and Capacity Development 50% Sustainable energy 40% Food security 30% 20% Ecosystem & Environmental Stability 10% 0% 2008 Actual 2009 Actual 2010 Actual 2011 Actual 2012 Budget 2013 Proposed Source: Department of Budget and Management, Department of Agriculture, Department of Science and Technology 1) 2013 budget figures are based on the National Expenditure Program 2) Exclusion of the Department of Agriculture’s 2008 and 2013 budget figures, 2011 figures based on General Appropriations Fund, 2012 on National Expenditure Program The budget execution rates of climate Programs, Activities, and Projects vary among Departments/Agencies (on average 64 to 104 percent between 2008 and 2011). The Department of Environment and Natural Resources’ budget implementation shows a budget execution rate of above 90 percent; this must be taken with caution given that several of the externally funded Programs, Activities, and Projects are not reported in the budget and continuous appropriations have inflated the budget in past years. The Department of Public Works and Highways encountered a low implementation performance, notably in 2011, owing to a review of its public work contracts. The Department of Energy’s weak implementation performance in the past years is due mainly to difficulties in using its resources for mitigation activities under its special purpose funds. The Philippine Atmospheric, Geophysical and Astronomical Services Administration’s execution rate has fluctuated in recent years; this can be attributed in part to delays in the delivery of radars and in payment of import duties. The Departments’ implementation performance has improved significantly since 2012, owing to the Department of Budget and Management’s support through its “catch-up� plan and accountant management teams that have provided support to the Departments during budget implementation. xxxvi The climate agenda is funded mostly from domestic sources, highlighting the need to get country climate systems right (policy, finance, institutions), but donor aid plays an important catalytic role. On average, 82 percent of climate expenditures are financed from domestic sources, which included both General Appropriations Fund and special purpose funds. About four-fifths of donor aid is directed to Department of Public Works and Highways, largely to finance flood control projects. While donor aid accounts for only 6% of the climate expenditures in the remaining Departments, they have played an important catalytic role in piloting initiatives, providing global knowledge, and supporting investments to assist the Government in developing and executing climate activities at the central and local levels. Special purpose funds, which can be supported either through the either GAA or through other laws, account for about 2% of total climate expenditures, but constitute an important part of financing specific climate action in selected Departments (e.g. DOE’s Philippine Energy Efficiency Program). The National Disaster Risk Reduction and Management Fund and Calamity fund are aimed at directly addressing disaster prevention and climate adaptation but have largely focused on disaster response, recovery and rehabilitation.. Some Programs, Activities, and Projects are underfunded or not funded at all, while funding for others has increased. Lack of consistency between Programs, Activities, and Projects included in the Public Investment Plan, the Departments’ work programs, and the budget hinders analysis of financial gaps. Despite these challenges, the gap assessment showed that many Programs, Activities, and Projects have been fully funded or exceed identified funding needs, while a number of Programs, Activities, and Projects remain unfunded, underfunded, or have been delayed. Since climate appropriations at the local level are financed partly from a share of Local Government Unit income, some Local Government Units lack sufficient resources to support climate adaptation and climate disaster prevention activities. There are wide variations in the fiscal capacity of provincial governments and among Local Government Units within a province; the primary sources of funding are the Local Disaster Risk Reduction and Management Fund and the Local Development Fund. Highly vulnerable provinces tend to also have lower fiscal capacities, creating disparate levels of financing capacity between Local Government Units relative to exposure to hazards and poverty incidence. Financing available for climate Programs, Activities, and Projects at the local level is highly fragmented and actual funding availability varies, making it difficult for Local Government Units to undertake climate adaptation and disaster planning and prevention actions. There are at least nine funding sources for climate action at the local level. Each of these has its own set of rules, and the total resources available can vary from year to year. Fragmentation in funding sources and variability in available resources creates difficulties even for high-capacity Local Government Units such as Makati. Though policy reforms favor ex-ante investments in disaster risk, funding gaps remain to operationalize funding for prevention and preparedness, as the National Disaster Risk Reduction and Management Fund is still not mobilized at the national level where the Calamity Fund continues to be appropriated. xxxvii Public Financial Management Using the Government’s Public Financial Management reform agenda to introduce climate change priorities in the budget cycle mutually reinforces and boosts visibility and effectiveness in the implementation of climate action. The Government launched a comprehensive Public Financial Management reform program in February 2011, aiming to modernize processes and improve management efficiencies across the Public Financial Management lifecycle. These reforms have already yielded some encouraging results for the management of climate Programs, Activities, and Projects, and have complemented Government’s efforts to integrate adaptation and mitigation considerations into budget planning and to improve tracking and evaluation of climate Programs, Activities, and Projects. In recent years, climate change priorities have been mainstreamed in various budget planning tools such as national and local plans, sector strategies, budget calls, national budget memorandum, and guidelines. Challenges remain to ensure that mainstreaming efforts are coordinated between the national and sector plans/ strategies to achieve a prioritization of climate priorities that is translated into budget proposals. At the local level, there is a need to fast-track the completion of these guidelines and to ensure their consistency. Some initiatives of selected Departments and Local Government Units present best practices in the use of budget calls, guidelines, policies, or memorandums to develop climate Programs, Activities, and Projects. It may be possible to systematically scale up these efforts to other Departments and identify further tools and entry points. The Government has introduced several initiatives offering opportunities for scaling up, including the Medium Term Expenditure Frameworks and innovative programmatic approaches such as bottom-up budgeting, however only few Departments have implemented these. The formulation of sectoral Medium Term Expenditure Frameworks constitutes an opportunity to translate the NCCAP’s priorities into multi-year fiscal planning and budgeting. So far, only the Department of Environment and Natural Resources and the Department of Public Works and Highways have adopted such a framework in their internal planning and budgeting. The Fiscal Planning Bureau is planning to standardize the development of MTEFs and roll this out for use by Departments as part of an IDF grant. The bottom-up budgeting approach offers an opportunity to promote convergence, enhance the effectiveness of the selected program, and leverage additional resources from the Departments’ budgets to support for the climate change agenda. The effectiveness of this approach depends on the Government’s ability to address emerging problems such as coordination among Departments, clarity of roles, technical capacities, leveraging additional funds, etc. Other reforms related to the strengthening of procurement procedures and improved budget execution owing to the Department of Budget and Management’s account management teams have contributed to better management of several climate Programs, Activities, and Projects. Capacity to report on activities is low, but the Government is currently reforming its budgetary accounting with expected improvements in reporting and auditing xxxviii systems, which will enhance the mid-year and year-end M&E of Climate Programs, Activities, and Projects. A closer look at the Department of Agriculture and the Department of Environment and Natural Resources showed that they face many reporting requirements but have limited capacity to use reported data for strategic planning purposes. The current review of Major Final Output and performance indicators presents an opportunity to introduce Major Final Outputs that measure results in addressing climate change, but challenges remain for the Departments to identify the appropriate output/outcome indicators. The introduction of a new Unified Account Code Structure and Results-Based Management Performance is expected to materialize in the medium term; it remains to be seen how the monitoring and evaluation of climate Programs, Activities, and Projects will benefit from these reforms. In the meantime, the Zero Based Budget approach offers opportunities to evaluate the implementation of major climate Programs, Activities, and Projects. Recommendations: The Way Forward Carried out at the midterm of the current Administration, of the Philippine Development Plan 2011–2016, and of the first six-year phase of the National Climate Change Action Plan, the recommendations of this CPEIR aim to support the Government’s climate reform agenda. The recommendations aim to consolidate the strategic direction of the NCCAP and set the stage for scaling up actions over the next two phases. The goals for the remainder of the Administration’s term should be to: 1) Ensure that the enabling environment is firmly in place by completing and implementing the remaining pieces of the core climate change reforms; 2) Formulate, enact, and support complementary sector and local-level policy and institutional reforms; 3) Enhance planning, prioritization, design, and reporting of climate programs, activities, and projects to improve their effectiveness; and 4) Through the above reforms, increase efficiency of resource use and provide support for higher levels of financing. The recommendations and the Strategic Action Plan are anchored to the Government’s climate reform agenda through a framework that includes three pillars. The framework identifies the major objectives and the specific activities needed to achieve these objectives within each pillar, providing a basis for assessing critical linkages between the objectives and activities, prioritizing and sequencing of activities, and assigning clear responsibilities to agencies for achieving the climate change goals. The three pillars of the framework are: (1) Strengthening the Planning, Execution, and Financing Framework for Climate Change; (2) Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities; and (3) Building Capacity and Managing Change. Each activity in the framework is assessed in terms of priority and risk to enable its sequencing as part of the Strategic Action Plan. xxxix Pillar 1: Strengthening the Planning Execution, and Financing Framework for Climate Change A major weakness in the present policy and budget institutional framework is that no single mechanism unifies all climate change activities. Considerable efforts are being made to strengthen budget coordination and establish a comprehensive results- oriented budget system. The success of these efforts is critical to aligning the NCCAP, with the PDP, Departmental work programs, local development plans and the KRA-5. Effective use of budget and policy planning tools that are either in use or being developed are essential to ensure that climate change activities of the government—whether funded by the government or by development partners—are assessed, coordinated, and evaluated against the NCCAP goals, and that these goals are reviewed effectively in light of the implementation experience. Objective I: Strengthen the Budget Planning and Execution Framework for Managing Climate Programs, Activities, and Projects Implement and update climate screening guidelines to provide a common reference point for budget planning and management. In the context of the CPEIR, the CCC and the DBM developed climate screening guidelines to tag PAPs aimed at climate adaptation and mitigation. These were included as part of DBM’s FY 2014 budget memorandum. The results of the tagging should be used to identify climate PAPs in the budget planning and management process throughout Government. The guidelines should be implemented and updated on a regular basis going forward, based on clearly defined processes. In addition, support needs to be provided to develop off-line systems to enable selected Departments (e.g., DA) that have integrated climate action into their PAPs to more effectively tag and report climate expenditures. Strengthen the identification, convergence and funding of climate PAPs by making systematic use of budget processes and tools, including new opportunities created by PFM reforms. A variety of tools (e.g., budget calls, MTEF) already are available to improve the identification, development and selection of climate PAPs in the Departments’ budget planning and managing decisions. New opportunities introduced as part of broader PFM reforms (e.g. Zero Based Budgeting, the Program Approach, Bottom up Budgeting, and the Results-based Performance Management System), when applied to climate PAPs, provide additional opportunities to improve convergence, effectiveness and efficiency of the outcomes of the Government’s climate reform agenda. DBM needs to provide Departments with guidance for more effective use of these tools as well as provide participation incentives, for instance to offset likely higher cost to Departments for design and coordination in the Program Approach. Develop and adopt climate prioritization tools for use in the budget planning process. In a fiscally constrained environment and facing a broad set of issues, DBM needs to not only identify climate PAPs, it also need to prioritize and sequence them. Departments need support in balancing the need to satisfy their respective mandates while delivering on their climate change related responsibilities. Similar tools should be developed to support LGUs to prioritize climate action in their Annual Investment Plans. xl Establish comprehensive coverage of climate PAPs in national and sector plans, strategies, and budgets, and strengthen reporting of mid-year and end-year implementation. Budget transparency is impeded by the lack of a separate identification of climate change in the economic and functional classification of the budget, multiple sources of the appropriation structure, in-year re-alignments, and off-budget expenditure (e.g., development partner funds, Special Accounts, and SPFs). While some of these issues are addressed through the current PFM reforms (e.g., appropriations will be limited to one year), others will remain and should be closely monitored through off-line methods. The DBM is committed to capturing the full spectrum of climate activities through secondary coding of the budget to support strategic planning and reporting. In addition, it is important to continue strengthening the reporting of budget execution of climate PAPs at mid-year and end-year to identify the sources of financial inefficiency on climate expenditures. Objective II: Align Plans and Strengthen Implementation to Achieve Climate Change Goals Establish a shared climate program across Government by aligning the National Climate Change Action Plan with the Philippine Development Plan, Department work programs, local development plans and KRA-5. The NCCAP provides a reference point for the Government’s climate change agenda, but is not explicitly linked to the climate outcomes and outputs of the national (PDP, PIP, KRA-5), Department work programs, and local development plans. Planned updates to the PDP and the NCCAP in 2013 provide an opportunity to ensure a coherent set of climate outcomes and outputs between these plans. While the climate screening guidelines provide a common reference point for NCCAP activities, there is still a need to define what should be included in the KRA-5 classification to reduce confusion. Department work programs can be aligned with NCCAP priorities by: (1) increased convergence across Department work programs (e.g., through the Program Approach); (2) reformed sector policy; and (3) improved design, execution, and monitoring of PAPs. At the local level, incorporating CCC should provide guidelines on formulating and incorporating LCCAPs into CLUPs and CDPs, which in turn provide the basis for LGU resource allocation decisions in the Annual Investment Plan. Accountability for the shared climate program can be increased through the formulation of an operational business plan that identifies specific measurable targets by institution, in particular in preparation for phase 2 of the NCCAP. Formulate, enact and implement complementary sector policy reform to enable transformative climate action. The Government has already enacted some sector reforms (e.g. renewable portfolio standard, privatization of power generation), and the NCCAP identifies the need for additional reforms in key sectors (e.g. water sector governance, introduction of risk transfer mechanisms). Complementary sector reforms are essential to bring about larger-scale climate results, including through the mobilization of the private sector. Reform design of climate PAPs to strengthen implementation of the climate agenda. The effectiveness of individual PAPs in delivering climate results can be improved by enhancing their design in four areas: (1) establishing clear objectives and targets, (2) improved management of risks and uncertainty, (3) increased convergence and (4) xli recognition of co-benefits. PAP designs that explicitly include NCCAP objectives and measure their outcomes against the NCCAP targets strengthen support for climate action. The application of climate screening tools and Environmental Impact Assessment provides a means to more effectively manage risk and uncertainty at different stages of the project cycle. On a broader scale, the quality of the climate portfolio can be me made more resilient by establishing the project design criteria for the PSF and updating the ICC review criteria based on risks and uncertainty related to climate change. In the context of the Government’s large infrastructure development agenda, one such tool, robust decision-making framework, supports designing PAPs that minimizes regrets in the context of uncertainty and disagreements about the likely effects of alternative plans and policies. The Program Approach can also be used to improve coherence and convergence in PAP design, reduce overlap in efforts, and increase focus on priority areas. Finally, greater recognition of the development of co-benefits of a PAP can here as well strengthen the design of climate PAP. Converge CCA and DRRM agendas at the national and local levels. The policy convergence on CCA and DRRM needs to be reflected in the implementation strategies, institutional arrangements, and financing. A first step in operationalizing this convergence at the national and local levels would be to simplify and integrate the vulnerability and disaster risk assessment tools so that they focus on short- to long-term climate risk management; to develop common indicators for monitoring progress; and to standardize reporting on climate-related disaster activities. In addition, at the local level it also entails the integration of CCA/DRRM into LDPs on the policy front, building implementation capacity of the LDRRMCs and LDRRMOs on the institutional front, and the harmonization of LDRRMF and PSF rules that ensure equitable access and cost- sharing agreements that reflect vulnerability and needs on the financing front. Adopt approaches to optimize mitigation opportunities. The CCC, the DBM, the NEDA, the DENR and the DOE have taken steps to identify mitigation opportunities to support the implementation of mitigation action. However, neither the NCCAP nor the development plans (PDP and Department work programs) have formulated an overall national low-carbon and low-emission strategy that optimizes mitigation opportunities or identifies national and sector-specific priorities for reducing GHG emissions in the form of marginal abatement curves. Formulation of such a national strategy can leverage some of the existing initiatives. In addition, strategy implementation would be facilitated by the development of an MRV system which is essential to reduce uncertainties and to leverage private financing, and by the establishment of data collection systems, baselines, and regulatory institutions. The participation of the private sector could also be strengthened by establishing a national carbon price to provide greater certainty about the value of mitigation activities. Objective III: Rationalize and Harmonize Climate Financing Instruments Clarify and streamline rules, as well as the eligibility criteria for climate financing at the local level. Establishing strategic and complementary eligibility criteria, scope, the level and sources of co-financing, including information on how to leverage funding, across the different sources of financing (e.g. PSF, LDRRMF, and LDF) will improve xlii targeting and increase effectiveness of these financing instruments. For instance, clear rules should be established to preclude financing from multiple sources for the same activity. This streamlining contributes to the convergence on CCA/DRRM (see para 137). The PSF Board could lead such an effort through the examples it sets in operationalizing the PSF and through the convening power it has due to its size and institutional visibility. Establish the Climate Finance Group to coordinate climate financing. Financing the climate agenda remains a challenge for mitigation and for national and regional adaptation PAPs. The DOF is in a powerful position to help mobilize and coordinate domestic and international resources, incentivize market-based instruments, and leverage private sector resources to address medium- to longer-term financing gaps. For instance, facilitating the broader use of risk sharing and risk transfer instruments, which can be appropriate for addressing large risks (e.g., catastrophic losses from large-scale flooding or damages from typhoons) requires tools that appropriately measure risks, set affordable premiums, can ascertain quickly whether a risk event has occurred, and can make payouts quickly. Such coordination requires the engagement of CCC, NEDA, DBM, and DOF and can be facilitated by providing some form of legal basis for the Climate Finance Group. Improve harmonization, alignment, and coordination of Development Partner financing as part of programmatic support to the Government’s climate reform agenda. The Philippine Development Forum Climate Change working group should be made more effective in providing more strategic support for the Government’s climate reform agenda. A more programmatic approach that reduces duplication of activities and increases coherence and transparency could strengthen support for the Government’s climate reform agenda. Pillar 2: Enhancing Leadership and Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities Effective leadership can drive climate change to the top of the policy agenda; systems to monitor results will improve accountability. Clearly defined institutional roles and responsibilities are essential for fostering leadership that can effectively facilitate the translation of policies into action and results. In this context, good use can be made of effective champions of climate change policy and practice. Agency experience can be used in a climate change communication policy. Objective I: Enhance CCC’s leadership role in reviewing and communicating climate change performance Strengthen the annual CCC review of climate change policy implementation to increase accountability, and generate lessons learned for best practices. Monitoring and reporting of NCCAP implementation by CCC could be improved in three areas. First, the CCC’s annual implementation progress report, while recapping past implementation, does not include desired goals for the coming year, an assessment of the achievements relative to the goals for the prior year, or a summary of key issues leading to performance shortfalls and recommend actions to overcome them. In essence, while there is reporting, xliii there are few suggestions for improvements. Second, the CCA/DRRM agenda remains uncoordinated, but could be improved if the CCC consolidated reporting of all climate- related disaster prevention. Finally, the CCC needs to establish a system to review the LCCAPs and their integration into the Comprehensive Development Plan and the Comprehensive Land Use Plans to generate necessary lessons learned. Objective II: Strengthen Coordination between CCC and Oversight Agencies and Departments Create a champion group to establish coordination between the CCC and the various oversight agencies. Improved coordination is essential for ensuring effective implementation of the Government’s climate reform agenda. The CCC, NEDA, DBM and DOF are responsible for overseeing the implementation of the most critical policy instruments affecting climate change governance. These Agencies could lead by example through improved coordination among themselves, including in the establishment of clear enforceable targets, roles and responsibilities, and accountabilities, which could establish the norms for climate change governance. Areas where relationship between the NEDA and the CCC could be clarified include setting entry points for updating the PDP and the NCCAP to ensure consistency, and updating the ICC review criteria to reflect climate considerations and establishing review criteria for the PSF. With respect to CCC and DBM, areas for coordination include updates of the climate screening guidelines, and integrating the CCC inputs into the budget process. Similarly, in relation to the DOF, the role of the CCC in identifying financing needs and the DOF in mobilizing funding must be clarified. Establish coordination between the CCC and the national and local DRRM Councils, and the PSF Board. The MOU between the NDRRMC and the CCC is not fully effective, and will need to be revised and expanded to include operational guidelines that better reflect the policy convergence with a clear focus on the specific responsibilities on climate related disaster risk prevention. The CCC does not have a local presence, so the role of the LDRRM Councils could be expanded to formulate and implement both DRRM and CCA activities. The PSF Act already defines the broad contours of the relationship between the PSF Board and the CCC, which is mandated to provide technical support to the PSF board with regard to developing criteria for project selection and prioritization, and in the review of projects. The Implementing Rules and Regulations designate the CCC as interim secretariat to the PSF, adding to the responsibilities of the CCC and making coordination between the PSF Board and the CCC essential for the success of the PSF. The CCC will be in a position to develop the operations manual and develop the review criteria for PSF projects, which are exempted from ICC reviews. Objective III: Strengthen Monitoring in the Departments and LGUs Reform existing M&E systems to link with the NCCAP across all levels of the government. The development of a consistent set of climate performance indicators supported by measurable targets to monitor progress will further enable activities across the government to be clearly focused and aligned. The CCC could lead the effort to identify and include climate performance indicators and major final outputs as part of the xliv Government’s current efforts to refine them and in establishing the RBPMS across Departments and Agencies. At the local level, climate activities could be reported by the LGUs in their Annual State of the Local Governance Report. A major long-term effort is required to address capacity issues and integrate Departmental M&E systems to climate change policies and goals. Departments are faced with many reporting requirements and limited capacity to use the data for strategic planning purposes, impeding the effective M&E of all Departments’ PAPs, including the climate PAPs. Similarly, the newly introduced RBPMS offers the ability to identify entry points for tracking and evaluating climate action, which helps establish a plan and identify priorities. Adopt tools to document and inform about the co-benefits of climate action and integrate them into the climate prioritization tool. Tools to inform about the co- benefits of climate programs, activities, and projects would strengthen support for prioritizing them in the budget planning process. They would also enable public reporting on NCCAP’s gender-related ultimate goal, raising awareness about climate change among the general populace. Pillar 3: Building Capacity and Managing Change Weak institutional capacity and low public awareness of the impacts of climate change can limit the effectiveness of climate programs, actions, and projects. Prioritizing capacity building efforts and developing a climate knowledgebase at all levels of Government will pay dividends through a more successful mainstreaming of climate change into policy, budgets, and financing. Formalizing systems and networks to facilitate knowledge sharing is essential to support implementation. Objective I: Build Skills and Knowledge-base on Climate Change Develop staff capacity through training programs, throughout the Government. Implementation of the climate reform agenda requires knowledgeable and skilled staff throughout Government. Staff training to raise capacities to carry out these tasks would streamline implementation of the climate reform agenda, and would help significantly with raising institutional memory. Government agencies, in consultation with the CCC, should develop programs to train staff in climate change technology and administration and to adapt business processes to incorporate these skills. Incentivize generation of knowledge, and facilitate the sharing of knowledge to overcome the significant capacity gap in oversight agencies, throughout Departments, and at the LGU level. PAPs under implementation can provide powerful lessons and data to all areas of government that are involved in climate activities. This points to the need to develop systems for identifying lessons learned from climate PAPs at national and local levels, incentivize staff to extract lessons, use content management systems to help categorize and organize information, and synthesize lessons learned to improve dissemination. To complement the development of internal knowledge, efforts must be taken to establish a strong network with external key players in climate change by supporting the development of a virtual network of practitioners, and through the establishment of Centers of Excellence. The internal and external knowledge need to be xlv made readily accessible to staff to enable them to make informed decisions. The DENR, the lead designated agency for effective dissemination of information at various levels, has an online Climate Change Resource Center that was established to improve science- based knowledge on climate change. At present, the website offers very limited resources on climate change; most of the information available consists of old news articles, suggesting that the website is not regularly updated. This needs to be strengthened and updated with linkages to information portals and repositories, which could help gather the knowledge created by academia or specialized agencies as well as to collect lessons learned from the implementation of programs. Objective II: Raise Public Awareness of Climate Change Raise Public awareness of climate change to guide private actions. The majority of Filipino people are already knowledgeable about climate change and are personally taking actions to address climate change risks or reduce emissions. However, the poor and the less educated, who are often the most vulnerable, are also are the least knowledgeable about climate change. Raising public awareness through a targeted information education and communication campaign can increase the adaptive capacity of the most vulnerable populations. Strengthen public support for climate reform through enhanced and informed civil society participation in climate change policy and review. Civil Society Organizations (CSOs) serve a particularly important role in ensuring implementation of the climate change agenda by raising awareness of the issue, building trust in communities, and exerting pressure for increased transparency. This helps garner the necessary popular support for climate change programs and the current reform agenda. The continued participation of CSOs in institutions (the CCC Advisory Board; the PDF, NDRRMC, and LDRRMC proceedings; and the PSF Board) and their input on policies will not only help ensure responsiveness to community needs but also strengthen decisions. The quality of participation by CSOs can be strengthened by providing easy access to knowledge repositories and information portals. xlvi Introduction 1. Climate change is occurring now and will intensify in the next few decades, threatening in particular developing nations, with the Philippines being one of the most vulnerable countries in the world. The global mean temperature and sea levels have increased gradually since pre-industrial times, with the largest changes occurring in the past few decades. The frequency of heavy precipitation events has increased over most land areas, along with more intense and longer droughts, leading to severe impacts on human lives as well as global, regional, and local economies. The Philippines is already experiencing temperature increases; sea-level rise; stronger storms, floods and droughts; and ocean acidification, all of which will intensify and affect subsistence livelihoods as well as urban and coastal areas. These impacts will put pressure on jobs and the economy, increasing the social vulnerability of poor communities. Models project that global average temperatures may very likely increase by as much as 4°C within this century, which will lead to non-linear and unpredictable weather patterns. While it may be technically possible to hold warming below 2°C, doing so will require a commitment by all governments to set their countries on a low-carbon, green-growth development path. Yet, even a 2°C increase will require significant action to build resilience against climate impacts. 2. Climate-related impacts will put additional pressure on development, and may halt and in some cases reverse gains from development activities. The Philippines’ ambitious development goals are at risk unless significant measures are taken to increase climate resilience. Many development activities implemented in the past few decades may not have taken climate change into consideration. For example, water management and agricultural activities designed only with past or current climate conditions in mind may fail to meet food security and water supply goals in the event of increased droughts. Some coastal infrastructure and settlements may not have taken into account the threats from sea-level rise, and efforts to protect coral reefs from pollution may be hampered by the effects of ocean acidification. 3. Climate change and development are interconnected and should be addressed symbiotically; most activities to address climate change also advance the development agenda. Responding to the risks from climate change creates opportunities that benefit the Philippine economy and society. Many of the measures that could be taken to adapt to climate impacts are also good development practices, increasing the resilience of communities and vulnerable populations to current weather–related disasters and bringing significant benefits to agriculture and urban and coastal areas. Similarly, the prospect of growth in the transport and energy sectors could create opportunities for the development of renewable energy and the implementation of energy-efficient technologies, which can increase energy independence and reduce costs. 4. Recognizing the challenges posed and opportunities created by climate change, the Philippine Government has put forward a comprehensive and strategic climate reform agenda. Carried out through three six-year phases from 2011–2028, the climate change agenda focuses on transforming the climate policies and the institutions that support it to better plan, prioritize, execute, monitor, and report on climate change expenditures and activities, thereby 1 achieving sustained goals. The first phase focuses on creating an enabling environment and readiness, with climate change recognized as one of five key results areas in the Government social contract. Through the Climate Change Act, the country has enacted a set of climate- specific laws complemented by the creation of climate-specific institutions. These institutions aim to integrate and coordinate climate change at all levels of government—national, regional, and local—to improve financing, prioritization, and planning. The Philippines has made considerable progress in implementing the reforms, but important elements are still missing. 5. To assess gaps and accelerate implementation of the climate agenda, the Department of Budget and Management and the Climate Change Commission sought advisory services from the World Bank to carry out a Climate Public Expenditure and Institutional Review (CPEIR). The review is being carried out at the mid-term of the current administration, which coincides with the mid-term of the first six-year phase of the National Climate Change Action Plan (NCCAP) as well as the Philippine Development Plan. It has occurred early enough to provide recommendations for finalizing the first phase of the NCCAP, and creates a firm baseline of results for the second phase of the NCCAP. It offers specific recommendations to make the reforms more effective; to facilitate and develop a coherent, transparent, and effective system for mobilizing and utilizing climate financing; and to better align policies, institutions, and public spending with the country’s climate change agenda. The CPEIR builds on methods used in traditional and environmental public expenditure reviews to identify: i) Innovations in policy, institutions, and financing of climate action; ii) Achievements, limitations, and disconnects in the current approaches to addressing climate issues; and iii) Policy and process reforms to more effectively deliver desired climate results and enhance quality of the decision-making process. 6. The CPEIR, carried out from February 2012 to March 2013, is a qualitative and quantitative examination of factors that determine the ability of public institutions, policies, processes, and financing to translate the climate agenda into desired results. The CPEIR uses a policy-based approach to identifying climate expenditures, focusing on budget and institutional practices of five government Departments and their attached Agencies as well as two local government units. It is used to identify ways to increase the efficiency and effectiveness of implementation, and helps guide longer-term Government-led stakeholder dialogues on climate change. It offers a rich set of findings and analysis to inform the climate change dialogue in the Philippines, and should be useful for carrying out similar exercises in other countries. 7. This Extended report contains six parts including: i) Part I: Analyzing the physical science and underlying socioeconomic basis of the challenges and opportunities posed by climate change to the Philippines. ii) Part II: Reviewing the national, sectoral, and local policy environment relevant to the climate agenda, and the institutions that support these policies, for effective and efficient implementation of the policy and financial agenda. 2 iii) Part III: Providing a snapshot of the country’s public expenditure on climate change, including the strategic allocation of resources to the country’s climate agenda and priorities at the national, departmental, and local levels. iv) Part IV: Providing a set of recommendations for the development of an action plan. v) Part V: Annexes providing unabridged select key messages, summary of the findings underpinning the recommendations, a three-year work plan, and the framework for the analysis. vi) Part VI: An Addendum to the Extended this part which contains technical annexes consisting of a detailed list of Program, Activities and Projects as well as a set of detailed statistical tables. 8. An Executive version of this report The Executive Report provides decision makers (as well as stakeholders not directly involved in the review) with a summary of the key analytical findings, lessons learned, and recommendations. 3 Part I: Scientific and Socioeconomic Review 4 Part 1: Select Key Messages Climate Change Challenges Climate scientists concur that global climate change is happening and will worsen in coming decades. x Global temperatures has increased 0.8°C since pre-industrial times and may surpass the 2°C increase and reach 4°C+ by as early as 2060 leading to a non-linear path of unforeseen climate events impacting global, regional and national economies. The Philippines suffers and will continue to experience climate-related impacts, which will have detrimental consequences for the poor and their livelihoods in rural and urban areas. x Sixteen provinces are among the top 50 most vulnerable regions and four cities are among the top- ten most vulnerable cities to climate-related impacts in the region. x Sea level rise is a larger threat to the Philippine coastline compared to other countries in the region with 42 percent of the coastal population (2nd in the world) and 14 percent of the total population (1st in the world) at direct risk. x Climate-related impacts will reduce cultivatable land and nursery areas for fisheries, which will increase food insecurity and loss of livelihoods for poor communities. x Fast-growing environmental deterioration and unsustainable development trends combined with high levels of poverty and one of the fastest population growth rates aggravate climate-impacts. Ranking in the top 25 percent on greenhouse gas emissions compared to other low- to medium-income countries, and with emissions on the rise due to rapid urbanization and motorization, the Philippines must take action on halting emissions if it wants to become a global player in the climate dialogue. x Urban population growth drives emissions, and is higher in the Philippines than in similar Southeast Asian countries like Indonesia, Thailand, and Vietnam. x GHG emissions are projected to quadruple in the energy sector and double in the transport sector by 2030. Opportunities Adaptation measures will increase climate resilience and also contribute to achieving the development objectives set in the Philippine Development Plan. x Increasing the climate resilience of agricultural practices alleviates food insecurity, reduces malnutrition, and helps preserve water resources. x Building resilience to future extreme weather events also reduces the current impacts from such events. Implementing mitigation measures decreases greenhouse gas emissions, creates jobs, and will lower energy costs, which in the Philippines is the second highest in the region. x Opportunities that brings negative abatements costs exists in the power, industry, transport and residential sectors where total mitigation potential in 2020 is estimated at 37% of emissions below a BAU scenario. x In terms of reducing greenhouse gas emission in the Philippines, wind and hydropower are particularly promising in the Philippines offering the lowest abatements costs, help reduce energy dependence and creates jobs. The development benefits of implementing the climate agenda and the losses in failing to do so make it imperative act now. x Philippines aims to accelerate annual economic growth to 7-8 percent during the current PDP period, growth that is inclusive and creates one million new jobs annually. x Building capacity and institutions to enact and implement reforms are inherently slow processes and failure to act now can lead to actions that are difficult or expensive to reverse. x Climate reforms make it easier to realize Philippine’s development goals through improvements and more effective infrastructure, more skilled workforce, and technological innovations. 1 For a full set of key5messages, see Annex 1. Part 1: Scientific and Socioeconomic Review 1. Climate change has become a major issue of concern for the Philippines with the Government proactively engaged in addressing it. There is little disagreement that climate change is happening with its impacts felt across the world. Climate change is a sustainable development and social equity issue for the Philippines, with impacts occurring throughout most of the economy. Although the country’s current global share of GHG emissions is relatively small, they are expected to rise significantly over the coming decades. Development carried out in consideration of climate change provides co-benefits and opportunities for sustainable greener growth. The Government has laid out a broad agenda to proactively address climate change. While the development benefits of implementing this agenda expeditiously is imperative, failing to act on them now makes it that much harder to reach the ambitious development goals set out by the Philippines. Climate Change Impacts Physical Exposure to Climate Change in the Philippines 2. Climate scientists concur that global climate change is happening and will gain strength in the coming decades, requiring immediate action to prevent further warming and to adapt to the impacts of a changing climate (see Figure 1). For 650,000 years carbon dioxide in the atmosphere have never been above 300 parts per million, yet current levels are at 400 parts per million. Primarily as a result of rising concentrations of greenhouse gases in the atmosphere, the global mean temperature has increased 0.8°C above pre-industrial levels. Most warming has occurred since 1970, with the rate of warming in the past decade being nearly double that of the past century. All 12 years to date in the 21st century (2001–2012) rank among the 14 warmest in the past 133 years. Temperature increases of 1.8–2.2°C are virtually certain both globally and locally during the 21st century. Even if Parties of the United Nations Framework Convention on Climate Change (UNFCCC) comply with the emission pledges made at the Conference of the Parties in Cancun and Copenhagen, warming is set on a trajectory that may likely exceed 3°C, with a possible 4°C increase as early as 2060, causing a non-linear path of unforeseen climate events affecting global, regional, and national economies. While technologies are available to reduce GHG emissions to levels that can keep temperatures below the 2°C increase, putting them in place but would require even greater commitments from governments (World Bank 2012a). 6 Part 1: Scientific and Socioeconomic Review Figure 1. Scientific Agreement on Temperature Changes Source: NASA Earth Observatory, 2013 3. Gradual changes in global temperature patterns have already led to and will continue to result in severe impacts worldwide. Since 1950, oceans have warmed by 0.09°C, sufficient to cause severe disturbances in ecosystems. Warming oceans, along with ocean acidification, already impact coral reefs worldwide, which serve as important feeding and spawning grounds for many fish species that support the livelihoods of fisher folk. Extreme climate-related events have increased worldwide, with a greater frequency of prolonged droughts, intense rains and flooding, and intensifying and more deadly storms. In the coming years, all nations will be affected by climate change, which already causes detrimental impacts to global, regional, and local economies (World Bank 2013). The burden on developing countries is expected to be the greatest, as they contain large poor populations, often living in densely populated areas, whose livelihoods are at severe risk. 4. Climate change is projected to result in higher temperatures, changing precipitation patterns, rising sea levels, and generate more intense weather events in the Philippines. Based on the Intergovernmental Panel on Climate Change’s (IPCC) midrange GHG emission scenarios, the Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA) (2011) estimate that annual mean temperatures would rise by 0.9°C to 1.1°C in 2020 and by 1.8°C to 2.2°C in 2050, relative to 1971 to 2000.1 A reduction in rainfall is expected in most parts of the country 1 PAGASA used the IPCC’s GHG emission scenarios with the Providing Regional Climates for Impact Studies Regional Climate Model and the historical data from 1951 to 2009. 7 Part 1: Scientific and Socioeconomic Review during the summer season (March through May), and an increase is expected in Luzon and Visayas during the southwest monsoon and transition seasons (June through November) (PAGASA, 2011). Extreme weather events would become more frequent in terms of high temperature and change in precipitation (Figure 2). The intensity of extreme events is also expected to be heightened with the increasing risks of floods and droughts (Pulhin, Tapia, and Perez 2010). Although the sea level rise around the Philippines has not been fully assessed to date, the rate of sea level rise in coastal areas of Asia is reported to be between 1 to 3 mm per year, which is marginally greater than the global average (Cruz et al. 2007). Figure 2: Projected Extreme Events in the Philippines, 2020 and 2050 (a) Number of days with maximum (b) Number of days with rainfall (c) Number of days with daily temperatures exceeding 35°C. equal or less than 2.5 mm per day. rainfall greater than 300 mm. Source: PAGASA (2011). 5. Substantial warming of 4°C or even higher temperatures could be possible by 2100 exacerbating the severe risks for human support systems such as food production, water resources, and ecosystems (World Bank 2012a). Under a 4°C warming, heat extremes will strongly increase in Southeast Asia; in particular, southern Philippine islands will see the strongest increase in frequency and intensity of extremes with all summer months experiencing unprecedented heat extremes. Sea levels in the region will rise by about 125cm, exceeding the global average by 10-15 percent (World Bank2013). As a result, the risk of crop yield reductions would rapidly increase (Schlenker and Lobell 2010; Schlenker and Roberts 2009), while water scarcity would be significantly aggravated (Gerten et al. 2011). Loss or degradation of ecosystem services would be accelerated as a consequence of growing species extinctions, declining species abundance, or widespread shifts in species and biome distributions (World Bank, 2012). 6. Changes in the frequency, intensity, spatial extent, duration, and timing of extreme weather are likely to result in increased weather-related disasters with widespread adverse human, material, economic, or environmental effects requiring immediate emergency response (IPCC, 2012). In the Philippines, an average of about 6 8 Part 1: Scientific and Socioeconomic Review typhoons led to a disaster each year based on 1980 through 2008 records. Weather- related events in the same period also brought an average of 2 to 3 flood occurrences and drought almost every four years (Pulhin et al. 2010). Just in recent years, from 1990 to 2006, the country experienced record disasters, including the strongest typhoon, the most destructive typhoons, the deadliest storm, and the typhoon with the highest 24-hour record rainfall (NDRRMC). The IPCC (2012) also has medium confidence that with the overall temperature increase in the 21st century, there will be an overall increase in drought occurrences. As sea-surface temperatures rise, typhoons would become more intense with average instantaneous maximum wind velocity increasing by about 9 percent and are projected to be accompanied by up to a third more rainfall with considerable flooding risk. The southern Philippine islands are projected to see the strongest increase in frequency and intensity of extremes, with all summer months experiencing unprecedented heat extremes (World Bank 2013). Non-Climatic Factors Exacerbating Climate Vulnerability 7. Geography, fast-growing environmental deterioration, and unsustainable development practices combined with high levels of poverty and one of the fastest population growth rates in the world aggravate climate vulnerability in the Philippines. Absent of any land barriers, the Philippines is directly exposed to multiple climate hazards typhoons (in the northern and eastern parts), floods (in central Luzon and southern Mindanao), landslides (based on terrain), and droughts, making the Philippines more vulnerable to climate risks than other Southeast Asian countries. These risks are aggravated by a number of other development induced factors. For example, widespread mining and deforestation in Mindanao were blamed for recent flash floods, including those produced by Tropical Storm Sendong in 2011, which cost the lives of about 1,000 people (Iqbal 2011). The neglect of drainage systems and the lack of long-term planning and enforcement exacerbated the floods in 2012, which swamped nearly all of Manila (Macaraig, 2012). The land subsidence resulting from overuse of groundwater in Metro Manila and Central Luzon worsens floods and accelerates sea level rise at Manila’s South Harbor 10 times faster compared to the early 1960s (Malig 2011). Other anthropogenic causes behind the extreme flood event caused by the 2009 Typhoon Ondoy in Manila included a decrease in river channel capacity through encroachment of houses, siltation from deforestation, and garbage; the disappearance of 21 km of small river channels; urbanization accelerating runoff concentration and reducing infiltration losses; and loss of natural retention areas (World Bank 2010). Meanwhile, water scarcity, already felt in many areas of the country at certain seasons, is aggravated by the deterioration of water quality due to pollution from untreated domestic sewage, industrial wastewater, agricultural runoffs, and urban runoffs (CCC 2011). The degradation of coral reefs and mangroves, caused by human activities such as the use of destructive fishing gear, pollution, and the conversion of mangrove forest for aquaculture, would accelerate beach erosion and aggravate the damage caused by waves and storms to coastal areas (Hoegh- Guldberg et al. 2007; United Nations Environmental Programme–World Conservation Monitoring Centre 2006). 9 Part 1: Scientific and Socioeconomic Review Climate Vulnerability of the Philippines 8. The Philippines is the third most vulnerable country in the world to weather- related extreme events, earthquakes, and sea level rise 2 (Alliance Development Works 2012). Absent of land barriers, the Philippines is exposed directly to multiple climate-related hazards such as typhoons (in the northern and eastern parts), floods (in central Luzon and southern Mindanao), landslides (based on terrain), and droughts, making the Philippines more vulnerable to climate risks than other Southeast Asian countries (Figure 3). NDRRMC has classified provinces based on their vulnerability to different hazards (i.e., temperature change, rainfall change, El Nino Southern Oscillation (ENSO) events, typhoons, flooding). Twenty-three provinces are considered to be at high risk to disasters, most of which are climate- and weather-related hazards, especially those caused by typhoons and excessive rainfall (see Table 1). Sixteen provinces in the Philippines are among the 50 most vulnerable regions in Southeast Asia (Yusuf & Francisco 2010).3 Figure 3: Climate Change Vulnerability Map (a) Southeast Asia (b) The Philippines Source : Yusuf & Francisco 2010 2 This ranking is based on the 2012 WorldRiskIndex, which was developed by the United Nations Institute for Environment (UNU-EHS) in cooperation with the Alliance Development Works. The WorldRiskIndex assesses a country's disaster risk by combining four components: exposure to natural hazards (i.e., earthquakes, storms, floods, droughts and sea level rise), susceptibility, coping capacity, and adaptive capacity. 3 Yusuf & Francisco (2010) derive their vulnerability index for each sub-national area by factoring in its exposure to bioclimate-related hazards, human and ecological sensitivity to exposure (through population density and biodiversity information as proxies, respectively), and adaptive capacity. 10 Part 1: Scientific and Socioeconomic Review Table 1: Provinces at-risk to Climate and Weather-related Hazards Risk Category Very High Risk High Risk Temperature Sulu, Basilan, Lanao Del Sur, Lanao Del Norte, Davao del Norte, change Maguindanao Zamboanga Del Sur, Tawi-tawi, Misamis Occidental, Camiguin, Siquijor, Misamis Oriental, Cebu, Agusan Del Norte, Zamboanga Del Norte, Albay, Sarangani, Negros Oriental, Negros Occidental, Ifugao Rainfall change Albay, Pampanga, Ifugao, Rizal, Western Samar, Romblon Cavite, Sorsogon, Laguna, Biliran, Batangas, Pangasinan, Masbate, Metro Manila, Tarlac, Nueva Ecija, Northern Samar, Aklan, Capiz, La Union ENSO events Sulu, Basilan, Maguindanao, Lanao Misamis Occidental, Sarangani, inducing drought del Sur, Lanao del Norte, Davao del Zamboanga del Sur, South Cotabato, or an abnormal Norte Zamboanga del Norte, North Cotabato, increase in rainfall Sultan Kudarat, Siquijor, Tawi-Tawi, Negros Oriental, Camiguin, Davao Oriental, Misamis Oriental, Bukidnon Typhoons with Ifugao, La Union, Cagayan, Ilocos Pampanga, Camarines Sur, Catanduanes, strong winds and Sur, Albay, Mountain Province, Nueva Ecija, Ilocos Norte, Northern heavy rainfall Kalinga, Pangasinan, Sorsogon Samar, Tarlac, Apayao, Rizal. Benguet, Camarines Norte Flood potential Pangasinan, Nueva Ecija, Pampanga, Iloilo, Bulacan, Camarines Sur, Agusan Maguindanao, Tarlac, Cagayan, Leyte, Del Sur, Zamboanga Del Sur, Davao del North Cotabato, Negros Occidental Norte, Sultan Kudarat, Oriental Mindoro, Davao Del Sur, Zambales, Isabela Source: NDRRMC. 9. Sea-level rise within this century will affect a larger percentage of the Philippine coastline compared with that of other developing countries in the region. Sea level rise and storm surges are projected to affect a larger share of the coastal land area, population, and gross domestic product (GDP) of the Philippines compared to other countries in the region, such as Indonesia and Vietnam (Dasgupta et al. 2009). Even assuming the sea level in the region rises at the global average rate of about 100 cm, about 14 percent of the Philippines’ total population (the highest share in the world) and 42 percent of its total coastal population (second highest in the world) will be affected by intensifying storm surges resulting from more intense typhoons (Brecht et al. 2012) affecting 64 out of 81 provinces and at least 703 municipalities (Department of Environment and Natural Resources [DENR] 2010). Social and Economic Impacts of Climate Change 10. Climate change is a sustainable development and social equity issue for the Philippines, with impacts occurring throughout most of the economy. Climate change is also increasingly perceived by the Government as a “national security� issue. Climatic changes and the severe impacts of climate change are already evident and recognized affecting the country’s various economic sectors, particularly agriculture, water resources, coastal ecosystems, and infrastructure. Additional and even greater climatic variability and change combined with existing socioeconomic issues and 11 Part 1: Scientific and Socioeconomic Review increasing environmental deterioration presents a growing concern that greater impacts will likely be felt in the medium- to long-term with grave effects on people’s livelihoods and the economy, with the poorest and vulnerable being affected the most. 11. Agriculture, water resources, ecosystems, and infrastructure, including the facilities for the power and transport sectors, are particularly vulnerable to climate impacts. x Agriculture: Because of unpredictable climate patterns (e.g., high temperature and periodic rains and drizzles) and extreme weather events, the country’s agricultural productivity would continue to decline (CCC 2011; DENR 2009; PAGASA 2011). The annual damage to agriculture from typhoons, droughts, and floods already reaches Php 12 billion (3 percent of the total agricultural production4) (CCC 2011). The Isabela Province, which had no catastrophic disaster but repeated weather events of low-to-moderate intensity experienced the worst agricultural damage worth Php 5.6 billion between 1992 and 2006, followed by Cagayan Province (Php 3.1 billion) and Camarines Sur Province (Php 2.4 billion) (NDRRMC). Global warming is likely to further reduce rice yield by up to 75 percent in the Philippines by 2100 as compared to 1990 (Asian Development Bank [ADB] 2009). Food insecurity and loss of livelihood are likely to be further exacerbated by the loss of cultivated land and nursery areas for fisheries due to inundation and coastal erosion in low- lying areas (Cruz et al. 2007). x Water resources: The use and allocation of water resources for various purposes, such as domestic water supply, irrigation, hydropower generation, and tourism, would be seriously affected (DENR 2010). For example, the droughts associated with ENSO events from 1997 to 1998 caused massive crop failures and water shortages in the Philippines (Cruz et al. 2007). Generation from hydroelectric power plants fell by 20.3 percent from 9,788 GWh in 2009 to 7,803 GWh in 2010 due to low water levels in dams and rivers as a result of the severe El Niño phenomenon (DOE 2010). Areas where rainfall is projected to decrease would face a growing shortage of water, whereas the incidence of flooding increases in areas where rainfall is intensified (PAGASA 2011). More than 40 percent of a total of 70 provinces, including Metro Manila, would have 20 percent to 40 percent less precipitation during the summer season. x Ecosystems: Due to the 1998 to 1999 ENSO-inducing coral bleaching, the live coral cover of the Philippines decreased by half, and fisheries yield diminished by more than Php 7 billion (Center for Environmental Concerns Philippines 2011; Santos, Dickson, and Velasco 2011). The continuing degradation of coral reefs due to global warming and ocean acidification will further impact on coastal protection, fisheries, and tourism, having serious consequences for subsistence-dependent societies; these consequences will 4 The estimation is based on data provided by the National Statistics Coordination Board [NSCB] 2012. 12 Part 1: Scientific and Socioeconomic Review worsen as the atmospheric carbon dioxide concentration increases (Hoegh- Guldberg et al. 2007). x Infrastructure: Prolonged and frequent rainfall, strong winds, higher waves, and temperature variations will accelerate the structural fatigue and materials failure (DENR 2010). The most vulnerable infrastructures identified in the Philippines include the national road network, light rail transit (LRT) systems in Metro Manila, port facilities, power transmission systems, and irrigation facilities. Extreme weather events, mainly floods and storms, also cause tremendous damage to infrastructure. For example, the damage to physical assets, caused by the 2009 Ondoy and Pepeng typhoons alone, reached Php 68.2 billion (World Bank 2009). Albay Province experienced the worst infrastructure damage caused by climate-related hazards, which was worth about Php 730 million, between 2004 and 2008 alone (NDRRMC). Flooding in Manila would cause various damages, mainly to buildings, ranging from Php 5 billion to Php 112 billion in different current and future scenarios (i.e., the intensity of flooding, the development of master plan infrastructure, the presence and level of climate change) (World Bank 2010). 12. Climatic variability—unusual or erratic weather—negatively affects the welfare of rural households. According to Balisacan, Skoufias, and Piza (2012), negative rainfall shocks defined as less-than-usual precipitation reduce household consumption. Specifically, rainfall below one standard deviation of the long-run average causes the consumption to decrease by about 4 percent. The impact of the negative shocks varies according to regions, and the most affected regions include Ilocos and Western Visayas Islands. In these regions, a negative shock decreases household consumption by 9 percent. Households with less access to highway and market suffer greater impact of negative rainfall shocks than those with more access. Investing in agriculture and infrastructure (e.g. transportation, irrigation, adaptive agriculture research) would alleviate negative climate impacts on welfare. 13. Climate change variability and extremes seriously hit the poorest and most vulnerable people in both rural and urban areas. Farmers and fisherfolk—among the poorest population categories in the Philippines with poverty incidences of 45 percent and 50 percent, respectively—are affected most severely because of their high dependence on resources affected by a changing climate for their livelihoods, food, fuel, and medicine, and are less equipped to adapt to climate related disasters and weather variations (Peralta 2008; NAST; NEDA 2011). Increases in local temperatures will lead to reduced crop yields, and extreme weather events such as droughts and floods most often also deteriorate local crop production. With limited access to sustainable, alternative livelihoods and economic means, the capacity of poor people to adapt to climate variability and extremes is low (Butardo-Toribio 2011). 14. The urban poor in informal settlements are one of the most vulnerable groups to climate-related impacts, due in part to the additional pressures on urban systems and livelihoods created by rapidly increasing population growth. Flooding caused by monsoon rains in 2012 hit the poor in Metro Manila especially hard (Boyle 13 Part 1: Scientific and Socioeconomic Review 2012). The lack of adequate housing, drainage and canals, and water catchments to collect water contributed to placing these vulnerable people in a catastrophic situation. The urban population is growing faster in the Philippines than in similar Southeast Asian countries such as Indonesia, Thailand, and Vietnam. The urban poor in informal settlements account for 45 percent of the total Philippines’ urban population, and are particularly vulnerable to floods associated with intensified storm surges and sea-level rise (World Bank 2013). Four Philippine cities (San Jose, Manila, Roxas, and Cotaboato) are among the top 10 most vulnerable cities in the East Asia and Pacific region to sea level rise and intensified storm surges (Dasgupta et al. 2009). 15. Furthermore the information available to Local Government Units (LGUs) to deal with localized climate-risks is generally lacking or not available in a format easy to use for the LGUs. A recent assessment of the technical capacity of LGUs to undertake CCA interventions indicated key gaps (Regional Resource Centre for Asia and the Pacific 2012). Specifically, the LGUs lack knowledge and access to information about: climate change risks; non-climate multi-temporal and multi-spatial hazards (i.e., geo-physical, ecological, human induced); biophysical features; climate-impacts on key economic sectors and ecosystems; adaptation options appropriate to local conditions; and funding mechanisms that can support CCA at the local level (Regional Resource Centre for Asia and the Pacific 2012). Downscaled climate projections at the municipal level as well as climate trends covering 30 years for LGUs’ respective areas of responsibility are necessary. More context-specific research data is also required on how projected changes in climate parameters can impact major economic sectors and ecosystems such as farming, fishing, water resources, marine resources, local biodiversity, infrastructure, and human health. Contribution to Global Warming 16. Simultaneously, although the country’s current global share of GHG emissions is relatively small; overall emissions are expected to rise significantly. The growth in the national economy along with a fast growing population will lead to increased consumerism in particular in the transportation and power sectors thereby contributing to overall global climate change, and requiring additional investments in innovative technologies for mitigation purposes to keep GHG emissions low. 17. The Philippines has been a minor contributor to global warming, though among low-to medium income countries its annual greenhouse gas emissions rank in the top 25 percent. The country’s total GHG emissions, excluding land use change and forestry, have hovered around 80 million metric tons of CO2 equivalent (MtCO2e) since the late 1990s, while the emissions intensity per GDP has been declining reaching 272 5 tCO2e/$million in 2008 (Figure 4). This corresponds to about 0.3 percent of global rd emissions or 43 in terms of GHG emissions and 112th in terms of emissions intensity in 6 the world. Among the 128 low- and middle-income countries that are the members of 5 Year 2008 is the latest year when GHG emission data is available. 6 Other countries with about the same level of GHG emissions include Algeria (108.0), Romania (95.8), Nigeria (94.9), Kuwait (76.3), Chile (75.6), and Austria (73.7) (World Resources Institute 2012). 14 Part 1: Scientific and Socioeconomic Review the World Bank7, the Philippines’ GHG emissions and emissions intensity are 24th (in top 25%) and 71st (in top 75%), respectively. Figure 4: Greenhouse Gas Emissions in the Philippines (a) Greenhouse gas emissions and emissions intensity (b) Projected greenhouse gas emissions from per GDP (excluding land use changes and forestry). energy and transport sectors. Source: World Resources Institute 2012. Source: Transport and Traffic Planners Inc. 2010. 18. GHG emissions in the Philippines are very likely to increase significantly due to its growing economy, urbanization, and motorization. The country’s principal emission sources are the energy and transport sectors accounting for 36 percent and 32 percent of the total emissions in 2005,8 respectively (Transport and Traffic Planners Inc., 2010). By 2030, under a business as usual (BAU) scenario, the emissions from the energy sector is estimated to quadruple based on the assumptions that a mid GDP annual growth rate is 5 percent and an average annual growth rate of electricity demand is 5.2 percent (Figure 5)9. Under this scenario, the dependence on coal for power generation would increase, and the carbon intensity of electricity production would increase by 170 percent from 436 tCO2 per GWh in 2007 to 740 tCO2 per GWh in 2030; as a result, the CO2 emissions from coal-fired power plants would account for more than 96 percent of the total emissions from power generation in 2030 (Figure 6 and Box 1). Similarly, the emissions from the transport sector would double with the assumption that an annual increase in vehicle population is 6 percent, which already worsens the severe traffic 7 Due to the lack of emission data, the following countries are excluded: Kosovo, Marshall Islands, Micronesia, Montenegro, Somalia, St. Lucia, St. Vincent and the Grenadines, Timor-Leste, and Tuvalu. 8 Year 2005 is the latest year when the data of GHG emissions by source is available. 9 The data of GHG emission projections, cited in this report, is from Transport and Traffic Planners Inc. (2010). This reference provides the latest information about not only the emission projections, but also the GHG abatement cost that is discussed below in this report. However, the information may need to be updated to reflect various changes in the circumstances, including the available emission reduction opportunities and the regulatory and technological scenarios, that have occurred since the publication of the reference. Further research is needed to refine and inform the projections as well as other relevant information. 15 Part 1: Scientific and Socioeconomic Review congestion. Overall, the cumulative emissions between 2008 and 2030 from the energy and transport sectors would reach 1,711 and 1,145 MtCO2e, respectively. Figure 5: Greenhouse Gas Emissions of Selected Southeast Asian Countries, 2008 (excluding land use changes and forestry) (a) Total emissions. (b) Emissions intensity per GDP. Source: World Resources Institute 2012. Figure 6: Philippines’ Energy Sector (a) Projected power generation by source (GWh). (b) Historical and projected CO2 emissions by source (MtCO2e). Source: Transport and Traffic Planners Inc. 2010. 16 Part 1: Scientific and Socioeconomic Review Box 1: Coal fired Power Generation in the Philippines The Philippines expects a continued increase in coal-fired power stations, while the government promotes indigenous resources, including coal, to ensure energy security (Kessels & Baruya 2013). Coal accounts for 28 percent of the country’s fuel input mix for power generation in 2011, having the second largest share following geothermal (42 percent) (Department of Energy 2012). It is expected that coal will maintain the high share with the assumption that coal remains as one of the least-cost options for power generation (Institute of Energy Economics 2011). In the next few years, the capacity of coal-fired power generation in the Philippines, which is currently 4.2 GWe, is seen to increase by 1.6 GWe (Kessels & Baruya 2013). The coal demand is projected to nearly quadruple from 12.5 Mt in 2010 (of which 80 percent is used for power generation) to 48 Mt in 2030. While most of the current and projected demands is filled by imports, the government is expected accelerate exploration and development of coal prospect areas with discussion s of 30 coal exploration projects (National Economic Development Authority 2011; Tanquintic-Misa 2011). In terms of emissions, although the current coal-fired power stations have installed technologies to reduce pollutants, it may not be possible at the moment to use the cleanest coal combustion opportunities because the unit sizes may be too big for the transmission system. For example, super-critical units would likely be 600 MW and up, and it may be difficult to build new units in increments larger than 300 MW in the current situation. More analysis is currently being done in the context of the low carbon studies managed by the Climate Change Commission. 19. Urbanization will increase carbon emission driving the already high demand for raw materials, natural resources, energy, and fuel (Cruz et al. 2007; Dulal and Akbar 2012). The urban population of the Philippines in 2011 is about 46 million, or 49 percent of the total population (United Nations 2012). The country’s urban population is expected to increase at around 2 percent until 2035, and afterward stay in the range of 1.5 percent to 1.9 percent until 2050. Meanwhile, the percentage of urban population would continue to increase up to 66 percent by 2050. The urbanization of the Philippines is significant compared to other Southeast Asian countries in terms of the percentage of urban population and its growth rate (Figure 7). The Philippines’ average annual growth rate of urban population (2.0 percent) between 2010 and 2050 is the fourth highest in the region, following Timor-Leste (3.6 percent), Laos (2.4 percent), and Cambodia (2.3 percent). 17 Part 1: Scientific and Socioeconomic Review Figure 7: Urban Population of Selected Southeast Asian Countries, 1950–2050 (a) Percentage (b) Annual growth rate Source: United Nations 2012. 20. Mitigating GHG emissions from the energy and transport sectors requires a large amount of additional investments. Table 2 summarizes the investments required to reduce GHG emissions from the two sectors during 2008 through 2030 based on different scenarios (i.e., business-as-usual or baseline scenario; medium- and low-carbon scenarios) (Transport and Traffic Planners Inc. 2010). According to this estimation, 4 percent to 14 percent of additional investments would be necessary in the energy sector to reduce its GHG emissions by one-quarter or one-half. Similarly, in the transport sector, 11 percent to 26 percent of the investments would be required additionally. Table 2: Cumulative Greenhouse Gas Emissions and Total Investments in Power and Transport Sectors by Scenario, 2008–2030 Baseline Medium Low Energy sector Cumulative emissions (MtCO2e) 1,711 1,279 807 Change in emissions compared to -25% -53% baseline Investments (US$ billion) 100 104 114 Change in investments compared 4% 14% to baseline Transport sector Cumulative emissions (MtCO2e) 1,145 872 509 Change in emissions compared to -25% -53% baseline Investments (US$ billion) 11 26 Change in investments compared 11% 26% to baseline Source: Transport and Traffic Planners Inc. 2010. 18 Part 1: Scientific and Socioeconomic Review Opportunities in a Changing Climate: Building Climate Resilience and a Low- Carbon Economy 21. Development carried out in consideration of climate change provides co- benefits and opportunities for sustainable green growth. Building resilience, in particular in the agricultural, health, and energy sectors will also likely increase benefits in terms of improved livelihoods and increased access to assets. Increased energy use offers significant opportunities for technologies assisting to realize emission reduction potential not only lowering energy cost, but opening opportunities to mobilize market- based instruments for green low carbon growth. Similarly, several of the actions that reduce GHG emissions could also provide local co-benefits cleaner and healthier air or building resilience, for example in the agricultural sector using crop rotation techniques. 22. Strategic and well-prioritized climate adaptation actions would provide the Philippines with significant development co-benefits (Hamilton and Akbar 2010). Adaptation measures would make the Philippine society more resilient to climate impacts with the contribution of achieving development objectives set by the Philippine Development Plan and/or the Millennium Development Goals. For example, reforms in the agriculture sector towards improved R&D and climate-smart agriculture that is focused on crop varieties based on expected agro-climatic conditions, and supported by extension services, enhances productivity of the rural farmers. Similarly, institutional changes that redirect climate resilience financing and its prioritization at the local level towards the most vulnerable areas and people, could focus on programs that are often more participatory and are labor intensive thus calling for job creation. 23. A wide range of benefits through mitigation measures could be materialized for quality improvement, create jobs and business opportunities, and increase energy security. A number of policy reforms would expand labor intensive programs such as scaling up of the renewable energy market, expansion of energy efficiency programs and multi-hazard building, including retrofitting buildings and infrastructure. The large-scale investments in multi-hazard retrofitting and reconstruction works enhance the capacity of the engineering and construction industries, and create local jobs. This aspect is particularly relevant in the context of government priority of creating opportunities for more and better jobs, along with addressing climate change and disaster risks. Comparable to other middle-income, low-GHG intense, countries with specific climate change–related laws, the Philippines could significantly avail from such opportunities. (Table 3). 19 Part 1: Scientific and Socioeconomic Review Table 3: Greenhouse Gas emissions of Selected Countries with Climate Change–related Legislation Country Total Global Emissions Intensity Global Name of Legislation Emissions Ranking per GDP Rankin (MtCO2e) (tCO2e/$million) g Brazil 413.3 16th 225.2 133rd Law No. 12187: National Policy on Climate Change 2009 China 7232. 1st 955.8 12th Act on Addressing Climate 3 Change (Draft Proposal) Kenya 11.9 94th 215.5 135th Kenya Climate Change Draft Bill Mexico 468.9 12th 327.7 92nd General Law of Climate Change 2012 Peru 41.0 67th 180.6 152nd Climate Change Legislation 2012 Philippines 82.9 43rd 271.7 112th Republic Act No. 9729: Climate Change Act of 2009 Source: World Resources Institute 2012. Building Climate Resilience 24. Improving the climate resilience of agricultural practices also alleviates food insecurity and malnutrition, contributing to eradicating extreme poverty and hunger, reducing child mortality, and improving maternal health. Modifying farming practices and improving crops and livestock through breeding practices as well as investing in new technologies and infrastructure would enhance the adaptive capacity of the agriculture sector to climate risks (Cruz et al. 2007). Activities may include improving irrigation systems and their efficiency, as well as adjusting crop-choice and the application of fertilizer and pesticides according to actual environmental conditions thereby developing more heat-, drought-, disease-, pest-, and salt-tolerant crop varieties (National Economic Development Authority 2011); and (Cruz et al. 2007). The most commonly used adaptation measures in Southeast Asian countries are adjustment in cropping calendars and patterns; changes in management and farming techniques, use of heat-resistant varieties, diversified farming, intercropping, and crop rotation (ADB 2009). Strengthening the agricultural extension and support services and the information, education, and communication (IEC) programs would be another useful option to increase the adaptive capacity of farmers through enhancing their level of awareness and understanding of climate risks and climate-sensitive farming technologies (CCC 2011; National Economic Development Authority 2011). Introducing risk transfer mechanisms (e.g., agricultural and weather insurance products) would also enhance the adaptive capacity by providing social protection for farming communities. With the implementation of the activities mentioned previously, it is expected that agricultural production would be maintained or increased amidst climate change to secure not only the sufficient and stable food supply to meet dietary needs of people, but also maintain the livelihood and income of subsistent farmers who constitute the poorest population subcategories in the Philippines (National Economic Development Authority [NEDA] 2011) and tend to be the most vulnerable to climate impacts (Box 2). 20 Part 1: Scientific and Socioeconomic Review Box 2: Adaptation co-benefits in agriculture Worldwide experience shows that strengthening the resilience of agriculture through the implementation of adaptation measures does lead to a significant improvement in farm productivity, farmers’ livelihood, and national food security. x A water-saving irrigation and drainage project in the Huang-Huai-Hai river basin in northern China not only reduced water use by 55 percent, but also increased cash crop yields by 75 percent and grain yields by 27 percent (World Bank 2012). x The erosion control programs in China—returning the devastated Loess Plateau to sustainable agricultural production—increased grain production by more than 30 percent to secure food supplies in an area where food was sometimes scarce in the past, and improved the livelihoods of 2.5 million people with steady increase in farm-family income through transforming agricultural production from generating a narrow range of food and low-value grain commodities to high-value products. x Having employed various adaptation measures, including inter cropping, multi- cropping, and improved planting techniques, the community-managed- sustainable agriculture in Andhra Pradesh, one of India’s major producers of rice, cotton, groundnuts, and lentils benefited about 740,000 farmers by lowering the cost of cultivation while maintaining yields. x Conservation farming, a system promoted in Zambia of agronomic practices such as dry-season land preparation, mulching, and crop rotation, was highly profitable, doubling maize yields and increasing cotton yields by 60 percent compared to conventional plowing systems. x Over 5 million hectares of rejuvenated indigenous agroforestry system benefited 4.5 million people in Niger with a range of selected and protected species providing improved soil fertility, fodder, wood and fuel, and a variety of fruits and foods, thereby diversifying farmers’ incomes and providing alternatives in case of famine caused by drought. x Improved drought tolerant varieties of maize, an important staple food and cash crop for farmers in sub-Saharan Africa, delivered higher and more stable yields despite variable rainfall, lifting more than one million people out of poverty every year in West and Central Africa alone. x Protecting coastal wetlands in Vietnam’s four Mekong provinces through reducing destructive practices and planning trees diminished pressure on coastal mangrove ecosystems and enhanced livelihoods for local communities through a resurgence of aquatic resources such as crabs and clams (World Bank 2011). 21 Part 1: Scientific and Socioeconomic Review 25. Increased climate resilience in water resource management lessens the risk of crop failure due to droughts and of conflicts associated with water shortages, thus improving food security and water sufficiency. To address more frequent and intense droughts, various adaptation measures could be applied to improve water efficiency for example through (a) demand side management reducing water consumption or increasing water use efficiency and (b) supply side management expanding supplies, reducing water loss, or improving cooperation on shared water resources (World Bank 2012b). Modernization of existing irrigation schemes (Cruz et al. 2007) and the rehabilitation of water distribution infrastructures would for instance avoid leakages and reduce inefficiencies and thus preserve water (CCC 2011). The following measures are already taken in Southeast Asian countries to improve water shortages: rain harvesting technologies, training for efficient use of water, and reclamation of used water (ADB 2009). Water harvesting technologies have been implemented in the Philippines through promoting rain and storm water collection as well as water conservation, reuse, and recycling (CCC 2011). To improve the adaptive capacity of the water sector, it is also helpful to develop water monitoring and information systems and incorporate climate change–related factors (e.g., changes in precipitation, temperature, runoff, and evapotranspiration) in hydro-meteorological forecasts, total and seasonal water availability, water demand, and water storage planning (World Bank 2012b). 26. Enhancing flood control and storm protection and the resilience of infrastructure in local communities would reduce climate variability and climate change–related mortality, economic losses, and disruption of natural ecology, thus enhancing human security and ecological stability with the contribution to poverty reduction and biodiversity conservation. Main activities include constructing or strengthening dykes and embankments (World Bank 2012b); retrofitting key infrastructure such as roads, bridges, and power transmission facilities; revising engineering and building codes and standards with consideration of projected heavier rainfall and higher wind speeds (DENR 2009); implementing IEC programs (CCC 2011); and developing and implementing settlement adaptation and resettlement plans for highly vulnerable communities. Establishing or improving flood warning systems and flood control facilities, such as pumping stations and a water gate, are other examples of key adaptation measures taken in the region (ADB 2009). In urban areas, using vulnerability mapping, land use planning, and zoning that restrict future development in hazardous locations and retire key infrastructure and vulnerable buildings in these areas would reduce damage costs (World Bank 2010). These activities are expected to alleviate the impact of floods and storms on infrastructure and people, especially the poor, who are affected most seriously. Additionally, ecosystems and biological diversity, particularly in coastal and low lying areas, would be protected. 27. Climate change adaptation and DRR activities exhibit significant potential synergies. Understanding and addressing current hydro-meteorological hazards is often one of the first steps taken in addressing the disaster-related risks from climate change (See Figure 8). Historically, DRR practices have primarily focused on responding to and rehabilitating from the impacts of disasters. In contrast, addressing climate change is primarily about prevention and preparedness. The difference between them arises from the specific risks that are addressed. DRR focuses on hydro-meteorological as well as 22 Part 1: Scientific and Socioeconomic Review geophysical hazards (like volcanoes and earthquakes) in the short-term, whereas climate change adaptation (CCA) is focused on only the former, primarily with a short, medium and long-term view. Figure 8: Linkage Between Climate Change Adaptation and Disaster Risk Reduction and Management Source: Castillo 2007. 28. In the context of the Philippines, developing climate resilience will also often prevent large impacts from current disasters. About 90 percent of damages from extreme natural events in the Philippines are climate are caused by climate-related impacts. Historically, DRR has focused on recovery and rehabilitation to disasters. Managing the risk of extreme climate events before they become disasters entails assessing risk, reducing risks, and mitigating them. Addressing climate change is primarily about prevention and preparedness to future climate change and variability. Enhancing climate resilience will also avert current disasters as the impacts of current extreme events are reduced (Box 3). 23 Part 1: Scientific and Socioeconomic Review Box 3: Climate change adaptation reducing disaster risk A case of Guagua, Pampanga, Philippines. The municipality of Guagua, located in the province of Pampanga, is prone to seasonal flooding due to mainly the municipality’s low topography and heavily silted river channels. While a high tide of 1 meter triggers flooding, rainwater from the municipality’s high-elevation areas drains toward the low- lying areas during wet seasons through secondary waterways and interior tributaries. A variety of adaptation measures to improve flood control, storm protection, and infrastructure have been taken since 1991, including the regular monitoring of typhoons, the stricter application of standards for building permits, the construction of a secondary dyke in case the primary dyke collapses, and the improvement of existing roads. As a result, annual flooding has reduced to one-fourth from 90 days to 21 days, and the annual losses in the business sector have declined by 77 percent. Moreover, the above-mentioned effective adaptation measures leading to appropriate disaster preparedness have resulted in a significant downward trend in the house and infrastructure damages and the municipal expenditures to repair them (Pulhin et al. 2010). 29. Climate actions can create employment opportunities especially in the field of agriculture and infrastructure. The small-scale sustainable farming and the sustainable forestry management have great potential to create new jobs globally (United Nations Environment Programme 2008). While there are no official statistics publicly available regarding the number of jobs to be created in the Philippines, the shift from traditional chemical-based farming to organic agriculture and the growth of reforestation programs are likely to have a positive impact on the country’s employment because of the labor- intensive nature of these jobs (Strietska-Ilina et al. 2011).10 Additionally, enhancing flood control and storm protection and retrofitting infrastructure and buildings would provide significant job opportunities. Investing in local infrastructure to climate proof existing infrastructure and prepare for future climate change can create jobs, replacing the jobs in agriculture, which may be lost due to climate change (International Labour Organization 2011). Building a Low-Carbon Economy 30. The Philippines has great mitigation potential by promoting energy savings to achieve sustainable energy use and a lower GHG emissions. Introducing various energy efficiency programs, many of which present negative abatement costs, would greatly contribute to reducing energy use, and therefore GHG emissions from buildings, 10 For mitigation, despite an expectation of a significant increase in jobs related to renewable energy worldwide, the employment effect from the growth of relevant sector in the Philippines may be modest compared to that of other countries such as China with the projection of more than one million jobs created in related industries. This is because, for example, it is unlikely that the Philippines will become a large producer of solar panels. According to the industry estimate, if the Renewable Energy Act of 2008 is fully implemented, up to 50,000 jobs can be generated in the next 20 years in the Philippines’ renewable energy sector (Department of Labor and Employment 2011). 24 Part 1: Scientific and Socioeconomic Review industry, and municipal services. For example, the ADB (2009) estimates that the total mitigation potential in 2020 in the power, industry, transport, and residential and commercial sectors is 68 MtCO2, which is 37 percent of the emissions under business-as- usual scenario. According to the estimation by Transport and Traffic Planners Inc. (2010), a cumulative abatement potential by 2030 of heat rate improvement, system loss reduction, and other energy efficiency interventions with negative abatement cost is 373 MtCO2e in total (Figure 9). Administrative and regulatory support (e.g., providing building codes and efficiency standards) would facilitate these programs. The implementation of such activities would promote energy conservation and improve the competiveness and profitability of the Philippine industry by lowering energy cost, which is presently the second highest in the region after Singapore and the ninth highest out of 44 international markets (Visconti 2012). Figure 9: Abatement Cost and Cumulative Abatement Potential for Power and Transport Sectors, 2008–2030 Source: Transport and Traffic Planners Inc. 2010. 31. There is also a large potential for the development of low carbon renewable energy, such as wind and hydroelectric, with possible contribution to securing energy sufficiency and security. The potential of wind is 76,600 megawatts (MW); hydro is 13,097 MW; and geothermal is 4,531 MW (CCC 2011). The energy potential of biomass is 277 million barrels of fuel oil equivalent per year. The Philippines is already taking steps to realize this potential. By 2030, the National Renewable Energy Program 25 Part 1: Scientific and Socioeconomic Review (NREP) aims to triple the total installed capacity by increasing geothermal by 75 percent; hydro by 160 percent; biomass by 277 MW; wind by 2,345 MW; solar by 284 MW; and ocean by 71 MW (Table 4) (DOE 2011)11. The NREP requires a large amount of additional capacity of hydro (3,862 MW; 39 percent of the total additional capacity of 9,865 MW) and wind (2,103 MW; 21 percent) in Luzon. The additional capacity of 1,264 MW of hydroelectric (13 percent of the total additional capacity) will be also installed in Mindanao. In terms of GHG emission reduction, the potential of wind and hydro are particularly promising, with a cumulative abatement potential of 138 and 85 MtCO2e, respectively, at the lowest abatement cost of US$15/tCO2e (Transport and Traffic Planners Inc. 2010). Biomass and geothermal also provide considerable mitigation potential of 132 and 96 MtCO2e, respectively, at less than US$45/tCO2e. While expanding and developing renewable energy as an alternative energy source would reduce GHG emissions, as indicated previously, such an initiative would also significantly reduce the dependency on imported oil for energy supply and improve energy self-sufficiency. 32. Promoting better traffic management, modal shift, and cleaner and more fuel-efficient vehicles would contribute not only to a low carbon economy, but also to improving environmental quality and public welfare. Specific mitigation measures promote biofuels, low-cost vehicle efficiency improvements, transport demand management, and public mass transport systems such as bus rapid transit (BRT) development and urban rail expansion (Transport and Traffic Planners Inc. 2010). With the abatement cost at less than US$10/tCO2e, the public transport improvement, the congestion pricing, the BRT systems, and the motor vehicle inspection could achieve the cumulative abatement of 206 MtCO2e by 2030. In addition to climate benefits, these measures would help diminish traffic accidents and congestion, avoiding associated economic losses. This would also improve local air quality and reduce noise pollution; as a result positively impacting public health and welfare. 33. The Philippine Energy Plan (PEP) promotes low-carbon economy by improving energy efficiency and introducing clean alternative fuels and technologies (DOE 2012). The PEP continues to support the NREP tripling the renewable energy- based power capacity by 2030. Policy mechanisms of the Renewable Energy Act will be implemented. The Plan also aims to increase the percentage of public utility vehicles using alternative fuels such as electricity and compressed natural gas to 30% by 2030. For energy efficiency, 10% energy savings on the total annual energy demand are targeted at all economic sectors with an expectation of reducing 4.7 MtCO2e by 2030. 11 Due to relatively high abatement costs, as indicated in Figure 9, it may not be feasible to introduce all renewable energy according to the NREP. Further, comprehensive research is needed on the optimal mix of energy sources, including non-renewable resources, to allow power supplies in the Philippines to meet growing demand in a more cost-effective and carbon-efficient manner. As one of such efforts, the Government of the Philippines intends to develop the Mindanao Energy Strategy, and the World Bank supports this initiative by providing assistance to the government (Wallace, 2013). 26 Part 1: Scientific and Socioeconomic Review Table 4: Capacity Installation Targets for Renewable Energy in the Philippines Energy Source Installed Capacity Additional Installed Capacity (MW) Addition (MW) Capacity Capacity (MW) as of 2010 2011-2030 Ratio by 2030 Geothermal Luzon 899.0 820.0 91% 1,719.0 Visayas 964.0 335.0 35% 1,299.0 Mindanao 103.0 340.0 330% 443.0 Subtotal 1,966.0 1,495.0 76% 3,461.0 Hydro Luzon 2,346.0 3,861.5 165% 6,207.5 Visayas 13.0 268.7 2,067% 281.7 Mindanao 1,040.0 1,263.9 122% 2,303.9 Subtotal 3,399.0 5,394.1 159% 8,793.1 Biomass Luzon 9.0 97.3 1,081% 106.3 Visayas 29.0 142.6 492% 171.6 Mindanao 0.0 36.8 3,680% 36.8 Subtotal 38.0 276.7 728% 314.7 Wind Luzon 33.0 2,103.0 6,373% 2,136.0 Visayas 0.0 227.0 22,700% 227.0 Mindanao 0.0 15.0 1,500% 15.0 Subtotal 33.0 2,345.0 7,106% 2,378.0 Solar Luzon 0.0 228.1 22,805% 228.1 Visayas 0.0 34.0 3,400% 34.0 Mindanao 1.0 22.0 2,200% 23.0 Subtotal 1.0 284.1 28,405% 285.1 Ocean Luzon 0.0 35.5 3,550% 35.5 Visayas 0.0 11.0 1,100% 11.0 Mindanao 0.0 24.0 2,400% 24.0 Subtotal 0.0 70.5 7,050% 70.5 Total 5,437.0 9,865.4 181% 15,302.4 Source: DOE 2011. 34. The Clean Technology Fund (CTF) country investment plan (CIP) supports the country’s efforts to transform the energy and transport sectors, leveraging resources and accelerating the implementation of projects and programs to reduce GHG emissions and achieve development goals (CTF Trust Fund Committee 2009). In the energy sector, the CTF/CIP investments expand the distributed generation with renewable energy resources and increase energy efficiency through demand side management. In the transport sector, the investments are made to develop the BRT systems in Metro Manila and Cebu City, which is expected to reduce GHG emissions by 27 Part 1: Scientific and Socioeconomic Review about 0.6 to 0.8 MtCO2e/year, and significantly reduce traffic congestion, improve traffic safety, save travel cost and time, and enhance environmental quality.12 GHG emissions savings on renewable energy and energy efficiency are expected to reach 3 MtCO2e/year, and the solar power investment will result in more than 100,000 tons of CO2 savings per year. The CTF/CIP investments would create significant development impacts, for example through the expansion of renewable energy or providing market opportunities for small and medium enterprises, which would both generate new jobs. To finance these projects, the CTF leverage co-financing of $250 million to mobilize financing of about US$2.5 billion from the government, multilateral development banks, carbon finance, and the private sector. 35. Finally, climate change risks are also perceived to present real opportunities for businesses in the Philippines. According to a survey targeting the Philippines’ private sector, 79 percent of respondents believe that although climate change poses risks to organizations, its impacts such as extreme weather events and increasing temperature provide business opportunities (PriceWaterhouseCoopers Financial Advisors Inc. 2011). The opportunities identified by Philippine businesses include maximized use of green facilities or buildings, use of recyclable materials, the manufacturing of green materials for local and international markets, and opportunities for innovation. The respondents have already taken some actions to address climate change, including tree planting and solid waste management for mitigation, and just over half (52 percent) of the respondents indicated that they will increase investment for climate change in the next 12 months. The Imperative to Implement Climate Reforms Now 36. While these opportunities make it easier to attain the Philippines’ ambitious development goals, Philippines has much to lose if it fails to act now on the climate reforms that have begun but can gain with concerted effort. Philippines aims to accelerate annual economic growth to 7-8 percent during the current PDP period, growth that is inclusive and creates one million new jobs annually. This growth is to be achieved by increasing investments in the productive sectors (agriculture, industry and services) facilitated by increased competitiveness resulting from three factors workforce skills development, improved infrastructure, and technology and innovation. In total gross domestic investment will need to increase significantly from 16 to 22 percent of GDP. Making growth inclusive is achieved through targeting of poorer areas and through the provision of social services and social insurance directed at those most in need. 37. Philippines has a lot to lose by not acting to address climate change expeditiously. While it is evident from recent typhoons such as Ondoy, a single climate- event can result in damages 2 to 3 percent of GDP wiping out much of the economic gains with significant impacts on the poor, addressing slow onset events is just as important. Land use plans can be set to provide proper incentives to locate people and assets away from high risk areas at low cost but will be costly to protect or relocate in the future once harsher climate materializes. Building capacity and institutions to enact and 12 Additionally, emerging metropolitan areas such as Metro Davao, Naga, Bacolod, Iloilo, and Cagayan de Oro have been identified as potential sites for BRT project implementation. 28 Part 1: Scientific and Socioeconomic Review implement reforms are inherently slow processes and failure to act now can lead to urbanization processes that are much more vulnerable to climate risks. Similarly, large infrastructure investments are more likely to underperform resulting in the need for premature replacement or be overdesigned increasing current costs. Additionally, In the case of flood protection, they can provide a false sense of security incentivizing the location of population and assets in more hazardous places. 38. Implementing the Government’s climate reform program contributes to the broad development goals through several channels. First, reforms in the energy sector promoting renewable sources and energy efficiency contributes directly to energy security, lowers energy costs making them more competitive. Second, improvements in the program design of programs such as the National Greening Program, increased employment especially among the poor while at the same time contributing to the protection of natural resources that constitute the livelihood of the pool. Third, designing and retrofitting infrastructure such as flood control and storm protections, not only creates jobs but also reduces climate risks and hence the cost of doing business increasing the competitiveness of the productive sectors. Fourth, global interest on addressing climate change also creates greater opportunities for technology transfers and innovation for instance in terms of carbon capture and storage and improved more resilient farming practices. 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Visconti, K. (2012, August 20). Philippine electricity prices to stay high. Retrieved December 22, 2012 from http://www.rappler.com/business/10737-electricity- prices-in-ph-likely-to-stay-high-in-the-short-term Wallace, S. (2013). Mindanao Power System Modelling: Potential Gas Generation and LNG Terminal. Washington, D.C.: World Bank. World Bank (WB). (2009). Philippines typhoons Ondoy and Pepeng: Post-disaster needs assessment. World Bank (WB). (2010). Climate risks and adaptation in Asian coastal megacities: A synthesis report. World Bank. (WB). (2011a). Climate-smart agriculture: A call to action. World Bank (WB). (2011b). Mitigating the adverse impacts of natural disasters on the Philippines: A study of disaster risk financing options. World Bank. (WB). (2012). Adapting to climate change: Assessing World Bank Group experience. World Bank (WB). (2012a). Turn down the heat: Why a 4°C warmer world must be avoided. World Bank (WB). (2012b). Typology of activities with climate co-benefits by WB sector. World Bank. (2012c). World development indicators. Retrieved April 11, 2013 http://data.worldbank.org/country/philippines World Bank. (In press). Turn down the heat II: Global hotspots and regional case studies. 34 Part 1: Scientific and Socioeconomic Review Yusuf, A. A., & Francisco, H. (2010). Hotspots!: Mapping climate change vulnerability in Southeast Asia. Singapore: Economy and Environment Program for Southeast Asia 35 Part II: Policy and Institutional Review 36 Part 2: Select Key Messages Policies x The Philippines’ new comprehensive climate policy agenda builds a foundation for consistent reforms at all levels of government having evolved from a fragmented approach to coordinated integration of climate change in policy formulation and development. x Thematic priorities of the National Climate Change Action Plan and the sector-focused Philippine Development Plan, KRA-5, Department Work Programs, and local development plans are not aligned requiring improved coordination across the sectors in planning and policy development. x Translating complementary sector reforms, targets and co-benefits into Department programs is necessary to develop sector readiness and establish consistency in planning and prioritization of climate activities at the national level. x The Climate Change Act requires the national government to provide technical assistance to the LGUs, but support remains insufficient to enable LGUs to formulate and mainstream climate change actions into their locally mandated plans. Institutions x The Philippines has reformed its institutional structure by establishing centralized national institutions aimed at stronger coherence and horizontal and vertical coordination of one climate change agenda thereby filling a critical gap in support of effective and efficient climate policy and financing. x The Climate Change Commission's broad scope of responsibilities limits its effectiveness as a policy coordinating body if steps are not taken to formalize, prioritize and streamline these roles. x Formalized institutional collaboration between the Climate Change Commission and other national, sector and local Departments and Agencies, is an important, required next step to set a strategic direction and ensure that planning and prioritization of climate change activities is streamlined. x Monitoring and evaluation ensure efficiency and increase accountability and transparency of institutions implementing climate change activities. x Execution of the policy agenda is hampered by a lack of institutional capacity and climate knowledge at the national and local level. x Tools to assist with prioritization and planning are often too technical and complex to use. 1 For a full set of key messages, see Annex 1 37 x Chapter 1 describes the key elements of the policies that define the Government climate reform agenda and reviews how they can be made more effective in the context of the Philippines’ sustainable development goals. It begins with a brief overview of the climate reform agenda, its context, objectives, basis, legitimacy, clarity and transparency and how it relates to DRRM and low carbon/green growth. It ends with an analytical review of the degree of convergence between this reform program and the broader development agenda. x Chapter 2 focusses on the new institutional structure for implementing the climate reforms. It begins with a brief discussion of the new institutions. This is followed by a review of the functioning of the new institutional structure along different stages of the policy cycle -- setting strategic directions, planning and prioritizing, financing, executing climate action, monitoring and reporting performance, as well as knowledge generation and management. 38 Chapter 1: Policy Review 39 Part 2: Chapter 1: Policy Review 1. This chapter describes key elements of the policies that define the Government climate reform agenda and reviews how they can be made more effective in the context of the Philippines’ sustainable development goals. Recognizing the urgency of addressing Philippine’s vulnerability to climate change, the Philippines embarked on a reform agenda consisting of a comprehensive set of policy changes aimed at strengthening, integrating and institutionalizing government initiatives to address climate change in the context of sustainable development. This chapter begins with a brief overview of the climate reform agenda, its context, objectives, basis, legitimacy, clarity and transparency. and how it relates to DRRM and low carbon/green growth. The chapter ends with an analytical review of the degree of convergence between this reform program and the broader country development agenda. 2. The Philippines has enacted comprehensive climate laws, strategies and action plans during the last few years that have transformed the climate agenda from a fragmented sectoral issue to a coordinated national one, positioning the Philippines among 23 developing countries that have enacted climate specific laws (Globe International 2013). The Philippines has gradually expanded the scope of its climate related policies since 1997, enacting a series of stand-alone laws designed to address climate change in different segments of the economy (see Figure 10). The Climate Change Act was enacted in 2009 to consolidate and institutionalize all government initiatives addressing climate change and to strengthen and coordinate their implementation. This was followed in 2010 by the Disaster Risk Reduction Management Act, which declared the government’s policy to mainstream disaster risk reduction and climate change in development processes, including policy formulation, socioeconomic development planning, budgeting, and governance. These two laws have been followed by the adoption of strategies and corresponding action plans. A recent report places the Phillippines among 23 developing countries with climate specific laws. The Philippines laws are comprehensive, covering seven of eight areas assessed, only one of 10 developing countries. While the Philippine law does not include carbon pricing, which has been adopted in just three developing countries – India, Mexico, and South Korea, it does provide fiscal incentives for renewable sources of energy. One of the Few Countries with a Comprehensive Climate Change Policy 3. The Climate Change Act set in motion the formulation and implementation of a broad climate reform agenda encompassing all agencies of the government. The Climate Change Act declares as state policy the systematic integration of climate change in various phases of policy formulation, development plans, poverty reduction strategies, and other development tools and techniques by all agencies and instrumentalities of the government, making the Philippines one of the few countries with a comprehensive law on climate change. It established the Climate Change Commission (CCC) as the lead policymaking body tasked to coordinate, monitor, and evaluate the government programs and action plans related to climate change and to ensure the mainstreaming of climate change into the national, sectoral and local development plans and programs. The CCC is also required to formulate the National Framework Strategy on Climate Change (NFSCC) and the National Climate Change Action Plan (NCCAP) to guide the country’s climate agenda which is to be implemented by sectoral Departments/Agencies at the 40 Part 2: Chapter 1: Policy Review national level and by LGUs at the local level. Whereas, the Act assigns specific functions to some Departments,1 all remaining departments are to formulate their own climate change plans consistent with the NFSCC and the NCCAP. To support the CCC, the Act also provides for the Climate Change Office, a broad-based Advisory Board and the constitution of a national panel of technical experts.2 Figure 10: From Fragmented to Comprehensive Laws/Policies Fragmented Sectoral Approach Coordinated National • Agriculture and Fisheries Modernization Integration Act (1997) • Climate Change Act (2009) • Philippine Clean Air Act (1999) • National Framework Strategy on Climate • Ecological Solid Waste Management Change (2010) (2000) • Disaster Risk Reduction and • Philippine Clean Water Act (2004) Management Act (2010) • Biofuel Act (2006) • National Climate Change Action Plan • Renewable Energy Act (2008) (2011) • National Disaster Risk Reduction and Management Plan (2011) •People’s Survival Fund (2012) 4. Based on the available scientific evidence, the CCC formulated the NFSCC with clearly defined overall objectives and the broad parameters for developing a climate action plan, albeit without specific targets for most areas. The framework envisions a climate risk-resilient Philippines with healthy, safe, prosperous and self- reliant communities and thriving ecosystems formulated within the context of the 1 The Climate Change Act assigned specific central departments and agencies with the following tasks: Department of Education (DepEd): Integrate climate change into the primary and secondary education curricula; Department of Interior and Local Government (DILG): Facilitate the development of a training program for LGUs in climate change; Department of Environment and Natural Resources (DENR): Oversee the establishment and maintenance of a climate change information management system and network, including climate change risks, activities, and investments; Department of Foreign Affairs (DFA): Review international agreements related to climate change; Philippine Information Agency (PIA): Disseminate information on climate change; and Financial institutions: Provide preferential financial packages for climate change–related projects. 2 The Advisory Board is composed of Secretaries from the following Departments/Agencies: Department of Agriculture, Department of Energy, Department of Environment and Natural Resources, Department of Education, Department of Foreign Affairs, Department of Health, Department of the Interior and Local Government, Department of National Defense (in his capacity as Chair of the National Disaster Coordinating Council), Department of Public Works and Highways, Department of Science and Technology, Department of Social Welfare and Development, Department of Trade and Industry, Department of Transportation and Communications. In addition, it also include the Director-General of the National Economic and Development Authority (in his capacity as Chair of the Philippine Council for Sustainable Development), the Director-General of the National Security Council, the Chairperson of the National Commission on the Role of Filipino Women, and the Presidents of the League of Provinces, the League of Cities, the League of Municipalities, and the Liga ng mga Barangay. It also includes representative from the academe, the business sector, and nongovernmental organizations. 41 Part 2: Chapter 1: Policy Review country’s sustainable development goals. The framework was developed based on the available scientific information on the climate science and in relation to the country’s socio-economic conditions. It includes two pillars – adaptation and mitigation, with an emphasis on adaptation as the anchor strategy. DRRM is explicitly recognized as one of goals under the adaptation pillar. The NFSCC is expected to guide the national and subnational development planning processes.3 It recognizes capacity development, knowledge management, IEC advocacy, gender mainstreaming, research and development, and technology transfer as important issues that cut across pillars. The means of implementing the NFSCC include multi-stakeholder partnerships, financing, valuation and policy, planning, and mainstreaming (Figure 11). While the strategy does not contain specific targets for most areas, it does aim to specifically double renewable energy capacity from 4500 MW to 9000 MW in 20 years. 5. Stakeholder consultations during the formulation of the NFSCC and the NCCAP have generated some level of public support for the climate reform agenda. The NFSCC was crafted in collaboration with the Government, nongovernment agencies, and academia. The CCC organized a national capacity building and assessment workshop with participation of policy-makers and members of the scientific communities to formulate country goals. Following the workshop, the Commission consulted with stakeholders in key regions of the Philippines and coastal areas in particular. The CCC brought together participants from National Government Agencies, CSOs, academia, professional organizations and the business sector at a national consultation meeting to prepare the NCCAP. Key Departments (e.g. DOE, DOTC, PAGASA, DENR) provided inputs based on their activities and plans. Participants, grouped into strategic clusters, met several times over the following months to fine-tune the plan and produce successive drafts. Despite these consultations, Departments’ perceptions of their climate programs varies from what is in the NCCAP suggesting the need for further consultations. 3 Specifically at the national level it includes the formulation of the Philippine Development Plan (PDP), the Public Investment Program (PIP) and sectoral Plans; at the subnational levels, it includes the RDP, RDIP, PPDP, NFPPs; and at the local level, it included the CLUPs and the CDPs. 42 Part 2: Chapter 1: Policy Review Figure 11: The National Framework Strategy for Climate Change 2010 Climate Change Framework .. CLIMATE CHANGE _............,_ .......... ·----- • Ollfllinl,....,.. ,_.. IMPACTS AND VISION: CLIMATE PROCESS DRIVERS VULNERABILITY A climat• ri•lc· r••ili•nt Pltilippin•• witlt • EnetJY • E - -1"'-....... eo.t.l lt•altlty, .,., prwp•row anJ Hlfnliant ....,...... a,_,., • Tl'lftiiiCIR aM~nne, ............,l ·- • .._. u.. a.,.. • Food....wy communlti••, anJ tltrivlnt anJ proJullflv• ~•m• ............ ·w..- ........... SUSTAINABLE .~---~--- DEVELOPMENT ADAPTATION MITIGATION • Enhanced Vulnerability and Adaptation • Energy Efficiency & Conservation Assessments • Renewable Energy • Integrated Ecosystem·Based Management • Environmentally-Sustainable • Cllmate-Responsrve Aarlculture Transport • Water Governance &Management • Sustainable Infrastructure • CHmate· Responsive Health Sector • National REDO+ Strategy • Disaster Risk Reduction &Management • Waste Manaaement • Cllmate-prooftng of Infrastructure ~--------------------------------,r~-~--------------~------ - 1 C.jaClty ICnowllclp IECetld Geftdw "-~hand~ I Multl-t-llkeholdet Polo Planro ~nd l ~~ Ma,.._m Advoacy MIOnstNamonc Tkllnolocvlrantfer 11 Part'*"'lp' Ftnanarc Valuation r:v. _rc I M10nstrea,..rc 1 I CROSS-CUTIING STRATEGIES II MEANS OF IMPLEMENTATION I ~--------------------------------'~---------------------------- Source: CCC 2011 43 Part 1 -- Chapter 1: Policy Review The National Climate Change Action Plan 2011–2028 is the Government’s Road Map for Climate Action 6. The NCCAP is a solid framework document that sets out a climate agenda spanning three 6-year periods, with the first phase under the current Administration focused on firmly establishing readiness for the entire climate agenda and to begin operationalizing it at sectoral and local levels. The NCAAP is formulated around seven thematic priorities aimed at two ultimate outcomes -- enhance adaptive capacity of communities, resilience natural ecosystems and sustainability of built environment to climate change, and successful transition to climate smart development (see Figure 12). The NCCAP provides a detailed results matrix which includes 92 activities (supported by 328 sub-activities) in 41 output areas aimed at achieving 19 immediate outcomes. Ambitiously, over 90% of the sub-activities are to begin during the initial 6-year period. Three-fifth of these, mostly focused on creating the enabling environment are planned to be initiated and completed in the initial 6-year period. The sub-activities in the later periods are focused more on scaling up climate action and the development or application of new technologies and knowledge. Figure 12: NCCAP Priority Areas and Outcomes 2011-2028 Source: Climate Change Commission 7. The NCCAP provides a strong focus on, and shift to, adaptation but not to the detriment of mitigation, a clear evolution in Philippines climate policy. Prior to the passage of the Climate Change Act, climate activities in the Philippines primarily focused on mitigation (e.g., the Philippine Development Plan (PDP) 2004–2010). Recognizing the high vulnerability of the Philippines to the impacts of climate, including those from extreme weather events, the NCCAP calls for integrating Climate Change Adaptation (CCA) and DRRM and mainstreaming both into development plans at all 44 Part 1 -- Chapter 1: Policy Review levels. The NCCAP envisions public financing, prioritizing adaptation to reduce vulnerability and risks of communities, while creating a policy environment that encourages private sector participation to optimize mitigation opportunities for sustainable development. 8. The NCCAP strategic priorities are defined along thematic areas rather than sectors making coordination between Departments essential for the successful implementation of NCCAP. The thematic orientation of NCCAP requires many different Departments to plan and work together to implement actions to achieve the NCCAP goals. The Advisory Board which includes representation from all relevant Departments and Agencies provides a coordination mechanism at the highest levels Government. The reorganization of the cabinet into clusters corresponding to KRAs, including climate change, provides an additional avenue to facilitate coordination at that level. While formal mechanisms to foster coordination among Departments/Agencies at an operational level have not been proposed, the Governments’ convergence agenda and innovative reforms such as the Program Approach budgeting should help. 9. The NCCAP activities do also include many sectoral policy reforms indicating the desire to be transformative and the importance of acting at the sectoral level under a national coordinated approach. While a few NCCAP priority activities directly aim to increase resilience or reduce GHG emissions, most activities are focussed on reforming polices towards creating an enabling environment for climate action. The policy reforms included in the NCCAP are broad-based cutting across the NCCAP priority areas and sectors. They include the enactment of the land use bill, the adoption of regulation on commodity shifting and agriculture land conversion, amendment of the water code, creation of a water regulatory commission, guidelines for implementing IWRM, policy and guidelines on water conservation, revision of NWRB standards for water allocation, adoption of new flood plain management rules, inclusion of water recovery system in National Building Code. Similarly, NCCAP priority activities related to mitigation include the development of programs to promote conservation, the expansion of PPSCOP, the development of a sustainable renewable energy (RE) roadmap, including the integration of biofuels program, guidelines on developing the RE market, the implementation of incentives schemes for RE host communities and the LGUs, the promotion and adoption of environmentally sustainable transport such as MRT, LRT and BRT and e-trike programs, and incentives for mass transport fleet. 10. The NCCAP does not contain detailed implementation arrangements including how outputs and outcomes should be prioritized, providing Departments with limited budget planning guidance. The NCCAP results framework includes a detailed list of outputs and supporting activities that are to be carried out during each six- year phases of the NCCAP to achieve its outcomes. It also assigns specific Government Agencies (Gas) to lead and other Gas to support each of the listed outputs to one or more. The NCCAP does not identify the mechanisms by which Lead GAs organize among themselves and between them and coordinating Agencies to carryout the listed activities. While the activities included in the NCCAP were selected based on inputs from the National Government Agencies and other stakeholders, the selected activities are not prioritized or costed. As such, prioritization has to be completed as part of the regular 45 Part 1 -- Chapter 1: Policy Review budget planning process. The Climate Change Act requires Departments to finance NCCAP activities out of their regular budgets. Since the NCCAP, neither provides guidance on prioritizing among the NCCAP activities nor has established targets, Departments do not have a firm basis for their climate change related decisions in their budget planning process. In a fiscally constrained environment, National Government Agencies have limited incentive to carryout NCCAP activities beyond those they would have done anyway. 11. The Climate Change Act requires the national government to provide technical and financial assistance to the LGUs for the accomplishment of their local climate change action plans, but support remains insufficient to enable LGUs to formulate and implement such plans. At the local level, the LGUs are the frontline Agencies in the formulation, planning and implementation of climate change action plans in their respective areas. The Climate Change Act adds climate change adaptation as one of the regular functions of municipal and city governments. It directs Barangays to engage with municipal and city governments in prioritizing climate change issues and in identifying and implementing best practices and other solutions. Provincial governments are expected to provide technical assistance, enforcement and information management in support of municipal and city climate change action plans. The Act further requires the LGUs to regularly update their respective action plans. The National government is required to provide technical and financial assistance to LGUs in formulating and implementing their local action plans.4 However, the climate policy does not identify what an LCCAP entails nor identify the mechanisms by which the national government would provide support and how the development of such a plan would be funded. LGUs are required to set aside 5 percent of their total income for the LDRRMF of which up to 70 percent can be used for disaster prevention activities. 12. The CCC has been piloting the ECOTOWN approach at the LGU level on a demonstration basis while several Departments have been supporting specific LGU needs through a variety of convergence initiatives. The NCCAP proposes implementation at the local level through ECOTOWNs ecologically stable and economically resilient towns.5 The approach sets up a planning unit composed of municipalities or a group of municipalities located within and in the boundaries of critical key biodiversity areas highly vulnerable to climate risks. Coordination is achieved through convergence of national government programs to the Ecotown sites. The program is still at a demonstration stage. The approach provides one practical model for how the LGUs can integrate climate action and strategies into their development plans. Several other models on service convergence to meet specific LGU needs developed by the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR) are also available providing the LGUs with some degree of support. 13. Monitoring and reporting on the NCCAP implementation progress has been challenging as systems are not in place to collect and integrate results from various National Government Agencies. The NCCAP assigns the CCC with the overall 4 “It shall be the responsibility of the national government to extend technical and financial assistance to LGUs for the accomplishment of their Local Climate Change Action Plans.� Source Climate Change Act 2009 Section 14. 5 The approach is currently being piloted by CCC in the provinces of Surigao del Norte, Bohol and Romblon. 46 Part 1 -- Chapter 1: Policy Review responsibility of monitoring, reporting, and evaluating the progress of the NCCAP implementation. It does not, however, specify how implementation progress on specific tasks is to be monitored and where the responsibility for monitoring lies. While Agencies do report on the PAPs that they are implementing, these do not necessarily collect or provide information on the climate results. Further, there are no guidelines to ensure that the collected information can be aggregated across the PAPs to provide higher level results. At the local level, while some LGUs have begun to develop and implement their local climate LCCAPs, often as part of their CLUPs, systems are not in place to monitor or review and learn from these plans. People’s Survival Fund Signals Government Prioritization of Adaptation at Local Level 14. The NCAAP also identifies financing gaps as an important aspect of implementation challenges that need to be addressed but does not provide either a financing strategy or estimates of the resources needed to implement it. The Philippines has historically relied on domestic resources and to a lesser extent international resources to finance its climate related expenditures (REECS 2010). The Climate Change Act requires National Government Agencies and LGUs to allocate from their regular appropriations adequate resources for their respective climate programs. Government Financial institutions are required to provide preferential packages for climate programs. The NFSCC, in addition, also identifies the provision and access of scaled-up new and additional financial resource as a means of financing national and local requirements. The NCAAP does not identify a financing strategy or provide estimates of the costs of implementing it. It only summarizes the various sources of international financing and the types of activities that they finance suggesting avenues on how domestic and global climate finance can be complementary. The NCCAP does not suggest the extent to which any of these sources can finance specific NCCAP priorities, present a strategy for accessing these sources, or whether they should be accessed for particular priorities and not others. 15. The People’s Survival Fund (PSF) Act provides dedicated financing for adaptation at the local levels, leaving important gaps in coverage. The Climate Change Act was amended in 2012 to establish a performance-based replenishable annual one-billion peso appropriation to finance adaptation programs and projects based on the NFSCC. A PSF Board is to be created with responsibilities to promulgate policies, provide strategic guidance on the management and use of the funds, and provide final approval for projects to be funded. The draft Implementing Rules and Regulations (IRR) reconfirms the scope of activities that are to be funded by the Act which is narrower (with support only for adaptation activities of the LGUs and communities) than the NFSCC or the NCCAP.6 As currently structured, only the LGUs and communities can submit 6 The PSF Act provides an illustrative list of activities that would be supported which includes the following: (a) adaptation activities in the areas of water resources management, land management, agriculture and fisheries, health, infrastructure development, natural ecosystems including mountainous and coastal ecosystems; (b) improvement of the monitoring of vector-borne diseases triggered by climate change, and in this context improving disease control and prevention; (c) forecasting and early warning systems as part of preparedness for climate-related hazards; (d) institutional development, for the LGUs, in partnership with local communities and NGOs, for preventive measures, planning, preparedness and management of impacts relating to climate change, including contingency planning, in particular, for droughts and floods in areas prone to extreme climate events; and (e) strengthening or establishing 47 Part 1 -- Chapter 1: Policy Review proposals for consideration by the PSF Board. This seems to preclude the funding of adaptation activities undertaken by other regional entities or the National Government Agencies (NGAs) that directly support multiple LGUs and local communities. However, the list of supported activities includes a number of such programs, such as forecasting and early warning systems and the strengthening and establishment of regional information networks. The modalities of how such inter-LGU or multi-LGU programs can be funded and the incentives for individual local governments to propose such programs with large spillover benefits outside of their own jurisdiction is not indicated and has to be considered by the PSF Board in establishing its operational guidelines. 16. Establishing transparent project selection criteria for the PSF based on consultations with a broad range of stakeholders is essential for maintaining support and demand for the reforms. While the PSF limits support to adaptation activities of the LGUs and communities, the activities that are to be supported can still be quite extensive if a relatively broad definition of adaptation is used. Good governance rules including clarity on prioritization and transparency in the decision making process will be essential for quick approval and implementation of projects by the PSF. The Climate Change and DRRM Frameworks Clearly Reflect a Convergence Agenda 17. There is growing recognition that climate change adaptation is an appropriate mechanism to address weather-related disaster prevention. Enacted as a follow up to the Climate Change Act, the Disaster Reduction and Management Act (2010) adopts a holistic, comprehensive, proactive perspective on disaster risk reduction and management, that ties it strongly to climate change adaptation. Historically, climate- related disaster risk reduction and climate change adaptation tended to be seen as parallel approaches with institutional arrangements which worked to separate them further. The NDRRM Act represents a paradigmatic shift in the way disaster risks are seen to have to be managed, evolving from what could be considered as a reactive approach focused on disaster response and rehabilitation to a preventive approach focused on disaster risk reduction and management through prevention and preparedness. The NDRRM Fund document (2011) shows the overall direction and set of priorities to guide national and local efforts in DRRM. It includes four elements – disaster prevention, preparedness, recovery, rehabilitation, and response. This shift in focus to disaster prevention, conceptually and operationally links CCA and DRRM. 18. The climate change and DRRM policy frameworks reflect a conceptual convergence in their approach related to climate-related disaster risks. Climate change is expected to expose the country to more climate-related disaster hazards (see Figure 8). Adaptation actions aimed at increasing the resilience of people and their assets to climate change also make them less vulnerable to current weather-related disasters. Similarly, actions focused on preventing weather-related disaster risks increase the resilience of communities to withstand medium to longer term changes in climate. These linkages are recognized in both the Climate Change Act and NDRRM Act which require the CCC and the NDRRMC to jointly undertake certain activities (community-based and regional centres and information networks to support CCA initiatives and projects. Interestingly, the fund may also serve as a guarantee for risk insurance needs for farmers, agricultural workers, and other stakeholders. 48 Part 1 -- Chapter 1: Policy Review scientific DRRM/CCA assessment, mapping, analysis and monitoring) at the local level. This convergence is also recognized in the NCCAP, which includes reduced risks from climate change and disasters as one of its priorities, and in the NDRRM Plan, which sees CCA as an appropriate mechanism to prevent or mitigate weather-related disaster risk (see Figure 13). Figure 13: Linkages between Climate Adaptation Actions and DRRM Adaptive Capacity Prevention Preparedness Response & Rehabilitation Climate related DRRM Climate Change Adaptation 19. Despite the conceptual convergence on CCA and DRRM policies, implementation has been slow due to parallel strategies, action plans, tools, institutions, monitoring and reporting. The NCCAP and the NDRRMP mandate LGUs to develop the local DRRM plans (NDRRMP) and the Local CCA Plans (LCCAP) which are to be integrated into the CDPs and the CLUPs. The CCC is responsible for ensuring the mainstreaming of climate change, in synergy with disaster reduction and management into local development plans. Both the CCC and the NDRRMC are required to coordinate with each other on their engagement with the LGUs. While the two Agencies have signed an MOU affirming their collaboration to harmonize and coordinate with each other in supporting the LGUs and to develop a joint work plan, in practice, coordination and collaboration is limited. Few LGUs have DRRM plans and strategies and most have been developed following a disaster to better respond to them. Adaptation and weather-related disaster prevention is not systematically included in development plans as DRRM and CCA are not viewed within a sustainable development framework by most Agencies and communities. GHG Emissions Reductions and Low Carbon/Green Growth Initiatives Need Joint and Coordinated Framework of Actions 20. While uncoordinated low carbon/green growth initiatives and programs exist across the government, more effective GHG emissions reduction could be achieved through a comprehensive approach that facilitates prioritization and policy 49 Part 1 -- Chapter 1: Policy Review coherence. Green growth is an economic strategy that focuses on achieving economic growth that is environmentally sustainable, often by decoupling economic growth from ever rising carbon emissions. These policies can lead to innovation, often cost less than expected, and can improve productivity but are not a “green job� miracle especially if other inefficiencies are not corrected. Examples of strategies with high local and immediate benefits include low-carbon low cost energy supplies, loss reduction in energy supply, energy demand side management and the development of public transport. Reduced deforestation or afforestation may also have significant local and immediate benefits but inertia or the risk of irreversibility increases the urgency acting on them. 21. The Philippines does not have a comprehensive low/carbon green growth strategy instead elements of a strategy have been developed by different Departments. The CCC is currently spearheading several projects together with key government Agencies to establish a national system for the preparation of GHG emission inventories, to formulate National Mitigation Actions (NAMAs) and Low Emission Development Strategies (LEDS), and to develop Monitoring Reporting Verification (MRV) systems to support implementation and evaluation of mitigation actions. Development partners including the European Union, the governments of Germany (BMU) and Australia (Ausaid), the United Nations Development Programme (UNDP) and the U.S. Government have supported and complemented these efforts. However, the piecemeal approach by which these programs have been developed and their fragmentation across sectors creates difficulties in prioritizing activities. A more comprehensive approach backed by a common policy would not only facilitate prioritization and coherence to better manage trade-offs, but also provides the necessary signal to promote greater private sector engagement. International support can often incentivize actions where local and international benefits tradeoffs exist. 22. The National Greening Program (NGP), a large forest rehabilitation program established to provide multiple benefits, has the potential to deliver significant additional adaptation and mitigation co-benefits through improved targeting and design. As a convergence initiative among the DA, the Department of Agrarian Reform (DAR), and the DENR created by Executive Order (EO) No. 26 issued on February 24, 2011, the NGP seeks to grow 1.5 billion trees in 1.5 million hectares nationwide within a period of six years, from 2011 to 2016. Half of the targeted trees to be planted under the program would constitute forest tree species intended for timber production and protection as well. The other 50 percent would be comprised of agroforestry species. Areas eligible for rehabilitation under the program include all lands of the public domain. Specifically, these include forestlands, mangrove and protected areas, ancestral domains, civil and military reservations, urban greening areas, inactive and abandoned mine sites, and other suitable lands. The NGP aims to reduce poverty by providing alternative livelihood activities for marginalized upland and lowland households through seedling production and care and maintenance of newly planted trees. The NGP also seeks to enhance the country’s forest stock to absorb carbon dioxide. While well designed forestry programs can provide significant adaptation as well as carbon sequestration benefits, the design and the targeting of the NGP have not focused on them, limiting its potential to deliver climate results. 50 Part 1 -- Chapter 1: Policy Review 23. The recently adopted Philippine National REDD Plus Strategy (PNRPS) has created new opportunities to strengthen institutions for developing and scaling up carbon sequestration opportunities. Given the importance of land use changes in increasing climate risks and the impacts, a coordinated approach to carbon sequestration and to adaptation is essential. The CCC drew from an earlier initiative by Philippine nongovernmental organizations (NGOs) to jumpstart REDD Plus in the country. CoDe REDD was formed to ensure that national REDD Plus developments yield co-benefits for biodiversity conservation and community development. After a series of workshops to develop a multi-stakeholder REDD Plus Strategy and guide a future targeted action plan, the CCC integrated REDD Plus into Section 8.5 of the NFSCC, which in turn led to the issuance of EO No. 881 on REDD Plus planning and development. The PNRPS presents a broad range of strategies and corresponding activities over a 10-year time horizon. The CCC is responsible for providing general oversight and overall policy guidance while the DENR is tasked to organize multi-stakeholder REDD-plus Councils. The emphasis on stakeholder consultations from national to local levels and its phased implementation should ensure support for the program hence probability for success. Establishing a credible monitoring, reporting and verification (MRV) system for carbon sequestration will be essential to leverage additional resources for scaling up the program. 24. While sectoral policies have promoted Market Based Instruments (MBI) and private sector engagement, their scope remains limited to a few sectors. The deregulation of the power sector has provided many incentives and has brought in private resources and players to support mitigation efforts. Some of the major programs include tax holidays for carbon credits, renewable portfolio standard, financial incentives for wind geothermal and mini-hydro development, tax exemptions for biofuels, building and equipment standards, cleaner production technology, efficient lighting, ecolabeling, and the sustainable consumption program.7 25. Unlike in some other countries, no subsidy is provided on fossil fuel consumption in the form of low, regulated prices or tax levels. Unlike in some countries, no environmental taxes on energy consumption that stem from fossil fuels are currently under discussion. As the country has the second highest energy costs in Asia after Japan, the price signals from the market are strong already and should provide 7 Tax holidays for carbon credits, reduced income tax, feed in tariffs (upcoming), and a tax reduction for equipment purchase. (Renewable Energy Act, RA 9513); Wholesale Electricity Spot Market and the Renewable Portfolio Standard, which regulates that distribution companies must source a percentage of their power from renewable energy power plants and that renewable energy generated is prioritized for distribution by companies; Financial incentives for developers of wind energy projects (EO 462);;Financial incentives and privileges for geothermal energy development (Presidential Decree 1442); Elimination of regular fuel tax and exemption from Clean Water Act and the mandated minimum content in diesel to promote biofuels (Biofuels Act, RA 9637); Private sector incentives to Filipinos to invest in mini-hydro facilities and participate in the development of the mini-hydropower industry, and incentives a package of assistance to encourage companies to improve their environmental performance, including energy efficiency under DENR’s Philippine Environmental Partnership Program (PEPP) ; DOE’s standards program for equipment energy and building energy usage under the Clean Air Act ; Integrated Program on Cleaner Production Technologies (the Department of Science and Technology [DOST]); Philippine Efficient Lighting Program (the Department of Energy [DOE]); Eco-labeling program green choice (the Department of Trade & Industry [DTI]); Switch Program, with projects on energy efficiency, zero carbon resorts, and sustainable consumption and production (SCP). 51 Part 1 -- Chapter 1: Policy Review enough incentive for companies and households to undertake energy efficiency and conservation efforts. Synergies between National/Sector/Local Policies are Key 26. The national, Departmental and local development plans are only partially aligned with NCCAP due to variations in the definitions of what constitutes a climate change activity and differences in outputs, outcomes, and goals. The NCCAP priorities are thematic in nature often cutting across the sector-based focus of the PDP8, Key Result Area 5 (KRA-5), the Department Work Programs, and local development plans. Such differences lead to difficulties in monitoring climate activities and makes coordination and convergence across Departments and between levels of government difficult. While formal mechanisms to foster coordination among Departments/Agencies at an operational level have not been proposed, the Governments’ convergence agenda and the new innovative reforms may be able to improve coordination. Consistency and good structured synergy with existing plans will determine the efficiency and effectiveness of implementation. This includes aligning outcomes of the climate agenda and development plans at the national (PDP), sector (work programs) and local level (CLUPs and CDPs). The efficiency and effectiveness of implementing the Climate Change Act, the NFSCC, and the NCCAP depend on their consistency and synergy with existing laws, policies, and plans. This section reviews the consistency and synergy between the climate agenda and the national development plans (PDP, PIP and KRA-5), sector polices/plans, and local policies/plans. Philippines Development Plan: Partially Aligned with NCCAP, Scope for Further Alignment 27. Systematic Inclusion of the NCAAP outcomes and outputs in the Philippine Development Plan is essential for mainstreaming climate change into Department’s planning and priority setting efforts and in monitoring the implementation of the NCCAP. National development goals are embodied in two major plan documents: the NFPP for long-term goals and the PDP for goals that a particular administration wishes to pursue during its six-year term.9 The National Economic Development Authority (NEDA) coordinates the formulation of the primary development planning tool, the PDP, on a six-year cycle. It provides broad sector-based strategies, outcomes, and indicators for measuring results, including for climate change, but does not include specific activities or actions to be undertaken. Planning guidelines issued by the NEDA are based on priorities identified in the PDP. As such, it provides the basis for national Department and Agency planning, investment programming, budgetary appropriations, and other 8 The PDP aims to (1) attain sustained economic growth that provides productive employment opportunities; (2) Equalize access to development opportunities across different geographic, income and social spectra, and (3) Formulate and implement effective and responsive social safety nets, 9 The NFPP provides the analytical parameters for the planned allocation, use and management of the country’s land and other physical resources. It is intended to serve as a framework through which the planning and management of these resources are guided at the national and subnational levels. The NFPP provides a broad long-term development vision and philosophy based on characteristics of the physical resources peculiar to the country. It contains general strategies which provide directions to the overall development of the country based on natural and market requirements and offers major policy guidelines and policy options for each of four major land use policy areas, namely, Protection Land Use, Production Land Use, Settlements Development and Infrastructure Development. 52 Part 1 -- Chapter 1: Policy Review funding decisions. It also facilitated monitoring of implementation progress across government. (See Box 4 for an example of climate change planning in the UK). Box 4: UK’s Experience in Climate Change Planning As one of the leading countries tackling climate change, the UK has taken a coordinated approach to reducing its greenhouse gas (GHG) emissions and vulnerability to current and future climate risks through aligning departmental plans with national policies and monitoring the progress in policy implementation in an integrated fashion. To achieve the world’s first legally-binding GHG emission target, the UK government has focused on major emission sources such as power and transport, setting “carbon budgets,� a cap on the total quantity of GHG emissions produced in the country over a specified time (HM Government, 2009, 2010). These budgets provide a framework for reducing GHG emissions by at least 80% from the 1990 baseline by 2050, and have been allocated through the UK Low Carbon Transition Plan (LCTP) to government departments according to emissions from both the departments’ own estate and operations and the sectors over which the departments have policy influence to reduce emissions. Following the LCTP, each department has then devised a Carbon Reduction Delivery Plan with detailed actions to meet its quota. To advise the government and report its progress in emission reduction to Parliament, the Committee on Climate Change monitors the progress based on indicators that the Committee has developed, and suggests recommendations according to the sectors (Committee on Climate Change, 2009, 2012). Conducting the Climate Change Risk Assessments every five years, the government has set the main priorities for adaptation in the UK under five key themes: natural environment; buildings and infrastructure; health and wellbeing; business and services; and agriculture and forestry (HM Government, 2012). The government’s proposals and policies are devised around these five themes in a National Adaptation Programme that is also to be published every five years from 2013 (Department for Environment Food and Rural Affairs, 2012; HM Government, 2012). At the sector level, the Departmental Adaptation Plans establish each department’s policies and priorities. The progress in the priority areas, especially those that require early actions, has been assessed systematically against a set of indicators (i.e., indicators of climate impact, vulnerability to climate risks, and adaptation actions) (Adaptation Sub-Committee, 2010, 2011). References - Adaptation Sub-Committee. (2010). How well prepared is the UK for climate change? - Adaptation Sub-Committee. (2011). Adapting to climate change in the UK: Measuring progress. - Committee on Climate Change. (2009). Meeting carbon budgets – the need for a step change: Progress report to Parliament. - Committee on Climate Change. (2012). Meeting carbon budgets: 2012 Progress report to Parliament. - Department for Environment Food and Rural Affairs. (2012). Climate ready: Co-creation progress update and an invitation to respond. - HM Government. (2009). The UK low carbon transition plan: National strategy for climate and energy. - HM Government. (2010). Climate change: Taking action - Delivering the low carbon transition plan and preparing for a changing climate. - HM Government. (2012). UK climate change risk assessment: Government report. Source: http://archive.defra.gov.uk/environment/climate/programme/across-government.htm 53 Part 1 -- Chapter 1: Policy Review 28. Compared to prior plans, PDP 2011–2016 has a more prominent focus on climate change, mainly resulting from climate change being one of five Key Results Areas in the President’s Social Contract. Climate change was barely mentioned in the PDP 2004–2010; adaptation was not included in any significant way and coverage was primarily limited to the potential of the carbon market and the clean development mechanism. PDP 2011–2016 was formulated around the President’s Social contract which included the integrity of the environment and climate change as one of five key results areas. Accordingly, in formulating the Plan, NEDA directed sector Agencies to include climate change in their organizational outcomes and indicators. As a result, five of the chapters of the PDP 2011–2016 include extensive discussions on climate change, particularly in relation to disaster risk reduction; they are: agriculture and fisheries, competitive industries, infrastructure development, social development, and environmental and natural resources, and a sixth chapter on peace and security focuses on disasters but not necessarily on climate. However, the climate change priorities, outcomes, and activities identified in the PDP are similar but not the same as those included in the NCCAP, partly resulting from the timing of when the two documents were adopted. 29. At the national level, the NCCAP and the PDP are partially aligned with each other in terms of climate-related outcomes and outputs. Even though the PDP was launched as the NCCAP was still being developed, five chapters in the PDP include extensive discussions on climate change, particularly in relation to adaptation and disaster risk reduction and management, which are discussed in the agriculture and fisheries chapter, and the chapters in industry and services, infrastructure, and social development as well as the environment and natural resources. Mitigation is discussed only in the context of the chapter on ecosystem degradation and deforestation. Some immediate NCCAP outcomes are excluded from the PDP (e.g., climate risk responsive health delivery systems), while others lack detailed articulation of supporting activities. For instance, the immediate NCCAP outcomes on sustainable water supply and knowledge and capacity building in the water sector are presented without any reference to climate change, as is the case in other chapters (see Table 5). Since both plans are scheduled to be updated in mid-2013, an opportunity exists for improved alignment. The NEDA’s Effectiveness and Efficiency Review process provides an opportunity to fill many of these gaps, as do the CCC climate screening guidelines, which help identify a comprehensive set of PAPs based on the NCCAP. 30. Comparison of the NCCAP and KRA-5 outcomes indicates that the two are partially aligned. While outcomes and outputs for the KRAs are not clearly defined in a policy document, each of the PDP outcomes are mapped to one or more KRAs in the PDP results matrix, providing a first cut at defining potential KRA-5 outcomes. The PDP results matrix identifies objectives, sectoral and intermediate outcomes, as well as indicators, baseline values, and targets to monitor progress. While the PDP results matrix is not mapped to NCCAP outcomes, a simple comparison indicates that increasing sector resilience to climate change in agriculture and fisheries and environment and natural resources is an outcome common to both the NCCAP and KRA-5, which is supported by intermediate outcomes, outputs, and indicators. However, the alignment breaks down for key infrastructure subsectors (energy, water, transport). While improving climate resilience in infrastructure is a KRA-5 sectoral outcome, it is not supported by underlying 54 Part 1 -- Chapter 1: Policy Review outcomes, outputs, or measurable indicators related to climate resilience, which only include those for quality, adequacy, and accessibility of service. Instead, the sectoral outcome for infrastructure refers to subsector outcomes on improving resilience to climate change, which are yet to be defined. Table 5: Coverage of NCCAP Outcomes in the PDP 2011–2016 NCCAP Goals and Immediate Coverage in PDP 2011–2016 Outcomes Goal 1: Ensured food availability, stability, Outcomes 1 and 2: Significantly captured in the access and safety amidst increasing climate agriculture and fisheries chapter. change and disaster risks. Outcome 1: Enhanced climate change (CC) Results: Includes specific climate change outcome resilience of agriculture and fisheries production indicator for the sector. and distribution systems. Outcome 2: Enhanced resilience of agriculture and fishing communities from climate change. GOAL 2: Water resources sustainably managed Outcome 1: Highlighted and equitable access ensured. The following specific activities are not included: Outcome 1: Water governance restructured x Conduct gendered vulnerability and risk assessment toward a climate- and gender-responsive water of water resources and infrastructures. sector. x Develop and implement CCA plans for priority Outcome 2: Sustainability of water supply and watersheds and river basins. access to safe and affordable water ensured. x Rehabilitate degraded watersheds and river basins and Outcome 3: Knowledge and capacity for CCA in protect existing ones. the water sector enhanced. Outcome 2: General statements only. The following specific activities are not included: x Conduct water supply and demand analysis under various hydrologic conditions and estimate scenarios. x Review and modify, as appropriate, management processes of existing water supply systems and users to consider potential impacts of climate change. Outcome 3: General statements only. The following specific activities are not included: x Improve and update water resources database and information systems. x Develop gender-responsive knowledge products on water and climate change. Results: Indicators not included. Goal 3: Enhanced resilience of natural systems Outcome 1 and 2: Articulated in the environment and and improved adaptive capacities of human natural resources (ENR) chapter. communities to cope with environmental hazards The following are not included: including climate-related risks. x Establishment of Ecotowns. Outcome 1: Ecosystems protected and x Strict enforcement of environment laws. rehabilitated, and ecological services restored. x Policy review of the PEENRA. Outcome 2: Management and conservation of Results: Includes specific outcome indicator. protected areas, and key biodiversity areas improved. GOAL 4: Reduced risks of men and women and Key PDP Strategy: Mainstreaming of CCA and other vulnerable groups (children, elderly, DRRM in social development interventions. Overlap persons with disability, etc.) from climate change with NCCAP outcomes mixed. and disasters. Specific activities include: Outcome 1: CCA and DRRM practiced by x Integrating CCA/DRRM in national and local communities and sectors at all local levels. development plans. Outcome 2: Health and social protection delivery x Capacity building of local communities on 55 Part 1 -- Chapter 1: Policy Review NCCAP Goals and Immediate Coverage in PDP 2011–2016 Outcomes systems are responsive to climate change risks. DRR/CCA, and Outcome 3: CC-adaptive human settlements and x promotion of green technology in housing structures services developed, promoted, and adopted. and social infrastructures. The following are not included following NCCAP outcome/activities: x Making health and social protection delivery systems responsive to climate change risks. x Developing a long-term plan for adaptation of highly CC-vulnerable population and climate refugees. x Reducing population congestion and exposure to climate change risks. x Extensive Information Education Campaign (IEC) program on climate change risks and population management. GOAL 5: Climate change-resilient, eco-efficient, Outcomes 1, 2, and 3: PDP supports creating an and environment-friendly industries and services, enabling environment for the development of climate- and sustainable towns and cities promoted, smart industries and services, climate proofing of local developed, and sustained. infrastructures, and in enhancing private sector Outcome 1: Climate-smart industries and awareness on and mobilizing their support for services promoted, developed, and sustained. CCA/DRRM. Outcome 2: Sustainable livelihood and jobs The following are not included: created from climate-smart industries and x Creating and monitoring green jobs. services. x SME capacity building on climate-smart Outcome 3: Green cities and municipalities industries and services. developed, promoted, and sustained. Industry focus for CCA/DRRM: PDP: mining companies; NCCAP: green tourism promotion. GOAL 6: Sustainable and renewable energy and Outcome 1, 2, 3, and 4: Covered in the PDP chapter ecologically efficient technologies adopted as on accelerating infrastructure development. No major major components of sustainable development. differences between NCCAP and PDP. Outcome 1: Nationwide energy efficiency and conservation program promoted and Results: Includes an outcome indicator on resilience to implemented. climate change and natural disasters. Does not include Outcome 2: Sustainable and renewable energy an indicator on emission reduction, but is focused on (SRE) development enhanced. energy security and efficiency. Outcome 3: Environmentally sustainable transport promoted and adopted. Outcome 4: Energy systems and infrastructures climate proofed, rehabilitated, and improved. GOAL 7: Enhanced knowledge and capacity of Outcome 1: CCA/DRRM capacity building is women and men to address CC. integrated in many chapters. Outcome 1: Enhanced knowledge of the science Specific CCA/DRRM capacity-building activities are of CC. not detailed: x Establishing centers of excellence on climate change science at the national and regional levels. x Establishing climate change resource centers in all regions. x Developing formal and non-formal capacity development program for climate change science, adaptation, and mitigation. x Developing a CCA and mitigation technical training program. 56 Part 1 -- Chapter 1: Policy Review Sector Policies and Reforms are the Key to Implement the NCCAP, yet, Alignment at Goal Level is Partial and Does not Translate into Work Programs and Main Final Outputs. 31. While existing sectoral policies informed the formulation of the NCCAP outcomes and outputs, the pace at which climate adaptation and mitigation is being incorporated into Department work plans has varied across Departments. Climate change is already incorporated into the programs of all Departments reviewed in the study, albeit not systematically. This is not surprising, as the Departments were selected in the CPEIR based on the degree to which their primary goals were vulnerable to climate risks or had a high potential for mitigation (see Part V Annex 4). Laws enacted prior to the Climate Change Act to address climate change were primarily focused on specific sectors and particular areas within sectors. Given the many climate-related laws enacted prior to 2009, it is not surprising that sector policies already include some of the NCCAP priorities. While many of the NCCAP outcomes, outputs and activities are already in sectoral policies, others remain to be included in them. Table 2 summarizes the sector goals and main final outputs of selected Departments. Not all of them are fully aligned with the NCCAP. For example, the DA has a specific goal on sector resilience to climate change risks which corresponds well with one of the NCCAP general immediate outcomes on Food Security and the DOE’s main final output on national energy efficiency and conservation programs corresponds well with the NCCAP immediate outcome in energy efficiency. While Departments have made to enact some reforms included in NCCAP, many others have yet to begin or at the initial stages of discussion. Yet other outputs are in conflict with existing mandates adversely hindering their implementation. The progress of Departments in incorporating climate change into their work plans include: x The DA has started to adopt a broad based climate change mainstreaming approach which has translated in various initiatives throughout the DA’s programs which now need to be assessed for their performance, prioritized, scaled-up when relevant, with outcomes monitored and reported. Developing climate resilience is the key to agriculture in the Philippines (see Part I). The DA is focusing on, developing and implementing, a vulnerability and sustainability assessment tool, as well as various technologies that aim to increase the climate resilience of the sector. For example, the DA has been undertaking CCA-related initiatives in the past, such as breeding crop varieties that are more tolerant of heat, drought, and water logging, as well as improving irrigation water use efficiency. Phil Rice has been at the forefront of developing climate-sensitive rice varieties. In addition, the Bureau of Soils and Water Management undertake densification of agro- meteorological stations, which is a CCA priority of the Department, and site-specific testing for climate resiliency of crops. As a result of these programs, the Department is putting up “climate field schools� to integrate weather data gathering and forecasting, and is starting to roll-out the weather-based insurance system. x The DPWH has been at the forefront of infrastructure rehabilitation after disasters but longer term climate resilience is key to the DPWH, yet, in practice, the majority of its programs still tend to cater to a short-term DRRM rather than long-term CCA perspective. The DPWH’s central mandate is on roads and highways, not on seawalls and dams. Prior to 2009, the DPWH has been mainly 57 Part 1 -- Chapter 1: Policy Review focused on DRRM management, although flood control was already considered as a clear CCA activity. The Department’s CCA initiatives have gained more traction with the enactment of the Climate Change Act. The Department has an integrated environmental-cum-CCA office and has developed a plan of action on CCA for the years 2010 to 2022. A Capacity Assessment Report undertaken by UNDP indicates the DPWH is increasingly carefully examining the connection between DRRM and CCA. x The DENR strategies had a strong mitigation focus but have evolved to incorporate adaptation lately in the context of the climate reform agenda. The genesis of the DENR’s involvement in climate change was the creation of the DENR Secretary chaired Inter-Agency Committee on Climate Change in 1991. The DENR’s primary focus has been on the conservation of natural resources as a carbon sink, and surprisingly, not on CCA. In 2010, the Department formulated the Philippine Strategy on Climate Change Adaptation 2010-2022 (PSCCA) as input into the NCCAP, and to guide its own activities. . It has also formulated a new environment and natural resources (ENR) framework road map for the next 10 years. The ENR framework is currently being reviewed to increase its focus and relevant to CCA. Climate change awareness is high among central office personnel, particularly those in Forest Management Bureau and the Environment Management Bureau (EMB), indicating that the shift to adaptation—the deliberate process of building up the CCA concern—is now getting better understood and internalized. x The DOST’s involvement on climate change also is evolving towards CCA, from a more focused attention to mitigation research, consistent with the trend toward carbon reducing programs before the Climate Change Act. It served as co-chair of the Inter-Agency Committee on Climate Change beginning in the early 1990s. With increasing attention toward adaptation, the Philippine Council for Agriculture, Aquatic and Natural Resources Research and Development (PCAARRD) crafted the Philippine S&T Agenda on Climate Change (PSTACC) in Agriculture, Forestry and Natural Resources for 2010 to 2016. The agenda identifies gaps and science and technology priorities in agriculture (crops and soils, livestock, and poultry), forestry, agricultural resources (water), policies and institutions, and other cross-cutting concerns. x The DOE has historically played an important leadership role on climate change. Its attention over the years quite naturally has also been on mitigation, consistent with its mandate. In 1998, it implemented the Philippine Climate Change Mitigation Program (1998 to 2001), which sought to slow down the growth of GHG emissions through the expanded use of clean fuels in power generation, and by improving the efficiency of power generation, distribution, and use. Since then, the DOE has been involved in renewable energy and GHG abatement projects. The DOE’s participation in climate change gained prominence in 2007 when the Department assumed the chairmanship of the mitigation-oriented Presidential Task Force on Climate Change (PTFCC), the precursor of the CCC. The creation of the CCC should not alter its climate change leadership. 58 Part 1 -- Chapter 1: Policy Review 32. Overall, the NCCAP has not yet gained traction among the CCCC Department members, due to lack of incentives to focus on KRA-5 and limited guidance on the inclusion of NCCAP in strategies and work programs. The performance of Departments is measured and monitored against their Major Final Outputs using the Organizational Performance Indicator Framework indicators, which have been mapped to the KRAs, but not to NCCAP. As such, Departments have incentives to align their climate strategies and work programs with the KRA-5. Moreover, toward supporting the KRA-5 outputs, the CCCC asked Departments to identify their climate activities in their work programs for the 2011–2016 period, and the DBM has asked Departments to report on their activities supporting the different KRAs, including those on KRA-5. While the CCCC request was a one-time exercise carried out with limited guidance on the appropriate criteria to be used, the DBM guidance for reporting for KRA-5 has varied over the years, and was not related to the NCCAP. In contrast, the Departments have not been provided guidance or incentives to align their strategies and work programs to the NCCAP. In part, this reflects the finalization and dissemination of the NCCAP only after the KRAs had been established 33. Mainstreaming the NCCAP in the Departments’ plans and work programs requires the adoption of a common approach to tagging climate PAPs and the establishment of indicators and targets. To address the first shortcoming, the CCC and the DBM have recently developed climate screening guidelines for use in budget preparation beginning in FY 2014, based on the NCCAP. Upon its operationalization, climate PAPs supporting the NCCAP will be clearly be identified in the budget across the Government, providing the ability to monitor against the NCCAP. However, this still does not provide Departments with strong incentives to prioritize PAPs that support NCCAP. Accountability of Departments can be ascertained only if the NCCAP includes indicators and targets to measure implementation progress. While the NCCAP includes indicators for each output, it does not provide specific targets nor assign them to specific Departments. As a result, the size and scope of specific NCCAP programs in the Departments currently depend on each Department’s goals and MFOs. While in a few cases these may be well aligned with NCCAP outcomes (e.g. DA’s MFO o n increasing sector climate resilience with NCCAP outcome on food security), most Departments do not have MFOs related to NCCAP outcomes (see Table 6). Establishing targets for the NCCAP indicators and aligning them with established Departmental goals and outputs would incentivize Departments to fully mainstream NCCAP into their strategies and work programs. 59 Part 1 -- Chapter 1: Policy Review Table 6: Sectoral Goals and Main Final Outputs of Select Departments Department Sector Goal Main Final Output /Agency Department of 1. Food security improved 1. Agriculture and fishery support services delivered Agriculture 2. Growth in agriculture and fishery sector (production support, market development, credit increased facilitation, irrigation development, post harvest/ 3. Incomes in agriculture and fishery sector other infrastructure, extension support/ education/ increased training) 4. Sector resilience to climate change risks 2. Regulations developed, implemented, monitored increased and enforced 5. Natural resources conserved, protected 3. Plans and policies developed, implemented, and rehabilitated monitored and evaluated Department of 1. An efficient and globally competitive 1. Energy policies, plans and programs Energy energy sector 2. Overall supervision/implementation of electric 2. Energy self-sufficiency power industry reforms 3. Overall supervision/implementation of the rural electrification program 4. Market development and supervision of downstream oil and natural gas industries 5. Supervision of energy resources, exploration, development and utilization 6. National energy efficiency and conservation programs Department of 1. Natural resources conserved, protected 1. Plans, policies and standards developed, promoted, Environment and and rehabilitated monitored and evaluated Natural 2. Ecosystems and natural resources managed, Resources protected, conserved and enhanced; degraded ones rehabilitated 3. Appropriate regulations and standards enforced and monitored Department of 1. Access to markets and production areas, 1. National roads maintenance services Public Works and physical integration of the country 2. National roads construction services and Highways 2. Safe environment through infrastructure 3. Major flood control maintenance and construction facilities services 4. Other basic infrastructure construction and maintenance services Department of 1. Knowledge, science and technology for 1. S&T policy services Science and productivity, economic growth and job 2. S&T fund management services Technology creation 3. Regional S&T services PAGASA 1 Knowledge, S&T for productivity, 1. Forecast & warning services on weather, flood, economic growth and job creation climate, astronomy and extreme weather events 2. Hazard mapping and risk assessment services 3. Research and development 4. Risk mitigation and other services Climate Change 1. Resilience of natural systems enhanced 1. Plans, policies and strategies developed, promoted, Commission with improved adaptive capacities of human monitored and evaluated communities NEDA 1. Promote energy independence 1. Socioeconomic/physical planning and policy 2. Fight corruption and promote good advisory services governance 2. Investment programming services 3. Accelerate economic growth and job 3. Sectoral program monitoring and evaluation creation services 4. Improve social justice and delivery of basic needs 5. Enhance education and youth opportunity DBM 1. Fiscal strength 1. Budget and management policy services 2. Good governance 2. Agency budget and management services 3. Budget release services 4. Performance monitoring and evaluation services 60 Part 1 -- Chapter 1: Policy Review Local Policies: Local Governments Empowered to Act but Without Adequate Capacity 34. The Local Government Code (LGC) mandates the LGUs to create the CDP and the CLUP, offering an appropriate framework for integrating climate action. The Philippine Congress passed a key decentralization measure, the Local Government Code, in 1991 transferring responsibility for delivering many of the basic services and resources in the form of an Internal Revenue Allotment (IRA). Many of these services are affected by climate change and which have some impact on climate change and DRRM. Municipalities are generally made responsible for the delivery of frontline basic services (e.g., primary health care, construction, and maintenance of public elementary schools). The LGC mandates the LGUs to create the CDP and CLUP planning documents which correspond to the PDP and the NFPP at the national level. The LGC also ordered National Government Agencies (NGAs) to consult with LGUs regarding national programs that are implemented in LGUs “that may cause pollution, climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant species,� thus setting the stage for the early recognition of “measures that will be undertaken to prevent or minimize the adverse effects thereof�. When the CLUP is enacted into a zoning ordinance, it becomes a statutory plan. As such, it is a powerful instrument that the LGUs use to harmonize land allocations between competing and often conflicting uses, including climate adaptation. 35. The Climate Change Act requires the national government to provide technical assistance to the LGUs, but support remains insufficient to enable LGUs to formulate and mainstream implement required local climate change actions into their locally mandated plans. The Climate Change Act requires LGUs to develop the Local Climate Change Action Plans (LCCAPs), but does not specify exactly what that entails. The addition of another plan to the numerous plans corresponding to central government plans that LGUs are already required toformulate imposes a burden on LGUs.10 To lighten this burden, the CCC encouraged LGUs to incorporate CCA/DRM in their existing CDPs and CLUPs instead of preparing separate, stand-alone LLCAPs and LDRRMPs. Despite these steps, the limited technical and financial capacity of LGUs, and lack of clarity on how to formulate a LCCAP remain key barriers for integrating climate change into CLUPs. The NEDA and the Department of the Interior and Local Government (DILG) have been providing direct assistance to the LGUs in this regard. The DILG has spearheaded efforts to streamline planning processes in the LGUs, and climate-proofing the CDPs and the CLUPs (in lieu of developing a stand-alone climate/disaster plan) which will ease administrative pressures on the LGUs. In addition, the CCC and DILG have initiated efforts to develop a menu of options based on the hazard profile of LGUs. 10 These include: an Agriculture and Fisheries Management Plan, including the Strategic Agriculture and Fisheries Development Zone (SAFDZ); a Forest Management Plan or Forest Land Use Plan (FLUP); a Sustainable Integrated Area Development Plan (SIADP); an Integrated Watershed Management Plan (IWMP); an Ancestral Domain Sustainable Development and Protection Plan (ADSDPP); a Protected Area Management Plan (PAMP);a Coastal Resources Management Plan (CRMP). 61 Part 1 -- Chapter 1: Policy Review Mainstreaming Climate Change into CLUP and CDP: the example of Albay Province 36. The Province of Albay’s development plan ordains the concentration of high - regrets investments and developments (such as physical infrastructure, settlements, heavy industries) in landscapes which are less exposed to hazards and which are not environmentally constrained. Cognizant of the negative impact of climate change on poverty reduction and the achievement of the MDGs, the provincial government of Albay started to mainstream CCA and DRRM in its provincial development plan even prior to the enactment of the Climate Change Act and the DRRM Act. Climate change action and disaster risk reduction are explicitly recognized as essential to the attainment of the province’s overall development goal of achieving the MDGs in its 2011–2016 Provincial Development and Physical Framework Plan (PDPFP), which was approved by the Provincial Development Council in August 2009. 37. The PDPFP calls for the development of the Guinobatan-Camalig-Daraga- Legaspi (GUICADALE) platform as its flagship economic project and its main DRRM strategy. The GUICADALE platform is located in a plateau towards Sorsogon. Its development is meant to signal the shift of new economic development and settlements towards the safe zones. This involves the opening of the new Southern Luzon International Airport in Alobo, Daraga, the opening of the GUICADALE road network from Guinobatan-Camalig-Daraga-Legaspi,11 the construction of some 10,000 housing units for households which will be relocated from high-risk areas,12 and the development of Villahermosa, Daraga, as an extension of the Regional Government Center. Albay’s development plan also includes the construction of disaster-proofed school buildings in safe areas (away from the danger of Mayon eruption, flooding, and lahar flows), with provision for safe and sanitary evacuation facilities. It also proposes the retrofitting of four out of the nine basic emergency obstetric and newborn care and comprehensive emergency obstetric and newborn care facilities because they are located in flood-prone or landslide-prone areas. Mainstreaming Climate Change into CLUP and CDP: the example of Makati city 38. Makati’s CLUP recognizes the need to address existing environmental concerns without curtailing the momentum of the city’s growth if the city’s predominant status is to be sustained. Makati’s latest CLUP, which was formulated in 2000,13 deems preserving the city’s premier status among the most important development objectives for retaining its ability to attract cutting edge investments and infrastructure, its large revenue base, and, therefore, its resource capacity to serve the rest of Makati (Makati CLUP 2000). The development plans (CLUP, MTDP) of the city of Makati takes a highly holistic view of development that aims to preserve the city’s 11 The road connects the new international airport in Alobo, Daraga, and the south central station of the southrail in Comun, Camalig, to the city, the three municipalities after which it is named, two other municipalities (Jovellar and Pioduran), and Donsol, Sorsogon 12 It is the provincial government’s policy to provide permanent resettlement areas and facilities for families in the danger zones / risk areas since it deems that evacuation (and not rescue) should be the primary concern of the province in case of disasters. 13 The city’s CLUP is currently being updated. 62 Part 1 -- Chapter 1: Policy Review premier status as the center of finance and commerce in the country by addressing environmental concerns including improvements in the livability of the city. 39. In line with this, the city developed programs and projects which were originally aimed at improving the livability of the city (and consequently its competitiveness as a major center of finance and commerce in Asia), but which also generate climate change mitigation benefits such as solid waste management, urban greening, and vehicular anti–smoke belching campaign. In recent years, the city has been actively participating in various global networks of cities on benchmarking and capacity building activities related to climate change and disaster risk management (e.g., International Council for Local Environmental Initiatives [ICLEI], Cities for Climate Protection Campaign, and the WB and UNISDR Climate Resilient Cities Initiatives). With this participation, the city’s efforts in environmental management have been extended in the last few years to include climate change management programs (Makati City Profile for Climate Resilient Cities 2008). 40. The development plans of the city of Makati (i.e., the CLUP as well as the Medium-Term Development Plan or MTDP) appear to have a highly holistic view of the city’s development. In particular, the sectoral plans (e.g., economic development, social development, environmental management, and infrastructure development plans) are well integrated with one another, with the strategies, programs, and projects in any given sectoral component being aligned and supportive of those of other sectoral components. Thus, the programs and projects under the transportation sector are aimed at reducing and improving the flow of vehicular traffic into the city so as to reduce GHG emission through: The improvement and maintenance of its road network, improvement of transit infrastructure program (including pedestrianization project14 and establishment of mass transit system), Improvement in its traffic management program,15 the adoption of the e-jeepney16, and the enforcement of vehicular anti-smoke belching ordinance. 41. Although CCA and mitigation are not explicitly mentioned in these plans, many of the programs and projects which are currently being undertaken or are proposed for future implementation, especially those in the environment management, infrastructure, and housing sectors clearly have CCA and mitigation co-benefits and have since been explicitly linked to climate change in more recent presentations made by the city government. In particular, the city is currently drafting its GHG Management Plan with the assistance of the USAID and PLLENRO (Philippine League of Local Environment and Natural Resource Officers). 42. While the impact of climate change does not appear to be as severe in the city as in other parts of the country (e.g., Albay), the city continues to undertake measures and interventions to reduce the risk of flooding in low-lying areas, including drainage improvement projects; maintenance of drainage system and waterways; relocation of 14 “Pedestrianization� refers to the construction of walkways to encourage people to walk rather than take their vehicles for short trips within the city, particularly the central business district. 15 (e.g., strict enforcement of traffic rules, construction of off-site parking facilities, installation of traffic lights, and expansion of traffic segregation program in central business district to other barangays) 16 At present, there are 3 routes for these e-jeepneys: two in the central business district and the Green Route which serves the Poblacion Heritage Zone and City Hall. 63 Part 1 -- Chapter 1: Policy Review illegal settlers, especially those living along creeks and waterways; strict enforcement of ordinances and laws regarding encroachment, dumping of garbage, waste segregation, and other environmental laws; and Pasig River rehabilitation program. Complementary Local Initiatives Strengthen Climate Change and DRRM Mainstreaming 43. Complementary local policies can also provide needed public support for mainstreaming local climate action. The Local Government Code provides LGUs with latitude in the crafting policies and delivering frontline services in their respective jurisdictions. Complementary policies and programs can facilitate promote climate action. 44. Examples of legislation and resolutions that have supported the climate programs in the Province of Albay include: x SP Resolution 2007-24 dated August 8, 2007, Proclaiming climate change adaptation as provincial policy and mandating that all projects, programs, grants of license, and permits should be consistent with adaptation. x SP Appropriation Ordinance 2007-01 dated September 12, 2007, Supplemental Budget, identifies the Albay in Action for Climate Change (A2C2) program as a budgetary item and provides corresponding funding for its activities. x SP Ordinance to strengthen Sec.48. Item 3 Chapter 6 of RA 9003 (Solid Waste Management Law Ban on “open burning�) by providing a local mechanism for its enforcement (i.e., barangay tanods (village guards) to record any violation in a logbook). x SP Ordinance 2007-51 Updating and review of Comprehensive Land Use Plan (CLUP) for disaster risk reduction and climate change adaptation, which reorganized the Provincial Land Use Committee and CLUP Technical Working Group under Provincial Executive Order 2007-07. x SP Resolution No. 094-99 Declaring area within the 6 km. permanent danger zone as a “No Human Activity Area� (Lasco et al. undated). 64 Part 1 -- Chapter 1: Policy Review 45. Examples of city ordinances and resolutions that have supported the climate programs in the Makati city include: x City Ordinance 2003-095, Solid Waste Management Code requiring commercial establishments to use environmentally friendly packaging, requiring segregation of solid waste into biodegradable and non- biodegradable, providing guidelines on proper waste disposal and collection, imposing fines and penalties on violators of the code, and deploying environmental enforcers. Starting in June 2013, Makati will be fully implementing the Implementing Rules and Regulations of Sections 21, 22 and 23 of the Solid Waste Management Code which regulates the use of plastic products by business establishments. x City Ordinance 2004-32, Vehicle Emission Control Code setting emission control standards for vehicles of various types and imposing fines and penalties on violators of the same. x City Ordinance 2006-025, Amending the 2000 Zoning Ordinance providing bonus incentives to property developers that provide facilities and amenities that are of public benefit like green and open spaces and public heritage facilities. x City Resolution 2008-056, Declaring 8:30–9:30 pm as “Earth Hour� and encouraging residents/households and owners/managers of business establishments and buildings in the city to turn off at least one light during the hour every day to help ease global warming. x City Ordinance 2009-023, Regulating the use of groundwater and providing penalties for the violation thereof. 65 Part 2: Chapter 2: Institutional Review Chapter 2: Institutional Review 66 Part 2: Chapter 2: Institutional Review 48. The climate policy reform agenda is supported by changes in the institutional structure for its implementation. Several new institutions – the CCC, the Cabinet Cluster on Climate Change (CCCC), the PSF Board (PSFB) -- have been created or at various stages of mobilization. The Climate Change Act assigns existing Departments/Agencies and the LGUs with the responsibility of planning and implementing climate action. As such, coordination between the new institutions and existing Departments and the LGUs is an important determinant of implementation progress. This chapter begins with a brief discussion of the new institutional structure focusing primarily on the new institutions. This is followed by a review of the functioning of the new institutional structure along different stages of the policy cycle. The stages include – setting strategic directions, planning and prioritizing, financing, executing climate action, monitoring and reporting performance, as well as knowledge generation and management. The New Institutional Structure Adds Value and is Being Operationalized 49. The climate change institutional structure has evolved from a variety of fragmented Departments and Agencies to include centralized national institutions aimed at coordinating horizontally and vertically on the policy and financing aspects of the climate change agenda. The key institutions and linkages in the new structure are shown in Figure 14, illustrated separately from a policy and a finance perspective (left and right sides of figure respectively). Within each perspective, the policy making/oversight function is shown in the top half and the implementation/execution function is in the bottom half. The CCC is at the center of the new arrangement coordinating across the oversight agencies and with the implementing agencies on all aspects of climate policies. As an independent autonomous agency, chaired by the Philippine President, it is designed to have some leverage with respect to other Departments and Agencies.17 The CCC serves as secretariat to the Cabinet Cluster on Climate Change (CCCC) that was created to strengthen delivery of results on KRA-5. On the finance side, the PSFB is designed to play a central role in mobilizing resources with the CCC playing the role of a champion. The CCC supports DBM in its efforts to improve utilization and effectiveness of climate resources at the national level and assists the LGUs in their efforts to better integrate climate objectives into their programs. 17 The Climate Change Act replaced the Presidential Task Force on Climate Change, an ad-hoc body, with the creation of a permanent agency, the CCC. 67 Part 2: Chapter 2: Institutional Review Figure 14: Institutional Structure on Climate Change 50. Implementing the thematic priorities of the NCCAP through sector focused Departments requires the CCC to deliver on policy coordination and convergence planning. Achieving thematically focused NCCAP objectives requires Departments and Agencies to plan and work together. The CCC is responsible for harmonizing and coordinating Department policies and PAPs to ensure that the NCCAP goals are met. While the successful formulation and adoption of the NFSCC and the NCCAP following extensive multi-stakeholder consultation including Departments, the LGUs and civil society testifies to the coordination abilities of the CCC, it does not diminish the complexities of implementation coordination. Effectively utilizing the tools and processes that are already in place (e.g. the Program Budget Approach, existing convergence programs, and mobilizing cabinet sub-clusters around NCCAP priority) and building upon them is the first step in improved coordination. 51. The CCC’s key challenges in streamlining NCCAP implementation are operationalizing the many tasks that it has joint responsibilities for and prioritizing among all of its responsibilities. The responsibilities assigned by the Climate Change Act, Strategies and Plans to various institutions, organized around four functional streams— formulating policies and processes, raising awareness and implementation, monitoring and evaluation, and knowledge generation and management — are summarized in Figure 15. It does not fully reflect the added responsibilities of supporting 68 Part 2: Chapter 2: Institutional Review the PSF Board.18 The CCC is solely responsible for a broad spectrum of responsibilities which includes leading climate policy making, coordinating, monitoring, and evaluating climate change programs.19 In addition, the CCC is jointly responsible for many other tasks including coordination on sector policy which implies a need to consult and reach an agreement with the Departments and Agencies, before the tasks can be carried out. Failure to reach an agreement and the lack of full accountability for these tasks can also mean that these tasks do not get completed. The NCCAP does not provide CCC with any guidance on prioritizing among its numerous responsibilities. Figure 15: Institutional Responsibilities by Functional Stream Designated by the Climate Change Act 52. Implementation of the Ecotown approach, as a policy learning laboratory also represents a critical challenge for a centralized agency without regional/local networks. NCCAP implementation at the local level is packaged around Ecotown, which aims to build ecologically stable and economically resilient communities around climate 18 The PSF Law assigns the CCC with the responsibility of providing various secretariat services such as, determining project selection criteria and reviewing project proposals for consideration by the PSF board. The specific details are being finalized as part of the IRR for the PSF law. 19 Its responsibilities include formulating the official Philippine positions on climate change and leading the Philippine panel of negotiators at the United Nations Framework Convention on Climate Change (UNFCCC). At Durban, South Africa, the Commission assisted in fleshing out details on the Green Climate Fund. 69 Part 2: Chapter 2: Institutional Review threatened biodiversity. It is being piloted by the CCC in twelve LGUs across the country. The President has ordered the scaling up of the Ecotown project across various regions increasing the responsibilities based on preliminary results and demand. Successful implementation typically requires bringing multiple LGUs on board. As a new and innovative program, it attempts to blend sustainable development, natural resource management and climate action through the development of sustainable financing mechanisms based on the payment for ecosystem services and supplemented conditional cash transfers for poverty alleviation. The pilots are expected to provide the evidence base to support modalities for formulating implementing climate programs at the local level. Implementing the pilots covering diverse parts of the country has been challenging for the CCC, as it does not have a supporting regional/local network. Effective partnerships with Departments with strong vertical structures that reach down to local levels can help alleviate some of these challenges while at the same time freeing up staff resources to engage on the policy and coordination functions of these programs 53. The CCC’s policy coordination function can be further enhanced through consolidation and delegation of selected tasks to other agencies, the activation of the technical panel of experts and through the addition of staff commensurate with the significant expansion in its roles as PSFB secretariat. The CCC staff is dispersed across the spectrum of functions, with only a few staff assigned to strategic policy- making and coordination roles. This has begun to change as some tasks have been consolidated and delegated to other agencies (e.g. all vulnerability and mapping have been consolidated in vulnerability assessment at the National Mapping & Resource Information Authority (NAMRIA), a unit of the DENR). The activation and increased mobilization of the national panel of technical experts provides a second mechanism for increasing the CCC’s effectiveness in its policy coordination function. While the panel could provide quality advice on the CCC’s numerous tasks including their prioritization, it has only been used occasionally. Finally, the significant expansion of CCC’s responsibilities as Secretariat of the PSF Board will require a commensurate increase staff without which the CCC’s ability to accomplish its other goals would be adversely affected. 54. On the finance side, the People’s Survival Fund (PSF) Board is designed to guide coordination and mobilization of resources. The PSF Board was created with responsibilities to promulgate policies, provide strategic guidance to the CCC on the management and use of the PSF, and to provide final approval for projects to be funded. The CCC is to constitute an interim secretariat in the climate change office of the CCC to support the PSF Board, providing the CCC a strong role in developing the operations manual for the PSF Board. The CCC supports the Department of Budget and Management (DBM) in its efforts to improve utilization and effectiveness of climate resources at the national level, and assists LGUs in their efforts to better integrate climate objectives into their programs. 55. The Climate Finance Group (CFG) remains an informal ad-hoc group to support climate financing needs. The CFG was conceived during a discussion between the DOF, the DBM, the National Economic Development Authority (NEDA), and the CCC for mobilizing financial resources to respond to technical and human capacity needs 70 Part 2: Chapter 2: Institutional Review for sustaining efforts to reduce and/or mitigate the impacts of climate variability and change. The legal basis for its creation was not pursued, and CFG remains an ad-hoc informal group. 56. At the local level, LGUs are the frontline Agencies in formulating, planning, and implementing climate action. The Philippine Congress passed the Local Government Code (LGC), a key decentralization measure, in 1991, transferring responsibility for delivering many of the basic services and resources to LGUs in the form of an Internal Revenue Allotment. LGUs are responsible for many of the basic services affected by climate change. Municipalities are generally responsible for the delivery of frontline basic services such as primary health care, construction, and maintenance of public elementary schools. The LGC mandates that LGUs develop Comprehensive Development Plans (CDPs) and Comprehensive Land Use Plans (CLUPs), which correspond to the PDP and the NFPP at the national level. When the CLUP is enacted into a zoning ordinance, it becomes a statutory plan. As such, it is a powerful instrument that the LGUs use to align land allocations between competing and often conflicting uses, including climate adaptation. The Climate Change Act requires LGUs to develop Local Climate Change Action Plans, which can be integrated into the CLUP, CDP, Local Disaster Reduction Management Plan, Annual Investment Plan, Annual Operation Plan, and Physical Framework Plan. The national government is required to provide technical and financial assistance to LGUs in formulating and implementing their local action plans.20 The NEDA and the Department of the Interior and Local Government (DILG) have been providing direct assistance to LGUs in this regard, with the DILG spearheading efforts to streamline planning processes in the LGUs’ planning processes, and to integrate climate change into the CDPs and the CLUPs (in lieu of developing a stand-alone climate/disaster plan). The implementing rules and regulations create an LGU coordination unit within the Climate Change Office of the CCC, and encourage LGUs to create their climate change focal units. 57. At the local level, the CCC has initiated a number of partnerships with relevant agencies primarily focused on CCA/DRR with varying degrees of success. The CCC has taken initial steps to coordinate with: x The NDRRMC in assisting LGUs to prepare local CCA/DRRM plans. x The NEDA/RCDS in mainstreaming CCA/DRR in the Provincial Physical Framework Plans. Additional steps are essential to deliver results on the ground at the local level as discussed in the next section. x The Housing and Land Use Regulatory Board (HLURB) to incorporate CCA in the CLUP guidelines for LGUs. 20 “It shall be the responsibility of the national government to extend technical and financial assistance to LGUs for the accomplishment of their Local Climate Change Action Plans.� (Climate Change Act 2009, Section 14). 71 Part 2: Chapter 2: Institutional Review x The DENR/EMB in including CCA/DRR in the criteria for screening/prioritizing investment projects through the existing Environmental Impact Assessment (EIA) system. 58. The Cabinet Cluster on Climate Change created to foster greater cooperation on climate change, has not been fully effective in doing so due to limited decision making opportunities and fragmented support. Following the adoption of the President’s Social Contract, the Cabinet Cluster on Climate Change on Adaptation and Mitigation (CCCC) was created in 2011 to foster greater cooperation at the highest levels of government with the objective of delivering results on KRA-5. The CCCC meets monthly to consider agenda items introduced by its members, which have been dictated by the concerns raised by individual Departments rather than by any long-term program.21 The ability of the CCCC to take decisions has often been hampered by the non-attendance of many principals. Most attendees at the cluster meetings, except the Chair and the head of the Secretariat, are Department Undersecretaries, Assistant Secretaries, or Bureau Directors with no decision-making power.22 Notable exceptions are the decisions by the CCCC to define the climate change Program Approach around the 18 major river basins and the initiative for desilting four islets/sandbars in the middle of the Cagayan de Oro River. 59. The CCC coordinates the policy discourse amongst the cabinet cluster in its capacity as secretariat of the CCCC. However, competing demands on the CCC staff has sometimes limited their ability to provide needed support to the CCCC. The DENR Climate Change Office has backstopped the CCCC leadership, both in technical and administrative terms in these instances. The dual support services have led to a duplication of secretariat services in the Cabinet Cluster at times. 60. The NCCAP has not gained much traction among the CCCC Department members due to lack of guidance on how to incorporate it into their own action plans. Members of the Cabinet Cluster are focused on delivering results on their respective Departmental strategies. Their performance is measured and monitored against their MFOs using the OPIF indicators which have been mapped to the KRAs. As such, Department members are held accountable for delivering on KRA-5 results. With the introduction of the KRAs in 2011, the CCCC asked the member Departments to identify their climate activities in their work programs for the 2011-2016 period. This was a one- off exercise that was carried out with limited guidance on the appropriate criteria to be used. In subsequent years, Departments have been asked by DBM to report on their activities supporting the different KRAs including that on KRA-5. The guidelines for these have varied over the years, and have not identified how they relate to the activities and outputs identified in the NCCAP. As a result, Departments have had limited incentives to reorient their annual work plans to support the NCCAP. Recent efforts by CCC to define Screening Guidelines for identifying PAPs that support the NCCAP and 21 The topics have ranged from green accounting and carbon market trading to urban greening and ecological footprints. 22 It is chaired by the DENR Secretary, includes as members cabinet or cabinet-ranked secretaries representing the housing, science and technology, local government, public works, social development, agriculture, agrarian reform, energy, and defense departments. 72 Part 2: Chapter 2: Institutional Review DBM to integrate this into the budget process can begin to make Departments more responsive to NCCAP. A full reorientation will require additional steps that increase the accountability of Departments through upfront reviews of proposed work programs and regular monitoring against established indicators and targets. The CCC could mobilize its Advisory Board, which includes all of the CCCC members, to begin such a transformation. Identification of the Institutional Entry Points to Mainstreaming of the Climate Agenda is Key 61. Mainstreaming climate change requires an identification of the entry points in the implementation cycle. Implementation of the climate agenda occurs through both the policy making stages as well as its execution. The existing implementation cycle identifying key processes at national, regional and subnational levels at each of the stages of the cycle are summarized in (Figure 16). This section discusses the roles and responsibilities of different institutions during each of the stages of the cycle, at the national and subnational levels. The discussion focuses on the key entry points, how climate is being integrated and the key barriers that remain for successful implementation. Figure 16: Entry Points for Mainstreaming Climate Change in the Implementation Cycle 73 Part 2: Chapter 2: Institutional Review Climate Institutions Need to Set Joint and Consistent Strategic Directions An Important Role of the National Oversight Agencies 62. Standardized institutional processes do not yet exist for aligning the NCCAP outcomes and activities to national and sector plans. As discussed in Part II Chapter 1, NCCAP outcomes and activities are partially aligned with national plans (PDP, PIP, KRA-5). The NEDA is responsible for developing and updating the PDP, which were formulated with reference to the KRAs. It does not have any additional guidance on climate beyond what is in the PDP. Since, standard processes have not been established for updating the PDP, the CCC needs to agree with the NEDA on the best mechanisms for updating the PDP in the interim as well as to establish a permanent mechanism for future updates to take place. 63. Mainstreaming climate considerations entails updating the NEDA project and program evaluation criteria. The entry points for such an engagement are summarized in Table 7. The updates are not currently in place. The CCC needs to advocate for these changes with the NEDA and to establish a process for updating the project evaluation criteria. The most important of these is the ICC which reviews long- lived infrastructure projects. It is an established body with decision-making functions (subject to veto by the President). The CCC is headed by the President, and thus has considerable leverage for making such a change. The first step along this path is to initiate discussions between the NEDA and the CCC at the higher levels. Table 7: Potential entry points for CCC engagement with the NEDA Board NEDA Board Functions Potential Entry Points for Committees CCC Infrastructure Coordinate the activities of agencies involved in Update infrastructure design Committee infrastructure development. standards that include climate (InfraCom) Ensure policies, programs, and projects considerations. concerning infrastructure development are Update ICC review criteria to consistent with national development objectives include climate considerations and priorities. Regional Serve as clearing house for key regional Monitor inter-regional Development development policy/program proposals, which initiatives to see if they are Committee impact two or more regions. climate responsive. (RDCom) Formulate and monitor implementation of the Ensure NCCAP/MTPDP links framework for regional development of the at regional level. MTPDP. Use Adaptation Prioritization Direct the formulation and review guidelines Tool (regional level). for the regional allocation of agency budgetary resources. National Land Use Formulate a national physical framework plan Harmonize NCCAP/NLUC, Committee and other inter-sectoral policies and programs NCCAP/DRR links. (NLUC) that guide the rational utilization and management of the country's land and other physical resources, and prepare subnational physical framework plans. Promote the integration of land use and physical planning policies, plans, and programs, 74 Part 2: Chapter 2: Institutional Review including disaster risk management into national socioeconomic plans and programs. Social Coordinate matters concerning social Ensure NCCAP enforcement, Development development, including education, manpower, as SDC covers a number of Committee (SDC) health and nutrition, population and family NCCAP priority areas for planning, housing, human settlements, and the climate proofing. delivery of other social services. Coordinate the activities of government Explore NCCAP/poverty links agencies concerned with social development. through PSIA. Coordinate appropriate policies, programs, and projects consistent with the national development objectives. Effective Translation at Subnational Institutional Level is also Key 64. Integrating CCA into the local development (CDPs, MDPs, CLUPs) process requires cooperative efforts between the CCC, the DILG and the NEDA, and needs to be formalized. The LGUs have limited technical and fiscal capacity and many have pressing local needs. As a consequence, they accord lower priority to climate change. Technical and financial support in integrating adaptation can make a real difference for them. The CCC is a centralized agency with limited local presence and does not have the capacity to engage with all of the LGUs. The NEDA is a well-established agency set up to coordinate the development agenda across the departments. It has also piloted and implemented the MDG-F1656 project on the integration of CCA/DRR in the local context. The HLURB, which oversees the generation and execution of the CLUPs, has implemented a “clustering approach� to assist contiguous LGUs to come up with their local land use plans. The collaboration between the Commission and HLURB is necessary in the formulation of supplemental guidelines on mainstreaming climate and disaster risks in the comprehensive land use plans (CLUP). The DILG has a network of offices and ready-made support structure which it uses to provide LGUs with various services. Delivering support to the LGU will require cooperative efforts between the four agencies. Coordination on Climate Resilience between CCC and NDRRMC 65. Coordination between the CCC and the NDRRMC on CCA/DRR has been challenging and could be more effective through improved clarity on responsibilities. Coordination between the CCC and the NDRRMC at the local level in accordance with the MOU is at an early stage (see Part II Chapter 1). This reflects the differences between the history and practices of the institutions. The NDRRMC has an established organizational network that cascades from the national level down to the barangay level. It can in principle claim budgetary drawdowns from the NDRRM Fund and ask Departments to utilize their Quick Response Fund (QRF). It has been in existence for many years (through its predecessor), and has had a head start in relief and recovery undertakings. By contrast, the CCC has barely begun operations and only has a national level presence, even if its mandate encompasses all sectors and intergovernmental levels. Its budget is also limited in comparison with the NDRRMC funding. The history and practices of the two institutions are are complementary to each other which can be used to better delineate responsibility and accountability. Thus, 75 Part 2: Chapter 2: Institutional Review operationally, national planning coordination fits well with the CCC while the comparative edge on local implementation is currently clearly lodged in the NDRRMC. Coordination on Low Carbon/Green Growth 66. Lack of clarity and fragmentation in the leadership for green growth has limited its scope. As discussed in Part II Chapter 1, the Philippines does not have a national green growth strategy. Different Departments have taken the lead in defining Green Growth based on their own interests and complementarities with their existing programs at different times in the past. The lack of agreed definition and priorities for low carbon/green growth has led to a fragmented approach based on varied scenarios and assumptions covering a few sectors of the economy. While the NEDA has taken the lead at times, the CCC is currently engaged in several Low Carbon Studies. Other sector agencies that have defined Green Growth programs include the DOE and the Department of Transportation and Communication (DOTC). Assigning responsibility to lead the formulation of a national Green Growth Strategy to a single Department/Agency is essential for improving coordination on green growth. Planning and Prioritizing is the Next Big Challenge Important Planning and Prioritization Work is Needed at Sector and Local Levels 67. Departments employ different approaches to develop their climate portfolio, in accordance with their organizational needs. A diversity of Departmental needs and capacities may require flexible approaches and an integration of systems in a phased manner, for example: x Strategic planning approach. The DA developed a comprehensive climate change action plan through a multistep strategic planning process. This clearly defined platform gives CCA an organizational mandate. It is being mainstreamed across all DA units (through an Office of the Secretary Administrative Order). The resulting climate change actions have an organizational mandate and are well distributed across the DA. x Retrospective rationalization. The DENR does not have a comprehensive climate change action plan. Its climate change initiatives are a cumulative pattern of actions that are only rationalized retrospectively. Its practices are based on past mitigation experiences at the program level rather than the entire Department level, resulting in an uneven distribution of resources (FMB, EMB, MGB). Its preferred course of action is evolutionary, incremental, system conserving, and based on the ongoing flow of available information. 68. More systematic use of climate focused tools can strengthen the planning and prioritization processes in the Departments and the LGUs. The planning and prioritization process in Departments already use a verity of tools to support decision making. Climate focused tools can either integrated into existing systems or the complementing them can lead to improved prioritization and decisions. Tools already in 76 Part 2: Chapter 2: Institutional Review use include climate vulnerability and disaster risk assessments, climate impact assessment, and climate screening. Additional tools may include Adaptation Prioritization and the Poverty and Social Impact Assessments. Vulnerability Assessment (VA) 69. VAs are used for different purposes in different geographic scales. VA is the first step in understanding the impacts of climate change. At the national level, VA is necessary for incorporating climatic risks in setting development priorities and monitoring progress. At the sector level, VAs provides details and targets for key strategies in agriculture, environment, infrastructure, technological development, health, and education. At the local level, VAs can identify coping strategies within the context of comprehensive development and land use plans. 70. Existing tools are perceived to be technical and difficult to operationalize. Tools for VAs are being developed sporadically. Much of the current practice has focused on disaster related risks. Most of these tools -- including guidelines issued by IPCC, established instruments like DREAM, and climate-proofing instruments, like those developed by the University of the Philippines or those being built up by local scientists for the DA’s climate field schools -- have been found to be too technical for use by Agency technical personnel. 71. While standardization is not essential, a common VA framework would be useful in prioritizing climate action. There are no universally accepted approaches to vulnerability assessment because of differences in time and space scales at which the climate change processes operate, variations in thresholds, tipping points and hotspots, and diversity in local knowledge and adaptability. Nevertheless, at stake is policy coherence and effective use of financial resources, avoidance of duplication, and unnecessary competition among VA tools. These could be achieved only if a common framework is used. Such a framework might include a comprehensive set of physical indicators of vulnerability, identification of target vulnerable groups that are a priority for adaptation policy, a “mapping� of the pathways of present vulnerability, and how these might change in the future (using PAGASA scenarios). Climate Screening Tool (CST) 72. Climate screening tool, which is being developed by the DENR, provides a means to upfront assess PAPs and to identify design changes needed to account for climate change risks and opportunities.23 Its use can improve the ability of project managers to understand and integrate climate change factors into project planning, particularly at the early stages of project preparation. The screening process assesses the vulnerability of a project concept to climate change. In particular, it provides information on climate-related risks on specific sectors or project activities. The tool's application should guide project manager decision making about the need to incorporate climate change related factors in the design of their projects, the appropriate level of effort to be 23 This is different than the Climate Screening Guidelines piloted by CCC and adopted by DBM in 2014 budget call. 77 Part 2: Chapter 2: Institutional Review used to address these concerns and tools available for supporting the choice among adaptation options. Implementation is not yet well applied. Poverty and Social Impact Assessment (PSIA) 73. The PSIA supports NCCAP’s goal of a gender responsive climate change program. The NCCAP envisions building up the adaptive capacity of women and men in their communities guided by the principles that adaptation measures should be based on equity and in accordance with differentiated responsibility and accords special attention for the protection of the poor, women, children and other vulnerable groups. Poverty and Social Impact Assessment Tools have been used in a wide range of areas the assess the impacts of policies and programs on targeted segments of the population including the poor, women, and socially vulnerable groups. The PSIA tool can provide a starting point for reviewing the impacts of implementing the NCCAP and related specific activities on different segments of the population and can be used to better target programs as well as build grassroots support for the programs. Adaptation Prioritization Tool 74. An Adaptation Prioritization Tool is a simple multi criteria/cost-benefit tool that enables prioritizing projects in the planning process. Climate action provide development co-benefits, including poverty reduction impacts, job creation, gender empowerment, reduced environmental degradation etc. Assessing and reporting on these would provide evidence for broader development outcomes, and help support decision making and the demand for climate action leading to some more informed strategic prioritization in the budget planning process as well as help guide performance evaluation. Climate Impact Assessment (CIA) 75. A comprehensive framework for mainstreaming climate change into existing EIA processes is already in place. EMB has developed a framework for integrating climate risks into the existing EIA system to assess and design for potential climate vulnerabilities (See Table 8). Climate change is linked to the essential standard EIA process stages i.e. screening, scoping, impact analysis, mitigation, commissioning and monitoring. The mainstreaming effort does not imply a separate and added layer of data and work requirements over and above the existing procedure, but is merely designed to enhance and improve analyses of adaptive capabilities of the project visǦaǦvis the environment in which it will function. Climate-proofing the EIA at the procedural level will complement the move to revise ICC analyses and review criteria at the policy level. 78 Part 2: Chapter 2: Institutional Review Table 8: EIA and Climate Change 76. Current EIA practices present technical, procedural and structural deficiencies that limit their effectiveness. The technical shortcomings of the EIA are expressed in the poor quality of many EIA reports, the inaccuracy of impact predictions, the limited utility of mitigation and management measures, and the relevance of reports for decision-making which often falls short of internationally accepted standards. Its effectiveness is further limited by complicated by procedures, including inconsistencies in process administration and guidance, lack of EIA professionals steeped in CCA/DRR; localization of the EIA process, ECC issuance, and monitoring of compliance. Time delays (the EIA is commenced too late in the project cycle) and the costs of applying EIA also remain a serious concern for project proponents. Affected communities are more concerned with the lack of quality control of EIA studies or enforcement of mitigation measures. EIA also requires a coherent policy-planning framework and systematic follow up procedures. Often neither is well established. This requires overturning the practice of traditionally starting EIA late in the project cycle; 79 Part 2: Chapter 2: Institutional Review Institutional Structure of Climate Financing Needs to Complement Planning and Prioritization Governance of Climate Financing 77. Climate finance governance issues center around the way new climate funds, including the PSF, are managed. The CCC is expected to be influential in determining project design and selection under the PSF. It manages the PSF resources under the guidance of the PSF Board, reviews funding proposals for approval by the PSF Board, develops prioritization criteria, formulates transparency mechanisms regarding funding deliberations and decisions, and develops guidelines to accredit potential grant recipients.24 Potential conflicts between its multiple roles need to be addressed in the IRR that is under development to ensure transparency and accountability. The importance of the IRR cannot be overemphasized. It formalizes processes, inputs and engagements. It is important that the rules be explicit that they are for financing climate change adaptation and climate disaster risk preparation and not recovery and response operations. Additionally, it will be useful to ensure greater clarity on the ability of the LGUs to combine and leverage these funds with other sources of financing and how that might vary based on vulnerability or fiscal capacity. 78. Transparency in the mobilization and use of climate resources is essential for increasing the efficiency of resource utilization and for attracting additional new resources. A key part of such transparency is clear and agreed upon definitions and criteria for what constitutes climate expenditures with public access to information. Accountability and transparency can also be increased through the use the national panel of technical experts in the project appraisal, monitoring and evaluation process. 79. The fragmentation of resources often results in piecemeal approaches with higher transaction costs and lower effectiveness. Climate activities have been funded from the GAA (mainly, see Part III Chapter 1), from external sources, or through internal resource mobilization by the LGUs often on a project-specific basis. The creation of the PSF and the ability of the CCC to directly mobilize specific pot of resources provide new additional, innovative and dedicated sources of financing. However, the further fragmentation of resources could result in piecemeal approaches if systems are not put in place to plan, coordinate and assess across financing sources. Another possible risk is “double dipping�, in which local project proponents successfully avail of different, uncoordinated funding windows for the same programs. At the local level, the DILG is instrumental in providing climate change–compatible grants and derives most of its resources from the GAA. Improved access at low transaction costs is key in making the new funds more effective. Some of the policy barriers that need to be addressed by the 24 The CCC supports the PSF Board by developing criteria for prioritizing the allocation of funds and reviewing and evaluating projects and recommending their approval by the board by the board. The criteria to prioritize use of the fund are based on the following: (a) level of risk and vulnerability to climate change; (b) participation of affected communities in the design of the project; (c) poverty reduction potential; (d) cost effectiveness and attainability; (e) identification of potential co-benefits extending beyond LGU territory; (f) maximization of multi-sector or cross- sector benefits; (g) responsiveness to gender-differentiated vulnerabilities; and (h) availability of LCCAP.� 80 Part 2: Chapter 2: Institutional Review PSF Board include the complexity of climate scenarios, transaction costs to comply with bureaucratic requirements, and widespread support for high carbon alternatives. Then there are limitations of the LGU support capacity, as well as the limited capacity of local implementers. 80. There is an important gap in both mobilizing additional resources and in devising appropriate financing instruments to reduce fragmentation. The CFG was conceived during a discussion between the DOF, the DBM, the National Economic Development Authority (NEDA), and the CCC for mobilizing financial resources to respond to technical and human capacity needs for sustaining efforts to reduce and/or mitigate the impacts of climate variability and change. The legal basis for its creation was not pursued, and CFG remains an ad-hoc group. While the recent creation of the PSF Board, also chaired by the DOF, may dissuade government authorities from formalizing CFG, the need still exists for CFG or other like entity to coordinate and manage national and sectoral climate finance which could fill the institutional gap in funding coordination in key areas not covered by the PSF Board including at the sectoral level. 81. The Philippine Development Forum (PDF) provides, in principle, a venue for Development Partners to share information, developments, and priorities but yet, have not led to significant strategic harmonization and the development of a programmatic response to the Government’s climate reform agenda. The Climate Change Working Group of the PDF meets quarterly and could be made more effective with more structured engagements under a programmatic platform which would also facilitate CCA and DRRM coordination. Incentivizing Private Sector Engagement is a Requirement to be Transformative at Scale. 82. Lessons learned from pilot can be used to scale up the limited availability of such instruments. Risk financing initiatives and experience with Market Based Instruments are limited. The MDGF includes index-based weather insurance to address climatic risks to agriculture (that will provide pay outs based on specific weather parameters [e.g., heavy rainfall, significant increase in temperature]). It is sponsored by the International Labor Organization (ILO) and administered by the Philippines Crop Insurance Corporation (PCIC) and different Government Agencies and LGUs. It is being pilot tested in Agusandel Norte. Crop-specific insurance is offered by Mindanao-based private insurance company MicroEnsure. Another insurance type, like the “Natural Catastrophe Insurance,� that offers protection to loan portfolios of cooperatives is implemented by Cooperative Life and Mutual Benefit Societies. Oxfam and the Manila- based Institute for Climate and Sustainable Cities have likewise joined efforts to design suitable weather index insurance. High overhead costs and lack of sufficient investment funds to cover operations have been the key weaknesses of existing insurance programs. The inability to make prompt payments on claims after calamities also is a drawback. According to a Philippine Institute for Development Studies research, the agricultural insurance program, has had modest impact, especially for rice and corn. Lessons learned from pilots need to be evaluated while a comprehensive risk financing strategy should be finalized. 81 Part 2: Chapter 2: Institutional Review The New Institutional Set Up Needs to Now Focus on Execution Organizational Flexibility is Essential for Effective Sector Level Execution 83. At the Departmental level, organizational models vary across Departments based on internal needs with no universally appropriate model. The internal organizational structure of Departments could be an important determinant of how effective it is in pursuing or prioritizing climate objectives. However, the diversity of internal needs and current practices across Departments suggests the need for flexibility in choosing organizational model structures. 84. The DA and the DENR are the only Departments that have internal climate units. The DA created the Climate Change Program Office (CCPO) within its Planning & Policy Department in 2011 to serve the entire department. As a centralized unit, it has struggled to coordinate the execution of the Department’s climate initiatives. In contrast, the DENR created a Climate Change Office (CCO) in 2009 to service a joint DENR-GIZ Climate change adaptation program, which has also provided support, on an as needed basis, to the remainder of the department. It is staffed by personnel from the different DENR offices and contractual employees, thus has a greater outreach than stand-alone units. An important accomplishment of the unit was the development of the Climate Change Adaptation framework, which has contributed to reorienting the DENR’s focus from mitigation to adaptation. 85. The DPWH does not have a separate climate unit but is expected to create a cross- departmental cooperation scheme. Its bureaus—standards, design, construction, and maintenance—represent stages in infrastructure development. The arrangements at other Departments include a geographically distributed network of academic collaborators (DOST), the assimilation of climate functions into a related unit (NEDA Agriculture office)25, and the combination of discrete units (PCCARD from the fusion of PCAMRD and PCCARD). Vertical Coordination is Essential for Effective Execution at the Local Level 86. The LGUs have limited technical capacity but are confronted with uncoordinated national government plans requiring strong national support systems to make them effective in executing climate programs. The LGUs are diverse in their technical capacity and have varied organizational structures on CCA/DRRM. While some LGUs (e.g. Province of Albay and Makati city) have separate climate units, in many cases, responsibilities for CCA/DRRM are spread out across the various departments within the LGU with no single unit coordinating an overall response. The inter-sectoral nature of climate change makes a strong national support systems essential for effective execution of climate change programs at the local level Departments and Agencies use several different modes of service delivery, each with its own strengths and weaknesses, to support the LGUs. These include Co-management and the Ecotown approaches (where central departments work jointly with the LGUs), mobilization of 25 The NEDA Agriculture office staff developed expertise on climate change as part of the MDGF project and have been providing support to other units of NEDA. 82 Part 2: Chapter 2: Institutional Review regional offices to deliver more informed integrated Departmental services, and service convergence across Departments to provide integrated inter-Departmental services at the local level. No single model is best in all situations but some are more appropriate than others in specific circumstances. 87. While co-management of an activity by an LGU and Department takes advantage of natural opportunities, the number of such opportunities is limited. Co-management of an activity by an LGU and National Department/Agency is the simplest form of vertical coordination. Departments and Agencies carry out programs in specific regions/local areas based on their respective mandates. The LGUs are often better able to implement and manage specific local tasks due to their proximity and local knowledge. Co-management entails a partnership between them to execute a program more effectively through shared responsibilities and the injection of Departmental resources to the LGUs. A good example of an enabling fiat is the existing joint memorandum/circular between the DILG and the DENR (JMC 1998-01 and JMC 2003- 01) on co-management of forest lands within LGU territorial jurisdictions. Because they take advantage of natural opportunities that arise in carrying out existing programs, the number of such opportunities is limited. 88. Ecotown has been implemented by the CCC on a pilot basis to foster horizontal coordination at the local level around critical biodiversity areas. The Ecotown Framework shows the importance of evidence--based planning and decision-- making. Each Ecotown has a planning unit composed of a group of municipalities located within and in the boundaries of critical biodiversity areas that are highly vulnerable to climate change risks due to their geography, geographic location, and poverty situation, providing opportunities for local government units to plan together, beyond their political boundaries. It has been piloted in Surigao del Norte (Municipalities of Del Carmen, San Benito, San Isidro and Pilar in Siargao Island); San Vicente, Palawan; Eastern Samar (Municipalities of Borongan, Can--ǦAvid, Llorente, Guian); Ivana, Batanes; and Marikina Watershed, and the Government has decided to expand the program to twelve sites, based on preliminary results and interest in the program. In addition, the Province of Bohol and Romblon will be provided with technical assistance on climate-proofing their land use and development plans. The CCC has been supporting the use of vulnerability and risk assessment and natural resource accounting to help local chief executives in their decision making processes related to their poverty reduction and ecosystem protection plans. The CCC has been actively engaged on the implementation of the Ecotown Framework, partnering with the local government units and regional offices and linking them with government agencies, private sector, civil society and academe. It aims to use the lessons learned as the basis for future policy recommendations, framework and measures to be implemented on the ground. 89. Regional offices can be a bridging mechanism that coordinates intra- Departmental services to LGUs, but lack of functional integration hampers service delivery. Most Departments have a “hub-and-spokes� management setup—the DA, the 83 Part 2: Chapter 2: Institutional Review DENR, the DOST, and the DPWH have field offices in all regions.26 DENR’s local presence can be felt even at the provincial and municipal levels. These vertical structures bode well for cascading national climate policies and programs to local jurisdictions, and at the same time for obtaining local feedbacks on climate change initiatives. To support the devolution of basic service delivery to the LGUs, many national Departments have redirected LGU support functions to their regional offices. Most retained the existing regional setup with independent counterpart units in the region. While the proximity to the LGUs has improved the responsiveness of the units, service delivery requiring intradepartmental coordination has often slowed down due to the lack of leadership at the regional level. Convergence in service delivery could be achieved through the subordination of the functional units in the region to the Regional Director of the Department. The DA’s regional field units provide a successful example of functional integration at the regional level. 90. Service Delivery to the LGUs can be strengthened through convergence, where multiple government units use the same medium or network facility at the LGU level to improve vertical intergovernmental coordination. Convergence initiatives make possible the complementation of different agencies to ensure institutional efficiency. The CCC has initiated several partnerships to increase convergence on CCA: 1. The DILG and the HLURB to incorporate CCA in the CLUP guidelines for LGUs. 2 The NDRRMC in assisting LGUs to prepare local CCA/DRR plans. 3. The NEDA/RCDS in mainstreaming CCA/DRR in Provincial Physical Framework Plans. 91. Climate Field Schools (CFS) and Integrated Ecosystem Management (DENR) are two other examples of successful convergence initiatives. The CFS is a non-formal education method that utilizes a learning-by-doing approach that has effectively changed perceptions and practices for reducing climate-related risks among farmers. Scientific information is translated by agricultural extension workers into a language that farmers can understand, enabling them to apply the learning acquired in the field.27 The Integrated Ecosystem Management (IEM), on the other hand, serves as the base for 26 The DOE is probably the only Department with very few regional offices, but then it is focused more on climate change mitigation. 27 The Climate Field Schools (CFS), riding on the backbone of the DA’s Farmer Field Schools, have proved to be an effective convergence mechanism which is mediated through the DA’s regional field units and the LGUs: BSWM, as lead agency, takes care of soil and water management needs of farmers; BAR assists in the choice of crops; the National Irrigation Administration (NIA) supplies the Agromet stations; PhilRice assists farmers to experiment with hybrid rice varieties; the Agriculture Training Institute (ATI) provides the curriculum and training of farmers; the LGU agricultural officers provide direct services; and PAGASA assists with climate forecasting. As illustrated in pilot sites, the joint efforts of the DA units have yielded quantifiable benefits to farmers (e.g., higher yields, raised incomes). The implementation experience confirms that the most important risk management strategies are strong supervision, structured learning, and the flexibility to adjust actions to fit experience. 84 Part 2: Chapter 2: Institutional Review management and protection of the ecosystem for the sustained delivery of ecological goods and services with the participation of the LGUs and communities.28 Effective Monitoring and Reporting is the Other Required Next Step 92. Lack of agreed indicators and established M&E processes has limited the Monitoring and reporting of progress in NCCAP implementation. The NCCAP provides a detailed results matrix including outcomes, outputs, activities and outputs indicators. However, systems have not been put in place to adapt existing systems to monitor based on these indicators. The CCC requires NGAs to submit through the CCCC their existing climate change related activities and programs. Since the NCCAP does not have agreed upon indicators to measure against climate results, there is no mechanism to aggregate these submissions across departments to report on a consolidated progress report. While LGUs are required to submit their LCCAPs to the CCC, in practice systems are not in place to receive, monitor or review them. As a result, the CCC accomplishments report provides a narrative highlighting significant achievements on climate change during the prior year but does not report against the NCCAP results matrix. Specifically, it lacks basic information essential for assessing effectiveness of the overall program including the resources that are directed to the various NCCAP objectives and outputs and the results that they have delivered. 93. At the Department level, climate monitoring and reporting are sporadic and technical support is essential to build the capacity to develop appropriate indicators. M&E systems in Departments are sporadic and have primarily been mitigation-based. The DOE has long been monitoring the supply and utilization of biofuels. Along with the DENR, it is involved in GHG accounting and monitoring. There is little evidence of any Departments setting desired adaptation outcomes or any processes for evaluating the effectiveness of their plans, policies, and programs. The adoption of OPIF has shifted the focus of M&E systems away from inputs or activities to major final outputs delivered to clients.29 None of the Departments have climate related MFOs. However, the DA’s OPIF logical framework includes increasing climate resilience as one of its goals. While this supports the integration of climate change activities in DA’s programs, the absence of an MFO on climate limits its effectiveness. The DENR and DPWH are reviewing their OPIF logical frameworks. The lack capacity to develop appropriate quantifiable indicators has limited the extent to which climate change is incorporated in OPIF. The creation of 28 The Integrated Ecosystem Management (IEM), on the other hand, serves as the base for management and protection of the ecosystem for the sustained delivery of ecological goods and services with the participation of LGUs and communities. Watershed Management Councils (WMCs) established in all IEM sites oversee and institutionalize approaches for watershed management and rehabilitation. The program assists LGUs in the identification and development of habitat restoration and rehabilitation sub-projects funded under the IEM. In line with promoting the participation of various LGUs in the management and protection of the watershed areas, the WMCs approve LGU sub-projects for funding. The sub-projects strengthen involvement of LGUs and communities in the process of rehabilitating the watershed areas. 29 Through OPIF, DBM seeks to focus on three key outcomes: fiscal discipline —living within the means or resources available to the government; allocation efficiency—spending money on the right priorities; and operational efficiency—obtaining the best value for the money or resources available. 85 Part 2: Chapter 2: Institutional Review climate units in DENR and the DA may provide some capacity to develop M&E indicators. 94. The Results-Based Performance Management System (RBPMS) provides a new powerful opportunity to incorporate climate change indicators to monitor progress on the climate change agenda. At the national level, NEDA’s results, evaluation and monitoring matrix (REMM), is a comprehensive M&E system that includes some climate change indicators.30 Several initiatives (PhilCCAP Phase 1, DENR/PAWB CCA Project Screening Checklist) are underway to develop additional indicators and frameworks needed to monitor progress at the sector and project levels.31 95. Towards strengthening the overall M&E system, the President created an inter- agency task force, AO25, to harmonize, unify, streamline and simplify all existing monitoring and reporting requirements in government agencies relative to the National Leadership’s Agenda, the PDP 2011-2016, agency mandates, commitments and targets. The TF has been working since last year to establish a unified and integrated Results- Based Performance Management System (RBPMS) across all departments and agencies within the Executive Branch. RBPMS utilizes the Five KRAs set by the President, the Organizational Performance Indicators Framework (OPIF) of the DBM and the PDP- Results Matrix (RM) of the NEDA as underlying frameworks. The RBPMS will incorporate a common set performance scorecard, and at the same time, create an accurate, accessible, and up-to-date government-wide, sector, and organizational performance information system. One component of the RBPMS, the Performance based incentive system became operational in 2012. In addition, for FY 2012, each agency was required to incorporate a Transparency Seal that categorizes major programs along the five KRAs program/projects and provides the implementation status of program/project evaluation and/or assessment reports. The RBPMS is to be put in place, in FY2013 at which point Departments are expected to submit an improved set of performance targets and indicators. 96. At the local level, the CBMP and the DILG’s Local Government Performance Management System (LGPMS) are starting points for developing a systematic M&E system. An assessment of the horizontal M&E systems (e.g., community-based monitoring system [CBMS] and or LGPMS) and vertical M&E 30 It consists of an indicator framework for evaluating results as well as objective trees that illustrate the mean– ends relationship. An inclusive and iterative process to enhance and update the REMM annually is led by NEDA. Adaptation-related, time-bound, quantitative targets linked to development planning are specified in the results matrix, which will be utilized by NEDA as its monitoring mechanism. PDP’s “critical indicators�—for those sectors that will be closely monitored—include improving sector resilience in three critical climate change areas, including agriculture, infrastructure, and water supply. 31 The PhilCCAP Phase 1 project helps agencies rationalize allocation of resources to critical climate change projects. Sector agencies are preparing methods for VAs and risk assessments that will set the context for adaptation and provide a baseline for M&E. The DENR/PAWB CCA Project Screening Checklist will come up with a mixed methodology of outcomes, processes, and performance indicators based on: a) already existing indicators for development (e.g., PDP 2011-2016 critical indicators), natural resources management (e.g., Environment and Natural Resources Framework Plan of the DENR), disaster risk management, etc. appropriate for assessing adaptation in the Philippine context; and b) new indicators that may be necessary to be produced from new studies, surveys, or research to fulfill the NCCAP M&E requirements. 86 Part 2: Chapter 2: Institutional Review systems linking local level M&Es to national levels (e.g., MDG monitoring done by the NEDA) will likewise be done. The CBMS, launched in 2002, serves as a tool for local governance and complements the national poverty monitoring system. The CBMS likewise facilitates the implementation of targeted poverty reduction programs with its household and individual level data as well as the M&E of these poverty reduction programs. The LGPMS is a self-assessment development management tool for provinces, cities, and municipalities that provides information on the capacities and limitations of LGUs in the delivery of essential public services. Its major output, called the Annual State of Local Governance Report (SLGR), provides strategic information concerning LGU performance in governance along the areas of administration, social services, economic development, environmental management, and valuing the fundamentals of governance. Both CBMS (Figure 17) and LGPMS could be used both for service convergence and for vertical coordination. Meanwhile, the DILG has developed DRR/CCA protocols to issue an ISO-type “seal of disaster preparedness� for high- performing LGUs. Figure 17: CBMS Information Flow Civil Society: Important for Checking Reforms are on Track but also to Increase Pressure to Continue Reform 97. NGOs have provided critical support for the climate reform agenda and maintaining the momentum for the reform will require their continued support. NGOs were active in the formulation of both the NFSCC and the NCCAP, strengthening 87 Part 2: Chapter 2: Institutional Review the mandate for the climate agenda. They have participated in climate change steering committees or task forces as members, institutionalizing consensus-based climate policy- making. Continued avenues for NGO participation include the PSF Board, the CCC Advisory Body, and the PDF. As a pressure group, they monitor UNFCCC negotiations and the implementation of the Climate Change Act (especially in climate-proofing the government budget and development plans).32 Civil society and NGO participation increase transparency and builds trust in communities. They have improved public awareness and helped garner the necessary popular support for climate change and for the current reform program. They were instrumental in the push for creating the PSF and their continued participation in the policy making process will not only help ensure policies and programs remain responsiveness to community needs, but also strengthen the decision making process. Building Capacity across Government Essential to Mobilize for Action 98. The capacity to address climate issues is inadequate, but is higher in Departments where climate change is likely to affect many policy objectives directly; Capacity building is sporadic and not yet systematically translating into tangible action on the ground. The climate reform agenda is implemented by Departments and the LGUs with support from oversight agencies and requires knowledgeable and skilled staff in all aspects of climate policy, financing and institutions throughout Government. There is a significant lack in staffing capacity, in particular at the LGU level, yet also at the Department level because of limited expertise and knowledge on climate change. Skilled middle-level technicians are scarce and are easily pirated, leading to high staff turnover. Some of the key areas for capacity development include: Department planning units to translate the broad vision of the NCCAP into meaningful sector policy reforms and the PAPs and on the use of prioritization tools; Departments and the LGUs on program design, development of indicators and targets, and monitoring and reporting systems; the LGUs in incorporating vulnerability assessments into the CDPs and the CLUPs and AIPs; the LGUs and communities on the identification and preparation of the PAPs for funding through the BUB, PSF, LDRRMF 32 AksyonKlima is a key NGO partner in initiating dialogues between policy makers, scientists and civil society on key policy issues and in mobilizing scientific and academic, civil society and community involvement in the development of government policies on climate change and positions in international negotiations. AksyonKlimaPilipinas is a network of 40 Philippine-based NGOs involved in climate change advocacies. Although member organizations carry dissimilar perspectives and separate agendas, and compete for influence over government and over other levers of power, they do occupy the same policy space and share a relatively common understanding of the climate change problem. The network has quickly grown in size, strength and involvement in the local, national and international climate action. Its many activities include climate change advocacies, monitoring UNFCCC negotiations and the implementation of the Climate Change Act (especially in climate- proofing the government budget and development plans). Its most recent accomplishment is the production of a guidebook on how to integrate DRR and CCA at various levels. Social Watch Philippines, on the other hand, has organized the Alternative Budget Initiative, a consortium of 60 NGOs, which has been calling for more funding for climate change adaptation and mitigation measures since 2006 and the greening of MTPDP. Of late, it has been engaged in “tagging� potential climate change funds in the 2012 budget, in order to assist government in appropriately allocating money for both climate change adaptation and disaster risk reduction. 88 Part 2: Chapter 2: Institutional Review and the various other sources of funding, and the CCC on managing and monitoring the PSF portfolio. 99. Rationalization plans can be an entry point for introducing and strengthening Departmental capacities on climate; but has been slow and ineffective. The ongoing rationalization plans, which aim to reorganize and refocus Departments and Agencies on their core mission and revitalize their organizational structures, could be an entry point for strengthening institutional capacity. It was setup by EO 366 to reorganize Departments and Agencies based on their major final outputs (MFOs). As of end of 2012, Eighty 85 out of 216 Departments/Agencies and other executive offices (OEOs) have approved rationalization plans, and another 92 are awaiting approval from DBM. None of the approved programs included climate change consideration, partly reflecting the lack of climate-related MFOs in most departments. The approval process has been slow in some Departments, reflecting the political economy of structural change. As a result, it has led to limited mobility and has instead created a static workforce that has not been responsive to the capacity needs necessary for supporting the policy reforms. DBM, the rationalization plan manager, is reviewing the overall framework of the plan with a view to reforming and revitalizing it. 100. At the local level, the Local Government Academy under the DILG is the lead agency responsible for assisting LGUs in terms of local capacity building. As far as climate change is concerned, it has relied on University of the Philippines, Los Banos and the Manila Observatory in generating the CCA training program for the LGUs. It may be noted, though, that the Local Government Academy has not considered the NCCAP as a guide for its capacity-building activities; therefore, harmonization along this line seems to be in order. To Complement Capacity Building, a Priority Needs to be on Knowledge Generation and Management 101. Knowledge gaps and lack of a knowledge management system has been a key barrier for scaling up climate action in Departments and LGUs. The limited availability and access of both global knowledge on climate and localized information on best practices is a key barrier for scaling up climate action. The CCC has developed a Philippine Research and Development Agenda on Climate Change based on multi-- stakeholder consultations. The Agenda identifies the gaps and priorities on climate relevant researches that could help in the implementation of the NCCAP. The Agenda is envisioned to serve as the guiding document for the country’s research, science and academic institutions assisting the public, private and non--Ǧgovernment sectors in the quest for formulating solutions to issues and concerns brought about by climate change. Information gaps include participatory and science-based baseline data that are consistent with the PDP leading to discrepancies, uncertainties, and errors in plans. The key challenge at the local level has been the capacity to generate and capture useful actionable knowledge. Data collection methodologies are not synchronized to support planning and budgeting of key programs and projects. Mechanisms that allow consistent updating and harmonization of raw data are not in place to share such data among the relevant stakeholders, project developers, and key policymakers. Comprehensive and 89 Part 2: Chapter 2: Institutional Review accessible information management systems necessary to ensure coordinated planning and implementation across the many climate-relevant sectors are not available. The DENR together with specialized agencies are responsible for the setting up information collection systems that can be utilized by other agencies in support for their own activities. In addition, the Philippines does not regularly update its long-term sustainable development plans based on Agenda 21 nor does it have commonly agreed upon long- term sustainable development plans. 102. Insufficient information is a persistent issue across Departments and climate change stakeholders and it is essential to scale up provision of information services by supporting agencies providing these services. Generation of knowledge and its management are key issues in supporting the NCCAP implementation. Examples of information that are already available and in use include hazard maps (e.g., the Philippine Institute for Volcanology and Seismology [PHIVOLCS], MGB) used in screening processes and climate change projections from PAGASA. The main agencies that provide such support include PAGASA, NAMARIA, DOST, PCAARRD, PCIERD and the Kilma Climate Center. In addition, data portal such as SEARCA provide valuable and highly relevant information33. Some of the agencies providing knowledge and knowledge management services include the following: x The PAGASA plays a prominent support role in CCA and mitigation. Its mission is to provide weather, flood, climate, and astronomical products and services to promote the people’s safety and well-being, and contribute to national development.34 Its functions include: x The NAMRIA is mandated to provide the public with mapmaking services and to act as the central mapping agency, depository, and distribution facility for natural resources data in the form of maps, charts, texts, and statistics. The Agency produces geographically variable, location-specific, and spatially referenced information that are critical in CCA and DRR. Climate agencies led by the CCC have recently reached a consensus to lodge in NAMRIA all 33 Southeast Asian Regional Center for Graduate Study and Research in Agriculture’s (SEARCA’s) online portal provides quick and easy access to knowledge resources on climate change adaptation in agriculture and natural resources in Southeast Asia, as well as the Los Banos–based outfit’s online community, which can hold online forum discussions on science-based knowledge solutions and good practices in CCA. The Los Banos–based outfit’s online portal has information and media materials, dynamic exchange of science-based knowledge solutions and good practices, opportunities for graduate scholarship, research and development, short-term training, and policy advocacy, and a contacts database of climate change community members. The knowledge solutions are a good basis for policymakers, researchers, development workers, media, and farming/fishing communities for engaging in policy formulation or in discussing and determining policy-related interventions needed on climate change adaptation. (SEARCA) 34 Its functions include: Maintaining a nationwide network pertaining to observation and forecasting of weather and other climatological conditions affecting national safety, welfare, and economy; Undertaking activities relative to observation, collection, assessment ,and processing of atmospheric and allied data for the benefit of agriculture, commerce, and industry; Conduct studies of geophysical and astronomical phenomena essential to the safety and welfare of the people; Undertaking research on the structure, development, and motion of typhoons and formulate measures for their moderation; Maintaining effective links with scientific organizations here and abroad, and promoting an exchange of scientific information and cooperation among personnel engaged in atmospheric, geophysical, and astronomical studies. The agency also conducts relevant training and orientation to LGUs. 90 Part 2: Chapter 2: Institutional Review climate-related mapping effort, a key challenge to meet inasmuch as mapping is currently fragmented among a number of agencies, including the Bureau of Soil & Water Management (BSWM), the Mines and Geo-science Bureau (MGB), and other DENR units. x The DOST is the lead government Agency for climate knowledge, research, technology, and innovation. Three of the five sector councils of the DOST have formal statements concerning research and development (R&D) and technology transfer related to climate change. Since the 1990s, it has been involved in numerous projects that supported cleaner production activities in the industry. x The PCCAARD: PCAARRD had developed a comprehensive research framework on climate change for the agriculture and forestry sectors in 2009.35 The Forest Products Research and Development Institute (FPRDI) conducts research on proper identification, properties, uses, processing, and protection of forest products. The FPRDI is working on CCA through R&D on the utilization of wastes for development of construction materials. There are plans to develop further biomass to energy systems. x The Philippine Council for Industry and Energy Research and Development (PCIERD) plays a key role in the implementation of the Biofuels Law as it is responsible for the development and implementation of R&D programs on sustainable improvement of biofuels production and utilization technology.36 The country’s first vehicle research and testing laboratory, located at the University of the Philippines, Diliman, can determine the viability of different alternative fuels as well as fuel saving and emission control devices. x The Klima Climate Center: There are several research institutions (such as the Klima Climate Center) conducting research on climate change–related topics. Many of them focus on resource management issues and are also involved in awareness-raising activities. They actively disseminate their research results to NGAs and the public. x The Manila Observatory has developed a tool for assisting the disaster risk and vulnerability decision support system for the Municipality of Baclayonon the island of Bohol. The tool provides a qualitative rating system, which considers present and probable future conditions regarding Baclayon’s development. The tool helps the local Government evaluate development 35 Through vulnerability and impact assessments and the development of strategies for adaptation and mitigation, the Science and Technology Framework in Agriculture, Forestry and Natural Resources aims to sustain the productivity and competitiveness of agriculture and forestry of the Philippines. 36 It developed the Biofuels R&D program to support the implementation of the law and involved activities such as biofuels technology research, assessment, validation and documentation, alternative feedstock identification and development, feedstock raw material and biofuels analysis, performance testing of biofuels from different feedstock, techno-economic viability assessment of biofuels production plants, and technology promotion and transfer. 91 Part 2: Chapter 2: Institutional Review plans to optimize gains, ensure sustainability, and generate options for developing adaptation strategies. x The Southeast Asian Regional Center for Graduate Study and Research in Agriculture’s (SEARCA’s) online portal provides quick and easy access to knowledge resources on climate change adaptation in agriculture and natural resources in Southeast Asia, as well as the Los Banos–based outfit’s online community, which can hold online forum discussions on science-based knowledge solutions and good practices in CCA. The Los Banos–based outfit’s online portal has information and media materials, dynamic exchange of science-based knowledge solutions and good practices, opportunities for graduate scholarship, research and development, short-term training, and policy advocacy, and a contacts database of climate change community members. The knowledge solutions are a good basis for policymakers, researchers, development workers, media, and farming/fishing communities for engaging in policy formulation or in discussing and determining policy- related interventions needed on climate change adaptation. (SEARCA). 92 Part III: Public Expenditure and Financial Management Review 93 Part 3: Select Key Messages1 Climate Change Appropriations x Climate budget appropriations have increased reflecting a rise in leadership to address climate change through the country budget, heightened concerns, and a need to take action. x Budget planning and prioritizing for climate PAPs is difficult as multiple methods for identifying and classifying climate activities is used across the Government (KRA-5, Department work programs, and the National Climate Change Action Plan), which results in a three-fold variation in climate appropriation. x The overall increase in climate appropriations mainly results from increases on a few major PAPs. x While about three-fourths of climate budget appropriations are directed towards adaptation, appropriations for PAPs supporting GHG mitigation have increased twice as fast as appropriations for PAPs supporting adaptation in the past six years. Budget Implementation, Execution, and Sources of Funding and Financing Gap x While budget implementation for climate PAPs is mixed, with Department average execution rates varying from 64 percent to 104 percent, there has been improvement between 2008 and 2011. x Climate change activities are primarily funded from domestic sources including Special Purpose Funds, so the budget formulation, execution, transparency and accountability are key determinants of the effectiveness of climate PAPs in delivering climate results. x Though policy reforms have aimed to relocate funding from disaster response and recovery to disaster prevention and preparedness, most funding is still channeled through the Calamity Fund, exacerbated by an increased need for disaster recovery funding in recent years. x Donor funding play an important role in piloting initiatives and supporting investments to assist the Government in developing climate actions at the central and local levels for infrastructure, energy, and environment focusing on capacity building, policy advocacy, awareness-raising and technology adoption. x While a few major climate PAPs have been fully funded compared to projected needs identified in the work program, financing gaps exists for some major PAPs managed by the DOE, as well as for small PAPs managed by the DA, the DENR and the DPWH, which are underfunded or not funded at all. Local Climate Appropriations x Two factors appear to have contributed significantly to the relative success in funding and implementing CC-adaptation and mitigation programs and projects of the case studies of Makati and Albay; namely mainstreaming of the climate change agenda in development and land-use planning and the presence of supportive local policies. x Poorer LGUs have lower fiscal capacity and are often also the most vulnerable to climate risk. 1 For a full set of key messages, see Annex 1 94 x Chapter 1 examines the strategic allocation of resources at the national level in line with the country’s climate change agenda including assessments of climate appropriations by classification, by Departments and attached Agencies, by type of expenditures (mitigation versus adaptation), and by NCCAP priority area. It also includes assessments of the budget execution, sources of financing and financing gap. x Chapter 2 takes a closer look at the climate finance issues at the subnational focusing on two case studies -- Province of Albay and Makati City. This is complemented by an assessment of the fiscal capacity of LGUs and the sources of financing. x Chapter 3 focuses on the selected public finance management issues across the budget cycle, including the budget planning and process, procedures, budget transparency and execution, and M&E. 95 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Chapter 1: Financing Climate Change PAPs at the National Level 96 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 1. Chapter 1 examines the strategic allocation of resources at the national level in line with the country’s climate change agenda. It includes assessments of climate appropriations by classification, by Departments and attached Agencies, by type of expenditures (mitigation versus adaptation), and by the NCCAP priority area. It also includes assessments of the budget execution, sources of financing and financing gap. Climate Appropriations Levels Vary Threefold by Classification 2. Climate appropriation levels in the budget have to be aggregated from the appropriations for specific PAPs that are tagged as contributing to the climate agenda. Like many other countries, the Philippines does not appropriate an aggregate level of resources to support its climate change agenda. Instead, Department and Agency budgets include funding for specific Programs, Activities and Projects (PAPs) that address climate change. The total budget to support the climate agenda is determined by reviewing the PAPs included in the budget against classification initiatives. Four different initiatives are used in the CPEIR, with the NCCAP providing the primary reference. 1. PAPs identified by the DBM under KRA-5 in 2011 through 2013. 2. PAPs identified in the Departments’ work programs 2011-2016, with the reconstruction of the PAP appropriations for 2008-2010 and 2012-2013. 3. PAPs attributed to the NCCAP. 4. PAPs based on the climate finance classification system developed by several multilateral development banks (MDBs), which allows them to track adaptation and mitigation interventions. 3. The different classification initiatives classify the PAPs differently, including some major PAPs, creating difficulties in ascertaining the level of climate appropriations. Table 9 summarizes how several major PAPs have been tagged under the four classification initiatives.1 While the PAPs under the NCCAP were tagged with reference to the NCCAP outcomes, and activities as outlined later in this Chapter, the inclusion of specific PAPs in the Departments’ work programs were determined by the respective Departments involved. The KRA-5 classifications were finalized by the DBM based on inputs from the Departments. Both the Department’s work program and the KRA-5, in general, have a narrower focus than the NCCAP and may miss climate PAPs. For instance, the KRA-5 does not include flood control protection, a major PAP that clearly falls under the NCCP water sufficiency priority area. Similarly, energy efficiency PAPs funded through Special Purpose Funds clearly fall under the NCCAP sustainable energy priority area but is excluded from both KRA-5 and Departments’ work programs as the latter are limited to General Appropriations Act funded PAPs. The MDB classification system, which provides an independent method of reviewing the various tagging initiatives, indicates a strong correspondence with the NCCAP. Differences do 1 A comprehensive list of PAPs reviewed in the CPEIR and their classification is provided in Part VI, Technical Annex 1. 97 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level remain, for example in the classification of traffic decongestion projects, suggesting additional opportunities for climate action. Table 9: Comparison Selected Major PAPs by Different Tracking Initiatives Selected Major PAPs KRA-51 Departments’ NCCAP3 Classification Work Programs2 System of MDBs4 Flood control (DPWH) Excluded Included Included Included Quick Response Fund Included Excluded Excluded Excluded Calamity Fund Excluded Excluded Excluded Excluded Disaster-related rehabilitation (DPWH) Excluded Included Excluded Excluded PAPs financed by Special Accounts (DOE) Excluded Excluded Included Included Traffic decongestion Excluded Excluded Excluded Included 1 Based on selections by the DBM and sector Departments/Agencies. 2 Based on selections by sector Departments/Agencies. 3 Based on selections by the CCC and sector Departments/Agencies. 4 Based on selections by MDBs. (see Part V Annex 4). 4. Climate Appropriations levels vary up to threefold by classification initiative but climate appropriations trend upward under all initiatives in the past six years. Figure 18 shows the evolution of climate appropriations based on the four different classification initiatives from 2008 to 2013. Climate appropriations have increased under all initiatives in real terms. However, differences in approach, timing, and purpose of the different initiative result in significant variations in the level of appropriations across the initiatives. Climate appropriations under both the NCCAP and the Departments’ work programs start out a little over Php 11 billion pesos in 2008 but have grown at different rates over the past five years with appropriations under the NCCAP nearly 50 percent larger than under the Departments’ work programs. Climate appropriations are lowest under KRA-5, as PAP classification is largely based on the primary mandate of the Department. Climate appropriations under the MDB classification are consistently higher than under the NCCAP suggesting the existence of some missed opportunities. 98 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 18: Climate Appropriations by Classification, 2008–2013 (in Php billions) 60 50 MDBs Climate Finance 40 Classification System NCCAP 30 Department Work Programs 20 KRA-5 10 0 2008 2009 2010 2011 2012 2013 Notes: Only includes climate appropriations for Departments/ Agencies within the scope of the CPEIR (Part V, Annex 4). The 2013 appropriations are based on the 2013 NEP as 2013 GAA was not yet available at the time of writing of this report. KRA-5: Based on KRA-5 figures prepared in the context of the 2013 NEP preparation; 2011 = on obligation basis, 2012 = GAA 2012, 2013 = NEP 2013. Department’s work program : 2011–2012 = GAA appropriations; 2013 = 2013 NEP. NCCAP and MDB: DA: 2009–2011 = GAA 2009–2011; 2012 = NEP 2012; 2013 = not available NCCAP: Main Reference for Climate Appropriations in CPEIR 5. Climate appropriations supporting the NCCAP have increased by two and a half times in real terms over the past five years. PAPs tagged under NCCAP constitute the main reference for the CPEIR analysis discussed in this chapter. As discussed in more detail in Part V Annex 4, the NCCAP tagging is based on a review of the PAPs listed in KRA-5, the Departments’ work programs and the budget against NCCAP outcomes, outputs and activities. Figure 19 shows the evolution of climate appropriations based on the NCCAP from 2008 to 2013. They have increased from Php 12 billion in 2008 to Php 35 billion in 2012 corresponding to 0.9 and 1.9 percent of the national budget respectively. The aggregate appropriations for 2013 remains flat at the 2012 levels, primarily because the 2013 appropriations for the DA were not available for analysis. In fact, climate appropriations have been increasing at an annual average real rate of 26 percent between 2008 and 2012 far outpacing the average annual increase in the national budget of 6 percent over the same period. In terms of GDP, these allocations have been around 0.3 percent of GDP, which falls below the Stern Review recommendations that countries should expend at least 2 percent of GFP to implement climate action. This upward trend is mainly driven by increased investments in flood control protection, the National Greening Program, and the promotion and development of organic agriculture. 99 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 19: Evolution of Climate Appropriations Based on the NCCAP Classification, 2008–2013 (on appropriation basis, in Php billions) 35 2.5 30 2 25 20 1.5 15 1 10 0.5 5 0 0 2008 Budget 2009 Budget 2010 Budget 2011 Budget 2012 Budget 2013 Proposed Adaptation Mitigation Adaptation and Mitigation As a % of the National Budget Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. Notes: For all Departments excluding DA: 2008-2012 = GAA 2008-2012; 2013 = NEP2013 For DA: 2009–2011 = GAA 2009–2011; 2012 = NEP 2012 6. While the appropriation levels based on the NCCAP provides the best estimate for the level of climate appropriations, covering most of the climate appropriations in the budget, they are an underestimate of the actual level of support in the budget for the following reasons: 2 1. The in depth quantitative assessment of the CPEIR primarily focused on four out of the seven NCCAP priorities, while the remaining three priority areas were assessed qualitatively. 2. A number of Departments and Agencies supporting the NCCAP implementation are not part of the CPEIR.3 3. Several NCCAP activities under “operations� (e.g., related to capacity building or research, or climate proofing the infrastructure) are merged with several other activities in the same budget line. 4. Several NCCAP activities are funded in the budget under “general admin services (GAS)� and “support to operations,� which is outside the CPEIR scope. 2 See Part V Annex 4 for scope of CPEIR 100 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level KRA-5: PAPs Tagged Under KRA-5 have Been Subject to Several Revisions 7. Climate appropriations tracked under KRA-5 in 2011–2013 account only for a very small share of the total sum of KRA activities (KRA 1-5). Climate appropriations tagged under KRA-5 increased from Php 13 billion to Php 24 billion, an increase of 72 percent over two years (see Part VI: Technical Annex 2 Table 1).4 Despite this significant increase, KRA-5 accounts for on average only 1 percent of the total sum of KRAs between 2011 and 2013; most of the budget appropriations (on average, 55 percent) have been attributed to the KRA-2 “poverty reduction and empowerment of the poor and vulnerable,� followed by KRA-3, “rapid and inclusive sustained economic growth� (on average, 24 percent) over the same period (see Figure 20). Figure 20: Budget Appropriations by KRA, 2011–2013 (as a share in %) 100% 80% 60% 40% 20% 0% 2011 Actual 2012 Budget 2013 Proposed KRA-1 Anti corruption transparent KRA-2 Poverty reduction KRA-3 Economic growth KRA-4 Justice and Peace KRA-5 Environment and climate change Source: DBM 8. Climate appropriations tagged under KRA-5 have focused largely on PAPs managed by the DENR. As shown in Figure 21, the main PAPs tagged under KRA-5 in 2013 are under DENR, representing 66 percent of total KRA-5, followed by the DA (7 percent), and the Department of Social Welfare and Development (DSWD) (6 percent). 5 Taking a closer look at the Departments that are part of the CPEIR in KRA-5 and that manage climate appropriations, these Departments account for a large share, almost 70 percent, of total KRA-5. Climate appropriations under KRA-5 for these Departments increased by 66 percent from Php 9 billion to Php 16 billion between 2011 and 2013. This can be mainly attributed to increased budgetary allocations to DENR (notably, the NGP and the National Mapping & Resource Information Authority [NAMRIA]) between 4 KRA-5 assessment is based on KRA-5 figures prepared in the context of the 2013 NEP preparation. 5 See Part V Annex 4, Figure 2 for detailed list of Departments tagged under KRA-5. 101 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 2012 and 2013. The increase in DENR’s climate appropriations was offset by small cutbacks in appropriations for the DOE and contractions in real terms by DPWH over the same period. Figure 21: Budget Appropriations Attributed to KRA-5 by Department and Agency, 2013 (as a share in %) 5% 6% 6% 5% DENR 5% DA DOST DND DSWD 7% MMDA Others 66% Source: DBM Note: “Others� includes DAR, DOE, DPWH, DOH, DILG, NEDA, CCC, PRRC, Budgetary Support to Government Corporations and PSEPF 9. The DBM introduced a PAP tagging system for providing the approximate distribution of resources across the KRAs in 2011 with significant revisions to the methodology since its introduction. In the first tagging exercise by KRAs (2012 budget preparation), all PAPs were subjected to be tagged by KRA 1-5 or not to be tagged if it was unclear when one KRA supports multiple KRAs. Lacking clear guidance, some Agencies tagged some PAPs into multiple KRAs. Rather than split such PAPs into multiple KRAs, the DBM decided to attribute each PAP to a single KRA based on the primary mandate of the Agency. Since the tagging was done manually, only major PAPs were tagged for reporting purposes. There was no database system set up since the budget data was prepared and consolidated to provide approximate results quickly. 10. In the context of the 2013 NEP preparation, the Departments and Agencies were tasked to limit tagging their PAPs into one KRA, in accordance with their main mandate. This policy led to a decrease in allocation for KRA-5. In the case of DPWH for example, the flood control project was tagged as KRA-3 since it was deemed intended for economic/infrastructures. In another example, the DA added more activities (such as the Quick Response Fund) in the budget of several bureaus (e.g., the Agriculture Training Institute [ATI], the Bureau of Agriculture & Fisheries Product Standards [BAFPS]). At the same time, DBM agreed to no longer track special purpose funds (such as the Calamity Fund) and revised the list of Departments and Agencies included in 102 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level KRA-5—compared to the initial tagging in 2011, NEDA, DSWD, and the Department of Defense (DND) were added, and the Department of Finance (DOF) and the Priority Development Assistance Fund (PDAF) were removed. 11. While the revisions of KRA-5 for 2013 presents a more comprehensive picture, discussions with the DBM and the Departments suggest that there is still insufficient clarity and inadequate guidelines on the selection of activities, Departments, and Agencies. Some of the outstanding issues include: x First, PAPs from different Departments and Agencies were tagged for different years. This is mainly because Departments/Agencies, not in the CCCC, were given the option to tag their PAPs as KRA-5 (e.g., the Department of Health [DOH], the NEDA, the DSWD, or the Land Bank of the Philippines). The presence of Agencies in one year but not another may also be due the funding of specific PAPs in selected years only. x Second, similar activities were tagged differently by different Departments (e.g., the DA tagged the Quick Response Fund in 2012, but the DPWH did not tag the Disaster Rehabilitation Project). x Third, important adaptation measures, such as flood control, that address the effects of climate change are not captured under KRA-5 anymore due to the decision to tag PAPs based on the Departments mandates. Departments’ Work programs: Departments Reviewed in CPEIR Account for most of the Climate Appropriations Tagged in the Departments’ work programs 12. Departments’ work programs 2011-2016 reflect their efforts to identify available resources and estimated funding needs for climate PAPs. The members of the CCCC were requested for the first time in September 2011 to prepare a work program for 2011 through 2016, including funded and planned climate-related PAPs (see Part V, Annex 4). The exercise was conducted with guidance from the CCCC and the CCC and within a limited timeframe. Departments were requested to identify PAPs and not subcomponents/specific activities. While the initial plans were to update the work programs annually, such updates have not been conducted. Analysis of the initial work programs shows that: x The Departments that are within the scope of the CPEIR account for the bulk of the funding reported in the work programs (on average, 90 percent) over the period 2011 through 2016, with the main funding proposals being derived from the DPWH and the DA. x The inclusion of total appropriations for a PAP even though only some activities embodied in the PAP address climate change overstates the reported climate appropriations. For example, the DA incorporated all its major programs, such as the National Rice Program, the National Corn Program, and the Bureau of Agricultural Research even when only a few activities within these programs address climate change. This is not as large a 103 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level problem for other Departments that tracked entire programs (e.g., the DOE and the DENR) where most of the embedded activities address climate change. x The Departments’ work programs 2011 through 2016 are not fully aligned with the NCCAP activities because the latter was being drafted as the work programs were prepared. As such, a range of NCCAP activities are not incorporated into the work programs. The Departments’ work programs in turn did not feed into the preparation of the NCCAP. Neither the Department’s work programs nor the NCCAP have been updated since 2011 to their alignment with each other. x The estimated funding needs are significantly higher than the actual appropriations in the Departments within the CPEIR scope. Figure 22 compares appropriations and estimates in the Departments’ work programs for 2011 through 2016 with the corresponding appropriations in the budget for 2008-2013 for the Departments in the CPEIR scope.6 While the appropriations for these Departments have been rising, they provide a fraction of the needs identified in the work programs. Some, but not all of this difference can be explained by the overstatement in the DA’s appropriations. 6 The difference in appropriations in 2011 is mainly due to over-tracking PAPs in the DA’s 2011 through 2016 work program; the appropriations identified based on the Departments’ work programs include the revised budget figures (based on a budget exercise conducted by the DA in March 2012 (see part V Annex 4). 104 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 22: Departments’ work programs 2011-20161 and GAA Appropriations for 2011–2016 Departments covered in CPEIR2 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Budget Budget Budget Budget Budget Proposed Estimate Estimate Estimate (red) (red) Estimate Estimate (blue) (blue) Depts Work programs 2011-2016 (incl. selection of Depts based on CPEIR) Appropriations 2008-2013 based on PAPs in Depts work programs (incl. Depts selected for CPEIR) Source: CCC, DBM, DOST (the Philippine Council for Industry and Energy Research and Development [PCIEERD], Philippine Council for Agriculture, Aquatic and Natural Resources Research (PCAARRD), Philippine Council for Health Research and Development PCHRD], DA. Note: Only includes Departments and Agencies within the scope of the CPEIR 1 2011 = GAA 2011; 2012–2016 = Departments budget proposal. 2 All Departments except DA: 2008–2012 = GAA appropriations; 2013 = 2013 NEP; DA: 2009–2011 = GAA 2009–2011; 2012 = NEP 2012. MDB Climate Finance Methodology Suggests Climate Appropriations are Underestimated 13. Climate appropriations based on the MDBs classification system are the highest among the four tagging initiatives, suggesting a possible underestimation of appropriations. Major PAPs were identified based on the typology list developed by several MDBs for tracking climate finance in their portfolios.7 Using this methodology, the total climate appropriations increased from Php 16 billion in 2008 to Php 50 billion in 2013. Table 10 summarizes the appropriations trends by Department and highlights two specific program in DPWH -- flood control protection and traffic decongestion – that account for two-thirds of the climate appropriations in 2013. 7 Under the MDB classification, PAPs need to satisfy three criteria to be tagged as contributing to climate change adaptation (see part V Annex 4). As such, the Philippines Disaster Risk Management Development Loan with a CAT DDO is tagged as adaptation as it is designed to strengthen the integration between DRRM and CCA. 105 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 10: Climate Appropriations by Department Based on the Climate Finance System Developed by Several MDBs, 2008-2013 (on appropriation basis, in Php millions) Department 2008 2009 2010 2011 2012 2013 DOE 157 226 315 528 776 3,760 DPHW 13,233 13,871 18,177 21,395 26,615 36,941 o/w flood control protection 7,469 8,196 9,352 14,006 13,123 20,117 o/w traffic decongestion 5,763 5,674 8,825 7,389 13,492 16,702 DENR 2,660 4,303 4,054 4,379 5,503 8,944 DA n/a 464 650 2,258 6,600 n/a DOST 438 Total 16,049 18,864 23,195 28,560 39,932 49,646 Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP (excluding the DA). 2 The DA’s 2008 and 2013 budget figures are excluded; 2009–2011 figures based on GAA, 2012 on NEP. Climate expenditures for DA are based on sub-PAP level analysis undertaken by the DA at the time when the 2012 NEP was being reviewed by the Senate and is available for 2009-2012 only. Climate Appropriations by Department rising Faster than Department Budgets 14. Climate appropriations are concentrated in a few Departments, with a few major PAPs accounting for a large share of the appropriations. The DPWH commands the lion’s share of total climate appropriations (52 percent), followed by DENR (32 percent) and DA (9 percent), DOE and DOST (see Table 11, Figure 23). In part, this reflects the Government’s commitment to prioritize investments for flood control protection (DPWH) in the face of periodic flooding events in the recent past and the creation of the National Greening Program to provide multiple benefits including poverty reduction, enhancing food security, environmental stability and biodiversity conservation, and enhancing climate change mitigation and adaptation. Table 11: Climate Appropriations as a Share of Total Departments and Agencies Budget Appropriations 2008-2013, based on NCCAP classification (in %) Department 2008 2009 2010 2011 2012 2013 Average 2008-13 DOST (PAGASA, PCAARD, PCHRD) 3 4 4 4 4 3 4 DOE 1 1 2 2 2 10 3 DA n/a 9 6 13 23 n/a 9 DENR 33 37 35 25 33 31 32 DPWH 63 49 53 55 37 56 52 TOTAL 100 100 100 100 100 100 100 Source: DBM, DA, DOST 106 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 23: Trends of Climate Appropriations by Department/Agency, 2008–2013 (on appropriation basis, in Php billions) 25 20 15 10 5 0 2008 2009 2010 2011 2012 2013 DOE DENR DPWH DA DOST/PAGASA Source: IMF, DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2009 –2011 figures based on GAA, 2012 on NEP. 15. The importance of climate appropriations within the Departments/Agencies total budget appropriations varies significantly by Department reflecting the diverse Department mandates. For instance, climate appropriations account for about 70 percent and 48 percent of the total appropriations for the PAGASA and the DENR respectively (See Table 12). PAGASA’s mandates which include weather and flood forecasting, and tropical cyclone warning, are directly related to adaptation, and hence result in a high climate appropriations share. Similarly, the DENR’s mandate for conservation and management of natural resources include a large range of PAPs in its budgets that provide mitigation and adaptation co-benefits. In contrast, climate appropriations account for less than 10 percent of the total appropriations for the DPWH and DA. DPWH manages one of the largest budgets based on its mandate to plan, construct, and maintain public infrastructure which includes roads, bridges, flood control, and water resources, with flood protection constituting a small part of its total appropriations over 2008 through 2013. The share of climate appropriations for DOE has fluctuated over time as different PAPs have been added or ended. 16. Climate appropriations have grown between 2008 and 2013 in absolute terms across all Departments and Agencies and relative to the total appropriations of the respective Department/Agency (see Figure 24). Climate appropriations have grown faster than the total appropriations for each of the Departments analyzed, and are most pronounced for the DOE and the DA. The growth has occurred in spurts as specific PAPs are added or expanded (see part VI Technical Annex). 107 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 12: National Budget Composition by Department/Agency, 2008–2013 (on appropriation basis, in Php millions) 2008 2009 2010 2011 2012 2013 GRAND TOTAL 1,314,613 1,434,145 1,472,977 1,580,017 1,816,000 2,006,000 o/w Depts. climate 0.9 1.1 1.2 1.6 1.9 1.8 appropriations (in %) General Public Services 238,597 272,960 280,818 300,956 320,331 346,063 o/w PAGASA 737 717 794 1,205 1,284 1,462 PAGASA’s climate 44 85 71 68 71 n/a appropriations (in %) Economic Services 359,098 224,632 214,530 189,961 235,933 298,026 o/w DPWH 137,912 158,795 141,779 122,005 125,742 165,574 DPWH’s climate 5 5 7 12 10 12 appropriations (in %) o/w DA 34,806 40,746 34,825 32,650 53,256 63,727 DA’s climate n/a 4 3 10 16 n/a appropriations (in %) o/w DENR 10,612 13,13 11,884 13,221 17,465 23,629 9 DENR’s climate 37 48 51 48 66 49 appropriations (in %) o/w DOE 824 3,079 988 1,285 8,815 4,347 DOE’s climate 19 7 32 41 9 86 appropriations (in %) Social Services 368,342 411,786 415,840 544,861 613,390 698,770 Other 348,576 346,897 395,048 368,071 443,287 450,088 Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2009–2011 figures based on GAA, 2012 on NEP. 108 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 24: Growth Rates of Department/Agency’s Climate Appropriations and Total Budget Appropriations, 2008–2013 (in %) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% DOE DA DENR PAGASA DPWH Total Departments in CPEIR Climate Change Budget Annual Average Growth Total Budget Annual Average Growth Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2009–2011 figures are based on GAA, 2012 on NEP. Climate Appropriations are Adaptation Focused but Mitigation is Rising Faster 17. Nearly three-fourths of climate appropriations since 2008 have been directed towards adaptation interventions, though the share of appropriations directed towards mitigation has been rising rapidly. The PAPs addressing climate change under the NCCAP classification are divided into the following three categories using criteria similar to those used in the MDB classification system. 1. Adaptation only 2. Mitigation only 3. Adaptation and mitigation 18. The evolution of the share of appropriations directed towards each of these three groups area shown in Figure 25. About 76 percent of climate appropriations in 2008 were directed to PAPs that provided adaptation benefits (excluding PAPs that provided both adaptation and mitigation benefits) while about 11 percent were directed to 109 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level PAPs with mitigation benefits.8 While the appropriations for all three categories have risen in real terms between 2008 and 2013, the rate of growth has not been uniform. Appropriations for PAPs providing mitigation only benefits have risen at an average annual real growth rate of 46 percent nearly three times as fast as compared to the average annual real growth rate of 17 percent for PAPs providing adaptation only benefits. As a result, by 2013, only 65 percent of appropriations were directed to PAPs with adaptation benefits while appropriations for PAPs with mitigation benefits had risen to nearly 29 percent. These results do not include several PAPs financed by Special Purpose Funds that address mitigation, likely underestimating the share of climate expenditures directed towards mitigation.9 Figure 25: Climate Appropriations by PAPs Addressing Adaptation, Mitigation, or Both, 2008–2013 (in %) 100 90 80 70 PAPs contributing to adaptation 60 and mitigation 50 40 PAPs contributing to mitigation (only) 30 20 PAPs contributing to adaptaton 10 (only) 0 2008 2009 2010 2011 2012 2013 Budget Budget Budget Budget Budget Proposed Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD] Adaptation Appropriations Concentrated in DPWH followed by DENR and DA 19. Climate appropriations for adaptation are concentrated on a few PAPs with three Departments accounting for nearly all appropriations. Figure 26 shows the evolution of the share of climate adaptation appropriations by Department. The DPWH accounts for about 72 percent of the total adaptation appropriations followed by the DENR (15 percent) and the DA (12 percent). x All of DPWH’s climate appropriations is directed to providing adaptation benefits almost entirely for flood control protection. Budgetary allocations to flood control protection increased by 75 percent in real terms, from Php 7.5 billion in 2008 to Php 20.2 billion in 2013. 8 13 percent of climate appropriations in 2008 and 6 percent in 2013 were directed to PAPs that provided both adaptation and mitigation benefits. 9 Only releases are available for Special Purpose Funds and not the appropriations. 110 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level x About 35 percent of DENR’s total climate appropriations have direct adaptation co-benefits, which are not specifically tracked and monitored (including activities such as land management, surveys of foreshore reservation, ecosystem research, etc.). Adaptation is not treated separately from development in the CPEIR. Discussions with DENR showed that, in recent years, while climate variability is no systematically accounted in the design of PAPs, it is increasingly being incorporated in the choice of locations for planting or research than before. x About three-quarters of DA’s total climate appropriations is for adaptation, comprised of a major project managed by the Philippine Rice Research Institute (PRRI) and the funding of a range of small-scale projects. x DOST’s small-scale attached Agencies (PAGASA, PCIEERD, PCAARRD, PCHRD) mainly support adaptation activities with most of the budget going for PAGASA’s weather, flood forecasting, and research services. This represents about 5 percent of the total climate appropriations for adaptation. x PAGASA’s funding makes an important contribution to building CCA and disaster risk prevention capacity (notably related to understanding and monitoring hazards [i.e., hazard identification, mapping, and forecasting]). Recent efforts have been made to prioritize more resources to such preventive investments, but the level of funding remains very modest.10 x The DOE recognizes the importance for energy systems to adapt to the impact of variability in temperature and weather.11 Mainstreaming adaptation actions are still at an initial stage (e.g., the National Grid Cooperation began to identify potential sites for power plants). This involves carrying out vulnerability assessments, the integrating climate change projections into planning tools, and designing energy systems to ensure a more climate- resistant infrastructure and adequate location of the facilities. Adaptation activities are difficult to identify in the DOE’s budget (e.g., the recent directive issued by the DOE requiring service providers to revise the design of transmission and power infrastructure) and, in part, are under the responsibility of the National Grid Cooperation and private service providers. Other adaptation-related investments suggested to be also largely funded by the National Grid Cooperation or other private electricity co-operations 10 The recent DRR study that reviewed DRR budget allocations in the national budget concluded that funding for understanding hazards (mainly funded by PAGASA and NAMRIA) account for Php 1 billion in 2010 (less than 5% of total DRR budget) (Understanding Existing Methodologies for Allocating and Tracking National Government Budget for Disaster Risk Reduction (DRR) in the Philippines, 2012). 11 DOE considers programs that address the country’s self-sufficiency needs in energy (promotion of energy efficiency or further exploring renewable energy potentials) an adaptation intervention. The CPEIR methodology considered a program to have adaptation co-benefits if it takes into account climate change aspects in planning and design of the energy supply, demand side management to respond to climate change by reducing energy consumption, or increasing energy efficiency and climate-related regulatory support aimed at improving energy efficiency such as norms, building codes, etc. 111 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level include the strengthening of power transmissions and distribution systems, the laying of underground cables for power distribution systems, or the protection of energy facilities along coastal defense walls. Figure 26: Climate Appropriations for PAPs Supporting Adaptation only by Department, 2008–2013 (in %)1,2 100 90 80 70 DOST 60 50 PAGASA 40 DA 30 DENR 20 10 DPWH 0 2008 Budget 2009 Budget 2010 Budget 2011 Budget 2012 Budget 2013 Proposed Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD] 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded, 2011 figures are based on GAA, 2012 on NEP. Mitigation Appropriations Concentrated in DENR, followed by DA and DOE and rising rapidly 20. Climate appropriations for mitigation are concentrated on a few PAPs in three Departments. Figure 27 shows the evolution of the share of climate mitigation appropriations by Department. The DENR accounts for about 75 percent of the total mitigation appropriations followed by the DOE (15 percent) and the DA (10 percent). The rapid increases in mitigation appropriations in the last five years have resulted from the prioritization of the National Greening Program, the Philippine Energy Efficiency Project and the Tamang Abono Program. The primary intent of most of these PAPs is to provide development benefits with GHG emissions resulting as a co-benefit. x Three-fourths of the appropriations for mitigation are managed by DENR and have increased by 380 percent in real terms, from Php 1 billion in 2008 to almost Php 7 billion in 2013, mostly in favor of the Department’s National Greening Program. x Recent increases in DA’s climate appropriations for two major projects (the PRRI-managed mitigation project and the composting-related Tamang Abono Program) can also explain the increase in activities for mitigation; however, similar to other mitigation activities, their main purpose is to reduce sharp declines in production while also providing mitigation co-benefits. 112 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level x Climate appropriations to the DOE to finance the Philippine energy efficiency project since 2010 and the new e-vehicle project (replacing petrol-fuelled tricycles with electronic models), which is included in the 2013 budget, have led to a spike in the Department’s climate envelope (reaching Php 3.8 billion in 2013 from Php 157 million in 2008). Actual spending over the past years is significantly higher, as many activities are funded out of a special purpose fund.12 Figure 27: Climate Appropriations for PAPs Supporting Mitigation only by Department, 2008–2013 (in %)1,2 100 90 80 70 60 DOST 50 DA 40 DOE 30 20 DENR 10 0 2008 2009 2010 2011 2012 2013 Budget Budget Budget Budget Budget Proposed Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2011 figures based on GAA, 2012 on NEP. PAPs Supporting both Adaptation and Mitigation: win-wins in DENR and DA 21. A small number of PAPs, corresponding to about a tenth of the climate appropriations, increase climate resilience while sequestering carbon providing both adaptation and mitigation benefits. Synergies exist between strengthening the adaptive capacity of forests and soil and tree carbon sequestration in about a fifth of DENR’s climate appropriations in 2012 that finance protect area management or soil conservation and watershed management. Similarly, the DA also manages projects that have adaptation and mitigation co-benefits (e.g., mangrove planting or PRRI’s project to develop mitigation and adaptation technologies and strategies). (See Figure 28). 12 See section below on special purpose fund for more details. 113 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 28: Departments’ Climate Appropriations by PAPs Contributing to Mitigation and Adaptation, 2008–2013 (in %)1,2 100 90 80 70 60 DOST 50 DA 40 DENR 30 20 10 0 2008 2009 2010 2011 2012 2013 Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2011 figures based on GAA, 2012 on NEP. Climate Appropriations by NCCAP Priority Area 22. Climate expenditures and appropriations are concentrated on water sufficiency, followed NCCAP priority areas on ecosystem and environmental stability, and food security. Trends in the composition of climate expenditures and appropriations by NCCAP priority area are shown in Figure 29.13 More than 90 percent of climate expenditures are concentrated on three priority areas (water sufficiency, ecosystem and environmental stability and food security). While activities for some NCCAP priorities themes fall neatly within the purview of a single Department (e.g. sustainable energy), activities for the other themes span across several Departments and Agencies (e.g., water sufficiency).14 However, as only a few small scale PAPs could be attributed across priority areas, appropriations by NCCAP priority areas largely mirrors appropriations in the corresponding Departments. For three NCCAP priority areas (human security, climate-smart industries, and knowledge and capacity development) activities could either not be identified in the budget or are negligible limiting the 13 The assessment does not include programs and projects identified in DOST’s attached Agencies and PAGASA as these cannot not be linked to the NCCAP priority areas. The review of the NCCAP priorities addressing water sufficiency, ecosystem and environmental stability and energy security is based on obligations (“actuals�) for 2008 - 2011, appropriations (“budget�) for 2012 and (“proposed�) NEP for 2013. For DA, only the appropriations are available for the years 2009-2011 and the NEP for 2012. 14 The NCCAP identifies seven thematic priority areas for actions: food security, water sufficiency, ecosystem and environmental stability, human security, climate-smart industries and services, sustainable energy and knowledge, and capacity development. 114 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level analysis for these priority areas to a qualitative assessment. The remainder of this section examines in detail by NCCAP priority area the level and composition of funding by NCCAP output. Figure 29: Composition of Expenditures and Appropriations by NCCAP Priority Area, 2008–2013 (on obligation and appropriation basis, in %) 100 90 80 70 60 50 40 30 20 10 0 2008 Actual 2009 Actual 2010 Actual 2011 Actual 2012 Budget 2013 Proposed Water sufficiency Ecosystem & Environmental Stability Food security Sustainable energy Knowledge and Capacity Development Source: DBM, DA, DOST [PCIEERD, PCAARD, PCHRD]. 1 The 2013 budget figures are based on the NEP. 2 The DA’s 2008 and 2013 budget figures are excluded; 2011 figures based on GAA, 2012 on NEP. Food Security: Spread Thin Across PAPs but Concentrated in Three Agencies 23. Appropriations supporting NCCAP priority on food security increased more than twofold in real terms since 2011, from Php 3.3 billon to Php 8.3 billion in 2012 (see figure 30). The climate PAPs supporting this priority area are managed by the DA and spread out among 10 bureaus and institutions. However, more than half of the appropriations during 2009 to 2012 are concentrated in three agencies, notably the PRRI (25 percent), BSWM (24 percent), and the Regional Field Unit 1 (16 percent). The upward trend coincides with the DA’s efforts in 2011 and 2012 to mainstream climate change aspects in budget planning, including the reinforcement of some ongoing activities (e.g., education and training on climate change resilience or activities related to weather-based insurance) and the development of new climate change–related activities (e.g., the composting or the adaptation and mitigation projects managed by PRRI). 24. The more detailed assessment is based on sub-pap level data prepared by the DA during the 2012 NEP review against DA’s six sector strategies that contribute to the 115 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level second operational goal on climate resilience. NCCAP activities are difficult to identify in the DA budget (see Part V Annex 4). Instead, this review is based on sub-PAP level information on 86 projects supporting DA’s second operational goal on climate resilience. The data was prepared by the DA during the 2012 NEP review and based on a special request by the Senate for the 2009-2012 budget data. Since this data is not mapped to the NCCAP outputs, the assessment is carried out in terms of DA’s sector strategies. 25. Only a few PAPs account for the bulk of DA’s climate appropriations. As shown in Figure 30 below, most of the DA’s climate appropriations (93 percent in 2012) fall under its first two strategies, addressing “the reduction of climate change–related risks and the vulnerability of natural ecosystems and biodiversity� (72 percent in 2012) and “increase the resilience of agriculture communities� (22 percent in 2012). As such, most of the PAPs are under the first two strategies, though only a few command the lion’s share of the funding (67 percent of total climate appropriations), including the climate change project managed by the PRRI,15 the Tamang Abono Program (related to composting activities) and the small-scale irrigation projects managed by BSWM, and activities under the RFUI.16 Figure 30: Climate Appropriations by the DA’s Sector Strategies of its Sector Goal on Climate Change and Respective Projects, 2009–2012 (on appropriation basis, in Php million) 9 000.0 Continue vulnerability and adaptation assessments 8 000.0 7 000.0 Strengthen the capacity of communities 6 000.0 5 000.0 Incorporate natural hazards and climate risk in the agricultural land use plan or CLUP 4 000.0 3 000.0 Strengthen the agriculture and fisheries insurance system 2 000.0 1 000.0 Increase the resilience of agriculture communities 0.0 2009 2010 2011 2012 Reduce climate change-related risks and the Budget Budget Budget Proposed vulnerability of natural ecosystems and biodiversity Source: GAA DA 2009–2011, NEP 2012. Note: The 86 projects and programs are incorporated in the six strategies: 28 projects and programs included in the first and second strategy, 2 in the third strategy, 3 in the fourth strategy, 8 and 17 in fifth and sixth strategy, respectively. 15 The PRRI manages three projects since 2011, comprising of 1) the assessment, monitoring, and evaluation of climate change impacts, risks, vulnerabilities, and response strategies in rice and rice-based farming systems in the Philippines; 2) the development, evaluation, and enhancement of mitigation and adaptation technologies and strategies; and 3) the inventory, measurements, and monitoring of GHGs. 16 Key programs of the RFU I relate to supporting climate change activities under production support, irrigation development, and training/education. 116 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 26. Budgetary allocations in favor of risk-reducing mechanisms (e.g., insurance, guarantees) have decreased in real terms between 2009 and 2011, but constitute a priority again under the 2012 budget (see Figure 31). A challenge remains to ensure climate vulnerabilities are reflected in the premium for which a new insurance weather index still needs to be established. In contrast, allocations to strengthen the capacity of communities and conduct vulnerability assessments are quite modest, representing 6 percent and 3 percent of total climate change related budget allocations, respectively. Figure 31: Composition of Agriculture Climate Appropriations by Sector Strategy, 2009–2012 (in %) Continue vulnerability and adaptation assessments 100% 90% Strengthen the capacity of 80% communities 70% 60% Incorporate natural hazards and 50% climate risk in the agricultural land 40% use plan or CLUP 30% Strengthen the agriculture and 20% fisheries insurance system 10% 0% Increase the resilience of 2009 2010 2011 2012 agriculture communities Budget Budget Budget Proposed Source: GAA DA 2009–2011, NEP 2012. 27. Despite the concentration of appropriations on a few PAPs, DA’s climate appropriations are spread thinly across 86 PAPs and opportunities to scale up several key activities have not yet been pursued. While it is difficult to judge the adequacy of the level of funding for each intervention, it seems that opportunities to scale up several activities related to research on climate-resilient varieties, water conservation, or the setup of a climate database that informs the technical and planning units on location-specific climate risks have not yet been pursued. On the other hand, funding for the remote sensing/Geographic Information System (GIS) for Climate Change as well as for the expansion of the web-enabled Geographic Information Infrastructure (GII) in Agriculture and Fisheries could not be secured under the 2013 budget. Water Sufficiency: Largest Appropriation Despite less than Comprehensive Coverage 28. A comprehensive assessment of the activities related to water sufficiency could not be carried out due to the multiplicity of Departments and Agencies that support the implementation of this NCCAP priority. The three NCCAP outcomes under the water sufficiency priority -- water governance, water supply, and knowledge management -- are under the mandate of various Departments and Agencies at the central 117 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level and local level (See Part VI). Only a few activities could be identified within the scope of the CPEIR, managed primarily by DPWH and DENR. The multiplicity of Departments and Agencies involved makes it more difficult to obtain a clearer picture of activities in the national budget that support this priority. 29. Nearly all of the expenditures and appropriations supporting the NCCAP priority area on water sufficiency is directed to water governance (notably the rehabilitation and protection of watersheds and river basins) and funded through flood control protection. a. NCCAP output: CCA and vulnerability reduction measures implemented x The relatively high budget envelopes for activities supporting NCCAP output “rehabilitation and protection of watersheds and river basins� in 2012 and 2013 reflect a past trend of increased appropriations to deal with perennial flooding in outlying areas and cities (Figure 32). Climate proofing to render the infrastructure more resilient to higher frequencies and intensities of typhoons is not yet done systematically due to high budget implications. x Other climate expenditures supporting this output are difficult to capture in the budget. While not always documented separately, various activities have been funded (e.g., use of bioengineering technologies to strengthen the resilience of the infrastructure, upgrading flood control and road drainage standards, provisioning underground detention tanks as part of storm water management systems, establishing retarding basins, desilting rivers, as well as installing flood monitoring and warning systems in coordination with PAGASA/DOST). b. NCCAP output: Water supply and demand management of water improved x Some funding is included in DPWH’s budget for the implementation of the NCCAP activity related to water harvesting technologies; however, appropriations are very small and not systematically documented in the budget.17 Though this seems to have been considered a cost-effective measure, DPWH did not propose additional funding for rainwater collectors in 2013. Other NCCAP activities are implemented at the level of localized water systems (ex. review and modification to the process and supply demand management of existing and new water supply systems) for which funding could not be identified or are implemented by the National Septage and Sewage Program (“implement the Clean water Act and the National Septage and Sewage program), which was only recently launched on a pilot basis.18 17 In compliance with the RA 6716 (1989) and the EO 774 (2008), the DPWH installed 461 rain water collection systems (RWCSs) in various DPWH Region and District offices and within the premises of public school compounds between 2009 and 2011. The 2012 budget included Php 39.6 million for the construction of 582 units of RWCSs. 18 Funding was provided in the NEP 2013 in the sum of Php 200 million to support one pilot project in one LGU. It is planned to fund the next phases through a cost sharing of 40 to 60 % between NG and LGUs. 118 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level c. NCCAP output: Quality of surface and ground water improved x Another NCCAP activity, the improvement of “water quality of surface and ground water,� is partially supported by DENR’s budget through the implementation of the operational plan for the Manila Bay Coastal Management Strategy and EMB’s budget (under water quality management); however, the appropriations are not reported separately in the budget and instead merged with other budget items. d. NCCAP output: knowledge and capacity x Under “knowledge and capacity� of the water sector, some small funding for institutional capacity development on climate change and disaster risk management was identified, although the funding is negligible (Php 123 million or 0.6 percent of total water sufficiency). Figure 32: Climate Expenditures and Appropriations Supporting the NCCAP’s Strategic Priority on Water Sufficiency, 2008–2013 (on obligation and appropriation basis, in Php millions) 25,000 NCCAP output: Knowledge 20,000 and capacity for IWRM and 15,000 adapatation planning improved 10,000 5,000 NCCAP output: CC adaptation and vulnerability reduction 0 measures implemented Source: GAA DPWH 2008–2012, NEP 2013 Ecosystem and Environmental Stability: Concentrated on Forest Management (NGP) and Land Management 30. Expenditures and Appropriations for PAPs supporting the NCCAP Priority on Ecosystem and Environmental Stability have rapidly increased from about Php 2 billion in 2008 to nearly Php 10 billion with most supporting the NCCAP output on “development and implementation of [climate change] mitigation and adaptation strategies for key ecosystems�. Being generally formulated, most climate-related PAPs in the DENR’s budget were classified as supporting the output on climate change mitigation and adaptation strategies, accounting for more than 90 percent of the funding supporting this priority (See Figure 33, Table 13). However, the alignment is not straightforward because the PAPs also contribute to activities under other NCCAP outputs (e.g., “implement the National REDD-Plus Strategy [NRPS]�). The identification 119 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level of funding activities related to the management and conservation of protected areas and biodiversity areas, done under the Protected Area & Wildlife Service PAP, is more clear cut. Other NCCAP outputs are either funded under “support to operations� or mainstreamed in programs under “operations� (e.g., spending related to “increased knowledge and capacity for integrated ecosystem-based management at the national, local, and community level addressed�). PAPs supporting other outputs under this NCCAP priority were difficult to map with the budget. 31. A few activities -- forest management (e.g. the NGP) and land management (e.g. land services) -- accounted for 84 percent of total appropriations supporting this priority in 2012 suggesting a clear preference toward high-scale investments. This raises some questions about sufficient funding in capacity building, research, and broader ecosystem management. While a large share of the budget has been increasingly appropriated by investments in forestry in recent years (increasing by 76 percent between 2012 and 2013), other key activities (e.g., related to coastal management) have either decreased or are insufficiently funded (e.g., capacity building and research) to support climate proofing of the current large investments and maintenance. Figure 33: Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Ecosystem and Environmental Stability, 2008–2013 (on obligation and appropriation basis, in Php millions) 12000 10000 8000 6000 4000 2000 0 2008 2009 2010 2011 2012 2013 Actual Actual Actual Actual Budget Proposed NCCAP Output: Development and Implementation of CC mitigation and adaptation strategies for key ecosystems NCCAP Output: Management and conservation of PAs and key biodiversity areas Source: DENR 120 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 13: Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Ecosystem and Environmental Stability, 2008–2013 (on obligation and appropriation basis, in %) NCCAP output 2008 2009 2010 2011 2012 2013 Actual Actual Actual Actual Budget Proposed Development and 94 95 93 94 95 95 implementation of CCA and mitigation strategies for key ecosystems Forest management 46 61 57 54 44 76 Land management 24 22 23 20 40 10 Ecosystems R&D 16 7 6 9 6 7 Coastal management 7 5 7 10 6 2 Improve solid waste 1 2 0 1 0 0 management Better management and 6 5 7 6 5 5 conservation of Protected Areas and biodiversity areas Protected Area and Wildlife 6 5 7 6 5 5 Service Strict implementation of 0 0 0 0 0 0 environmental laws Institutionalization of natural 0 0 0 0 0 0 resource accounting Enhancement for integrated 0 0 0 0 0 0 ecosystem-based management approach in PAs and key biodiversity areas TOTAL 100 100 100 100 100 100 Source: GAA DENR 2008–2012, NEP 2013. Sustainable Energy: Concentrated on Energy Efficiency 32. While climate expenditures and appropriations supporting NCCAP strategic priority on sustainable energy have fluctuated over the past five years, mobilization of funding for the energy efficient e-vehicle project have more than tripled climate appropriations between 2012 and 2013. Figure 34 shows the evolution of climate expenditures and appropriations related PAPs based on DOEs appropriations and obligations.19 With the exception of 2009 due to funding to national energy efficiency programs, energy-related expenditures rose steadily by 64 percent over the period 2008 to 2011. In 2013, the DOE benefited from a funding boost to its budget in support of its energy efficient e-vehicle budget. 19 An alignment of the climate change PAPs with the NCCAP outputs is difficult given that several climate change PAPs can contribute to one NCCAP output. The PAPs are therefore grouped according to the four main NCCAP outcomes addressing energy security. 121 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 34: Climate Expenditures and Appropriations Supporting the NCCAP Strategic Priority - Energy Sufficiency, 2008–2013 (on obligation and appropriation basis, in Php millions) 4000 3000 2000 1000 0 2008 2009 2010 2011 2012 2013 NCCAP Outcome: Promotion of energy efficiency and conservation NCCAP Outcome: Expansion in the development of sustainable and renewable energy Source: GAA DOE 2008–2012, NEP 2013. 33. On average, promotion of energy efficiency and conservation accounts for 60 percent of total climate expenditures in the DOE whereas, expenditures on environmentally sustainable transport and renewable energy are low in both relative and absolute terms (see Figure 35). Over the past several years, almost all public resources attributed to the Government’s energy efficiency agenda have been spent by the responsible Directorate and two main programs, the Philippine Energy Efficiency Project (PEEP) and the National Energy Efficiency and Conservation Program (NEECP). With the closure of the PEEP in 2012, these relatively high spending levels are likely to drop. The future funding needs will focus mainly on the implementation of the Government’s Energy Management Program which aims to reduce total annual energy demand of all government institutions by 10 percent. Other activities such as developing policy to encourage investments, promote energy efficiency and the creation of partnerships with communities and the private sector are less budget intensive. In the context of the Government’s renewable energy roadmap, the DOE is currently carrying out an initial resource assessment. Funding of the DOE’s key priorities (such as the development of R&D programs or the implementation of the renewable energy roadmap) may lag behind in the 2012 and 2013 budget. Taking a look at spending related to environmentally sustainable transport, the National Biofuel Board (the biofuel and alternative fuels program) consumes most of the budget, which accounts for 13 percent of the DOE’s total climate spending. Funding for the NCCAP priorities for 2011 through 2016, such as the implementation of a clean fleet program or the adoption of an integrated land use and transport planning process, has not yet been secured in the 2013 budget. 122 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Figure 35: Composition of Energy Expenditures and Appropriations by NCCAP Strategic Priorities, 2008–2013 (on obligation and appropriation basis, in %) 100% NCCAP outome : Promotion of 80% environmentally sustainable transport 60% NCCAP outcome :Expansion in the 40% development of sustainable and renewable energy 20% NCCAP outcome : Promotion of energy 0% efficiency and 2008 2009 2010 2011 2012 2013 conservation Actual Actual Actual Actual Budget Proposed Source: DBM Human Security: Focused on Response and Recovery Rehabilitation Activities not Disaster Prevention 34. The NCCAP priority on Human Security has three main immediate outcomes: 1. CCA and DRRM practiced by communities and sectors at all local levels. 2. Health and social protection delivery systems tare responsive to climate change risk. 3. CC-adaptive human settlements and services developed, promoted, and adopted. 35. Since the NDRRMF has not been funded yet, a quantitative assessment of the expenditures and appropriations for the Human Security priority area is not possible. Table 14 summarizes the key activities under this priority that fall within the mandate of the Departments within the scope of the CPEIR.20 The NDRRMC is the only Agency within the scope of the CPEIR with a mandate to lead implementation of activities under this Priority. Its responsibilities include conducting vulnerability and risk assessments, enhancing knowledge management on climate change, improving health emergency preparedness. As discussed in-depth in the sources of financing section, the Calamity Fund, also managed by the NDRRMC, continues to primarily support response, reconstruction and recovery activities and not disaster prevention. 20 See Part VI Table 17 for a list of outcomes, activities and responsible Agency. 123 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 14: NCCAP Strategic Priority on Human Security by Outcome, Activity, and Government Agency Immediate Activities Government Outcomes Agencies CCA and DRRM Conduct provincial level vulnerability CCC, NDRRMC, practiced by and risk assessments. PIA—All agencies, communities and all LGUs sectors at the local Develop and implement knowledge CCC, NDRRMC, level management on climate change and PIA—All agencies, disaster risks. LGUs Increase local and community capacities for CCA/DRRM management. Health and social Improve system for health emergency DOH, NDRRMC— protection deliver preparedness and response for climate All NGAs, LGUs systems are and disaster risks. responsive to climate Improve system for post-disaster DOH, NDRRMC— change risk health management. All NGAs, LGUs Source: NCCAP [Selected list of activities based on the Departments that are part of the CPEIR.] Climate-Smart Industries and Services: Small Appropriations Mostly at Initial Stage of Development 36. The NCCAP priority on climate-smart industries and services focuses on three strategic areas: a. Promotion and development of climate-smart industries. b. Creation of sustainable livelihood and jobs from climate-smart industries and services. c. Development and promotion of green cities and municipalities. 37. Funded activities under the Climate-smart industries and services NCCAP priority either are at an initial stage or are mainstreamed in the budget under GAs and support to operations limiting the ability to carry out a quantitative assessment of appropriations directed towards this priority area. The key activities under this priority that fall within the mandate of the Departments within the scope of the CPEIR are summarized in Table 15.21 Several Departments that are part of the CPEIR (DENR, DOST, DA, and DPWH) support the implementation of this NCCAP strategic priority. The DENR, Environmental Management Bureau, and the DOST manage several activities under “Climate-smart industries and services promoted, developed, and sustained�. Some activities are part of the Department’s mandate (e.g., improve enforcement of environmental laws - DENR) and others are supported by Agencies (e.g., development of climate-sensitive Environmental Impact Assessments and eco-labeling - 21 See Part VI Table 17 for a list of outcomes, activities and responsible Agency. 124 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level EBM). However, funding has not yet been secured in the Departments’ budgets for most activities. Table15: NCCAP Strategic Priority on Climate-smart Industries and Services by Outcome, Activity, and Government Agency Immediate Activities Government Outcomes Agencies Climate-smart Establish database on climate-smart industries and CCC, DTI, industries and services. LGU—Cabinet services Provide a stable enabling policy for the development and cluster on promoted, implementation of climate-smart industries and services. economic developed, Enhance public/private partnership climate-smart development, and sustained investment promotion. DENR Enhance tourism policies and strategies to promote green tourism. Implement policies that provide incentives to business DTI, DENR, practices that incorporate eco-efficiency. DOLE, Improve enforcement of environmental laws. DOF, NEDA, Assist Small Medium Enterprises’ in developing capacity DOST for eco-efficient production. Develop knowledge products on climate-smart best DTI, DENR, practices. DOF, DOST Develop and implement a training program on GHG emissions inventory and carbon footprint. Assist enterprises to adopt and implement Environmental Management System, GHG Reduction/cleaner production, and Environmental Cost Accounting Implement climate proofing of local infrastructure. LGU, DILG, Green cities DPWH—All and NGAs municipalities Intensify waste segregation at source, discard recovery, DENR— developed, composting, and recycling. NSWMC— promoted, and DILG, DA, sustained DepED, MMDA, LMP, LCP, Ligangmga Barangay Source: NCCAP [Selected list of activities based on the Departments that are part of the CPEIR.] 38. Both activities included under the “Green cities and municipalities developed, promoted, and sustained� outcome are partially funded by DPWH, DA, and DENR [EBM]. Making local infrastructure climate resilient is at an initial stage, with a few flood protection projects incorporating climate projections in their designs; however, the incremental cost could not be identified. Regarding the “intensification of waste segregation at source, discard recovery, composting, and recycling,� outcome, the 125 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level activity is supported by DA’s Tamang Abono Program as well as EMB’s ecological solid waste management program and estero program. Programs such as Tamang Abono which provide multiple priorities have been reported only under one priority to avoid double counting. Knowledge and Capacity Development: Partially Funded 39. The NCCAP priority on Knowledge and Capacity Development focuses on three areas: 1. Enhancement of knowledge on the science of climate change. 2. Enhancement of the capacity for CCA, mitigation, and DRRM at the local and community. 3. Establishment of climate change knowledge management and accessibility to all sectors at the national and local levels. 40. Activities under the NCCAP priority on Knowledge and Capacity Development are partially funded through small-scale projects and PAGASA’s regular mandate. Table 16 summarizes the key activities under this priority that fall within the mandate of the Departments within the scope of the CPEIR. 22 Several activities, notably under “enhancement of knowledge on the science of climate change� are funded partially through PAGASAs PAPs, supporting the “improvement of government systems and infrastructure required for climate change modeling and climate forecasting.� On the other hand, DOST has conducted climate change–related capacity building activities to support “the development and implementation of capacity building program for government Agencies on climate change�. Since the appropriations for these activities are not available, a full quantitative assessment cannot be completed for this priority area. 22 See Part VI for a list of outcomes, activities and responsible Agency. 126 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 16: NCCAP Strategic Priority on Knowledge and Capacity Building by Outcome, Activity, and Government Agency Immediate Activities Institutions Outcomes Involved Enhanced Establish centers of excellence on climate change DOST, CHED— knowledge on science at the national and regional level. CCC, all NGAs, the science of Improve government systems and infrastructure LGU leagues climate change required for climate change modeling and climate forecasting. Develop and implement a capacity building program DOST, CCC—All for government Agencies on climate change. agencies Develop and implement a national integrated program for conduct of risk, vulnerability, and adaptation assessment. Implement a national system for monitoring GHG emissions. Source: NCCAP [Selected list of activities based on the Departments that are part of the CPEIR.] Budget Execution: Utilization has been a Challenge but has been Improving 41. The impact of public spending depends on the financial efficiency with which the allocated resources are managed. In the current section, a closer look is taken at the financial efficiency of the climate change–related programs and projects by examining budget execution. To analyze budget execution (that is, the extent to which the authorized amounts were obligated), expenditures (measured as obligations in the Philippines) are compared to appropriations and the actual allotments released. The assessment focuses on the budgets of the DOE, DPWH, DENR, and PAGASA which have complete set of obligations and allotment data.23 A large share of DOE’s climate PAPs are funded through the special purpose fund (151) for which only releases are available. As such DOE’s utilization rate is assessed only against its allotments. A comparison of the national budget execution performance (by total operations, programs and projects) could not be conducted due to the lack of data. 42. While average budget execution rates for climate PAPs exceed 64 percent for most Departments, three of four departments have at least one year of budget utilization below 40 percent indicating specific challenges. Table 17 shows budget execution rates for the four Departments based on appropriations and allotments for 2008 through 2011. While the average execution rate during this period the DPWH, DENR and PAGASA climate PAPs ranges between 64 and 104, both DPWH and PAGASA include a year with budget execution below 40 percent, while the execution rate for DOE has been below 40 percent in most years. In contrast, DENR’s execution rates exceed 100 percent in a number of years indicating possible inflation of these rates arising for instance from mismatched data. Some of the specific budget execution challenges faced by the Departments are summarized below: 23 Allotments and obligations are not available for DA’s and DOST’s climate change related PAPs. 127 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level x DOE has had challenges in utilizing special purpose funds to support the promotion of energy efficiency and sustainable renewable energy in most years. Weak absorption capacity across other spending categories has also led DBM to reject DOE’s newly submitted projects (e.g. wind resource assessment project) for the past two years.24 DOE has succeeded in improving its implementation performance during the past year, based on a “catch up� plan and the close monitoring of the execution performance jointly with DBM. x DPWH’s low budget execution rate in 2011 resulted from a review of all its contracts. Another source of delay has been related to lump sum allocations under the flood control projects, although these are less used in 2012 and 2013.25 DPWH has attempted to speed up implementation by undertaking preconstruction activities (including feasibility study, design, and bidding short of award of contract) in the year prior to the year construction activities are funded in the budget. As a result, most of the projects funded in 2013 are well advanced in terms of preconstruction activities, and many of them are ready to be awarded in the first quarter of 2013. x PAGASA’s low execution rate in the past two years is partly due to delays in the delivery of radars at the port and, thus, delays in payment of import of duties, being very tedious. Challenges have also been noted by the Agency and the DBM regarding its strategic leadership and organizational culture (e.g., securing funding and following up of equipment/facility maintenance). This has lately affected the Agency, as activities that are part of its mandate have been given to other Agencies of the DOST. For example, the Nationwide Disaster Risk and Exposure Assessment for Mitigation (DREAM) Program is managed by the PCIERD, although the program focuses on Light Detection and Ranging (LiDAR) technology to generate detailed topographic maps of the Philippines, which is part of the PAGASA’s mandate. x While DENR’s execution rate has consistently exceeded 80 percent, these rates have to be taken with caution given that several of the externally funded PAPs are not reported in the budget while continuous appropriations have inflated the execution rate. According to the DENR, some of the key challenges the Department has encountered in implementing the NGP relate to activities in fragile areas, delayed bidding due to bureaucratic procedures or lack of bidders, internal delays resulting in delays of releases, and weak capacity in finance and accounting due to lack of manpower. Similar to DOE, DENR has been able to improve its performance through the DBM’s support closer monitoring of the utilization rate of some key climate PAPs. 24 The proposal was rejected in 2011 and 2012 but is included in the 2013 budget. 25 Projects are not yet identified under lump sum allocations so that design and costing need to undergo a review by the Bureau of Construction. 128 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 17: Climate change PAPs utilization rates of selected CPEIR Departments/Agencies Appropriations/Allotments versus obligations, 2008–2011 (in %) Department/ Agency CC PAPs 2008 2009 2010 2011 Avg. 2008– 2011 DOE obligations/allotments 25 55 34 39 38 DPWH obligations/appropriations 89 77 62 27 64 obligations/allotments 69 78 79 79 76 DENR obligations/appropriations 102 100 89 126 104 obligations/allotments 81 81 104 88 89 PAGASA obligations/appropriations 130 85 38 54 77 obligations/allotments 68 61 92 52 68 Source: DBM. Sources of Financing 43. Climate activities at the national level are funded through appropriations from the Government’s Appropriation Act (GAA), the special purpose funds, Special Account in the General Funds (SAGFs) and external aid. These sources are reported differently in the budget. Only the transfers of the releases are available on an allotment and obligation basis for Special Purpose Funds and some external funded projects. Most grant funded development partner support are not documented in the budget and instead and financial reporting is done under a special account or trust fund off budget. The following assessment of sources financing is carried out on an obligation basis based on data obtained from DOE, DPWH, DENR and PAGASA. Similar data could not be obtained for PAPs funded by DA and DOST’s attached agencies. Domestic Funding: Primary Source for Climate Appropriations 44. Climate expenditures are mostly funded from domestic sources indicating the necessity for strengthening country financial systems for delivering climate results. Domestic resources have funded on average 82 percent of climate expenditures in the four selected Departments (DPWH, DENR, DOE, PAGASA) between 2008 and 20110 (see Table 18). However, development partner support is very concentrated, with Department of Public Works and Highways accounting for 80 percent of the total development partner support (most of which is focused on flood protection). About 94 percent of the climate expenditures in the remaining Departments are financed from domestic sources. Development partner support has also played an important catalytic role in financing pilot activities, providing global knowledge, and developing lessons learned. While most of the domestic funding stems from the GAA, Special Accounts provide a third of the funding for the Department of Energy. While Special Accounts clearly offer some flexibility in managing resources, they can weaken accountability for 129 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level the use and absorption of funds. A few key points on the sources of financing by Department include: x For DENR and PAGASA, domestically funded climate expenditures have remained at the roughly same level as a share of total climate expenditures. x DPWH experienced a sharp drop in GAA obligations in 2011 as all of its contracts were put on hold and reviewed, resulting in a corresponding decrease in the share of climate expenditures domestically. With the contract reviews completed, and no deviations in the appropriation trends, DPWH’s historical reliance on climate finance through GAA can be expected. x DOE’s sharp increase in domestically funded expenditures as a share and in real terms between 2010 and 2011 is due to increased counterpart funding for the Philippine Energy Efficiency Program. Table 18: Sources of Financing for Climate Expenditure by Department/Agency and year (on obligation basis, in %) 2008 2009 2010 2011 Average 2008–2009 DENR Domestic funding 93.2 94.1 93.8 90.8 93.0 Foreign-assisted 6.8 5.9 6.2 9.2 7.0 Total 100.0 100.0 100.0 100.0 100.0 DPWH Domestic funding 68.8 81.2 81.2 32.7 66.0 Foreign-assisted 31.2 18.8 18.8 67.3 34.0 Total 100.0 100.0 100.0 100.0 100.0 DOE Domestic funding (Fund 102) 65.0 24.0 59.0 90.0 59.5 Locally funded (Fund 151) 35.0 76.0 40.0 10.0 40.1 Foreign-assisted (Fund 171) 0.0 0.0 1.0 1.0 0.4 Total 100.0 100.0 100 100.0 100.0 PAGASA Domestic funding 100.0 100.0 100.0 99.6 99.9 Foreign-assisted 0.0 0.0 0.0 0.4 0.1 Total 100.0 100.0 100.0 100.0 100.0 Source: DBM. Special Purpose Funds and Special Accounts: Greater Flexibility but Weaker Accountability 45. Special Purpose Funds (SPFs) and Special accounts in the GAA are an important source of domestic financing for climate PAPs for some Departments, offering more flexibility in managing resources but also weakening accountability 130 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level for the usage and absorption of the funds. The Philippine budget includes a number of SPFs, SAs. Some of them are earmarked for specific programmatic purposes. Others represent variants of contingency funds for eventualities that are impossible or difficult to estimate precisely ex ante (e.g., the Calamity Fund).26 They provide Departments with flexibility in managing their resources as they do not require returning to Congress for approval of supplementary budgets, can be carried over from one year to the next acting as a buffer against revenue unpredictability.27 Their flexibility can also weaken accountability for their usage as they are not subject to systematic monitoring, control, and evaluation.28 DOE is much more reliant on SPFs/SAs than the other Departments, but PAGASA and DENR also utilize SPFs/SAs for specific needs. 46. On average, a third of DOE’s total climate expenditures between 2008 and 2011 were financed by SAs. They financed the following six PAPs the Biofuel Program, the National Energy Efficiency and Conservation Program, the Alternative Fuels for Transportation and other purposes, the Household electrification program in off-grid areas, the Household Electrification Program using new and renewable energy, and the resource assessment of low enthalpy geothermal resources during this period. The share of climate expenditures financed under the SAs have fluctuated between 10 and 76 percent during this period as different programs were launched or closed (see Table 11). SA shares peaked in 2009 when the National Energy and Conservation Program was launched and bottomed out in 2011 with cutbacks in spending under the NEECP and the closure of the Household Electrification Program Using New and Renewable Energy. 47. PAGASA and DENR also have used SPFs to meet specific needs but these funds are much smaller and have not been used much. PAGASA lists a number of disaster prevention programs to be financed by SPFs including “Enhancement of weather and climate monitoring for disaster prevention and mitigation in Cebu and adjacent areas.� “disaster mitigation program,� “disaster mitigation through enhanced weather forecasts using moderate resolution imaging spectroradiometer (MODIS) data,� and “updating climatological weather patterns for ship routing.� Of these only the first one has been funded during the 2008 – 2011 period, accounting for less than 1 percent of PAGASA’s climate expenditures. Similarly, DENR reported an SPF on “Wildlife Fund� that has the potential for funding climate expenditures; however, expenditures are only reported for 2011 and are miniscule. 48. The DRRM Law revamped the calamity fund creating a new special purpose fund, the National Disaster Risk Reduction and Management Fund, and introducing changes in the allocation criteria to favor disaster prevention. In line with the paradigmatic shift towards disaster prevention, the DRRM law (RA 10121) introduced changes in the allocation criteria aiming to provide 70 percent of the amounts appropriated to the NDRRMF for disaster prevention and mitigation related activities with the remaining 30 percent to support the Quick Release Funds (QRF) for relief and recovery programs. The new provisions allow Departments and LGUs to better address emergencies and 26 Source: World Bank, Philippines Public Expenditure and Financial Accountability, 2010. 27 Source: World Bank. Public Expenditure and Financial Accountability, 2010. 28 See for instance, DOE’s low budget execution rate compared to other Departments. 131 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level hazards by mitigating their effects and preparing the communities, strengthening communication and early warning devices. In addition, to strengthen the management of the NDRRMF’s QRFs, these funds are now lodged under the budget of several implementing Departments (DSWD, DND, DPWH, DA and DepED) to facilitate the utilization of these resources.29 49. Despite the increased funding of the national Calamity Fund in recent years, most of the funding continues to be allotted to post disaster reconstruction, in line with increased needs for such efforts.30 Through 2013, the GAA has not included any appropriations for the NDRRMF instead appropriations have continued for post-disaster relief, recovery and reconstruction through the Calamity Fund.31 As such, 100% of the amount appropriated under the Calamity Fund is used for disaster relief, recovery and reconstruction. Partially, this can be explained by increased funding needs for post disaster activities, reflected in increased budgetary allocations for the Calamity Fund from Php 5 billion in 2011 to Php 7.5 billion in 2012 and 2013. 32 Most of the 2011 allocations of the Calamity fund supported activities related to rehabilitation, repair, or restoration. In the same year, the Philippines experienced the greatest number of natural disasters, resulting in the depletion of the Calamity fund and the inclusion of a supplementary budget in the GAA to fund rehabilitation work. Appropriations under the QRF lodged in selected agencies’ budgets also increased from Php 3.1 billion in 2012 to Php 3.7 billion in 2013. Funding under the QRF was also reported insufficient by DBM as demonstrated by large backlogs in infrastructure rehabilitation.33 50. The DBM is also of the opinion that disaster prevention should be funded as part of the regular budgets of the Departments to reduce implementation delays, but has yet to develop systems to incentivize disaster prevention actions by 29 The release of QRFs is now subject to approval by DBM while, prior to this, a declaration of a state of calamity by the President was needed and departments had to seek endorsement by the OCD/ NDRRMC, which recommends the funding proposals to the Office of the President before DBM can release funding. 30 The ADB-funded DRR study came to a similar conclusion—most funding goes to minimizing exposure of the population (e.g., through the construction of flood control / seawall and drainage projects) instead of to the consequences of hazard events, reaching more than half of total DRR appropriations in 2011. The second highest spending item is on disaster response (aid relief and rehabilitation funded under the Calamity fund) and sustainable recovery (disaster related repair and reconstruction under the Calamity Fund), accounting for more than a third of total DRR appropriations. 31 The Calamity Fund can be used to fund relief, reconstruction and rehabilitation activities (including pre-disaster activities like preparation of relocation sites, and disaster management training) related to the occurrence of natural calamities, epidemics, crises resulting from armed conflicts, and other catastrophes. 32 A recent WB/GFDRR study using as a reference the data from the 2009 tropical storm Ondoy and Typhoon Pepeng and taking a look at direct property damage and loss, reported that govern ment’s allocations available covered about 5 percent of total public sector disaster recovery and reconstruction needs. [WB/GFDRR, Mitigating the adverse impacts of natural disasters on the Philippines: A study of disaster risk financing options, 2011] 33 There are additional sources of funding for DRR such as a contingency “Presidential fund� which is not specifically earmarked for natural disasters but has funded some disaster relief projects in the aftermath of natural disasters and the PCIC, which finances the premium subsidy based on claims that are triggered by natural disasters. Private charitable donations and indemnity payments from private insurance companies further supplement the resources from the government. The funding amount from these sources is, however, either difficult to capture or, if available, modest and does not constitute a significant element of national disaster risk financing. [WB/GFDRR, Mitigating the adverse impacts of natural disasters on the Philippines: A study of disaster risk financing options, 2011.] 132 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Departments. According to DBM, funding disaster prevention under the Departments’ regular budgets would better facilitate the execution of cost-intensive investments, such as seawalls, which are not done normally under SPFs. Operationally, funding disaster prevention measures out of the NDRRMF, a special purpose lump sum fund, would entail Departments submitting proposals for funding to DBM followed by an evaluation and approval of such proposals during the budget year. The need to evaluate individual proposals would likely delay when these activities could start being implemented. However, the current arrangement does not allow the DBM to incentivize Departments in undertaking disaster prevention activities from the 70 percent of resources set aside for such activities under the NDRRMF. Systems to improve monitoring and tracking of such expenditure in Department budgets could begin to address the current shortcomings. 51. A few additional issues that need to be clarified and addressed to ensure the NDRRMF is effective include: x Integrating climate change concerns into the planning and design of DRRM projects has been difficult because of inadequate data and information. x The funds disbursement process of the Calamity Fund is cumbersome resulting in long delays. As a result, Agencies have been more hesitant to apply for funds. Similar procedures under the NDRRMF could affect incentives to apply for funds. x There is limited coordination with other funds (see Part III Chapter 2) leading to duplication and delays. x Coordination between PSF and LDRRMF to reduce double dipping by LGUs. Development Partner Aid: Increased Coordination and Programmatic Linkage to Government Reform Agenda can Increase Effectiveness 52. Foreign-funded climate change adaptation and mitigation activities have increased with the increase in the climate-related events. According to a 2011 study assessing development partner support for CCA and mitigation in the Philippines, foreign-funded activities over the past decade have increased in line with the increases in climate-related events with most development partner-supported initiatives focused on climate-related disasters and climate mitigation interventions in the infrastructure, energy, and environment sectors.34 Development partner initiatives in the infrastructure sector focused on flood prevention and management, evacuation shelter, and water impounding facilities. In the energy sector, development partner supported activities on renewable sources, energy conservation, and electrification. Most support in the environment sector focused on the management and conservation of forests and fishery. Most interventions focused on capacity building, policy advocacy, and awareness-raising and technology adoption, notably at the local level. 34 The most active development partners supporting the Philippine Climate Change Agenda include UNDP, ADB, the World Bank [WB], the Japan International Corporation Agency (JICA), the Australian Agency for International Development (AUSAID), GIZ, the British Embassy, the World Health Organization (WHO). 133 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 53. Foreign loans and assistance, which account for about a third of DPWH’s climate expenditures, have supported the rapid increase of expenditures and appropriations for flood control projects over the past five years. While this underscores development partners’ commitment to support Government’s efforts in reducing the effects of floods and storms, similar to high cost infrastructure investments in other sectors, this raises questions about the sustainability and inclusion of future maintenance costs in the budget. 54. Development partner contributions’ have also played an important role in piloting initiatives and supporting investments to assist the Government in developing climate actions at the central and local levels.35 In the case of DENR, development partner aid represented, on average, 7 percent of the Department’s climate expenditures between 2008 and 2011. Coastal management initiatives have been a priority and are reflected in a 55 percent increase in expenditures from Php 331 million in 2010 to Php 517 million in 2011. Most Departments within the scope of the CPEIR have benefited from a range of smallǦscale and innovative grantǦfunded climate change projects (e.g., Global Environment Fund, the Millennium Development Goal Fund [MDGF]), which are often not reported in the budget. For some Agencies (e.g., PAGASA), development partner support is provided as in kind donations (e.g., Doppler radars funded by JICA) and are not appropriated, although Government counterpart funding in terms of import duties on Doppler radars are reflected in both appropriations and obligations. 55. Given the range and level of development partner support across several sectors for the Governments’ climate change agenda, the management, coordination, and mobilization of aid can be a challenge. Similar to other sectors, the range of development partners who finance climate change activities can raise some problems associated with dependency on development partner -financed projects. For example: 1. Poor predictability and reporting on actual development partner aid.36 2. Sustainability of large-scale investments affected by insufficient maintenance. 3. Different reporting formats used by DPs or inadequate reporting impeding tracking, monitoring, and evaluating of aid. 4. Diversion of officials’ time away from Departments activities due to development partner-related demands.37 35 Reporting of aid is available for Overseas Development Aid-funded loans but only for a few grant-funded projects. Figures have to be taken with caution due to weak development partner aid reporting. 36 Development partner Agencies provide little or no information on projected disbursements or actual disbursements, but share some information on the potential possible pipeline for funded projects. No schedules of likely fund flows are provided to the Government (Source: World Bank, Public Expenditure and Financial Accountability, 2010). 134 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 5. Lack of effective aid harmonization because meetings are infrequent and mechanisms to coordinate aid have not been fully explored. This, in turn, can impact the Departments’ and Agencies’ strategic budget planning and can add administrative management costs. 56. The management of climate change PAPs can become challenging when working with various Agencies across several sectors to address cross-sectoral issues. The recent MDGF Joint Programme “Strengthening the Philippines’ Institutional Capacity to Adapt to Climate Change,� implemented by six United Nation Agencies, in partnership with nine national agencies, aimed to establish a pool of knowledge and expertise across several sectors (among other goals), but faced a number of challenges when implementing a multiagency cross-sector project, including high start-up and learning costs due to the scale of institutional participation and had to take into account implementation delays to ensure national ownership.38 Financing Gap for Climate PAPs in Selected Sectors 57. The financing gap analysis, which seeks to identify the difference between desired funding and actual appropriations, focuses on the major climate PAPs in four sectors due to data availability. The analysis compares desired funding levels for PAPs that support NCCAP priorities as reflected in the Departments’ work programs 2011-2016 and in the Philippine Investment Program 2011-2016 and the actual GAA appropriations for 2011 to 2013. The assessment covers four sectors (agriculture & fishery, water, environment & natural resources and energy). The quality of the assessment varies across sectors based on the availability of data and difficulties matching PAPs across the three data sources. Agriculture and Fishery Sector: Assessment Difficult; Some Underfunding 58. The financing gap in the agriculture and fishery sector is difficult to assess due to differences in 1) DA’s bureaus and Agencies included in the PIP compared to DA’s 2012 exercise identifying PAPs supporting climate resilience in the budget and 2) PAPs included in the PIP compared to the work program and DA’s budget. Most PAPs included in the PIP were not included in the 2012 budget exercise conducted by DA. For instance, most of the climate change PAPs tagged in the PIP are managed by NTA, FIDA, ITCAF and BSWM while in a separate budget exercise DA included the climate change PAPs of PhilRice, ATI, PCIC.39 Important climate change PAPs supporting composting, SSIPs, mitigation and adaptation technologies and strategies, the insurance system are not included in the PIP. This difference in the classification of PAPs between the PIP and the DA’s budget exercise partly results from the timing of the 37 For example, the Albay’s Governor Joey Salceda, who pioneered CCA and DRR in local governance and made popular the “zero casualty� and “preemptive evacuation� strategies, became an alternate Board member of the Green Climate Fund of the United Nations Framework Convention on Climate Change, representing Asia. 38 MDGF, Strengthening the Philippines Institutional Capacity to Adapt to Climate Change (MDG-F 1656) – Final Evaluation Revised report, 2012 39 See Part VI Technical Annex 2, Table 15. 135 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level two exercises.40 As a result, the level of funding of total PAPs identified in the 2011- 2012 GAA is higher than what was identified in the PIP – thus, the gap assessment is limited to only a few comparable PAPs.41 As shown in Table 19 below, a comparison of a few climate change PAPs included in the budget, PIP and DA’s work programshows that significant funding was planned in the 2013 budget for the development and implementation of National Farmers Registry System (NFRS) and Inventory System of Agriculture and Fishery Investments (ISAFI) but the respective appropriations were not secured in the 2013 budget. Other climate change PAPs such as the establishment of agro-meteorological stations in highly vulnerable agricultural areas are within the planned budget. 59. Taking a look at the funding of the agriculture climate change PAPs in the national budget (based on a review of DAs six climate change related sector strategies), only a few major PAPs take the lion share of DA’s climate change appropriations (see Climate Appropriations by Department above); the 86 climate change PAPs suggest to be spread thinly across the NCCAP which points to some underfunding or scope to scale up a range or PAPs. 42 DA was able to secure some important funding to support the development of mitigation and adaptation technologies and climate change impact studies that are managed by Phil Rice (See Table 12). On the other hand, it seems that opportunities to scale up several activities notably related to research on climate resilient varieties, establishment of field schools, water conservation or the setup of a climate data base that informs the technical and planning units on location specific climate risks have not yet been pursued. Water Sector: Financing Short fall for Small Scale PAPs, but Flood Protection Funded 60. A comparison of the planned and actual funding of climate change PAPs in the water sector shows a mixed picture with actual allocations exceeding pledges made in the PIP for flood protection, funding shortfalls for small scale climate change PAPs and lack of clarity on the extent of shortfall for water supply and weather forecasting. The Government’s strong commitment to address flooding, drainage and shore protection is shown by budgetary allocations in the 2013 budget which are higher compared to the planned funding included in the PIP and the DPWH’s work program work program (see Table 20 below). Also some important DRRM and CCA capacity building funding for the Pampanga Bay was secured in the 2013 budget that was not included in the PIP and DPWH’s work program. For other climate change PAPs, such as PAGASA’s weather and flood forecasting, the available data is less clear - according to the PIP, temporary high funding needs were suggested for 2011, followed by a drop in allocations for the upcoming years. In contrast, budget appropriations were lower in 2011 but significantly higher in 2012 and 2013. A comparison of funding needs of climate change PAPs supporting the provision of water supply was not possible as similar climate change PAPs could not be found in the GAA, suggesting either a shortfall in funding or the merging of these activities with other spending items in the GAA.43 40 The PIP listing was prepared in 2011while DA conducted its special budget exercise in March 2012. 41 The high level of appropriations of DA’s work program is discussed above in section A. 42 See Part VI Technical Annex 2, Table 15. 43 See Part VI Technical Annex 2Table 16 on the total PIP funding of activities in support of the water sector. 136 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level More work is needed to ensure similar PAPs are compared and clarity exists about the funding needs related to key climate change interventions in the sector. Nonetheless, Table 20 shows some funding shortfalls for small-scale activities. This concerns notably to the funding of the rainwater collector systems for which DPWH did not propose funding in 2013 despite a successful scaling up of these projects in past years (see Appropriations by Department). 61. The assessment of the NCCAP funding needs in support of the water sector is limited to the following observations. First, an assessment of the funding needs of the NCCAP activities identified for the water sector is limited to DPWH and DENR’s responsibilities that cover only a few NCCAP activities while several other Agencies are also involved but are not within the scope of the CPEIR.44 In accordance with its mandate, DPWH sees its main role in implementing the National Sewerage & Septage program and considers as a priority the scaling up of funding for this program and mobilization of resources for a training program on the use manuals of sewerage and septage projects. It seems that less focus is being put on small-scale activities, such as the development and funding of harvesting technologies (ex. retarding basin; rain water collections or water tanks) or the profiling of watersheds and river basins (no funding has been requested for this in 2013). DENR is responsible for the implementation of several capacity building projects (on IWRM and adaptation planning) and studies (water and supply demand analysis) but it is not clear if the Department was able to secure respective funds in the 2013 budget. Environment and Natural Resource Sector: NGP and Medium Scale PAPs Adequately Funded 62. Funding of NGP, several major PAPs, and medium-scale PAPs is consistent with the commitments in the PIP; only the Clonal Nursery project is delayed and falls short in terms of budget funding compared to the PIP commitments. The funding of small-scale activities is more difficult to examine but some evidence suggests a lack of funding or underfunding of some PAPs. Funding of Government’s National Greening Program largely reflects the committed funding in the PIP (see table 21 below). However, investments in favor of the Clonal Nursery project have been delayed by a year and fall short by Php 400 million in contrast to the commitments in the PIP for 2013. Most other medium-scale PAPs such as the biodiversity conservation or the soil conservation and watershed management are funded within the proposed funding in the PIP or DENR’s work program. While a focus has been put on large and medium-scale PAPs, some evidence suggests that small-scale activities might lack funding or might not be sufficiently funded. For instance, funding for the ground water resource assessment has not yet been mobilized in the budget. Other activities related to capacity building, training or the mainstreaming of CCA in planning tools suggests to be conducted at a pilot basis but have not yet been scaled up. 63. An assessment of the adequacy of the NCCAP activities in support of ecosystem and environmentally stability could not be conducted due to insufficient 44 Note as mentioned in Part V Annex 4, a range of Agencies support the NCCAP implementation but are outside the CPEIR scope (ex. DOH, DA, NWRB, NEDA, LWUA, DILG, PWP). 137 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level budget information. Discussions with DENR indicated that most NCCAP activities are currently being funded under different budget categories (projects, support to operations or operations), however climate change PAPs found in the budget could be attributed to only a few NCCAP activities. 45 A key challenge is the broad formulation of some NCCAP activities (for example, implement the National REDD Plus Strategy) allowing us to attribute several PAPs to one NCCAP activity but rendering an assessment of the funding adequacy difficult. More analytical work is needed to examine jointly with the Department the current NCCAP funding level and identify scope to scale up PAPs. Energy Sector: Funding Secured for Only One of Three Major PAPs 64. While the PIP includes three major climate change PAPs to enhance the country’s energy security, funding for two has not yet been secured in the budget; other small scale PAPs have been implemented with delays but are adequately funded- only a few PAPs cannot be assessed in terms of their funding adequacy as the level of funding in the budget is not known. As illustrated in Table 22, funding of climate change PAPs in the PIP shows Government’s commitment to enhance energy security. The bulk of the funding is being allocated to three major PAPs (the renewable energy project, the ocean-thermal energy conversion project and the Electric Tricycle project). However, only the E-vehicle project could be identified in the 2013 budget. Other PAPs included in the PIP and DOE’s work program work program (such as the alternative fuels for transport program, the biofuel program or the NEEC program) show delays in the actual funding given that appropriations were secured only in the 2013 budget. Despite the delays, the budget allocations correspond to the planned funding stated in the PIP and the work programs. Only a few PAPs are difficult to assess (most notably the NREP) because the level of funding is not reported separately in the budget. Funding for the VA is discussed with GIZ but has not yet been secured. Lastly, more clarity is needed for the funding of climate change PAPs by DOE’s SPFs in 2013 for which budget information was not yet available. 65. An assessment of the adequacy of NCCAP funding is difficult as some PAPs have been supporting several NCCAP activities or others are implemented by bureaus and Agencies (ex. Investment promotion office, power bureau and planning bureau) but the level of funding is not known; nevertheless the discussions with DOE revealed several areas of funding needs.46 x Promotion of energy efficiency and conservation: A priority for DOE is the implementation of Government’s Energy Management Program (aiming to set 10% of energy savings on the total annual energy demand of all government institutions). In this context, the Department’s current funding needs focus on funding the lamp replacement project and the implementation of audits (requiring energy auditors and instruments, a mobile energy bus, etc.). DOE also seeks to mobilize technical assistance on how to phase out high gasoline consumption cars. Other activities, such as the policy development to 45 See Part VI Technical Annex 2, Table 17. 46 See Part VI Technical Annex 2, Table 18, illustrating the funding through the national budget. 138 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level encourage investments in energy efficiency and the creation of partnerships with communities and the private sector, are in part funded through projects. However, more analytical work is needed to understand the adequacy of funding these activities. x Expansion in the development of sustainable and renewable energy. With the support of USAID and JICA, DOE is currently conducting a hydro resource assessment in Mindano. More funding is needed to support policy research related to RE potentials and projects and the development of standards (ex. the use of biofuels). While IEC and public consultations have been launched by the Investment promotion office and the power bureau, DOE expressed a need for support to the integration of RE aspects in the energy plans across all regions and respective implementation. x Promotion of environmentally sustainable transport. Funding for the NCCAP priorities for 2011-2016, such as the implementation of a clean fleet program or the adoption of an integrated land-use and transport planning processes, has not yet been secured in the 2013 budget. x Climate proofing and rehabilitation of energy systems in infrastructures. More work is needed to better understand current and future funding needs related to climate proof energy systems. 139 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 19: Agriculture & Fishery sector - comparison of planned and actual funding of selected climate change PAPs 2011- 2016 (on appropriation basis, in Php million) Source climate change PAPs 2011 2012 2013 2014 2015 2016 CC PAPs TOTAL climate change PAPs 346 1 693 3 911 1 080 242 257 included in the Unified and Enterprise Geospatial Information System 26 1 448 3 435 0 0 0 PIP 2011-2016 (UEGIS) for the Dev and implem. of Nat. Farmers Registry Sys. and 19 1 437 3 425 0 0 0 Agriculture & Inventory System of Agr. and Fishery Invest. (ISAFI) Fishery sector Estab. of Agro-Meteorological Stations in Highly Vulnerable 7 11 2 0 0 0 Agricultural Areas (Local Early Warning Sys.) DA’s Work TOTAL climate change PAPs 22 067 50 313 54 671 49 201 49 314 44 733 program Work Unified and Enterprise Geospatial Information System 26 1 453 3 445 60 40 122 program 2011- (UEGIS) 2016 Establishment of Agro-Meteorological Stations in Highly 7 0 2 0 0 0 Vulnerable Agricultural Areas DA’s climate TOTAL climate change PAPs 3 272 8 280 change PAPs Unified and Enterprise Geospatial Information System 3 25 identified in the (UEGIS) budget1) Expan. of web-enabled Geographic Information 3 11 Infrastructure (GII) in Agriculture and Fisheries Dev and implem. of Nat. Farmers Registry Sys. and 0 14 Inventory System of Agr. and Fishery Invest. (NFRS) Estab. of Agro-Meteorological Stations in Highly Vulnerable 12 11 Agricultural Areas (Local Early Warning Sys.) Source: NEDA, DBM, DA 1) figures for 2012 = NEP 2012 140 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 20: Water Sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 (on appropriation basis, in Php million) Source CC PAPs 2011 2012 2013 2014 2015 2016 CC PAPs Total climate change PAPs included in 12 772 17 399 21 029 23 606 29 500 26 752 the PIP o/w Flood and Flood and Drainage Management Drainage 12 142 13 699 14 400 15 629 19 173 24 485 Management Weather forecasting 2 530 136 86 - - - o/w Water Supply 630 3 700 6 629 7 977 2 267 10 327 Depts work Total climate change PAPs program 11 385 10 885 12 885 13 685 17 305 23 515 work o/w rainwater collection systems (RWCS) 50 50 50 50 50 50 program o/w National Sewerage and Septage Management 15 15 15 15 15 15 2011-2016 Program o/w Flood Control Structures; Retarding Basins; Water Impounding Structures 11 300 10 820 12 820 13 620 17 240 23 450 o/w Modernize PAGASA facilities and technologies 4 3 o/w Climate change and Disaster Risk Management: 20 - - - - - Institutional Capacity Development (ICD). CC PAPs Total climate change PAPs identified in 14 007 13 123 20 240 the budget o/w Construction of flood control and drainage structures (dikes, spurdikes, revetment, sea barriers) 14 006 13 123 20 117 o/w Retarding Basins and Rainwater Collectors 1 - - o/w Weather and flood forecasting 821 954 978 o/w Integrated DRRM and CCA Measures in Pampanga - - 123 Bay Source: NEDA, DBM, DPWH, DOST- PAGASA47 47 Important funding in support of irrigation services and infrastructure is also included in and to be managed by NIA, however it is not clear how climate change projections have been included in the planning of these PAPs and therefore the funding was not included in the assessment. 141 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 21: Environment and Natural Resource Sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 (on appropriation basis, in Php million) CC PAPs 2011 2012 2013 2014 2015 2016 CC PAPs TOTAL climate change PAPs 6 009 12 093 35 257 15 989 14 857 14 879 included in the I. Natural resources conserved, protected and rehabilitation 5 179 11 386 34 256 14 994 14 149 14 120 PIP o/w Forest Development (National Greening Program) 1 372 2 150 5 164 5 164 5 164 5 164 o/w Forest Protection 225 474 420 434 499 559 o/w Clonal Nursery and Production of Quality Planting Materials 461 491 1 253 1 827 2 107 2 192 of Premium and Indigenous Species o/w Biodiversity Conservation Program 129 172 96 104 109 112 o/w soil conservation and watershed management 364 367 445 458 443 429 o/w National Capability Building for Land Degradation 11 10 2 2 2 0 Assessment (LADA) and CCA II. Environmental quality for a cleaner and healthier 586 353 501 498 354 380 environment improved o/w Environmental Management and Pollution Control 312 489 482 489 489 493 III. Resilience of natural systems enhanced with improved 244 353 501 498 354 380 adaptive capacities of human communities o/w Research, Development, and Extension Programs 128 133 138 144 150 o/w Groundwater Resource Assessment 11 11 11 12 14 o/w Climate Relevant Modernization of National Forestry Policy 2 & Piloting of REDD+ Measures o/w hazard and risk assessment (inc. LGU capacity building) 10 15 22 22 28 30 Depts work TOTAL climate change PAPs 2 236 7 531 15 388 7 192 7 039 8 001 program work o/w Forest development (NGP) 1 331 2 111 4 490 5 458 5 524 6 397 program 2011- o/w Forest protection 234 506 334 347 361 375 2016 o/w Biodiversity conservation 42 330 716 487 321 369 o/w Research and Development/ IEC and IS 5 135 137 144 149 156 o/w Groundwater Resource Assessment 9 11 11 11 12 0 o/w Mainstreaming CCA in plans/policies and programs 8 150 87 87 88 88 CC PAPs TOTAL climate change PAPs 4 990 11 517 11 565 identified in o/w Forest Development 1 430 2 211 5 073 the budget o/w Forest protection 691 938 957 o/w Clonal Nursery and Production of Quality Planting Materials 491 848 (QPM) of Premium and Indigenous forest species o/w soil conservation and watershed management 375 378 485 o/w biodiversity conserv. (Protected Area & Wildlife Service) 388 539 604 142 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level o/w Ecosystems Research and Development Service 271 298 323 Source: NEDA, DENR, DOST – PCIEERD, DOST - PHIVOLCS 143 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 22: Energy sector - comparison of planned and actual funding of selected climate change PAPs 2011-2016 (on appropriation basis, in Php million) Source CC PAPs 2011 2012 2013 2014 2015 2016 CC PAPs TOTAL climate change PAPs 3 431 14 773 32 173 28 507 30 643 20 850 included in the Ensure energy security 1 704 8 258 17 908 14 270 17 433 17 363 PIP o/w Renewable Energy Project 1 167 2 194 10 646 8 108 8 108 8 108 o/w Ocean-thermal Energy Conv. Project. - 2 432 2 432 1 621 1 621 1 621 o/w EE Electric Tricycle Project - 1 032 3 096 3 096 7 052 7 224 o/w Alternative fuels for transport program 17 10 20 20 20 20 o/w Biofuels Program 14 17 24 20 21 24 o/w Philippine EE and Conservation Project 343 1 068 254 25 25 25 o/w detailed Resource Assessment of selected low Enthalpy 2 20 10 30 - - Geothermal Areas Expand the Government’s electrification program 1 727 6 515 14 265 14 237 13 210 3 486 DOE's TOTAL climate change PAPs 217 217 238 262 288 317 work program Alternative Fuels for Transport/other purpose 10 10 11 12 13 14 work program Biofuels Program 17 17 19 20 22 25 2011-2016 National EE and Conservation Program 20 20 22 24 27 29 National RE Program 108 108 119 131 144 158 Participation in local and intern. climate change 12 12 13 15 16 18 talks/conferences Vulnerability Assessment of Energy Systems and 50 50 55 61 67 73 Infrastructures Related climate TOTAL climate change PAPs 528 776 3 756 change PAPs Expansion in the development of sustainable RE 65 65 220 identified in o/w Resource Assessment of Low Enthalphy Geothermal - - 10 the budget Resources Promotion of EE and conservation 441 694 3 448 o/w Philippine EE Project 425 677 46 o/w National EE and Conservation Program - - 25 o/w EE Electric Tricycle Project - - 3 096 Promotion of environmental sustainable transport 22 17 88 o/w Biofuels Program - - 23 o/w Alternative Fuels for Transport/other purpose - - 20 Source: DBM, DOE, NEDA 144 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 145 Part 3: Chapter 3: Critical Public Finance Management Issues Chapter 2: Financing Climate Change PAPs at the Subnational Level 146 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level 66. Chapter 2 takes a closer look at the climate finance issues at the subnational level through two local government case studies that have significant climate programs followed by a more general discussion of the LGU fiscal capacity to finance climate actions. LGUs are front-line agencies for formulating, planning, financing, and implementing climate change action plans in their respective areas. They are quite diverse and highly differentiated across geographic areas based on their vulnerability to climate and weather-related hazards, their technical capacities to formulate and implement adaptive actions, and on their fiscal capacities to finance them. Consequently, the adaptive response to climate change and climate variability is also highly localized as well, with many LGUs in need of significant support. The chapter purposely focuses on two LGUs which have been implementing significant climate programs, Albay province and Makati city, to illustrate what is feasible and to learn how these might be replicated in other LGUs. The two case studies are followed by a more general discussion of the fiscal capacity of LGUs to finance climate actions. 67. While the province of Albay and the city of Makati have proactively led on the climate agenda, their circumstances are quite different presenting two contrasting case studies of local leadership on the climate agenda. Both LGUs have led the mainstreaming of climate change policies and actions in their respective areas by explicitly incorporating climate change issues in their development and land-use plans, enacting complementary local policies, financing climate actions from their own budgets and mobilizing additional external resources. They present contrasting case studies due to their differences in their exposure to climate hazards, specific vulnerabilities, per capita income levels, and poverty incidence. Case Study: Province of Albay -- successfully leveraging external financing for adaptation 68. The Province of Albay represents a highly vulnerable LGU with a high poverty incidence and low fiscal capacity highlighting the necessity of planning and prioritization. As indicated in Part II, the Province is highly exposed to climate and weather-related hazards, experiencing 3 to 5 typhoons annually and has been identified by NDRRMC as being at high or very high risk for impacts from temperature and precipitation changes and typhoons. A GFDRR report identifies Albay as among the 23 provinces most at risk from natural hazards partly resulting from heavy agricultural and infrastructure losses primarily from typhoons and heavy rains. The provincial government of Albay is one on of the poorest in the country with a 2009 per capita income of 837 pesos, less than half the national average of 1509 pesos (see Table 23). Nearly 90 percent of its income is derived from external resources, primarily through the IRA transfers from the national government. The incidence of poverty in Albay has remained high at roughly 43 percent in comparison with the national average of 25 percent–26.5 percent in 2003–2009. About 7 out of 10 provinces had a lower poverty incidence than Albay in 2009 imposing much larger social demands on the government despite its lower than average income. 69. The fiscal capacities of most municipal and city governments within the province of Albay are also closer to the corresponding national averages but for the 147 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level most part are still lower. The total income of municipal government in the province of Albay is on average 13 percent lower than that of the average municipal government nationwide (See Table 23). LGU income per capita of Tabaco City is 29 percent below that of the average city government while those of Legaspi City and Ligao City are, respectively, 10 percent and 8 percent lower than that of the average city government nationwide. Table 23: Per Capita Income of LGUs in Albay for 2009 External Own-source Total LGU Sources incl. revenue Income IRA Albay province 86 751 837 Legaspi City 1,019 2,263 3,282 Ligao City 354 3,007 3,360 Tabaco City 399 2,193 2,592 Daraga 431 960 1,391 Guinobatan 317 1,274 1,591 Polangui 288 1,028 1,316 Tiwi 336 1,506 1,842 Camalig 413 1,125 1,538 Oas 91 1,271 1,361 Libon 102 1,168 1,270 Bacacay 80 1,086 1,167 Malinao 136 1,776 1,913 Pio Duran 81 1,694 1,775 Rapu-Rapu 255 1,464 1,719 Santo Domingo 254 1,327 1,580 Malilipot 349 1,245 1,595 Manito 95 1,806 1,902 Jovellar 87 2,154 2,240 All Albay Muni a/ 164 849 1,013 National average Province 170 1,339 1,509 City 1,316 2,333 3,649 Municipality 268 1,565 1,833 Author's estimates based on LGU income data f rom the Bureau of Local Government Finance (BLGF) f or LGU income and poverty incidences f rom National Statistical Coordination Board (NSCB) 70. Cognizant of the adverse impact of climate and weather-related hazards on poverty reduction and the achievement of the MDGs, the provincial government of Albay has proactively enacted policies and programs that have facilitated the financing of climate actions, despite its relatively weak fiscal capacity. The Albay Provincial Government started to mainstream CCA and DRRM in its provincial development plan even prior to the enactment of the Climate Change Act and the DRRM Act. For instance, in 2007, the Government proclaimed CCA as provincial policy in 2007 funded the Albay Action for Climate Change program in its budget and reorganized the Provincial Land Use Committee and CLUP Technical Working Group. In 2009, the Provincial Development Council approved the 2011–2016 Provincial Development and Physical Framework Plan (PDPFP) which explicitly recognizes climate change action 148 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level and disaster risk reduction as essential to the attainment of the province’s overall development goal of achieving the MDGs. Its development plan ordains the concentration of high-regrets investments and developments (such as physical infrastructure, settlements, heavy industries) in landscapes which are less exposed to hazards and which are not environmentally constrained. Accordingly, the PDPFP calls for the development of the Guinobatan-Camalig-Daraga-Legaspi (GUICADALE) platform, signaling the shift of new economic development and settlements towards safer zones. In this sense, a CLUP that is risk-based is deemed to be the key climate adaptation and DRRM instrument. The development plan also includes the construction of disaster- proofed school buildings in safe areas (away from flood prone areas) with provision for safe and sanitary evacuation facilities and proposals for retrofitting four health care facilities located in flood or landslide-prone areas. 71. Albay has appropriated about 15 percent of its budget for climate change/DRRM programs, significantly higher than the national commitment, reflecting its strong leadership on climate actions. Table 24 provides a snapshot of the climate change and DRRM related appropriations in the budget of the provincial government of Albay for the years 2008-2012. The Government appropriated Php 761 million for climate change/DRRM actions, representing more than 15 percent of its total budget during this period. This is about 7 to 8 times higher than the national Government’s appropriations of 2 percent of its budget in 2012 and is at the high end of expenditures among countries that have completed a CPEIR.48 72. After rising sharply in 2009, Albay’s aggregate appropriations on climate change/DRRM related activities have tapered off in 2010–2012. Nonetheless, its combined appropriations for climate change related activities in 2012 are 80 percent higher than the 2008 level in real terms. Concomitantly, the share of climate change related activities in Albay’s budget rose from 12 percent in 2008 to a peak of 17 percent in 2009 and 2011 before contracting to 15 percent in 2012. The ramping up of the province’s climate change spending coincides with the creation of the Centre for Initiatives and Research on Climate Adaptation (CIRCA).49 48 The climate relevant expenditures as a proportion of total expenditure for six countries that have completed a CPEIR are as follows: Thailand 2.7%, Nepal 6.7%, Bangladesh 5.5 to 7.2%, Cambodia 14.9 to 16.9% and Samoa 15%. Caution should be taken in making cross-country comparisons of climate expenditure shares due to difference in methodology and scope and judgment involved in CPEIRs (UNDP 2012). 49 The province established the CIRCA in 2008 in collaboration with the EMB, World Agroforestry Centre, and Bicol University “to enhance the ability of Albay residents, in particular , and Filipinos, in general, to cope with climate change.� 149 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 24: Appropriations for climate change/DRRM Initiatives of the Province of Albay, 2008–2012 (in million pesos) PAPs 2008 % 2009 % 2010 % 2011 % 2012 % 2008-12 % PAPs with adaptation co-benefits 89.4 11.9 140.7 16.1 148.5 14.6 176.3 16.0 185.5 15.0 740.3 14.9 APSEMO 7.3 1.0 11.8 1.3 7.3 0.7 8.2 0.7 8.8 0.7 43.3 0.9 CIRCA 3.3 0.3 2.0 0.2 2.5 0.2 7.8 0.2 LDRRMF 36.0 3.3 53.3 4.3 89.3 1.8 Counterpart Fund for barangay DRR-related proj. 30.0 4.0 72.0 8.3 72.0 7.1 72.0 6.5 72.0 5.8 318.0 6.4 Drainage improvement 12.2 1.6 12.6 1.4 17.5 1.7 18.1 1.6 5.0 0.4 65.4 1.3 Development of road network 40.0 5.3 44.3 5.1 48.4 4.8 40.0 3.6 43.8 3.5 216.6 4.4 PAPs with mitigation co-benefits 3.0 0.4 3.1 0.4 3.0 0.3 6.0 0.5 6.0 0.5 21.1 0.4 Environmental management incl. sanitary landfill 3.0 0.4 3.1 0.4 3.0 0.3 6.0 0.5 6.0 0.5 21.1 0.4 Total CC/ DRR program (in current prices) 92.4 12.3 143.7 16.5 151.5 14.9 182.3 16.5 191.5 15.5 761.4 15.3 Total appropriations (in current prices) 753.2 100.0 872.1 100.0 1,013.5 100.0 1,101.7 100.0 1,237.4 100.0 4,978 100.0 Total CCA/ DRR program (in 2008 prices) 92.4 139.9 141.4 163.5 166.8 Source: Status of Appropriations, Allotments and Obligations of Provincial Government of Albay, various years 73. Climate appropriations of the province are focused almost entirely on CC- adaptation programs which account for more than 97 percent of total climate change/DRRM spending during the 2008–2012 period. Given the province’s vulnerability to the effects of climate- and weather-related hazards, it is not surprising that about 70 percent of its aggregate allocation to CC-adaptation programs is on account of DRRM, namely the Calamity Fund/LDRRMF, counterpart funding to barangays for DRRM-related activities, the Albay Safety and Emergency Management Office (APSEMO), and drainage improvement projects.50 The remaining 30 percent of its aggregate allocation to CC-adaptation programs are mainly for infrastructure outlays in support of the redirection of development towards less hazardous, lower-risk areas, a clear manifestation of the mainstreaming of the CC-adaptation agenda in the Provincial Development Plan. 74. The provincial government of Albay has effectively leveraged its own resources to implement many more CCA and DRRM PAPs by cost sharing and collaborating with various NGAs and the development partner community. The total financial assistance Albay received from NGAs and various development partners on account of CCA and DRRM in 2008–2012 is equal to about 82 percent of what the provincial government spent on its own (see Table 25). For example, the provincial government is continuously building up the capacity of its staff as well as the capacities of its component cities and municipalities to undertake risk mapping, which is an 50 The APSEMO was created by virtue of a local ordinance as early as 1994 (long before the DRRMA mandated the creation of such an office at the local level). It has 25 permanent staff and is tasked to be the technical and administrative arm of the Provincial Disaster Risk Reduction Management Council (PDRRMC). As such, it coordinates and executes disaster management activities under the close supervision of the Provincial Governor/PDCC Chairman. 150 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level essential input to DRRM preparedness, damage assessment, response, relief, and recovery, in cooperation with various partners from both NGAs and the development partner community. Some of the activities that the Province has been engaged in include localized climate forecasting and statistics and flood mapping in partnership with the PAGASA; Landslide mapping in partnership with the Mines and Geoscience Bureau (MGB) of the DENR; Mudflow/lahar mapping in partnership with Manila Observatory; Training of 18 component LGUs for the mainstreaming of CCA and DRRM in their CLUPs and integration at the provincial level under the MDG-F/UNDP; and soil analysis for 15 municipalities by the BSWM of the DA; Earthquake mapping, volcanic hazard mapping, Rapid Earthquake Damage Assessment System Software Training in partnership with PHILVOCS. 75. In addition, the provincial government has been successful in mobilizing resources from NGAs and Departments for the more costly climate change related investments in its development plan (Salceda 2010): Some of these projects include Upgrading of health facilities (DOH); Construction of school buildings including those damaged by typhoons (DepED); Relocation of households in high-risk areas—National Housing Authority (NHA), DSWD, and NGOs); Construction of new international airport (DOTC); Development of new road network (DPWH and JICA); Bicol River Basin and Watershed Project (WB with national government counterpart); Mangrove plantation (DENR). Table 25: Funding Assistance to the Provincial Government of Albay for Climate Change related Programs, 2008–2012 (in thousand pesos) Donor / National Government Agency Year Amount Foreign: 141,663 1. AECID 2008-2011 139,116 2. Government of Korea 2008-2011 2,147 3. UNDP (CIRCA) 2009-2012 400 National Government Agencies 486,132 1. Dept. of Health (DOH) 2010-2011 40,308 2. Dept. of Social Welfare & Devt. (DSWD) 2010-2011 14,000 3. Dept. of Agriculture incl. BSWM 2010-2011 20,963 4. PAS-PCCARD 2010-2011 659 5. NIA 2010-2011 135,000 6. PGA-NEDA MOA (LGU-SUMMIT) 2010-2011 3,500 7. TF Calamity Fund - OCD 2010-2011 22,535 8. DepED - NG-LGU counterparting for classroom construction 2010-2011 86,000 9. DOTC - new International Airport 2010-2011 36,000 10. DBM 2010-2011 127,168 Grand total 2008-2012 627,795 Source: Provincial Budget office 151 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Case Study: Makati city – using own resources for climate adaptation and mitigation 76. Makati city represents a less vulnerable LGU with a low poverty incidence and high fiscal capacity highlighting the local competitive advantages of engaging in climate actions. Makati city is less exposed to climate and weather-related hazards compared to the rest of country, but it has experienced flooding in some of the barrangays along the Pasig river and nearby creeks. It had the lowest poverty incidence of 1.4 percent among all the cities in 2009, consistently well below the national average and National Capital Region (NCR) average.51 As the country’s financial and commercial center, Makati City has been able to raise significant revenue from its own-source. As a result, the city government’s total income per capita is more than twice that of other cities in the NCR and is close to four times that of the average non-NCR cities in 2009 (see Table 26). Table 26: Per Capita LGU Income of Makati vis-à-vis Other Cities, 2009 External Own-source Total LGU Sources incl. revenue Income IRA Makati 15,835 1,359 17,194 Other NCR cities 3,380 4,653 8,032 Non-NCR cities 974 3,479 4,453 All cities 1,957 3,766 5,722 Author's estimates based on LGU income data from the Bureau of Local Government Finance (BLGF) for LGU income and poverty incidences from National Statistical Coordination Board (NSCB) 77. Towards maintaining its premier status as the Philippines’ center of finance and commerce, the Makati city government has proactively enacted policies and implemented programs to address environmental concerns including those raised by climate change. Formulated in 2000, the latest CLUP, recognizes the need to address existing environmental concerns for preserving the city’s predominant status as the center of finance and commerce in the country.52 In line with this, the Sangguniang Panlungsod (the city legislative body) of Makati has passed several ordinances on environmental management and the city has developed PAPs (e.g. solid waste management, urban greening, and vehicular emission control) aimed at improving the livability of the city and also reducing greenhouse gas emissions. In recent years, the city has been actively participating in various global networks of cities on benchmarking and capacity building 51 Poverty incidence for Makati based on the small-area estimates of the NSCB were 3.7, 1.9, and 1.4 percent in 2000, 2003, and 2009 respectively. The corresponding poverty incidence estimates for the National Capital Region were 7.8, 6.9, and 4.0 percent while the national averages were 33, 30, and 26.5 percent. 52 Makati city recently updated its CLUP (2013-2023) has been approved by the Metro Manila Development Authority and pending its ratification by the Housing and Land Use Regulatory Board becomes final. It is said to be a model CLUP which highlights climate and disaster resiliency. 152 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level activities related to climate change and disaster risk management.53 While the impacts of climate and weather-related impacts are less severe than other parts of the country, the city continues to undertake measures to reduce flooding risks in low-lying areas.54 78. Climate change/DRRM programs account for over 8 percent of Makati city’s expenditures in 2008-2012, significantly higher than the national commitment, reflecting its strong leadership on climate actions. Table 27 provides a snapshot of the climate change and DRRM related spending of Makati city for the years 2008-2012. The city Government appropriated Php 5.9 billion for climate change/DRRM actions, representing 8.4 percent of its total expenditures budget during this period.55 While expenditures have fluctuated from one year to the next, they have grown in real terms at an annual average rate of 17.5 percent. The total expenditures in 2012 were Php 1.8 billion, accounting for 11.3 percent of the city’s total expenditures. This is about 5.5 times higher than the commitments of the national Government which appropriated about 2 percent of its budget in 2012 and comparable to the median level of expenditures among countries that have completed a CPEIR. 79. Makati spends about 4 percent of its budget on climate change mitigation activities, about 3 to 4 times higher than the share in the national budget. Close to 45 percent of the city’s spending on climate change-related activities in 2008–2012 is on account of mitigation activities (Table 27). This is consistent with the city’s focus on promoting itself as a green/livable city to increasing its competitiveness. While its mitigation expenditures have fluctuated year to year, they have peaked at 5.3 percent of total expenditures in 2012. This is more than 4 times larger the share of mitigation in the national budget.56 The city’s spending on climate change mitigation is focused on transport sector interventions (about 64 percent) that are intended to reduce GHG emissions by reducing vehicular traffic57 and the promotion of energy efficiency (about 34%). Other mitigation activities include the urban greening program to increase carbon sequestration through the planting of trees in open areas and parks and the development of more green space, capacity building and IEC programs, and solid waste management program (specifically solid waste reduction, recycling, and segregation) which is expected to result in the reduction in methane emission and lower fuel consumption of garbage trucks. 53 Some examples are International Council for Local Environmental Initiatives [ICLEI], Cities for Climate Protection Campaign, and the WB and UNISDR Climate Resilient Cities Initiatives. 54 Examples of interventions include drainage improvement, maintenance of drainage system and waterways, relocation of illegal settlers, especially those living along creeks and waterways; strict enforcement of ordinances and laws regarding encroachment, dumping of garbage, waste segregation, and other environmental laws; and Pasig River rehabilitation program. 55 These data do not reflect the resources that cities/municipalities transfer to barangays, some of which is used to fund climate change programs. 56 In 2012, appropriations for mitigation were 0.25 percent of the national budget. In addition, PAPs that provided both adaptation and mitigation benefits accounted for 0.35% of the national budget. 57 These include road improvement projects and the construction of more walkways connecting different buildings in the central business district. The city’s transport strategy also include s the adoption of the e-jeepney, and the anti- smoke belching campaign. 153 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 27: Spending on CCA and DRRM Programs and Projects of Makati City, 2008–2012 (in million pesos) PAPs 2008 % 2009 % 2010 % 2011 % 2012 % 2008-2012 % PAPs with mitigation co-benefits 386.0 4.2 630.2 5.0 354.1 2.6 390.5 2.1 857.5 5.3 2,618.4 3.7 Transportation 367.6 4.0 327.9 2.6 292.6 2.2 177.0 0.9 498.6 3.1 1,663.8 2.4 Land development & road maintenance 367.3 4.0 327.7 2.6 292.5 2.2 176.9 0.9 498.5 3.1 1,662.8 2.4 Anti-smoke belching campaign 0.3 0.0 0.2 0.0 0.2 0.0 0.2 0.0 0.1 0.0 1.0 0.0 Energy efficiency 3.5 0.0 290.7 2.3 51.0 0.4 204.0 1.1 350.1 2.1 899.3 1.3 Urban greening 14.1 0.2 10.8 0.1 10.2 0.1 9.1 0.0 8.3 0.1 52.3 0.1 Capacity building programs including IEC 0.6 0.0 0.5 0.0 0.3 0.0 0.3 0.0 0.2 0.0 1.9 0.0 Solid waste reduction 0.2 0.0 0.3 0.0 0.1 0.0 0.2 0.0 0.3 0.0 1.1 0.0 PAPs with adaptation co-benefits 459.0 5.0 479.7 3.8 404.8 3.0 927.7 4.9 990.8 6.1 3,262.0 4.6 Waste collection/ anti-garbage dumping 377.4 4.1 407.4 3.2 401.0 3.0 396.0 2.1 396.0 2.4 1,977.8 2.8 LDRRMF (prevention/ preparedness) 527.8 2.8 568.3 3.5 1,096.1 1.6 Relocation of informal settlers 80.4 0.9 71.2 0.6 3.2 0.0 2.8 0.0 25.0 0.2 182.7 0.3 Capacity building programs 1.3 0.0 0.8 0.0 0.4 0.0 0.9 0.0 1.4 0.0 4.8 0.0 Rainwater collection 0.0 0.3 0.0 0.1 0.0 0.2 0.0 0.1 0.0 0.6 0.0 Total CC/ DRR program (in current prices) 845.0 9.3 1,109.9 8.8 758.9 5.7 1,318.2 7.0 1,848.4 11.3 5,880.5 8.4 Total LGU spending (in current prices) 9,094.8 12,581.1 13,422.0 18,835.4 16,320.8 70,254.3 Total CC/ DRR program (in 2008 prices) 845.0 1,079.9 708.5 1,182.6 1,610.0 Source: Makati City Government 80. Despite being less vulnerable than the rest of the country, Makati city spent about 5 percent of its budget on adaptation activities, significantly higher than the national average. The city’s spending on climate change adaptation is largely concentrated on PAPs that address flooding and on DRRM (see Table 27). The major adaptation activities are waste collection, anti-dumping campaign to curtail the obstruction of waterways with garbage (about 61%), DRRM and management including conduct of risk and vulnerability assessment, installation of early warning systems (about 34 percent) and the relocation of informal settlers along waterways (about 6 percent). Other adaptation activities include drainage improvement58, including declogging operations to minimize flooding in low-lying areas, clearing of easements along waterways and creation of linear parks, and rainwater harvesting. 58 Appropriations for drainage improvement is lumped together with road improvement. 154 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Fiscal Capacity of LGUs General Fund Income of LGUs 81. While LGUs are empowered to raise revenues internally, the Internal Revenue Allotment has grown to provide over 70 percent of the LGU incomes nationally. Table 28 summarizes the evolution of the total General Fund income of all LGUs from 2008 to 2012. LGUs income have increased from Php 229 billion to Php 316 billion and correspond to around 18% of the national budget during this period. The Internal Revenue allotment, which are direct transfers to LGUs from the national government accounts for about 70 percent of the total income of LGUs. The remaining LGU income is derived from internal LGU sources and the mobilization of other external sources. Table 28: General Fund Income of LGUs, 2008–2011 (in million pesos) 2008 2009 2010 2011 a/ 2012 a/ Total Income 229,239 262,416 299,778 325,443 315,654 of w/c IRA 154,302 185,680 204,996 229,555 218,648 Memo item: Calamity Fund/ LDRRMF 11,462 13,121 14,989 16,272 15,783 LDF 30,860 37,136 40,999 45,911 43,730 a/ projected Source: COA Annual Financial Report, various years 82. Most LGUs are dependent on external sources for over 85% of their income resulting from the uneven distribution of the Internal Revenue Allotment and capacity of LGUs to generate income internally. As summarized in Table 29, LGU income and IRA amounts are not uniformly distributed across LGUs. The average city is more than two an half times richer than the average province with per capita LGU incomes of 3649 and 1509 respectively. While cities on average receive higher IRA allotments on a per capita basis than provinces or municipalities, the big difference arises from the significant capacity of cities to raise revenues from internal sources, making them less dependent. Whereas the average province and municipality relies on external sources for nearly 85 percent of their income, cities generate sufficient revenues that external transfers only accounts for 36 percent of their income. 155 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 29: Per Capita LGU Income by Level of LGU, 2009 (in pesos) External Own-source Total LGU Sources revenue Income incl. IRA Per capita level (in pesos) average province 170 1,339 1,509 average municipality 268 1,565 1,833 average city 1,316 2,333 3,649 Percent distribution by source average province 11.3 88.7 100.0 average municipality 14.6 85.4 100.0 average city 36.1 63.9 100.0 Author's estimates based on LGU income data f rom the Bureau of Local Government Finance (BLGF) f or LGU income and population f rom National Statistics (NSO) 83. IRA contributes to equalizing per capita total incomes for LGUs but the progressivity is smallest with provinces. Tables 30 and 31 summarize the contributions of internal and external resources to the total per capita income of LGUs for LGUs stratified by their poverty incidence. Not surprisingly, LGUs with lower poverty incidence are able to generate more income internally on a per capita basis. The per capita external resources (primarily IRA) for cities is distributed in a highly progressive manner with high poverty incidence cities receiving more than twice the external resources that low poverty incidence cities receive. External resources are distributed almost evenly across municipalities. In contrast, at the province level, the lowest poverty incidence provinces receive 1,680 pesos per capita from external sources compared to 1,156 pesos per capita, nearly 25 percent more than the highest poverty incidence provinces. While the IRA results in a more equal distribution of resources, transferring more resources towards high poverty incidence LGUs, the progressivity is greatest for cities and the least for provinces. Table 30: Per Capita LGU Income of City Governments Ranked According to Poverty Incidence, by Source, 2009 External Own-source Total LGU Sources incl. revenue Income IRA Per capita level (in pesos) Quintile 1 (Richest) 3,124 1,359 4,483 Quintile 2 1,492 2,115 3,607 Quintile 3-5 (Poorest) 663 2,725 3,388 All 1,316 2,333 3,649 Percent distribution by source Quintile 1 (Richest) 69.7 30.3 100.0 Quintile 2 41.4 58.6 100.0 Quintile 3-5 (Poorest) 19.6 80.4 100.0 All 36.1 63.9 100.0 Author's estimates based on LGU income data f rom the Bureau of Local Government Finance (BLGF) f or LGU income and poverty incidences f rom National Statistical Coordination Board (NSCB) 156 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 31. Per capita income of provincial and municipal governments by poverty incidence for 2009 Provinces Municipal government by province Own- External External Total LGU Own-source Total LGU source Sources Sources Income revenue Income revenue incl. IRA incl. IRA Per capita level (in pesos) Quintile 1 (Richest) 294 1,680 1,974 424 1,621 2,045 Quintile 2 - 4 141 1,295 1,436 249 1,548 1,797 Quintile 5 (Poorest) 135 1,156 1,291 171 1,558 1,729 All 170 1,339 1,509 268 1,565 1,833 Percent distribution by source Quintile 1 (Richest) 14.9 85.1 100.0 20.7 79.3 100.0 Quintile 2 - 4 9.8 90.2 100.0 13.9 86.1 100.0 Quintile 5 (Poorest) 10.4 89.6 100.0 9.9 90.1 100.0 All 11.3 88.7 100.0 14.6 85.4 100.0 Author's estimates based on LGU income data from the Bureau of Local Government Finance (BLGF) for LGU income and poverty incidences from National Statistical Coordination Board (NSCB) 84. There are wide disparities in the overall fiscal capacity of LGUs across levels of local governments and the climate related disaster risk of LGUs, with a higher per capita IRA allotment directed towards less vulnerable provinces. Similarly, Table 32 summarizes the contribution of internal and external resources to total per capita income by hydrometerological risk in LGUs, based on LGU risk classifications done by GFDRR (GFDRR 2010). That study assessed and classified LGUs based on 4 climate related risks. Provinces that are classified by the GFDRR study (2010) as having high risk or very high risk of flooding, rainfall change, El Niño, and typhoons tended to have lower total LGU income per capita than provinces that have low or medium risk. In addition, external resources account for a smaller share of the total income in the higher risk provinces, suggesting that a more equal distribution would equalize per capita total income among provinces under different risk classes. Similar disparities exist for municipalities even though the differences are somewhat smaller for them compared to provinces. 157 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Table 32. Per capita LGU income of provincial and municipal governments ranked according to various hydrometeorological risk, 2009 a/ Provinces Municipal Government by province External External Own-source Total LGU Own-source Total LGU Sources Sources revenue Income revenue Income incl. IRA incl. IRA Flooding Per capita level (in pesos) Low/ medium risk 187 1,502 1,688 288 1,695 1,984 High/ very high risk 121 873 994 203 1,132 1,334 All 170 1,339 1,509 268 1,565 1,833 Percent distribution by source Low/ medium risk 11.0 89.0 100.0 14.5 85.5 100.0 High/ very high risk 12.2 87.8 100.0 15.2 84.8 100.0 All 11.3 88.7 100.0 14.6 85.4 100.0 Rainfall change Per capita level (in pesos) Low/ medium risk 169 1,475 1,644 248 1,672 1,920 High/ very high risk 175 925 1,100 324 1,203 1,528 All 170 1,339 1,509 268 1,565 1,833 Percent distribution by source Low/ medium risk 10.3 89.7 100.0 12.9 87.1 100.0 High/ very high risk 15.9 84.1 100.0 21.2 78.8 100.0 All 11.3 88.7 100.0 14.6 85.4 100.0 El Nino Per capita level (in pesos) Low/ medium risk 186 1,399 1,585 304 1,617 1,921 High/ very high risk 124 1,180 1,303 155 1,370 1,524 All 170 1,339 1,509 268 1,565 1,833 Percent distribution by source Low/ medium risk 11.7 88.3 100.0 15.8 84.2 100.0 High/ very high risk 9.5 90.5 100.0 10.2 89.8 100.0 All 11.3 88.7 100.0 14.6 85.4 100.0 Typhoon Per capita level (in pesos) Low/ medium risk 177 1,375 1,552 284 1,553 1,837 High/ very high risk 150 1,253 1,403 216 1,567 1,783 All 170 1,339 1,509 268 1,565 1,833 Percent distribution by source Low/ medium risk 11.4 88.6 100.0 15.5 84.5 100.0 High/ very high risk 10.7 89.3 100.0 12.1 87.9 100.0 All 11.3 88.7 100.0 14.6 85.4 100.0 Author's estimates based on LGU income and poverty incidence data from the Bureau of Local Government Finance (BLGF) and the National Statistical Coordination Board (NSCB) 158 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level Sources of Financing 85. Funding of CCA and mitigation programs and projects at the local level is highly fragmented and uncertain, creating difficulties for LGUs to plan. The LDRRMF and their Local Development Fund (LDF) are the primary sources of funding for Climate change related activities at the local level. Both of these funds are, in turn, sourced from the General Fund income of LGUs (i.e., sum of own-source revenue and intergovernmental transfers consisting mainly of block grants from the central government in the form of the IRA). On top of their regular General Fund income, LGUs may also tap into other sources of financing, including categorical or conditional grants from NGAs agencies (e.g. PCF, PDAF, BUB, PSF and grants from DPs), direct spending of NGAs on devolved Climate change related PAPs. Table 33 summarizes the key characteristics of the various sources of local climate financing. The sources vary based on the types of activities funded (only climate/DRRM or broad set of activities including climate/DRRM), the target LGU, and cost sharing requirements. The total amounts available during the most recent year and the amounts for climate are also reported. In the case of general funds, the amounts are not guarantees of funding but are indicative of what has been realized. The key features of each of these sources are discussed next. Table 33. Key Characteristics of Local Sources of Climate Financing Source Eligible Purpose Eligible/ Required Annual Amount Available targeted LGUs LGU Cost Most recent Amount of which Sharing Year (Php climate billion) change Amount LDRRMF DRRM; All LGUs n/a 2012 16 70% upto 70 percent for disaster prevention LDF development projects All LGUs n/a 2012 44 n/a including climate change PCF aligned with national Performance 50% 2011 0.5 18% priority assessment and poor municipality/ city/province th th PDAF development projects Poor LGU -4 to 6 none 2008-2010 7 to 10 n/a including climate class municipalities change BUB NGA priorities: achieve 609 poorest 5 to 30% 2013 9 n/a MDG, hunger municipalities elimination, job creation, CCA/mitigation and disaster preparedness PSF climate change LGU and communities n/a 2013? 1 100% adaptation NGA Direct support to devolved none none n/a in-kind n/a Spending function 159 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level LDRRMF: Provides the Base of Support for CCA 86. With the passage of RA 10121, LGUs are mandated to appropriate not less than 5 percent of their regular general fund income for the LDRRMF yearly of which 70 percent can be used for disaster prevention activities, providing a base of support for CCA.59 The LDRRMF is meant to support disaster risk management activities such as prevention (i.e., activities that are intended to avoid potential adverse impact of disaster by constructing dams and flood control structures, formulating and implementing zoning regulations, designing more appropriate structures and settlements; and paying calamity insurance premiums), preparedness (including training, installation of early warning systems, and purchase of life-saving rescue equipment, supplies, and medicines prior to a disaster), relief (i.e., provision of emergency services and public assistance during and immediately after a disaster), and recovery/rehabilitation (including restoration of livelihood and reconstruction of damaged infrastructure).60 While 30 percent of the LDRRMF is meant to be allocated as a QRF or stand-by fund for relief and recovery programs during and after disasters and calamities, the rest (70 percent) may be allocated for pre-disaster preparedness and prevention activities before the occurrence of said events. The law also provides that unexpended LDRRMF shall accrue to a special trust fund that will be used solely for the purpose of supporting DRRM and management activities within the next five years. However, any amount that is not fully utilized after five years shall revert back to the general fund. Thus, the aggregate Calamity Fund/LDRRMF went up from Php 11.5 billion in 2008 to Php 15.8 billion in 2012. 87. While the 2010 Law focuses on the transparent utilization of the disaster funds, requiring monthly reporting from the Departments, the physical verification of the funded activities remains a challenge. At LGU level, it is difficult to track the utilization of LDRRMF’s resources given the purchase of relief goods reported as Maintenance & Other Operating Expenditures (MOOE). Guidelines have been issued by the DILG and NDRRMC on the use of resources earmarked under the LDRRMFs with a long list of eligible equipment, goods, and services. Additionally, the trust fund at LGU level is off budget and thus, activities are more difficult to track. LDF: Could Provide Supplementary but Need to Compete 88. At the same time, the Local Government Code (RA 7160) mandates LGUs to set aside 20 percent of their IRA (as LDF) for the purpose of financing local development projects (Section 287), including CCA/DRRM. RA 7160 further 59 The erstwhile Calamity Fund is now called the Local Disaster Risk Reduction and Management Fund (LDRRMF) under RA 10121 (Section 21). 60 The use of the LDRRM funds at the local level is being questioned by some LGUs, who consider the preset use of the funds as an infringement on their autonomy. While some LGUs consider the resources essential for their disaster preparation and welcome the set-up of a trust fund to protect the use of the resources (in the past, these resources had been set aside on an annual basis and frequently were used at the end of the fiscal year for other purposes such as Christmas bonuses), other LGUs are less prepared to effectively make use of the resources for disaster preparedness. 160 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level provides that the LDF can only be used to finance projects that are explicitly identified in the Local Development Plan (LDP). Given the fairly large fiscal autonomy granted to LGUs under RA 7160 and the many development priorities of LGUs, CCA and mitigation programs and projects will necessarily have to compete against other development priorities of LGUs. This highlights the need to mainstream climate change in local development planning. Thus, the aggregate LDF rose from Php 30.9 billion in 2008 to Php 43.7 billion in 2012 (Table 28). Categorical Grants 89. Categorical or conditional grants from national government sector Agencies and DPs that are specifically meant to be spent on LGU programs and projects that are aligned with national objectives/priorities are another source of funding for LGU CCA and mitigation programs and projects. It should be emphasized that transfers coming from these categorical grants are treated off-budget at the LGU level, i.e., transfers are not co-mingled with the General Fund but are instead put in special accounts. Consequently, it is difficult to get a consolidated view of the total amount of categorical grants received by any one LGU. Given time constraints, it is not possible to have a complete inventory of these conditional grant programs. However, four examples (PCF, PDAF, BUB, and PSF) are cited here because of their importance in providing LGUs additional funding for climate change activities. In addition to specifying how the transfer could be expended, these grants may also require LGUs to finance part of the total project cost. NG-LGU cost sharing schemes are meant to leverage national government resources and to induce LGUs to provide greater funding for the specified service or program. Performance Challenge Fund (PCF): Incentive Based Matching Fund 90. The PCF incentivizes LGUs on good governance by providing matching funds for local development projects that are aligned to national government priorities including on climate change adaptation and disaster preparedness. The DILG manages the Performance Challenge Fund to recognize LGUs that exhibit good performance in the areas of transparency and accountability, planning, fiscal management, and performance monitoring. LGUs that pass DILG’s assessment of good budget management practices are eligible to access the PCF. However, priority is given to poorer LGUs -- 4th to 6th class municipalities and 4th to 5th class cities and provinces. Eligible LGUs can request matching funds for local development projects that are aligned to the following national government thrust and priorities, namely, the achievement of the Millennium Development Goals (MDGs), local economic development, adaptation to CC, and preparedness for disasters. The national government matches the LGU investment 50-50 up to a ceiling based on the LGU level (Php 7 million for a province, Php 3 million for a city, and Php 1 million for a municipality). The cost-sharing arrangement was temporarily suspended in November 2011 pending the rationalization of the government’s overall NG-LGU cost sharing policy. 91. In 2011 a total of 395 LGUs were able to access Php 524 million in PCF subsidies to fund a total of 629 projects with a total project cost of Php 992 million 161 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level (Table 34). CCA and DRRM projects account for 22 percent of the total number of projects and 18 percent of total PCF subsidy. CC/DRRM projects funded under the PCF include construction/repair of flood control structures, reforestation, construction of evacuation centers, acquisition of rescue equipment, and establishment of sanitary landfills, material recovery facilities, and sewerage systems. Table 34: Projects funded under PCF, 2011 No. of projects PCF subsidy Total Project Cost Subsidy rate (PhP M) (PhP M) All projects 629 524 992 0.53 of w/c: CC/ DRR 139 95 205 0.46 % to total 22.1 18.1 20.6 Source: DILG Priority Development Assistance Fund (PDAF): Good Supplement but Difficult to Predict 92. The PDAF (also known as Congressional Allocation) is another source of funding for Climate change related activities. The appropriations for the PDAF went from Php 8 billion in 2008 to Php 10 billion in 2009, Php 7 billion in 2010, and Php 25 billion in 2011–2013. The menu of projects that may be funded under the PDAF includes CC-relevant projects like irrigation, flood control, water impounding, septage and sewerage, housing, and off-grid barangay electrification. Projects funded under the PDAF are identified by members of Congress with each of them being assured of Php 70 million worth of projects and each Senator being assured of Php 200 million worth of projects in 2011–2013. Projects located in 4th to 6th class municipalities are given preference. Funding goes directly to the implementing agency which may either be an NGA or an LGU.61 93. Although PDAF can be a source to fund Climate change related expenditures, it should be noted that this is competing with other social and economic priorities of the legislator to his/her district. The funding may also vary from year-to-year and cannot be used in medium-term planning since members of the Congress changes every three years while members of the Senate changes every six years. Thus, PDAF funding cannot be relied on for medium-term planning Appropriations Lodged in Budgets of National Government Agencies: Bottom-up Budgeting (BUB): Targets Poor Communities Often also the Most Vulnerable 94. BUB offers an opportunity for local communities to better plan and prioritize their activities, as well as to increase collaboration with CSOs. During the preparation of the 2013 national government budget, the government implemented the BUB approach to planning and budgeting as a means of assuring funding of the 61 Only LGUs with the technical capacity may implement PDAF projects. 162 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level development needs of the poorest 609 municipalities. Under the approach, 595 poor municipalities, including several cities with high poverty concentration, prepare their Local Poverty Reduction Action Plan in a participatory manner with the help of CSOs, of which 61 partnerships have been formed so far. The approach is being piloted by the Human Development and Poverty Reduction Cluster and the Good Governance Corruption Cluster to respond to the development needs of poor municipalities and move toward satisfying the Government’s goal to reduce poverty from 26.5 percent in 2009 to 16.6 percent by 2015. The major output of this planning exercise is the identification of projects from a menu of programs that are already being undertaken by selected NGAs and for which target LGUs want to secure funding from said agencies. The participating Agencies under the BUB (DA, DENR, DOE, DOH, among others) were asked to earmark 10 percent of their total budget for programs and projects for the funding requests of the target LGUs. Only DA reached this limit. Like the PDAF, BUB can also be a source for Climate change related expenditures. A list of projects that LGUs can propose is available and captures some types of the projects such as irrigation systems and household electrification in off-grid area, small water impounding structures, and reforestation. The programmed appropriation for all BUB projects in 2013 was Php 8 billion. 95. While the BUB approach is laudable, the details of the design and implementation are under review based on recent experience. All projects submitted by the target LGUs for funding under the BUB from the 2014 national government budget should contribute to the following national government priorities: (1) achievement of MDGs, (2) hunger mitigation and elimination, (3) job generation and inclusive local economic development, and (4) climate change adaptation/mitigation and disaster preparedness under the new guidelines. They also require LGUs to provide counterpart funds equal to 30 percent of total project cost in the case of highly urbanized cities, 20 percent in the case of other cities, 15 percent in the case of 1st to 3rd class municipalities, and 5 percent in the case of 4th to 6th class municipalities.62 The BUB Executive Committee is the approving authority for the Local Poverty Reduction Action Plans. Communities have submitted about 1,500 draft proposals pertaining to “environment and natural resources� directly to the DENR. The lack of adequate guidelines for selecting the projects and the specific role that RDCs can or should play in the selection process are the main issues that remain unresolved. To increase the effectiveness of the BUB, the Government may want to strengthen the linkages between poverty and CCA and mitigation in project selection and review. People’s Survival Fund (PSF): Significant New Source that Needs to be Operationalized 96. Prospectively, RA 10174 assures regular funding of CCA from the national government through the establishment of the PSF. The fund is sourced from both external and local sources, including (1) seed money of Php 1 billion from the GAA for the initial implementation of the law, and (2) donations, endowments, grants, and contributions which shall be exempt from the development partner’s tax and which shall 62 The coverage of the BUB is expanded to include cities and municipalities with poverty incidence of 20% or higher in the 2014 budget. 163 Part 3 -- Chapter 1: Financing Climate Change PAPs at the National Level be considered as allowable deductions from the gross income of the development partner for tax purposes. The law further provides that the balance of the PSF from all sources shall not be less than Php 1 billion. The PSF is meant to support adaptation activities of LGUs that, in turn, support the National Strategic Framework on Climate Change (NSFCC), including adaption activities in the following areas: Water resources management, land management, agriculture and fisheries, health, infrastructure development, fragile ecosystems and integrated coastal zone management; improvement of the monitoring of vector-borne diseases triggered by CC; forecasting and early warning systems as part of preparedness for climate-related hazards; institutional capacity building both for national and local governments, in partnership with local communities and civil society groups, for preventive measures, planning, preparedness and management of impacts relating to CC, including contingency planning for droughts and floods in areas prone to extreme weather events; establishment or strengthening of national and regional centers and information networks for rapid response to extreme weather events; and guarantee for risk insurance needs of farmers, agricultural workers, and other stakeholders. As with the PCF, RA 10174 provides that the PSF shall encourage counterpart funding arrangements among LGUs, community organizations, the private sector, and other entities. At present, the challenge is to craft mechanisms to help in the prioritization of the proposals in a transparent manner. 97. Proposals submitted for funding under the PSF are supposed to be evaluated by the PSF Board based on the following criteria: x Level of risk and vulnerability to CC. x Participation of affected communities in the design of the project. x Poverty reduction potential. x Cost effectiveness and sustainability of the proposal. x Identification of co-benefits extending beyond LGU territory. x Maximization of multi-sectoral and cross-sectoral co-benefits. x Responsiveness to gender-differentiated vulnerabilities. x Availability of a climate change action plan. x Level of compliance with the NFSCC and the NCCAP. Direct Spending on Devolved Functions and Activities by NGAs: Potential Source but Depends on NGA 98. NGAs’ direct spending on devolved functions and activities is an additional source of funding for Climate change related programs and projects at the local level. Many NGAs continue to be involved in the direct delivery of (i.e., they continue to implement) devolved functions and activities. For instance, the resettlement of informal settlers residing in danger zones by the NHA and the implementation of flood control projects by the DPWH do not involve fund transfers to LGUs in general. Instead, the concerned NGAs directly provide the devolved services in the locality. Soriano et al (2005) estimate that 87 percent of non-IRA expenditures of the national government on devolved functions and activities in 2003 were in the form of direct spending by NGAs. 164 Part 3: Chapter 3: Critical Public Finance Management Issues Chapter 3: Critical Public Finance Management Issues 165 Chapter 3: Critical Public Finance Management Issues Part 3: Select Key Messages Public Finance Management x The Government’s 2011 PFM reforms can significantly re -enforce and boosts visibility and effectiveness in the implementation of climate actions and aid the identification, prioritization and monitoring of effectiveness. x Challenges remain at the national and sub-national levels limiting translation of National Climate Change Action Plan Activities into budget planning; however, the adoption of new budgeting tools like the Program Approach and the Bottom-Up Budgeting approach offers unique opportunities to enhance climate outcomes, increase convergence, reduce duplications, and leverage additional resources. x Significant efforts have been made in recent years to integrate climate adaptation and mitigation measures for climate change into budget planning tools at national, sectoral and local level but challenges remain as(i) the NCCAP is not yet used as a strategic tool by the Departments for budget planning, (ii) the various sector plans/strategies are not in sync and (iii) the mainstreaming process is not yet pursued systematically. x Some Departments have experimented with screening and other budget tools to facilitate mainstreaming of climate change aspects in budget planning at national and subnational levels; but this is limited to a few Departments/LGUs. x An assessment of Monitoring and Evaluation systems under the Departments of Agriculture and Environment and Natural resources showed numerous reporting requirements and limited capacity and knowledge to use the data for strategic planning purposes. 100. Chapter 3 focuses on the selected public finance issues across the budget cycle, including the budget planning and process, procedures, budget transparency and execution, and M&E. It presents an overview of the Philippines’ PFM System and seeks to assess current efforts and progress made in mainstreaming climate change considerations in the budget cycle. Unlocking the Budget Process to Mobilize Climate Finance 101. The budget serves as the instrument by which resources are allocated to PAPs with the budget process providing entry points for mobilizing finance for climate actions. Given fiscal constraints and competing development priorities, it is a challenge for the government to mobilize additional resources for CC. It is therefore important to understand the budgeting process and allocation of resources among Departments to examine constraints and opportunities to finance climate change PAPs. The budget cycle comprises four phases (see Figure 36):63 x Budget preparation x Budget legislation x Budget execution x Budget accountability 63 The following brief description of the budget cycle is based on the information included in the PEFA and the draft Report on Conceptual Design for Government Integrated Financial Management Information System (GIFMIS) 166 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level Figure 36: The Philippine Budget Cycle Start Here Budget Call Stakeholder Technical Budget Ennaaem,..nt Hearings Year-End Budget Performance Assessment Executive Review Preparation Review Quarterly Agency Performance Review The Budget Consolidation, Validation and Cycle Confirmation Budget Presentation to the These four phases of the Accountability President and Cabinet Reports budget cycle overlap in continuing cycles every year. For instance, while President's Performance Budget Targets & the Executive implements Outcomes the budget for the current year, it also prepar es Accountability House the budget for the next Deliberations fiscal year or defends Disbursement it before Congress. Senate Meanwhile, the execution Deliberations and accountability Allocation phases are implemented Bicameral simultaneously year- Deliberations round. Incurring ' c1 --- Obligations Allotment Release Execution Ratification and Enrolment --:' (ABM&SARO) President's Enactment and Veto Allotment and Cash Budget Execution Release Guidelines Legislation Release Programming Documents and Program Source: DBM 167 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level 102. Budget Preparation. The annual budget process officially starts with the issuance of the National Budget Call by the DBM through a National Budget Memorandum to guide all NGAs in budget preparation activities. The budget call contains the overall macroeconomic and fiscal policy framework and priority areas of the Government’s PAPs, the Department’s budget ceilings, and guidelines for the preparation of the Agency’s budget and sets the schedule of budget preparation activities.64 Based on the budget ceilings, the Departments prepare their budget estimates in consultation with LGUs, CSOs, and the Regional Development Council (RDC). These are submitted to the DBM (depending on the deadline prescribed in the budget call memorandum) and are then subject to several reviews at DBM, including the Technical Budget Hearing sessions (held by various Budget Management Bureaus in DBM) and the Executive Review Board (composed of the DBM Secretary and other senior officials within DBM). NGAs defend their proposed budgets, based on performance indicators, on output targets, and on absorptive capacity. The consolidated draft budget proposal is submitted to DBCC and the Cabinet for approval. Once endorsed, the budget proposal would be presented to the President. 103. Budget Legislation. Budget legislation starts upon the House Speaker’s receipt of the President’s Budget and ends with the President’s enactment of the GAA. Various deliberations are held on the budget submitted by the President including (1) deliberations by the House of Representatives leading to preparation of General Appropriations Bill (GAB) and its transmission to the Senate, (2) hearings on GAB by the Senate, which recommends amendments as applicable, and (3) bicameral deliberations to discuss and harmonize the conflicting provisions of the House and Senate Versions of the GAB. Based on these, a harmonized version of the GAB is produced and enacted as GAA by the President. 104. Budget Execution. Budget execution process begins with the issuance of guidelines on the release and utilization of funds and the submission of budget execution documents (BEDs) such as the Physical and Financial Plan, Monthly Cash Program, and Program of Monthly Income and List) by NGAs. Various divisions of the spending Agencies prepare the BEDs that are submitted to the DBM. On the basis of GAA, DBM prepares an Agency Release Program (ARP), defining the limits for allotments issued to an Agency, and the Cash release program (CRP) that sets the guidelines for disbursement level for each month in the year. Allotments, which compel an Agency to enter into an obligation, are released by DBM either comprehensively through the Agency Budget Matrix (ABM) or individually via Special Allotment Release Orders (SAROs). Based on the approved allocations, the NGAs undertake the execution of proposed programs and projects. NGAs can incur obligations when signing a contract or placing an order for the delivery of goods and services. DBM issues a disbursement authority to 64 The budget ceilings refer to the indicative levels arrived at in the formulation of the forward estimates. The forward estimates serve as the basis for the issuance of the indicative budget ceiling, which shall guide Agencies in the preparation of their respective budget proposal. The forward estimates cover the estimated annual cost of ongoing budgetary programs and projects. 168 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level authorize an Agency to pay the obligations either in the form of a Notice of Cash Allocation (NCA) or, in special cases, as a Non-Cash Availment Authority (NCAA) and Cash Disbursement Ceiling (CDC). In this final step of the budget execution phase, the payment orders issued by the NGAs are processed and payments are released to the employees, suppliers, and other payees through checks, which are encashed by the payees at respective Government Servicing Banks. 105. Budget Accountability. The final important element in the budget cycle focuses on monitoring, control, and evaluation of budget execution. Based on guidelines issued by DBM on the preparation and submission of Budget Accountability Reports (BARs), NGAs have to submit financial and physical reports on a monthly or quarterly basis.65 In addition to the accountability reports, NGAs also have to submit financial statements to the Commission on Audit (COA) and the Bureau of Treasury (BTr) for examination, audit, and settlement of accounts.66 The internal audit is performed by the internal audit staff from respective NGAs and external audit is carried out by the COA. DBM introduced a “no report, no-release� policy in 2012 which allows DBM to put subsequent fund release to an Agency on hold regardless of call-up letters, in case of non-submission of reports. 106. Annual Budget Performance Reviews are conducted mid-year and annually by DBM, in coordination with NGAs, and focus on the performance of an Agency in delivering MFOs. The reviews analyze financial and physical performance data (MFO performance indicators and targets) captured from Agency budget accountability reports submitted to DBM. At year end, all financial and physical performance information is analyzed and consolidated as a report to the President and Congress on the performance of NGAs in delivering MFOs. 107. The entry points along the budget cycle exist where climate change considerations could be incorporated include. The inclusion of NCCAP outcomes and strategies into the 2011–2016 PDP and the inclusion of NCCAP priority programs and activities in the PIP are key entry points for integrating adaptation and mitigation activities in the budget planning process. The costing of NCCAP priority programs and activities and their inclusion in sectoral MTEFs will enhance the ability of sector Agencies to access resources from the fiscal space available in the medium-term fiscal program when the budget proposals of Departments and Agencies are evaluated in the Technical Budget Hearings (TBHs) and Executive Review Board. Likewise, the TBH can provide the venue for the DBM to include CCC’s technical advice in evaluating requests for funding of PAPs above the ceiling with a climate lens. In the budget accountability sphere, the ongoing initiatives to improve the performance indicators for each of the MFOs in the OPIF of Departments and Agencies represent another 65 Reports submitted by the spending Agencies are Quarterly Physical Report of Operation (BAR 1); Quarterly Financial Report of Operation (BAR 2); Quarterly Report of Income (BAR 3); Statement of Allotments, Obligations and Balances (BAR 4); and Monthly Report of Disbursement (BAR 5). 66 The reports submitted by spending Agencies to COA and BTr are as follows: Trial Balance (monthly), Balance Sheet (quarterly), Statement of Income and Expenses (quarterly), the Statement of Cash Flows (quarterly), and the Statement of Government Equity (quarterly). 169 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level opportunity to improve the effectiveness of Climate change related programs.67 The secondary tagging of Climate change related PAPs will facilitate tracking of national government spending with CCA and mitigation co-benefits. Box 5 provides an example of such a system used for tracking expenditures for poverty in Uganda. The TBH that promotes the effectiveness of climate change programs and activities, and BARs, financial statements, and annual budget performance reviews provide opportunities for monitoring and evaluating the effectiveness of Climate change related interventions. Box 5: Secondary Tagging – Lessons from Uganda’s Virtual Poverty Fund ƒ Virtual Poverty Fund (VPF). VPF uses existing budget classification system for tagging and tracking the performance of specific poverty-reduction expenditure in the budget. A number of budget codes are hereby identified that label a portion of government expenditures as poverty-reducing. In principle, a well-designed VPF would allow for (i) maintaining the integrity of budget management and systemic reforms, (ii) adapting the existing budget classification system to “tag� pro -poor programs (hence “virtual� poverty fund), (iii) linking specific (e.g., HIPC) resources to these budget allocations, (iv) protecting budget disbursements to these programs, and (v) monitoring of performance of these expenditures. ƒ Uganda’s Experience with its VPF. In response to the need to ensure budget expenditures are orientated toward poverty reduction, the Government of Uganda introduced the Poverty Action Fund (PAF) in 1998. The setup of the PAF was simple and did not require additional institutional arrangements. The PAF has been successful in (i) re-orientating Uganda’s budget allocations toward pro -poor service delivery by ensuring additional resources were channeled to specific priority programs of Uganda’s Poverty Eradication Action Plan (as a result, allocation to PAF programs increased rapidly with the main beneficiary being local governments), (ii) mobilizing donor resources and harmonizing conditions by organizing more sector-specific donor resources and supporting donors’ shift from project to budget support, and (iii) improving budget predictability, transparency, and accountability. ƒ Some Key Lessons. The PAF experience in Uganda has demonstrated a number of key lessons on how to establish VPFs as mechanisms for tracking and monitoring poverty reducing expenditures: A VPF should be simple, regarded as a mechanism to identify priority expenditures in the budget classification system in alignment with the Poverty Reduction Strategy Paper. The definition of the programs included in the VPF should be reviewed regularly. Tracking of performance of the expenditures should be within a transparent budget-wide reporting and review system. A VPF should also support rather than replace the implementation of a country’s public expenditures management reforms. A key element of VP Fs, the protection of VPF expenditures, should be linked to a system of controlling overspending in other parts of the budget to limit the shocks to unprotected sectors. Source: T Williamson and S. Canagarajah. Is there a place for virtual poverty funds in pro-poor public spending reforms? Lessons from Uganda’s PAF 2003 67 Reform efforts focus on revisit the agencies’ PAPs to restructure and attribute every PAP to one MFO rather than the current set-up wherein one PAP can be attributed to multiple MFOs. 170 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level Public Finance Reforms: Opportunities for Improving Planning, Prioritization, Execution and Monitoring of climate change PAPs 108. The Government launched a comprehensive PFM reform program in February 2011 aiming to modernize processes and improve management efficiencies across the PFM lifecycle; the PFM reform agenda mutually reinforces and boosts visibility and effectiveness in the implementation of climate action. The objectives and coverage of the reform program are articulated in Philippines “Public Financial Management Reform Roadmap,� which constitutes a strategic plan for a whole-of- government approach to PFM reforms and aims to clarify, simplify, improve, and harmonize the financial management processes and related information systems of the civil service (see box on Philippines reform map below). The implementation of the reform program has yielded some encouraging results: 1. Improved reflection of policies and priorities in the budget (e.g., introduction of programs and associated budget aligned to the Social Compact budget priorities, associated itemization of lump sums, and timely passage of the budget in the past 2 years) 2. Modernization, standardization, and regulation of procurement activities of all levels of government, including LGUs or the refinement of the Major Final Outputs (MFOs), performance indicators (PI) and restructuring of the PAPs). 3. Improved expenditure evaluation capacity of DBM/NEDA (for example, introducing ZBB approach 2011–2013 to evaluate major programs).68 4. Implementation of transparency and accountability measures, including a review of all existing projects and bids in government Agencies to increase operational efficiency and the adoption of the Full Disclosure Policy and PFM Assessment Tool at the subnational level. 5. Improved budgeting and public expenditure targeting in some line ministries (e.g., adoption of MTEFs by selected Departments such as DepED, DPWH, DENR, and DOH supporting a more strategic allocation of resources). 68 Zero based budgeting approach guides DBM’s decisions to continue funding major ongoing PAPs based on a review and evaluation on whether the program objectives were achieved and if the PAP remains relevant. It ascertains if alternative or more efficient and effective ways to achieve the desired goals and objectives of the programs are available. The ZBB is implemented in the context of the Government’s broader development goals and PAPs need to be aligned with the President’s Social Contract and the 16 areas of Transformational Leadership. It must include programs for poverty reduction and empowerment of the vulnerable and marginalized sectors; ensure a sustained and inclusive growth, leveling the playing field as well as nurturing competitive industries. Budgets must also focus on programs, projects that encourage integrated and safe communities and sustainable use of resources for future generations. Finally, PAPs must be aligned with the major final outputs of agencies and each output should have at least three (3) performance indicators. These will allow the RDC-secretariat and NEDA to monitor and recommend for expansion if PAPs are effective; for reduction if below optimum and for phasing out if the PAPs are ineffective. As a matter of policy, the Zero-based budgeting approach can scale down if not totally eliminate all allocations for programs that are not aligned with these goals. 171 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level 109. A range of these recent reforms have already contributed to improving the management of Climate-related PAPs. For example, the programmatic approach has aligned and improved budget coordination of multiple Agencies in the implementation of Climate change related activities in specified ecosystems and river basins. Other example include the support of DBM’s Account Management Teams to monitor and support budget execution of several Departments that manage climate PAPs (e.g., DENR and DOE), the strengthening of procurement procedures (e.g., the review of contracts of DPHW’s flood control projects to improve operational efficiency), and the assessment under the ZBB approach of DENR’s reforestation program. Other reforms, such as establishment of a new Unified Account Code Structure (UACS) in the medium term for budgetary, accounting, and treasury transactions and auditing will enhance the mid-year and year-end M&E of Climate PAPs, particularly in tracking spending from appropriations, to allotments, to obligations and disbursements. The priorities of the Philippines PFM Reform Roadmap are: a. Increasing the efficiency and effectiveness of the allocation, utilization, and reporting of budgeted funds by oversight agencies; b. Improving PFM capability in select Departments to enable more efficient utilization and accountability of public funds for service delivery; c. Generating more timely, reliable, and accessible public expenditure management information; and d. Strengthening external oversight of public expenditure management linked to physical performance information. Instruments of Reform: Budget Procedures 110. In an effort to strengthen the reflection of policies and priorities in the budget as laid out in the social contract and the five KRAs, the Government introduced a number of budget procedures such as the adoption of the Program Approach and the bottom-up budgeting (BUB) approach to promote the focus on critical program targets underlying the five KRAs and to converge with the development needs of poor/focus cities and municipalities. Given the multi-sectoral nature of CC, these budget procedures provide opportunities to: 1. Enhance the effectiveness of NCCAP implementation. 2. Mainstream climate change considerations in bottom-up planning approaches. Program Approach: Potential for Convergence, Design critical for Effectiveness 111. The adoption of the program approach in the FY 2013 offers a unique opportunity for the Philippines Climate Change Agenda to bring about convergence 172 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level and greater coordination in the related activities of several Departments. In doing so, it can enhance the effectiveness of the selected program, reduce duplication of interventions, and leverage additional resources from the Departments’ budgets. In an effort to ensure the accomplishment of the key performance targets under the five KRAs of the President’s Social Contract with the Filipino People, the Government committed to use its fiscal space or uncommitted resources for the five key programs managed by each of the Clusters based on a holistic program approach. The Cabinet Cluster on Climate Change adopted the 18 major river basins as a priority site for implementing the Program Approach on climate change. The CCC led nine Departments/Agencies to craft the program “managing risk of communities within the 18 major river basins vulnerable to critical geological and hydro meteorological hazards through enhancing local adaptive capacity and strengthening natural ecosystems’ resilience to climate change and disasters.�69 The total appropriations for this program amount to Php 13.6 billion with the bulk of the funding coming from DENR (Php 9 billion, of which 73 percent of the funds are allocated to watershed and river basin management activities, 17 percent to Namira’s large-scale topographic base mapping, and the remaining 10 percent to various other items). As an oversight Agency, the CCC will need to develop core crosscutting capacities to coordinate, plan, and monitor climate change programs. The program approach presents a unique opportunity to enhance the inter-Departmental discussions and coordination as well as foster the CCC’s partnership with DBM. 112. While the program approach constitutes a unique window of opportunity to enhance the Government’s response in addressing climate change, its effectiveness depends on the Government’s ability to address some emerging problems including: x The need for increased consultations between the DBM and the CCC when formulating the Program Approach. Limited upfront consultations often necessitate subsequent changes in the scope on process resulting in implementation delays. x The improvement of coordination, planning, and implementation, which has been difficult as the approach involves eight Departments and more than nine attached Agencies. x Adequate technical capacity of staff, which is critical for tasks such as the identification of appropriate targets and indicators, and subsequent monitoring of them, which varies and is often lacking. 113. Scope exists for more consultation by DBM with CCC. The selection of key programs for the program approach as well as the funding was managed primarily by DBM without consultation with the Cabinet Clusters or oversight Agencies (e.g., the CCC). This has had implications for the timely preparation of the programs. For example, in one case, the DBM in the first instance inscribed the CCA Cluster program in the budget without consulting with the CCC or the lead Department of the Clusters and it 69 The participating Departments/Agencies are DENR, DILG, DOST, DENR, DA, and DENR, MMDA< PRRC, DPWH, DND, and DOH 173 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level subsequently had to change the scope and purpose of the program after consulting with CCC.70 In another case, the DBM did not include the CCC or the lead Department of the Cabinet cluster in the revision of the budget (which was cut from the initial draft proposal of Php 19 billion to Php 13 billion in July 2012). More inclusiveness would have helped to make the budgetary decision a more transparent process, enhance the buy-in by the Departments, and provide better understanding on the implication of the cuts for the Cluster. 114. Coordination and technical capacities are not even across Agencies involved in the program approach. Management of the program approach involves eight Departments and more than nine attached agencies. This large amount of actors has presented a challenge in terms of convening, coordinating, planning, and implementation purposes. An additional challenge can be found in the technical capacity of staff, which is highly variable, but critical for tasks such as identification of appropriate targets and indicators, and subsequent monitoring of them. 115. While the program approach was established as a first step to drawing on uncommitted resources or leveraging additional funds from existing budget of the agencies, such potentials for resource mobilization have not yet been fully exploited . So far mainly DA and CCC benefited from increased budget appropriations, mobilized under the fiscal space. The program approach has however not yet resulted in leveraging reallocations (towards the program) from existing budgets of agencies, as had been hoped by DBM. It will need to be seen which incentives and arrangements have to be in place to allow the program to attract additional funding from any fiscal space or reallocations. For this, it would also be important to clarify the expected duration of the program approach as well as the duration of the specific programs selected by DBM. Bottom-up Budgeting: Improved Targeting of the Most Vulnerable 116. The Bottom-Up Budgeting (BUB) approach also constitutes an innovative effort to make the planning and budgeting process of both local and national government more participatory with important opportunities to support climate actions. In line with the Government’s goal to reduce poverty from 26.5 percent in 2009 to 16.6 percent by 2015, the Human Development and Poverty Reduction Cluster (HDPRC) and the Good Governance Corruption Cluster (GGCC) are piloting a bottom- up budgeting approach to budgeting to respond to the development needs of poor municipalities. 117. Out of the 609 targeted municipalities, 595 municipalities have submitted their request which were included in the budgets of participating national government agencies. A selected number of Departments (namely the DA, DAR, DENR, DOE, NEA, DSWD, DepED, DOH/Philipine Health Institute, DILG, and DOLE) were tasked to incorporate the prioritized list of projects and programs of these municipalities into their budget proposals for 2013. The earmarked amount for these 70 Initially the program was called “interventions on poor conflict -ridden municipalities critical geological hazard areas.� As the focus on conflict-ridden municipalities poses a number of problems for the Department’s implementation of programs and projects, the focus of the program was changed in consultation with the CCC. 174 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level poverty-related projects represents Php 9 billion, with 31 percent being funded by DA and 29 by DepED. As mentioned in Part III Chapter 2, a menu of eligible activities was established that supports among others projects addressing climate change. A unique element of the approach is the creation of 61 partnerships with CSOs that are involved in the endorsement of the selection and monitoring of the communities’ priority projects. 118. While the BUB approach is also laudable, the devil is in the details of the design and implementation. Ideally, the communities were intended to submit their list of priority projects to the RDC for validation; the RDC was then to submit the proposals to the national agencies. In the case of proposals pertaining to ENR, those were submitted directly to DENR by the communities, bypassing the RDC and leaving the Department to select eligible projects out of 1500 draft proposals. While this can be attributed to the first-time experience, the main issue is lack of adequate guidelines for selecting the projects. To increase the effectiveness of the bottom-up approach on poverty, the Government may want to ensure that the program covers linkages between poverty and CCA and mitigation. Budget Formulation National Plans, Sector Strategies, and Local Development Plans: not Fully inSsync 119. At the budget planning phase, climate change priorities and strategies have been mainstreamed in several of the PDP’s core chapters (including the agriculture and fishery, infrastructure development, and natural resource and environment sectors). In recent years, there have been increasing efforts by the Government to integrate adaptation- and mitigation-related PAPs into budget planning tools (e.g., PDP, NCCAP, sector strategies and plans, and LDPs) at national, sectoral, and subnational levels. The preparation of the NCCAP provides an important strategic planning tool that already created significant awareness among the Departments on climate change concerns and contributed to a close involvement and support by DBM in the development of screening guidelines for climate-related PAPs. Departments and attached Agencies are making efforts to ensure that climate actions are reflected in their strategic planning and budgeting processes. A range of sector strategies or plans have been or are currently being updated by including climate change considerations.71 These revisions are either done through a top-down approach (DOE’s current efforts to integrate climate change concerns in central, regional, and local energy plans) or through a participatory approach in the case of DA involving all local, regional, and central staff in identifying climate change priorities and activities for the 2012–2017 Agricultural and Fishery Modernization Plan. 120. At the subnational level, efforts have focused on integrating climate change adaptation into local development planning and budget process. The Climate Change Act requires LGUs to prepare LCCAPs. In addition, the National Risk Reduction 71 These include the Agriculture and Fishery Modernization Plan (2012-20XX), Philippines Strategy on Climate Change Adaptation (2010), DPHW’s Climate Change Adaptation Action Plan ( 2011), Manila Flood Protection Master Plan (…), Science and Technology Roadmap on Climate Change (…), Forestry Master Plan (..), the Environment Framework (under prep.), and the Philippine Energy Plan (under prep.). 175 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level and Management Act (RA 10121) mandates that LGUs prepare LDRRMPs. Given the close link between CCA and DRM, and so as not to overburden LGUs by requiring them to prepare LCCAPs and LDRRMPs that are distinct from their CDPs and CLUPs, the CCC and NDRRMC have required LGUs to mainstream CCA and DRRM in their CDPs and CLUPs.72 121. Despite a range of planning tools and climate-friendly strategies/plans, challenges remain at the national and subnational level to ensure climate actions are prioritized in budget planning. x The mainstreaming of climate change aspects has not yet been done systematically for all chapters across the PDP (notably competitive industry and service sectors, social development, and peace and security). x The NCCAP provides the strategic framework for government’s climate action prioritization but it has not been used by NGAs to feed into the Departments’ budget planning and resource allocation. A main challenge for the Departments and Agencies remains the use of the action plan as a tool to integrate climate change concerns into their sectoral plans and identify activities for their respective budgets. In the same vein, the key challenge for CCC is how to incorporate sectoral/Agency climate change plans in the revised NCCAP. Recognizing the need to make the NCCAP a more operational tool for the Departments, the CCC launched a series of initiatives in 2012 to update the document, including a review of the alignment between the NCCAP priorities and the budget and the preparation of a results-based monitoring framework to allow better identification and tracking of the NCCAP activities. x The preparation and revision of policy and strategy documents were not always in sync, resulting in somewhat different climate policy priorities and activities for the sectors. Being prepared in parallel, the climate priorities outlined in the PDP sector chapters do not always match with the NCCAP strategic priorities. This is in part due to the sectoral orientation of NEDA in contrast to the thematic orientation of the NCCAP. As the PDP’s policy objectives are translated into the five-year public investment plan, this misalignment risk to continue at the operational level and raises questions about the prioritization of Climate Action coming from the NCCAP and PDP in a budget-constrained setting. x Climate sector strategies are also not always aligned with the NCCAP. For example, DENR’s Climate Change Adaptation Strategy, prepared in 2010, informed the preparation of the PDP but not the NCCAP. Planning needs to be prioritized carefully as the demands are great at the sector level. The 72 Under RA 10121, the OCD is tasked to review and evaluate the LDRMMPs of LGUs to facilitate the integration of DRR measures into local CDPs and CLUPs as well as to ensure that LDRMMPs adhere to national standards and programs. 176 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level proliferation of climate-related activities listed in various plans and strategy documents may adversely affect the Department’s planning capacity to ensure a strategic allocation of its climate-related resources. x The scaling up of the initiatives to mainstream climate change and DRM in CDPs and CLUPs remains a challenge.73 Significant progress has been made in the development of guidance to assist provinces in mainstreaming DRRM and CCA in their LDPs, but there is a need to fast-track the completion of these guidelines and to ensure the consistency of the guidelines produced by numerous efforts by different actors. As early as 2008, NEDA had developed and disseminated the guidelines for provinces on “Mainstreaming Disaster Risk Reduction in Land Use / Physical Planning in the Philippines.� However, only draft guidelines have thus far been developed to assist provinces in integrating assessments of their vulnerability to climate change in the planning process. Also, guidelines to assist cities and municipalities in integrating DRRM and CCA in the CDPs/CLUPs are still in the development stage. A number of DPs (e.g., UN Habitat, GIZ) have worked directly with some LGUs (Sorsogon, Makati, Albay) to help them mainstream DRRM and CCA in their LDPs. According to DILG, the strategy is to formulate the mainstreaming guidelines from the bottom up by generalizing the experience of selected pilot LGUs. To date, the mainstreaming guidelines are still in the development stage. A Medium-Term Perspective to Budget Planning: Great Potential for Prioritizing Climate Change but Limited Use 122. The formulation of sectoral MTEFs constitutes an opportunity to translate the NCCAP’s priorities into multi-year fiscal planning and budgeting; however, only DENR and DPWH have adopted an MTEF in their internal planning and budgeting. 123. The MTEF can be a useful tool to identify financing gaps at the sector level and serve as a basis for well-costed budget proposals from the sector Departments. It can also be instrumental in securing funding commitments (from Ministries of Finance and from development partners) over the medium term. In the Philippines, the basis of the macro MTEF is the two-year (that is, the budget year plus the two following years) forward-rolling estimates of the budgetary costs of existing programs and projects. In contrast, current sectoral MTEFs are based on a given Agency’s demand, usually in the context of a sectoral reform agenda. As such, it takes into account not only the future cost of approved and on-going programs but also the additional cost of new programs/policies in the medium term. The use of the MTEF does support a medium- term planning of climate PAPs and the allocation of additional funding. The Fiscal 73 The CCC is mandated to facilitate capacity building for local adaptation planning, implementation, and monitoring of climate change initiatives while the DILG and Local Government Academy (LGA) are tasked to facilitate the development and provision of a training program for LGUs on CC. 177 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level Planning Bureau is planning to standardize the development of MTEFs and roll this out for use by departments as part of an IDF grant. Budget Tools: Powerful but Underutilized 124. Budget tools such as screening guidelines can serve to facilitate the inclusion of climate action in budget planning at national and subnational levels. Some Departments have introduced or modified screening tools and guidelines but there is potential to scale up these efforts to other Departments and identify further tools and entry points. Given the strong interest by the Departments and LGUs in a screening tool to guide the identification of PAPs contributing to adaptation and mitigation, DBM jointly with the CCC and the support of the WB is in the process of developing screening guidelines with a typology that can identify programs and projects with mitigation and adaptation benefits. While the screening tool will focus primarily on identifying climate PAPs, the tool cannot yet be used for prioritizing PAPs as this would require a database for geographic and sector vulnerability, the translation of NCCAP priorities into fundable activities, and the availability of targets and indicators. 125. At the sector level, DA has been proactive and innovative by issuing a policy and implementation program on climate change and using a memorandum from the secretary to mandate that its units, bureaus, and Agencies implement a selected number of priority actions. Another innovative example of promoting Climate change related activities is Makati’s initiative to integrate in the 2010 and 2011 budget call climate change and DRRM as one of the critical programs eligible for allocations. 126. On the whole, however, it seems most CPEIR Departments and LGUs have not yet made use of internal policies, budget calls, directives or memorandums, to promote the identification and budgeting of priority climate activities or to integrate climate risk considerations in infrastructure vulnerable to weather extremes. Likewise, other potential entry points at the level of investment appraisal have not yet been fully explored, such as the integration of climate considerations in the ICC’s investment appraisal criteria. The application of a climate lens to infrastructure standards or building codes is also still at an initial stage and will require careful selection of investment PAPs due to its possible high budget implications. Budget Transparency: Efficiency can be Improved through Greater Transparency 127. A transparent budget presentation requires comprehensive coverage of all appropriations intended for a similar policy objective regardless of origin or delivery mechanism. As mentioned in Part V Annex 4 on the framework for analysis, the identification of some climate expenditures is constrained because the economic and functional classification of the budget does not allow the separate reporting of climate- related expenditures (e.g., DA’s “development of practices or techniques for more resilience to climate change in farming systems� is merged with several activities under one budget line: “formulation, research and development programs�). While in general budget, classification systems are not designed to document all climate expenditures, a question emerges for the Philippines on how to ensure better documentation and 178 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level reporting on climate-related expenditures on the one hand, while recognizing that broad changes in the classification system are not necessarily feasible as they are costly (in terms of introduction, in terms of administrative burden to implement, and especially in terms of introducing a proliferation of budgetary codes for any cross-sectoral issue, which would make them unmanageable). 128. A transparent budget presentation also requires comprehensive coverage of all expenditures intended for a similar policy objective regardless of origin or delivery mechanism. Tracking expenditures falls prey to the challenges just mentioned in budgeting (i.e., lack of comprehensiveness in the budget) but also the multiple sources of the appropriation structure (including approved appropriations, automatic appropriations, and continuing appropriations as well as supplemental budgets) and in- year realignments (enabled by procedures designed to encourage flexibility on the part of the implementing Agency but which can reach up to 30 percent of an Agency’s budget. Realignments can be applied to programs and projects across the budget, including the climate-related expenditures. All this makes it difficult to track expenditures against the original appropriation. In the case of Climate PAPs some evidence suggests that funds are difficult to track and need a more in-depth assessment. Current reform efforts address several of these issues, notably the multiple source of appropriation. Starting 2013 a new system will take place that confines appropriations to one year, thus the carrying over of budgets is not possible anymore. This will improve predictability of funds and budget execution and government operations. Budget Accountability: Key to increase public support and mobilizing resources 129. M&E systems are indispensable to evaluating the performance of climate PAPs with respect to the PAPs’ objectives, to test the accuracy of ex ante projections of climate vulnerabilities or the project’s impacts on the respective vulnerabilities, and to incorporate lessons learned about the adoption and mainstreaming of new and effective adaptation and mitigation interventions. There are efforts to establish either in the Departments or in DBM a M&E unit to respond to the need for data for evidence based policy decisions. The following section takes a closer look at the example of DENR and DA current M&E practices and implications for the M&E of climate PAPs. Common M&E Challenges: numerous reporting requirements 130. Similar to the M&E systems of other Departments, DENR and DA are faced with numerous reporting requirements and limited capacity to use the data for strategic planning purposes, affecting the effective M&E of all Departments’ PAPs, including the climate PAPs. During the fiscal year, DENR and DA have to comply with numerous reporting requirements as well as to respond to various ad hoc requests from various oversight Agencies (see Table 35 below). According to DA, its M&E unit prepare on average one to four reports on a daily basis. The quality of data is affected by delayed reporting and manual processes of documenting and recording. Regional offices often fail to submit timely financial and physical information, which in turn affects the quality of mid-year reporting (notably the monthly and quarterly reports). Weak reporting at the deconcentrated level can be attributed in part to understaffing and an 179 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level insufficient information system. Likewise at the central level, the preparation of numerous reports does not leave time for the staff to verify and validate the data, there is insufficient software support, and the planning unit lacks tools to prioritize data assessment. At the same time, senior management does not use the information for its strategic resource allocation planning. 131. The current review of MFOs and performance indicators presents an opportunity to introduce MFOs that measure results in addressing CC; however, challenges remain for the Departments to identify the appropriate output indicators. For instance, in the case of DA, it is difficult to assess the results of better irrigation systems resulting in better production due to the use of adaption technologies. Both Departments highlighted the needs for training to develop appropriate climate- related results indicators. Table 35: Summary of Some of DENR’s Main Reporting Requirements TYPE OF REPORT PERIODICITY DESTINATION BARs Monthly/ DBM quarterly Budget Execution Report Quarterly DBM Performance Report of DENR Quarterly CCC/ CCCC DENR: NGP reporting on accomplishment Weekly/ Office of the President monthly/ quarterly Socio Economic Report Semi/annually NEDA Status of issues (Narrative on directives of the Quarterly/Year Presidential Management President (KRAs/ convergence) end Staff Annual update of the Results Matrix Annually NEDA Input in the State of the Nation Annually Office of the President DA: Special reports (e.g., for DOL’s employment report) Various mid-year reporting requirements to development partners Integrated or Separate M&E systems for Climate PAPs 132. Efforts have been made by DENR to introduce results-based monitoring and to develop performance indicators, but the Department has not yet been able to fully capitalize on this. In 2011, DENR began to roll out on a pilot basis a results-based M&E system (with the Operation Manual developed with help of the WB). While the system is being rolled out to the regions, a current challenge is the lack of trained staff on M&E validations, survey mapping, and planning. DENR also conducted an innovative self-evaluation of its regional office in 2012. The Department requested the Development Academy of the Philippines to conduct an independent third-party evaluation to assess the performance indicators of its regional offices as well as to establish a performance report card to be used for the distribution of the annual bonuses. While the exercise allowed DENR to revise several of the indicators, it was 180 Part 3 -- Chapter 3: Financing Climate Change PAPs at the Subnational Level acknowledged that more work needs to be done to ensure targets are available and measurable. 133. The most important climate-related PAP of DENR, the NGP, are captured through DENR’s M&E system; efforts to closely monitor this presidential program have resulted in the set-up of a separate information system, raising questions about DENR’s effective management of two separate reporting systems. The Forest Management Bureau manages forest-related indicators that measure seven thematic areas, each with 57 indicators. Challenges remain for the FMB system also, notably to evaluate the sequestration potential of plants and trees. As NGP is a presidential priority program, a separate M&E system was put in place at the central and regional level to monitor the NGP and managed by the Office of the Secretary (OSEC). It focuses mainly on the plantation development (e.g., seedlings produced, area planted, jobs generated, contracts issued), which has been closely monitored (weekly, monthly, and quarterly) by the President’s Office over the past two years. Thus, DENR’s reporting has been focusing on the NGP’s implementation progress. While NGP’s monitoring reflects a well- functioning, effective M&E system, questions arise about DENR’s management of two separate reporting systems with staffing and resources having been reallocated in favor of NGP from the Forest Management Information System, further contributing to weaknesses in the reporting of the FMIS system. 134. In the case of DA, while the climate PAPs are not monitored separately, different systems are uses at the regional and provincial level which may create challenges in integration in the future. The DA’s Policy, Planning and Monitoring Evaluation Unit focuses on monitoring the sector’s commodities (rice, corn, crops, livestock, and fisheries), thus Climate-related PAPs are not monitored and evaluated separately. In contrast, different information systems are used at the regional and provincial level. This may create challenges in establishing a joint database for monitoring climate PAPs in the future. While some lessons could be learned from the WB-funded rice program implemented in Milano in providing incentives to subnational governments in setting up a joint database, this has not yet been pursued. 135. A few initiatives reflect efforts by DA’s staff to introduce impact evaluations, but these have remained selected one-time initiatives. The last comprehensive impact assessment of DA’s programs dates back to 1997. Since then, the Planning and Monitoring Unit has faced staff and resource shortages that have hindered their ability to conduct thorough impact evaluations. To assess the impact of DA’s program, the Bureau of Agricultural Staff conducted a rapid appraisal in three provinces to assess farmers’ perception of DA’s services. Though the appraisal was initially planned to cover all provinces, the Department could not mobilize sufficient resources to scale up the assessment. Another time, the Department was able to mobilize a small grant for the development of an M&E system at the provincial level, but the project failed as the staff never used the installed systems. 181 Part 4: Recommendations and Strategic Action Plan Part IV: Recommendations and Strategic Action Plan 182 Part 4: Recommendations and Strategic Action Plan 1. Carried out at the midterm of the current Administration, of the Philippine Development Plan 2011–2016, and of the first six-year phase of the National Climate Change Action Plan, the recommendations of this CPEIR aim to support the Government’s climate reform agenda. The recommendations aim to consolidate the strategic direction of the NCCAP and set the stage for scaling up climate activities over the next two phases. The goals for the remainder of the Administration’s term should be to: 1) Ensure that the enabling environment is firmly in place by completing and implementing the remaining pieces of the core climate change reforms; 2) Formulate enact, and support complementary sector and local-level policy and institutional reforms; 3) Enhance design and implementation of climate program, activities and projects to improve their effectiveness; and through these reforms, 4) Increase the efficiency of resource use and provide support for higher levels of financing. 2. The recommendations which include a Strategic Action Plan are anchored to the Government’s climate reform agenda through a framework that includes three pillars. The framework identifies the major objectives and specific activities to achieve these objectives within each pillar (see Box 6), providing a basis for assessing critical linkages between the objectives and activities, prioritizing and sequencing of activities, and assigning clear responsibilities to agencies for achieving the climate change goals. The three pillars of the framework are: (1) Strengthening the Budget and Financing Institutional Framework for Climate Change; (2) Enhancing Accountability through Monitoring, Evaluation, and Review; and (3) Building Capacity and Managing Change. The elements of the framework were reviewed and refined based on consultations with the relevant Government Agencies. Each activity is assessed in terms of priority and risk to enable their sequencing as part of a Strategic Action Plan. An Interagency Task Force has been constituted to finalize a three year Work Plan based on the initial sequencing of activities (see Part V Annex 3). This requires Agencies to identify and refine the outcome and output performance indicators for each activity consistent with the CPEIR recommendations and the NCCAP goals, which will guide the finalization of the work plan with specific milestones. 183 Part 4: Recommendations and Strategic Action Plan Box 6: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Strengthen the Budget Planning and Execution Framework for Managing Climate PAPs 1.1.1. Integrate climate change into budget planning and management tools 1.1.2. Establish comprehensive coverage of all climate change PAPs in national and sectoral plans, strategies, and budgets 1.1.3. Strengthen reporting of climate PAPs to cover mid-year and end-year implementation Align Plans and Strengthen Implementation to Achieve Climate Change Goals 1.2.1. Establish a shared climate program 1.2.2. Adopt complementary sectoral reforms 1.2.3. Reform design and execution of climate change PAPs 1.2.4. Converge climate change adaptation and disaster risk reduction and management 1.2.5. Adopt tools and strengthen processes to optimize mitigation opportunities Rationalize and Harmonize Climate Financing Instruments 1.3.1. Streamline rules and eligibility criteria for local climate financing 1.3.2. Adopt Reform of selected fiscal instruments in use after reviewing their climate impact 1.3.3. Establish Climate Finance Group to coordinate climate finance 1.3.4. Strengthen donor support for the Government’s climate reform agenda Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities Enhance CCC’s role in reviewing and communicating climate change performance 2.1.1. Strengthen the annual CCC review of climate change policy implementation Strengthen Coordination between CCC and Oversight Agencies and Departments 2.2.1. Operationalize the terms of reference for all Advisory Board members 2.2.2. Convene a Champions Group 2.2.3. Strengthen CCC coordination with the national and local DRRM Councils 2.2.4. Operationalize definition of responsibilities relative to the PSF Board Strengthen Monitoring in the Departments and LGUs 2.3.1. Reform departmental M&E systems and link to climate change M&E requirements Pillar 3: Building Capacity and Managing Change Build Skills and Knowledge-base on Climate Change 3.1.1. Establish climate change database and learning system 3.1.2. Develop climate change training programs 3.1.3. Create a virtual network of practitioners 3.1.4. Establish centers of excellence on climate science 3.1.5. Establish an information portal on climate change Raise Public Awareness of Climate Change 3.2.1. Strengthen the support for the climate reform agenda through enhanced civil society participation 184 Part 4: Recommendations and Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change 3. A major weakness in the present budget institutional framework is that no single mechanism unifies all climate change activities. Considerable efforts are being made to strengthen budget coordination and establish a comprehensive results-oriented budget system. The success of these efforts is critical to aligning the NCCAP, departmental work programs and the KRA-5. Effective use of budget planning tools that are either in use or being developed are essential to ensure that all climate change activities of the government whether funded by the government or by development partners are assessed, coordinated, and evaluated against the NCCAP goals--and that these goals are reviewed effectively in light of the implementation experience. Objective 1.1 Strengthen the Budget Planning and Execution Framework for Managing Climate Programs, Activities, and Projects 1.1.1 Integrate Climate Change into budget planning and management tools 4. Implement and update the climate screening guidelines to clearly define the scope of the government’s climate program [DBM, CCC, Departments]. In the context of the CPEIR, the CCC and DBM developed screening guidelines to tag programs, activities, and projects that are aimed at climate adaptation and mitigation. The tagging system was piloted with the Departments and has been included as part of DBM’s FY2014 budget call. The results of the tagging should be used as a common point of reference throughout the Government in budget planning and management. The guidelines should be updated and implemented on a regular basis going forward and processes to do so should be clearly defined. 5. Make systematic use of budget planning processes and management tools to improve the development and selection of climate programs, activities, and projects (PAPs) [CCC, Departments and LGUs]. A variety of tools such as budget calls, memorandums, Medium Term Expenditure Framework are available to support the Department’s budget planning and management decision including on their climate PAPs. Lack of a commonly agreed set of PAPs that define the Government’s climate program has limited the application of these tools in effectively supporting the climate agenda. The results of the climate screening guidelines (para 4) provide such a reference point and facilitate the systematic integration of climate PAPs into the budget planning process and management tools. 6. Utilize opportunities introduced by the broader set of public finance reforms to strengthen the identification, convergence, and funding of climate programs, activities and projects (PAPs) [DBM, CCC, and Departments]. Recent budget reforms applied to climate change PAPs provide a window of opportunity to improve the effectiveness and efficiency of the Government’s climate change agenda. For instance, 185 Part 4: Recommendations and Strategic Action Plan x Zero-based Budgeting Approach (ZBB): Select climate programs, activities, and projects annually for assessing the achievement of their objectives and outcomes and to help decision makers determine the adequacy of their funding levels. x Program Approach: Improve implementation of the FY2013 Program Approach on climate adaptation by a) clarifying roles, responsibilities and contributions of the participating Agencies, b) establishing coordination arrangements with the involved Departments, c) developing targets to monitor progress and d) assessing the impact of the Program Approach. Formulate additional programs in the coming years under Key Results Area 5 that include these considerations. x Bottom Up Budgeting (BUB): Strengthen the climate resilience of activities proposed by municipalities under the BUB by ensuring the use of adequate screening guidelines by the Regional Councils and clarifying the coordination of funding with People’s Survival Fund and Local Disaster Risk Reduction and Management Fund. x Result-Based Performance Management System (RBPMS): Identify entry points for tracking and evaluating climate programs, activities, and projects in the context of the newly introduced RBPMS. 7. Support the development of off-line systems to enable selected Departments to more effectively track and report their climate expenditures [DBM, DA]. Climate activities in the Department of Agriculture are integrated into the various major programs on specific crops or regions, rendering the budget data of limited use in systematically identifying and tracking climate activities. As a result, the CPEIR assessment of the Department of Agriculture relied on offline data that were created ad-hoc to review the sub-components of the programs, activities and projects (PAPs) in the budget. While the Online Budget Monitoring System and GIFMIS may improve the ability to better identify and track such embedded climate activities, the needed information will not be available until these systems are fully implemented in a number of years. As an interim measure, support should be provided to develop off-line systems to track such climate activities. As the Department of Agriculture’s 2012 ad-hoc exercise demonstrated, such a system is both feasible and affordable. For consistency, these systems should apply the climate screening guidelines (para 4) to the embedded sub-components of the PAPs. 8. Develop a climate prioritization tool for use in the Department budget planning process. [CCC, DBM, NEDA, DILG, Departments, LGUs]. The climate screening guidelines (para 4) identify programs, activities, and projects (PAPs) that support climate adaptation and mitigation but do not indicate the climate benefits that they provide. In a fiscally constrained environment, Departments need to prioritize and sequence climate PAPs, but do not have the needed prioritization tools to support them, as they strive to balance attaining their respective mandates while delivering on their climate change related responsibilities. Such a tool should also integrate the results of the co-benefits tool (para 40) as a way to strengthen the business case for the climate PAPs. Similar tools should be developed to support prioritizing climate PAPs in the annual investment plans of LGUs. 186 Part 4: Recommendations and Strategic Action Plan 1.1.2 Establish comprehensive coverage of all climate change programs, activities, and projects (PAPs) in national and sector plans, strategies and budgets 9. Monitor ongoing reform efforts to increase budget transparency for climate programs, activities, and projects (PAPs) [DBM]. Tracking climate expenditures against the original appropriations is difficult without the transparent presentation of the budget, which requires comprehensive coverage of all appropriations and expenditures intended for a similar policy objective regardless of origin or delivery mechanism. Since the Government does not have a separate system to present the climate budget, the factors that decrease transparency of the budget also apply to the climate budget. The relative importance of the different sources of non-transparency for the climate budget will be different than for the remainder of the budget. The current sources of non-transparency include the absence of a separate identification of climate change in the economic and functional classification of the budget, multiple sources of the appropriation structure, in- year realignments, and off-budget expenditures (donor funds and some of the special purpose funds). Current public finance reform efforts address some of these issues (e.g. appropriations will be limited to one year). The results of the monitoring can highlight the need for off-line methods to improve the efficiency of the climate budget management process. 1.1.3 Strengthen reporting of climate programs, activities, and projects (PAPs) to cover mid-year and end-year implementation 10. Monitor budget execution of climate expenditures [DBM, Departments]. Budget execution has been low for at least one of the last five years for a number of Departments. It has improved as affected Departments have begun to monitor key PAPs closely and DBM has enhanced its support through joint monitoring and catch up plans. While execution rates have improved at DPWH with the separation of pre-construction activities from the construction activity, continuous appropriation at DENR may be inflating execution rates. Continued monitoring of budget execution is important to identify the sources of financial inefficiency on climate expenditures. Objective 1.2 Align Plans and Strengthen Implementation to Achieve Climate Change Goals 1.2.1 Establish a shared climate program 11. Align National Climate Change Action Plan priorities with plans, programs, strategies and climate activities of oversight agencies, Departments, Agencies, and Local Government Units to establish a clear formulation of goals and targets to be achieved. The National Climate Change Action Plan provides a reference point for the overall climate change agenda. However, Departments, Agencies, and Local Government Units have often identified different climate programs, activities, and projects for different initiatives that, while not contrary to the goals of the National Climate Change Action Plan, are not necessarily completely congruent. To ensure alignment with national climate-related goals, plans across all levels of government (PDP, PIP, Department work programs, KRA5, CDP, CLUP) should be aligned with the National Climate Change Action Plan. 187 Part 4: Recommendations and Strategic Action Plan x Ensure a consistent set of climate outcomes when updating the Philippine Development Plan and National Climate Change Action Plan 1 [CCC, NEDA]. Planned updates to the Philippine Development Plan and the National Climate Change Action Plan in 2013 provide an opportunity to ensure a coherent set of climate-related outcomes and activities in both plans (e.g., under NCCAP’s food security and the PDP’s agriculture and fishery chapter, or enhancing knowledge and capacity for climate adaptation in the water sector). Further updates to the PDP and NCCAP would benefit from the use of common assumptions about climate scenarios and economic projections. x Consolidate the approach to align climate activities identified under Key Results Area-5 and National Climate Change Action Plan. [DBM, CCC, Departments]. Key Results Area classifications of PAPs are made based on the primary objective and mandate of the Departments or Agencies. As a result, PAPs that provide significant climate benefits, such as those related to flood protection, may not be reported as part of Key Result Area-5 if their primary objective is economic growth. The DBM is committed to capturing the full spectrum of activities identified by the screening guidelines (see para 4) through secondary coding of the budget so that this comprehensive list is available for strategically planning, prioritizing, and monitoring. Given the thematic nature of the National Climate Change Action Plan, and the multiple benefits that climate PAPs provide, there is still a need to define what should be included in the Key Result Area-5 classification. These could, for instance, include all of the PAPs which have a well-articulated climate objective and results framework, or include just those under the programmatic approach. Defining the activities that are to be included in Key Result Area-5 and under the secondary tagging will increase transparency, timeliness, and coherence of the climate data reported through the budget process. It would be the first step toward developing readiness for new climate finance such as the Green Climate Fund. x Align Departments’ work programs with National Climate Change Action Plan priorities to ensure strategic sector planning in line with national priorities [Departments, CCC, NEDA]. Because Departments and Agencies are responsible for implementing the majority of activities, aligning 1 See Guidelines for the Revalidation of the 2011-2016 Philippine Development Plan˗˗Results Matrices, March 2013 188 Part 4: Recommendations and Strategic Action Plan National Climate Change Action Plan priorities with work programs is the key step to establishing a shared climate program. Doing so would require three areas of improvement to be achieved through strategic sector planning and the development of annual work programs that, in the future, will be informed by, and supportive of, a climate change operational business plan (as recommended below). First, the thematic nature of National Climate Change Action Plan increases the necessity for convergence across Department work programs, which is a basic aim of the Program Approach (see para 6). Second, sector policy reforms essential for transformation must be implemented (see para 14) and third, the design, execution, and monitoring of programs, activities, and projects will need to be improved (see para 15, 16, 17,18). 12. Formulate Comprehensive Development Plans, Comprehensive Land Use Plans and Annual Investment Plans based on a strategic reference framework that is consistent with National Climate Change Action Plan objectives, outcomes, and outputs, [DILG, CCC, LGUs]. Use guidelines to be developed by the Climate Change Commission in coordination with the National Disaster Risk Reduction and Management Commission to incorporate vulnerability assessments into Comprehensive Development Plans and Comprehensive Land Use Plans, and to identify climate change activities that support the National Climate Change Plan (see para 19, 20). The identified activities would provide the basis for allocating climate funding in the Local Government Units’ annual investment plan, increase synergies with the Departments’ work programs, and mobilize new additional funding to cover any financing gaps. 13. Develop an operational business plan to be ready for the second and subsequent phases of the National Climate Change Action Plan [CCC, NEDA]. Based on the alignment carried out during phase one of National Climate Change Action Plan implementation, as well as the targets and indicators established, the Climate Change Commission should develop a climate change-specific operational business plan for each phase of the broad National Climate Change Plan. When fully developed, the plan should provide a clear vision of the climate change goals, priorities, and specific measurable targets for reform. Financing needs under the second and subsequent phases will be identified as part of the implementation process and should be reflected in the next Philippine Development Plan. Such a plan would not only increase accountability and focus the attention of all stakeholders on the risks, challenges, and opportunities, but also help reassure stakeholders about the continuity of the polices, which is essential for long-term investments. 1.2.2 Adopt complementary sectoral reforms 14. Formulate, enact, and implement complementary sector policy reforms to enable transformative climate action [Departments, CCC]. Departments are responsible for implementing NCCAP at the national level. The Government has already enacted some sectoral reforms such as setting a renewable portfolio standard, incentivizing energy service companies (ESCOs) or clean fuel vehicle, and the NCCAP identifies the need for additional reforms in key sectors (e.g. streamlining water sector governance, and introducing risk transfer mechanisms). These complementary sector 189 Part 4: Recommendations and Strategic Action Plan reforms are essential to bring about larger scale results. They are necessary particularly for mobilizing the private sector mitigation activities. 1.2.3 Reform design and execution of climate change programs, activities, and projects 15. Improve the design and monitoring of climate Programs, Activities and Projects (PAPs) [CCC, NEDA, Departments and LGUs]. The effectiveness of PAPs in delivering climate results can be increased by improving their design in three areas – clear objective and targets, improved management of risk and uncertainty, and recognition of co-benefits (see para 40). A variety of tools are available to support these design improvements. At the outset, PAPs need to identify the specific climate change objectives and targets, contain clear implementation arrangements, and include a results matrix that supports the means of reaching these objectives including. For instance, while the National Greening Program has the potential to improve climate resilience and more effectively sequester carbon through improved targeting, the program only identifies the mitigation goal but does not provide clear implementation arrangements for delivering on those results. Second, the PAPs design should include an assessment of the risks both from climate change and other sources and a plan to address them. A variety of tools are useful in managing climate risks at different stages. For example, climate screening tools are an effective way to systematically identify key climate-related issues that may need to be addressed during the early stages of project design. An Environmental Impact Assessment provides the opportunity to identify climate change vulnerabilities, formulate adaptation options, and document how the risks will be addressed and monitored during implementation. Equally important is the use of tools that incorporate uncertainty in the decision making process (see para 17). Finally, designing climate programs, activities, and projects to deliver co-benefits supports the demand for them (see para 40). For example the REDD+ program provides both adaptation and poverty reduction benefits while the energy efficiency programs decreases greenhouse gas emissions, create jobs, and increase energy security. 16. Update ICC review criteria and analysis to reflect climate change scenarios for all major large investments and for programs, activities and projects included in the Philippine Investment Plan [NEDA, CCC]. These criteria were last revised in 2005 and do not include the impacts and opportunities from climate change. Revisions to the criteria and analysis such as on the methods for incorporating climate risks, the development of the project baseline, the rates of return to be used for project evaluation, discounting and the planning horizon would make public investments more resilient and also incentivize new opportunities created by climate change. One of the most important updates and guidelines, in this context, is the development of guidelines for robust decision making under uncertainty (see para 17). 17. Adopt a policy framework for robust decision making under uncertainty in conjunction with developing supporting tools. [NEDA, CCC]. The future benefits of programs, activities, and projects (PAPs) can be significantly altered by the systemic risks posed by climate change, the long-term nature of the risk, the uncertain magnitude of the impacts, and the potential irreversible development impacts and inertia of the PAP itself. As summarized in Part I, significant impacts of climate change are becoming 190 Part 4: Recommendations and Strategic Action Plan evident in decades, well within the planning horizon of many PAPs (e.g. land use plans, construction of roads or flood protection systems). Traditional decision-making processes of predicting the risks and then acting on them are not likely to produce the best results because the risks are not fully quantifiable and experts disagree on the most likely effects of various plans and policies. As such, countries have begun to explore the use of robust decision making systems in their development and project planning processes. For instance, several water management firms and agencies in the US have used such an approach to amend their investment plans to account for climate change impacts and related uncertainty. Ho Chi Minh City has completed an analytical study of its vulnerability to floods and changes in rainfall and sea level rise. Robust decision-making focuses on the vulnerability of various alternative actions under possible future situations and choose options to minimize regrets. Doing so is often possible by prioritizing reversible or flexible strategies (that can be adjusted when more information is available), build safety margins (especially when it is cheap to do so, i.e. at the design level), or reduce decision making time horizons to reduce uncertainty. These approaches help maximize the long-term development of plans and policies and require an appropriate policy framework, adopted in conjunction with the development of supporting tools. 18. Ensure project design and review criteria for PSF funded programs, activities, and projects are aligned with the ICC review criteria [PSF Board, CCC, NEDA]. The Implementing Rules and Regulations exempt projects submitted to the PSF Board from existing ICC rules. NEDA is required to assist the CCC in establishing the necessary mechanisms, procedures and analytical methods to ensure that the projects approved are compliant with existing standards of Philippine government Agencies. The exemption creates parallel approval processes for similar projects funded through the GAA and the PSF, reducing budget transparency. 1.2.4 Converge climate change adaptation and disaster risk reduction and management 19. Improve convergence of Climate Change Adaptation and Disaster Risk Reduction and Management at the national and local levels [CCC, NDRRMC, NEDA, Departments, LGUs, and DILG]. The Climate Change Adaptation and Disaster Risk Reduction and Management Act have converged on developing climate resilience as the appropriate method for addressing climate-related disasters at a conceptual policy level. This convergence in turn needs to be implemented in strategies, institutional arrangements, and financing. At the policy level the convergence between DRRM and climate change adaptation should be reflected in their integration into the local development plans (see para 12). In terms of institutions, since the CCC does not have a local presence, the LDRRMC, or another local agency, could be tasked to implement broader climate adaptation activities in addition to the disaster prevention. This would require adequate training and capacity building (see para 43). Finally, on financing, the rules for the LDRRMF and the PSF should be harmonized so that LGUs and communities are directing more resources for disaster prevention have equitable access and cost sharing arrangements that reflect vulnerability and needs. Improved convergence should be aimed at reducing duplication, maximizing synergy, and increasing the effectiveness of resource use in the delivery of services at national and local levels. 191 Part 4: Recommendations and Strategic Action Plan 20. Simplify and integrate vulnerability and risk assessment tools, focusing on short- to long-term climate risk management [CCC, NDRRMC, DILG, LGUs]. A range of climate and disaster-reduction assessment tools are available, but many are complex and costly. A focused effort is needed to simplify the process of choice and develop a menu of integrated climate vulnerability assessment and climate disaster risk reduction tools for Local Government Units. These tools should focus on short-, medium- and long-term risks, with results presented at a less technical level. A simplified menu would be more accessible for the Local Government Units’ and Departments’ planning processes. It would help operationalize a joint Climate Change Adaptation-Disaster Risk Reduction and Management framework, and thereby facilitate improved and transparent prioritization and targeting of climate resources to areas most in need of climate action. 1.2.5 Adopt tools and strengthen processes to optimize mitigation opportunities 21. Develop tools and approaches to strengthen the institutional framework of REDD+ for more effectively managing forest resources [DENR, CCC]. The recent adoption of the REDD+ Strategy creates a range of opportunities to better manage forest resources while providing development co-benefits. New policies must take into account the weaknesses in institutional and political arrangements that have previously hampered implementation of natural resource management laws and policies and to use this new opportunity to improve on existing natural resource management frameworks. As a performance-based initiative, REDD+ will require empirical evidence of impacts requiring the establishment of baselines and a credible system to measure, report and verify (MRV) emissions reductions (see para 23). While some of these changes will be catalyzed by the incentives that the REDD+ introduces, effective forest conservation requires more than financial incentives. On-the-ground operationalization of new and existing policies depends on increased engagement with local field-level managers, communities, capacity building, institutional strengthening, safeguard mechanisms, and strong leadership including clarity on the Designated National Authority. 22. Develop tools that enable the formulation of Low Carbon and Low Emission Development Strategies and support their implementation [CCC, NEDA, DOE, and Departments]. The Climate Change Commission, National Economic Development Authority, Department of Environment and Natural Resources, and Department of Energy have taken steps to develop sector-specific strategies for reducing carbon emissions. A national Low Carbon Option Scenario that builds upon these efforts and draws on an assessment of greenhouse gas trends and opportunities for low-carbon development alternatives would identify national and sector-specific priorities for reducing greenhouse gas emissions in the form of a marginal abatement cost curve. Implementation of low-carbon studies in support of the development of such a strategy has started with support from development partners. The next steps will require the articulation of a common vision, including developing socio-economic indicators, emission projections under a business-as-usual scenario, and identification of mitigation potential and abatement costs. 23. Develop, adopt and support monitoring, reporting and verification (MRV) systems for greenhouse gas emission reductions in key sectors [CCC]. Leveraging 192 Part 4: Recommendations and Strategic Action Plan financing to identify options will depend increasingly on the development of a monitoring, reporting and verification system, which is an important indicator of climate finance readiness. The adoption of MRV systems and the development of capacity to implement such systems also reduce uncertainties about the value of mitigation activities, greatly facilitating private sector participation. 24. Facilitate and build readiness for market-based instruments [CCC, NEDA]. The NCCAP envisions a policy environment that supports the private sector engaging in mitigation opportunities in key sectors. The NFSCC envisions the valuation of environmental services and considers payment and incentives mechanisms as a means for implementing the climate agenda. A number of countries have already begun exploring innovative and cost-effective ways to scale up emission reductions and foster financial flows, including through carbon market instruments, from which much can be learned. In addition to a monitoring, reporting and verification system (see para 23), facilitating markets requires a few core components including systems for collecting data, setting baselines, establishing regulatory institutions. These building blocks provide the necessary support for implementing a number of different market based instruments including emission trading, crediting or offset schemes, carbon pricing, and emission certification programs. 25. Begin to establish a notional carbon price to signal the value of reducing emissions. [CCC, NEDA]. Establishing a notional carbon price would help anchor the appraisal of projects aimed at lower carbon alternatives and signal to private investors that emission costs need to be taken into account when making long term decisions. The prices would be derived from and would be supportive of the low carbon and low emission development strategies (see para 22). Objective 1.3 Rationalize and Harmonize Climate Financing Instruments 1.3.1 Streamline rules and eligibility criteria for local climate change financing 26. Clarify the rules and appropriate financing instruments for climate change adaptation and climate disaster risk prevention at the local level [PSF Board, CCC, LDRRMF]. Establishing strategic and complementary eligibility criteria, including information on how to leverage funding, will increase targeting and effectiveness of financing instruments and contribute to operationalizing a joint Climate Change Adaptation-Disaster Risk Reduction and Management framework. At the local level, the scope, eligibility criteria, and the level and sources of co-financing of programs, activities, and projects from the PSF, LDRRMF and LDF should be harmonized (e.g., rules to preclude financing from multiple sources for the same activity). The People’s Survival Fund Board could lead such an effort by designing simple eligibility, costs sharing and accountability rules that build on existing project management practices of Local Government Units. At the national level, disaster prevention activities can be financed by operationalizing the National Disaster Risk Reduction and Management Fund or by provisioning adequate funding in the budgets of selected Departments. 193 Part 4: Recommendations and Strategic Action Plan 1.3.2 Adopt reform of selected fiscal instruments in use after reviewing climate change impacts 27. Identify and address Government policies and programs as well as fiscal incentives that may have unintended negative consequences on the achievements of climate adaptation and mitigation goals [DOF]. Reforming perverse incentives would provide direct climate benefits and free up scarce public resources that could instead be channeled to support other government priorities, including climate change. The Climate Public Expenditure and Institutional Review has primarily focused on expenditures directed toward achieving climate goals, and not on the efficacy of attaining climate results through reforming perverse expenditures. Typical examples of such programs include direct or indirect subsidies that incentivize location of infrastructure or people in higher risk areas. 1.3.3 Establish the Climate Finance Group to coordinate climate finance 28. Create formally the Climate Finance Group (CFG) with responsibility for mobilizing resources and establishing modalities to support specific climate finance needs [DOF]. There remains an important institutional gap in coordinating the mobilization of additional resources to support national programs and in devising appropriate financing instruments to reduce fragmentation. While the PSF Board is focused on local adaptation financing, no such institution exists for addressing climate financing at the national and sectoral level. Conceptually, the CFG could be constituted as a powerful group for carrying out such a task, but it remains informal group. This shortcoming can be addressed by either augmenting the role of the PSFB or by providing some legal basis for the CFG to undertake this role. 29. Develop tools to support risk sharing and transfer initiatives [CFG, DOF]. Risk sharing and risk transfer instruments are appropriate instruments to address when the cost of adapting to the risks are large. For example, these instruments have been used to insure against weather-related crop failure and catastrophic losses from large-scale flooding or damages from typhoons. The success of these initiatives rests on tools that appropriately measure risks, set affordable premiums, can ascertain quickly whether a risk event has occurred, and can make payouts quickly. 1.3.4 Strengthen donor support for the Government’s climate reform agenda 30. Establish a regular forum, supported by a secretariat to strengthen the alignment between Development Partners’ support and the Governments’ climate change agenda [DOF, CCC, and Development Partners in coordination with sector Departments and LGUs]. Regular focused consultations between Government and a development partner forum would improve coordination and management of support information, focus on a results-based approach, and support making informed decisions on areas needing support. As a first step, the Philippine Development Forum Climate Change working group meetings should be made more effective (through improved organization and agenda setting, creation of Technical Sub-Working Groups focused on selected issues, and improved coordination with related Philippine Development Forum working groups such as local governance and disasters) to allow more strategic 194 Part 4: Recommendations and Strategic Action Plan discussions on the Government’s climate change agenda. These efforts should reduce duplication of activities, increase coherence and transparency, and enable the Government to effectively operationalize and strategically direct all support and financing sources toward climate activities. Such a group could also consider steps towards developing a programmatic approach to supporting the Government’s climate reform agenda. Pillar 2: Enhancing Accountability through Monitoring, Evaluation and Review 31. Effective leadership can drive climate change to the top of the policy agenda; systems to monitor results will make them more accountable. Clearly defined institutional roles and responsibilities are essential for fostering leadership that can effectively facilitate the translation of policies into action and results. In this context, good use can be made of effective champions of climate change policy and practice. Agency experience can be utilized in a climate change communication policy. Effective M&E is an essential underpinning of the CCCs policy and management role. Objective 2.1 Enhance CCC’s role in reviewing and communicating climate change performance 2.1.1 Strengthen the Annual CCC review of climate change policy implementation 32. Monitor and publicly report on the financing mobilized to support NCCAP and the climate change results realized against the climate targets [CCC]. The CCC is responsible for coordinating, monitoring and evaluating climate change programs and action plans of the Government. The CCC is required to submit an annual progress report on progress in implementing NCCAP. The reports would be more effective if they included the desired goals of the coming year together with an assessment of the achievements relative to the goals for the prior year including a summary of key issues leading to performance shortfalls and recommend actions to overcome them. The results, in turn could be used to update the operational business plan (see para 13). The report should provide disaggregated results by NGA to increase accountability. 33. Consolidate monitoring and reporting of all climate-related disaster prevention to increase accountability [CCC, NDRRMC]. Despite policy convergence on climate change adaptation and disaster risk reduction and management, climate- disaster prevention activities remain uncoordinated due to parallel institutions, financing and policies. Consolidating monitoring and reporting of all adaptation activities including climate-related disaster risk reduction in the short, medium, and long term by the CCC would increase transparency and help identify gaps and duplications (see para 19). 34. Establish system for review of CDP and CLUP [CCC]. LGUs are required to formulate and implement local climate change action plans and are to submit their plans to the CCC. Systems need to be set up for CCC to review these plans to generate lessons in terms of best practices. The reviews could also provide insights for setting priorities for funding through the PSF (see para 38). 195 Part 4: Recommendations and Strategic Action Plan Objective 2.2 Strengthen Coordination between CCC and Oversight Agencies and Departments 2.2.1 Operationalize terms of reference for all CCC Advisory Board Members 35. Clarify the relationship between the CCC and the Advisory Board Members [CCC]. The Commission has a mandate to manage, review and guide the Government’s climate change initiatives, whereas NEDA and DBM have more general developmental responsibilities. Moreover, the latter two entities have more direct linkages to and authority over other NGAs. A classic dilemma of program budgeting is how to reconcile the strategic function of program managers (like the Commission) versus the line management responsibilities of executive agencies of government. If scope for effective strategic review and redirection of priorities is limited, the general objectives of line agencies tend to prevail over high level strategic goals. Some steps are being taken to clarify these roles, but more work is required to establish a better balance between executive agency priorities and strategic, high level goals. Some key relationships that need to be clarified are as follows: x Identify and agree on the entry points and processes necessary to update plans to ensure consistency at the outcome and output levels [NEDA]. The Philippine Development Plan and National Climate Change Action Plan are in the process of being updated to give a clearer focus on KRAs.2 x Establish a process for updating the ICC review criteria to reflect climate considerations (e.g., treatment of uncertainty, climate scenarios, discount rates, economic rates of return, etc.) in the evaluation of major programs, activities and projects and Public Investment Programs [NEDA]. This process should result in a Commission report reviewing the direction of climate change policies. x Develop, integrate, and regularly update tools to translate climate priorities into Comprehensive Development Plans and Comprehensive Land Use Plans, along with disseminating them to Local Government Units through various channels [DILG]. x Establish process of undertaking future updates of the climate screening guidelines [DBM]. (see para 4). The Climate Change Commission and DBM have developed climate screening guidelines to enhance integration of climate into the budget process. This partnership can be strengthened by formalizing a process for undertaking reviews and updates of the system. 2 See Guidelines for the Revalidation of the 2011-2016 Philippine Development Plan˗˗Results Matrices, March 2013 196 Part 4: Recommendations and Strategic Action Plan x Establish process for CCC engagement in providing inputs in the budget process [DBM]. These areas could include: (i) the Climate Change Commission’s engagement in the formulation of the scope, objectives, monitoring frameworks, and selecting the programs, activities, and projects for climate change program approaches; (ii) the selection and adoption of performance criteria and indicators in tracking climate activities, and (iii) the review of staffing and climate capacity levels in the Departments as well as the Local Government Units in the context of the rationalization plans. x Formalize the roles and responsibilities of the Climate Change Commission in relation to the Department of Finance [DOF]. The Climate Change Commission can accept domestic resources for National Climate Change Action Plan implementation, but needs permission from the Department of Finance to accept additional international financing. In practice, the Climate Change Commission has limited experience raising the significant resources needed to meet the financing gap. The Climate Change Commission and the Department of Finance should develop a plan that identifies financing needs and outlines how to mobilize needed resources, which in particular could increase access to international financing as well as leveraging private-sector resources. This mechanism could play a key role in streamlining and coordinating financing of climate change initiatives discussed under Pillar 1 above. 2.2.2 Convene a Champions Group 36. Develop Terms of reference for the Champions Group. The CCC, NEDA, DBM and DOF are mandated to oversee the implementation of the NCCAP, PDP, Budget Management Memoranda and Philippine Investment Plan. Given that the most critical policy instruments affecting climate change governance in the country include those that, apart from being directly related to the climate change policy, have to do with public expenditure, this presents them with an opportunity to step up and lead by example. Their doing so would allow other agencies to build and/or strengthen their own climate change related activities, and would provide them with a clearer view of where and how they could further operationalize climate action plans in coordination with other agencies or institutions. The terms of reference needs to clearly establish targets, identify roles and responsibilities, and accountability. 2.2.3 Strengthen CCC coordination with the national and local DRRM Councils 37. Revise and expand MOU between NDRRMC and CCC to include operational guidelines that better reflect the policy convergence with a clear focus on the specific responsibilities on climate related disaster risk prevention [NDRRMC]. The CCC does not have a local presence, so the role of the Local Disaster Risk Reduction and Management Councils could be expanded to formulate and implement both Disaster Risk Reduction and Management actions and adaptation activities. This would also contribute to operationalizing the joint Climate Change Adaptation-Disaster Risk Reduction and Management framework. The CCC could 197 Part 4: Recommendations and Strategic Action Plan partner with alternate Agencies with a local presence in areas where LDDRMCs are not available to undertake adaptation activities. 2.2.4 Operationalize CCC responsibilities relative to the PSF Board 38. Establish a speedy, transparent approval process for projects submitted to the PSF board [PSF Board]. The PSF Act already defines the broad contours of the relationship between the People’s Survival Fund Board and the Climate Change Commission, which is mandated to provide technical support to the People’s Survival Fund board with regard to developing criteria for project selection and prioritization, and in the review of projects. The IRR designates the CCC as interim secretariat to the PSF and will likely be in a position to develop the operations manual. The IRR exempts PSF projects from ICC review and instead requires the development of a similar review criteria and process. It also facilitates the creation of units within Departments to liaise on climate policies and action. Objective 2.3 Strengthen Monitoring in the Departments and LGUs 2.3.1 Reform Departmental M&E systems and link to climate change M&E requirements 39. Existing M&E systems must be redesigned to fit with the National Climate Change Action Plan priorities across all levels of the government [CCC, DBM, Departments, NEDA, DENR, LGU]. The development, as an integral part of the program budget system, of a consistent set of climate performance indicators, supported by measurable targets, to monitor progress will enable activities across the government to be clearly focused and aligned. The Climate Change Commission could lead the effort to identify and include climate performance indicators and Major Final Outputs as part of the Government’s current efforts in establishing the Results-Based Performance Management System. At the local level, LGUs could report their climate activities in their Annual State of the Local Governance Report. A major long-term effort is required to address capacity issues and integrate departmental M&E systems to climate change policies and goals (see para 43). Departments are faced with numerous reporting requirements and limited capacity to use the data for strategic planning purposes, affecting the effective M&E of all (including climate) programs activities and projects in Departments. 40. Develop and adopt tools to document and inform about the co-benefits of climate action and integrate them into the climate prioritization tool [CCC, NEDA, Departments, LGUs]. Most climate activities provide development co-benefits such as poverty reduction, job creation, gender empowerment, and reduced environmental degradation or reduced air pollution. One of the guiding principles of the NCCAP is that adaptation measures should be based on equity and accords special attention for the protection of the poor, women, children, and other vulnerable groups. Similarly, the ultimate goal of NCCAP includes the optimization of mitigation opportunities towards a gender-responsive and rights-based sustainable development. Tools to inform about the co-benefits of climate programs, activities, and projects would make it easier to support prioritizing them in the budget planning process. They would also enable public 198 Part 4: Recommendations and Strategic Action Plan reporting on NCCAP’s gender related ultimate goal, raising awareness about climate change among the general populace. Pillar 3 Building Capacity and Managing Change Objective 3.2 Build Skills and Knowledge-base on Climate Change 3.1.1 Establish climate change database and learning system 41. Streamline content management systems within and across Departments and Local Government Units [Departments, LGUs]. Programs, activities, and projects under implementation can provide powerful lessons and data to all areas of government that are involved in climate activities. This point to the need to develop systems for identifying lessons learned from climate programs, activities, and projects at national and local levels, incentivize staff to extract lessons, use content management systems to help categorize and organize information, and synthesize lessons learned to improve dissemination. Staff should be provided with easy access to internal knowledge and encouraged to share information, coordinate meetings, and collaborate on tasks. 42. Make quality information and data available in a timely manner to support and complement implementation of climate-related tools [PAGASA, NAMRIA]. Localized and downscaled climate data and maps are essential to inform many of the tools described above, and should be made readily available. The lack of access to this information represents a gap in terms of defining clear climate activities (see para 4, 11,12,13,15, and 17). 3.1.2 Develop climate change training programs 43. Prioritize, finance, and carry out capacity-building programs that supplement mainstreaming of the National Climate Change Action Plan into policies, budgets, and financing [CCC, DILG, CICT, DBM, NEDA, DILG, LGA, Departments]. Developing able staff in all aspects of climate policy, financing, and institutions is a cross-cutting recommendation to both strengthen capacity through training and to build and share local and global knowledge. Government agencies, in consultation with the CCC, should develop programs to train staff in climate change technology and administration and to adapt business processes to incorporate these skills. The climate reform agenda is implemented by Departments and LGUs with support from oversight agencies, and requires knowledgeable and skilled staff throughout Government. Regular staff training to raise capacities to carry out these tasks would streamline implementation of the climate reform programs. DILG and LGA are responsible for facilitating the development and implementation of training programs at the LGU level. Some of the key areas for capacity development include: x Department planning units to translate the broad vision of the National Climate Change Action Plan into meaningful sector policy reforms and programs, activities, and projects, and on the use of prioritization tools (see para 8,11). 199 Part 4: Recommendations and Strategic Action Plan x Departments and Local Government Units on program design, development of indicators and targets, and monitoring and reporting systems (see para 15, 16, 18). x Local Government Units in incorporating vulnerability assessments into Comprehensive Development Plans and Comprehensive Land Use Plans and Annual Investment Programs (see para 19,20); x Local Government Units and communities on the identification and preparation of programs, activities, and projects for funding through the Bottom Up Budgeting, People’s Survival Fund, Local Disaster Risk Reduction and Management Fund and the various other sources of funding (see para 26). x Departments and LGUs to promote and incentivize the identification and dissemination of best practices (see para 41). x Climate Change Commission on managing and monitoring the People’s Survival Fund portfolio (see para 38). x A Champions Group to be convened on Climate Change mainstreaming, and Climate Change-related budgeting and financing (see para 36). 3.1.3 Create a virtual network of practitioners 44. Organize periodic symposium of experts to support a virtual network of practitioners that help capture, analyze, and coordinate knowledge [CCC]. While the Climate Change Act provisions for a technical panel of experts, it has yet to be formally established and activated. Currently the CCC works with a few experts on an individual basis. Climate change capacity can also be greatly expanded by establishing a virtual network of practitioners that can be galvanized through the organization of symposiums or south-south exchange or other exchange forums for bringing in global knowledge, using communities of practice that could gather knowledge from experts across the country, and taking advantage of the global social networking mechanisms. 3.1.4 Establish centers of excellence on climate science 45. Establish Centers of Excellence [CCC]. Foster increased research and development focused on climate change by recognizing centers of excellence, making it easier to attract talent and resources. This effort entails developing criteria for recognizing centers and areas of excellence, identifying and designating centers of excellence, and developing capacity-building and financing plans. Going beyond the proposed NCCAP activities, such centers should be expanded beyond science to practical issues of aligning and mainstreaming climate change and establishing best practices (see para 41). 3.1.5 Establish an information portal on climate change 46. Establish a knowledge repository or information portal on climate change that is easily accessible to Departments, Local Government Units, and communities [DENR]. Much of the information on climate change is often not readily available to 200 Part 4: Recommendations and Strategic Action Plan those who can put it to use. Information portals and repositories could help gather the knowledge created by academia or specialized agencies, as well as to collect lessons learned from the implementation of programs. The DENR, the lead designated agency for effective dissemination of information at various levels, has an online Climate Change Resource Center (CCRC) that was established to: improve science-based knowledge on climate change. At present, the website offers very limited resources on climate change as most of the information available consists of old news articles related to climate change suggesting that the website has not been regularly updated. Given past and current initiatives of the Department on climate change adaptation and mitigation, there is a need to have a central information management system. Research studies and tools on vulnerability assessment and adaptation are being produced by different agencies and research institutes, with some having conflicting results. A successful knowledge repository should be transparent, easily accessible, and open to government entities at all levels as well as civil society. Objective 3.2 Raise Public Awareness of Climate Change 3.2.1 Strengthen public support for climate reform agenda through enhanced civil society participation 47. Raise public awareness and maintain high civil society participation in national and local planning and priority-setting processes at the grassroots level [NGO, PSF Board, and DILG]. Civil society and NGO participation increases transparency and builds trust in communities. It improves public awareness and garners the necessary popular support for climate change programs and the current reform program. The continued participation of NGOs in institutions (CCC advisory board, the PDF, NDRRMC and LDRRMC proceedings, and the PSF Board) as well as their input on policies will not only help ensure responsiveness to community needs but also strengthen decisions. 201 Part 4: Recommendations Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency 1.1 Strengthen the Budget Planning and Execution Framework for Managing Climate PAPs Integrate climate 1) Reforms underway Link with 1.2.3 VHP: LR: DBM CCC, change into aim tag all CC- Use of planning Screening NEDA budget planning related spending in tools underpins Guidelines have and management budget based on all climate change been tested with tools climate screening activities departments, but guidelines); capacity and 2) ongoing PFM institutional issues 1.1.1 reforms provide may impede opportunity to progress. strengthen PFM reforms are identification, already in place. convergence and funding of climate PAPs. Establish Budget allocations, Link with 1.3.4 HP: HR: DBM NEDA , comprehensive special purpose funds, but long-term Broader set of CCC coverage of all donor funds are requires stakeholders will climate PAPs in currently partially or systematic create constrain 1.1.2 national and not included in climate institutional progress. sectoral plans, change monitoring and change beyond strategies and review. climate PAPs budgets Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency Strengthen Financial management Link with 1.1.1; VHP: HR: DBM DOF reporting of and reporting systems ultimately, budget Essential for PFM PH's decentralized climate PAPs to are currently management of and program system and the cover mid-year disintegrated. DBM has climate PAPs budgeting long-term nature of and end of year begun to implement an depends on GIFMIS implementation integrated financial tracking actual implementation. 1.1.3 management system spending and Administrative (GIFMIS) on a pilot outcomes strengthening can basis, which is be useful in short expected to be fully term. operational in several years. 1.2 Align Plans and Strengthen Implementation to Achieve Climate Change Goals Establish a shared Update national, Link with 1.1.2, HP: MR: CCC, Depart climate program sectoral, local plans 1.2.2, 1.2.3, 1,2,5 Increased Necessary, but NEDA ments, and NCCAP. NCCAP alignment is success dependent LGUs does not include important to on comprehensive climate change ensure the risks coverage. activities in and opportunities 1.2.1 Department work to development programs. PDP does programs are not include all NCCAP adequately outcomes and outputs. recognized in the PDP and NCCAP planning stages. outcomes and plans need to be developed 203 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency based on common economic and climate projections. Adopt Departments are Link with 2.2.1, VHP: HR: Key CCC complementary responsible for 2.2.2; Will be driving lack of incentive for Departm sectoral reforms implementing the Depends on force for more effective ents NCCAP. coordinated transformative coordination and Transformative impacts leadership from change in next program on climate change will CCC/DBM/NEDA, phases of NCCAP formulation among 1.2.2 require sectoral reforms lead agencies in programs of key Departments -- Energy, transport, agriculture, infrastructure, and environment. 204 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency Reform design Most PAPs have not Link with 3.2.1 VHP: MR: NEDA, Departm and execution of been designed with a Can strengthen ties Increasing Lack of traction of CCC ents climate change climate lens, resulting between efficiency and the CCC with the PAPs, in lost opportunities. appropriations and effectiveness of is Departments, and The ICC criteria were implementation essential for NEDA will remain last revised in 2005 and performance. generating the biggest risk do not include climate support for the 1.2.3 change considerations. Adds depth and climate agenda. Revisions to the criteria aids design of including robust climate change decision making PAPs frameworks would make investments more resilient. Converge climate CCA/DDRM policy Link to 1.1.1 VHP: MR: CCC NDRR change adaptation convergence has screening Paradigmatic shift Depends critically DBM MC and disaster risk converged on guidelines, and away from on progress in reduction and adaptation as 2.2.2 coordination disaster response uniformly tagging management appropriate way between CCC and to disaster climate change address climate related DRRM council. prevention is cost PAPs in national 1.2.4 disaster prevention, but effective and and local policy has not been essential for government. operationalized. Thus sustainable Limited incentives far only draft development. for coordination. guidelines have been issued on integrated assessment of 205 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency vulnerability to climate change, particularly at provincial and local level. Adopt tools and Current policy is Links to 1.3.3 and HP: HR: CCC NEDA, strengthen focused primarily on 1.3.4. Will improve CSO and public Departm processes to adaptation measures, Philippines have been ents optimize but significant profile outspoken on the mitigation increases in mitigation internationally need for opportunities including on REDD+ and potentially international are being implemented. attract financing. financing for In addition, steps are Provides mitigation, carbon being taken to develop development co- prices can't be 1.2.5 MRV systems and low benefits perceived as carbon strategies for imposing costs. specific sectors. Establishing a notional price for GHG emissions could support the low emission strategies by signaling to private investors. 1.3 Rationalize and Harmonize Climate Financing Instruments 206 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency Streamline rules Sources of local Link with 2.2.3; HP: HR/MR: DOF CCC and eligibility climate finance are Operationalization Reducing LGU capacity criteria for local fragmented with of the PSF fragmentation of Limited incentive climate change different eligibility provides an sources of for harmonization financing criteria, cost sharing opportunity to financing across sources of arrangements. harmonize across increases financing Strategic and sources of accessibility of complementary financing. funds and eligibility criteria, improves including information efficiency on how to leverage 1.3.1 funding, will increase targeting and effectiveness of financing instruments and contribute to operationalizing a joint Climate Change Adaptation-Disaster Risk Reduction and Management framework Refiew climate Taxes and subsidies Ensures MP: MR: DOF DBM, change impact of applied for other consistency across A limited number Divergent CCC, 1.3.2 selected fiscal purposes may have fiscal policies of such programs stakeholder Departm instruments in use unintended have been interests. ents consequences. PH has introduced 207 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency no fuel subsidy, but recently. other tax and spending instruments should be reviewed. Establish the The CFG, led by DOF, Link to 2.2.1, 2.2.2 VHP: MR: DOF CCC Climate Finance remains an informal NCCAP identifies International Group to group. There is a need climate finance as climate finance esp. coordinate to develop plan that an implementation for climate risk is a climate finance identifies financing challenge. new complex area. planning needs, develops Significant gaps appropriate instruments exist in the 1.3.3 to address risk-sharing, approaches to be and mobilizes needed used for financing resources. DOF is mitigation at all already engaged in levels and catastrophic risk coordination of finance. adaptation at the national and regional levels. Strengthen donor The climate change Link to 1.3.2, HP: MR: DOF CCC, support for Working Group of the 1.3.3, 1.1.1, 1.12, Coordinated Risks mainly relate develop Government’s PDF had been support can be a to making the ment climate reform established to share catalyst for Working Group partners 1.3.4 agenda information among change effective donors. This forum should be used more effectively to establish 208 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Supporti Pillars/Objectives Observations on Risks and Risk Lead Key Linkages Priority ng / Activities Current Status Management Agency Agency joint support for the programmatic approach to climate change planning, financing and M&E. 209 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review Pillars/Objectives Observations on Risks and Risk Lead Supporting Key Linkages Priority / Activities Current Status Management Agency Agency 2.1 Enhance CCC’s role in reviewing and communicating climate change performance Strengthen the The CCC is required to Links climate VHP: MR: CCC NEDA, annual CCC submit an annual change review Establishing Lack of traction of DBM, review of climate progress report on more effectively to effective the CCC with the NDRRMC change policy progress in budget policies and influence of bureaucracy. implementation implementing NCCAP. review processes. CCC on policy The reports would be formulation and more effective if they implementation include the desired oversight is 2.1.1 goals of the coming critical to long- year together with an term success assessment of the achievements relative to the goals for the prior year and a consolidated reporting of all climate disaster prevention activities. 2.2 Strengthen Coordination between CCC and Oversight Agencies and Departments Develop terms of Based on the All climate change VHP: MR CCC CCC Reference for all experience of the past reforms depend Critical for NGAs continue to Board CCC Advisory few years, coordination critically on reform. Most prioritize core Agencies Board members between CCC and coordination agencies are executive functions.. 2.2.1 executive agencies between CCC and represented in the (most are Board key NGAs. CCC Advisory members) can be Board. streamlined and formal 210 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review Pillars/Objectives Observations on Risks and Risk Lead Supporting Key Linkages Priority / Activities Current Status Management Agency Agency processes established to reduce transaction cost and effectiveness. Convene a The CCC, NEDA, Link with 2.1.1, VHP: MR: CCC, Champions DBM and DOF are 2.2.1 Leadership by the Bureaucratic NEDA, Group mandated to oversee four agencies boundaries need to DBM, the implementation of would enable be clarified and DOF the NCCAP, PDP, other possibly adjusted. Budget Management Departments to 2.2.2 Memoranda and the conceptualize and Philippine Investment operationalize Plan, key elements of their own climate climate change change action. governance and public expenditure. Strengthen CCC The CCC does not have Link with 2.1.1, HP: HR CCC NDRRMC coordination with a local presence, so the and 1.2.4 A necessary Bureaucratic the national and role of the LDRRM clarification of boundaries need to local DRRM Councils could be CCC functions to be clarifies. Current 2.2.3 Councils expanded to formulate strengthen focus MOU between and implement both on areas of NDRRMC and CCC DRRM actions and comparative does not have adaptation activities. advantage. sufficient operational detail. Operationalize The CCC is mandated A necessary VHP: MR: CCC, 2.2.4 CCC to support the PSF, refinement of CCC Operationalizing the limited resources PSF responsibilities including identifying duties the PSF is compared to the 211 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review Pillars/Objectives Observations on Risks and Risk Lead Supporting Key Linkages Priority / Activities Current Status Management Agency Agency relative to the criteria for projection, important for large LGU needs PSF Board review projects for fiscally make it critical to approval by the board constrained LGU, define clear and but also transparent criteria establishing for project selection country systems for climate finance. 2.3 Strengthening Monitoring in the Departments and the LGUs Review Departments are faced Linked to activities HP: MR CCC NEDA departmental with numerous 2.2.1 and 2.1.1 M&E systems Department capacity DBM M&E systems reporting requirements Essential for long- are the key to constraints and link to and have limited run improvement in increasing 2.3.1 climate change capacity to use the data climate change accountability M&E for strategic planning M&E. requirements purposes; Few climate indicators and targets are in place 212 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 3: Building Capacity and Managing Change Pillars/Objective Observations on Risks and Risk Lead Supporting Key Linkages Priority s/ Activities Current Status Management Agency Agency 3.1 Build Skills and Knowledge-base on Climate Change Establish climate Systems to identify and Link to 1.2.3, 3.1.2; VHP: MR: Depart change database disseminate best also cross- The efficiency 1) Department ments and learning practices are limited.. cutting˗˗all aspects and effectiveness capacity constraints system of the climate of climate PAPs 2) Availability of 3.1.1 change program. can be improved appropriately from lessons skilled practitioners learned from that can capture current lessons. experiences. Develop climate Mainstreaming of Cross-cutting˗˗all VHP: MR: CCC NGAs change training climate change is new aspects of the Knowledgeable Trainees need to be LGAs programs for all Departments and climate change staff is essential used effectively Agencies. All Agencies program to implement need to identify skill climate reform 3.1.2 gaps and training agenda. needs, CCC needs to liaise with the NGAs and facilitate a consolidated training program Create a virtual The technical panel of Cross-cutting˗˗all HP: MR CCC network of experts has yet to be aspects of the CC capacity can 1) CCC capacity practitioners formally established climate change be greatly constraints and 3.1.3 and activated. program expanded by 2) availability of Currently the CCC establishing a appropriately works with a few virtual network skilled practitioners 213 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 3: Building Capacity and Managing Change Pillars/Objective Observations on Risks and Risk Lead Supporting Key Linkages Priority s/ Activities Current Status Management Agency Agency experts on an of practitioners individual basis. that can be galvanized through the organization of symposiums or south-south exchange or like events. Establish Centers The NCCAP identifies Link to 3.1.2; also HP: MR: CCC of Excellence on the creation of Centers cross-cutting all natural 1) CCC capacity Climate Science of Excellence on aspects of the opportunities constraints and Climate Science. Plan climate change exist to 2) availability of needs to be devised to program. showcase appropriately 3.1.4 select and develop innovations in skilled practitioners terms of reference for climate action the centers. The scope that facilitates should be expanded to leadership in provide linkages to global fora development. Establish an The DENR, the lead Link with 3.2.1; but HP: MR: DENR CCC, information agency designate for also cross-cutting˗˗ Engages the Limited Departments portal on climate IEC, has an online all aspects of the public and Department 3.1.5 change Climate Change climate change generates capacity, Resource Center program. demand for willingness of (CCRC) to disseminate climate action. Departments to information at various collect and share 214 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part 4: Recommendations and Strategic Action Plan Table 36: Strategic Action Plan Pillar 3: Building Capacity and Managing Change Pillars/Objective Observations on Risks and Risk Lead Supporting Key Linkages Priority s/ Activities Current Status Management Agency Agency levels. The website has best practices. not been regularly updated and most of the information is old news and articles. 3.2 Raise Public Awareness of Climate Change Strengthen CSO were instrumental Cross-cutting: HP: LR: CCC NDRRMC public support in the formulation of CSOs provide Active CSO CSOs are already for climate the CCA, NFSCC, essential support to engagement is quite engaged reform agenda NCCAP and the PSF. all aspects of the important for the through They have a climate change continued public 3.2.1 enhanced civil representative in the policy and support of the society CCC advisory board, implementation climate reform participation the PSF Board and in agenda. the national and local DRRM Councils. 215 VHP= Very High Priority, HP= High Priority, MP = Medium Priority VHR= Very High Risk, HR= High Risk, MR = Medium Risk, LR=Low Risk Part V: Annexes 216 Annex 1: Unabridged Select Key Messages 217 Annex 1: Unabridged Select Key Messages Part 1: Select Key Messages x Climate scientists concur that global climate change is happening and will strengthen in coming decades requiring immediate action to prevent further warming and to adapt to the impacts of a changing climate. o For 650,000 years carbon dioxide in the atmosphere have never been above 300 parts per million, yet current levels are at 394 parts per million and continue to increase global temperatures. o Global mean temperature has increased by 0.8°C since pre- industrial times with most warming occurring since 1970, and the ten hottest years in the last 12 years. o Ocean temperature has increased by 0.09°C and sea levels have risen by 15-20 cm since pre- industrial times with rates doubling in the past decade. o Temperature increases of about 2 °C is certain both globally and in the Philippines during this century. o Even if emission pledges made at the Conference of the Parties in Cancun and Copenhagen are fully met, global mean temperatures are set on a trajectory that to exceed 3°C reaching 4°C as early as 2060 causing a non- linear path of unforeseen climate events impacting global, regional and national economies. o Available technology to lower GHG emissions and keep temperatures below the 2°C increase are available, but would require even greater commitments from governments. x The Philippines is highly and increasingly exposed to both slow onset impacts associated with sea level rise, ocean warming and acidification and s udden onset impacts associated with typhoons, heat extre mes, flooding and drought events. o Even though mean temperature increases for South East Asia are projected to be lower than global averages, the frequency of extreme temperature days is projected to increase making current extremes the new normal by 2040. o While there is uncertainty about the total precipitation levels during the monsoon, both the frequency of heavy precipitation events and the number of consecutive dry days is projected to increase the risk of floods and droughts. o Sea levels in the region are expected to rise by 50 cm by 2060 with further increases to 75 to 110 cm by the end of the century, rising about 10 to 15 percent faster than the global average, placing low lying areas at risk of flooding and saltwater intrusion. o Warmer ocean temperatures are projected to put coral reefs under severe thermal stress with nearly all coral reefs experiencing severe bleaching by 2040 and at high risk even earlier. o The typhoons making landfall in the Philippine are projected to be more intense, with increases in wind speeds of 9 percent accompanied by up to a third more rainfall and associated flooding risk. 218 Annex 1: Unabridged Select Key Messages x The Philippines suffers and will continue to experience climate -related impacts with detrimental consequences for the economy and the livelihoods of the poor particularly in high risk urban and coastal areas. o Considering socioeconomic factors and exposure to weather-related risks and climate change the Philippines is the 3rd most vulnerable country in the world and sixteen provinces of the Philippines are among the top 50 most vulnerable regions in Southeast Asia. o Flooding, salinity intrusion, and extreme temperatures reduces cultivatable land and is projected to reduce yields by up to 75 percent by 2100 in the Philippines resulting in loss of livelihoods for poor communities and increasing food insecurity for the country. o Sea-level rise within this century will affect a larger percentage of the Philippine coastline compared to other developing countries in the region impacting 14 percent of the total population (highest in the world) and 42 percent of the total coastal population (2nd highest in the world). o Nursery areas for fisheries such as coral reefs are affected by warmer oceans, sea level rise, and ocean acidification resulting in a 50 percent decrease in projected catch potential with corresponding impacts in the livelihoods for poor communities. o Coastal cities with large and increasing population and assets are particularly vulnerable to risks from more intense typhoons and coastal flooding and storm surges with four Philippine cities (San Jose, Manila, Roxas, and Cotabato) ranked among the top-ten most vulnerable. x Projected climate impacts are aggravated by rapid environmental deterioration and unsustainable development practices particularly in high poverty areas. o Degradation of coral reefs caused by the use of destructive fishing gear, pollution, and the conversion of mangrove forest for aquaculture accelerates beach erosion and loss of livelihoods inducing migration of the poor into informal urban settlements. o The urban population growth is higher in the Philippines than in similar Southeast Asian countries like Indonesia, Thailand, and Vietnam, increasing pressure on often ill equipped local governments. o About 45 percent of the urban poor in the Philippines live in informal settlements without adequate water and sanitation services in dense clusters and often in high risk areas making them particularly vulnerable to flood damages and health risks. o Land subsidence due to overuse of groundwater in Metro Manila and Central Luzon worsens floods and accelerates sea level rise at Manila’s South Harbor 10 times faster compared to the early 1960s o The conversion of mangrove forest for aquaculture accelerates beach erosion and removes a protective barrier against storm surges during typhoons resulting in higher damages. o Widespread mining and deforestation, neglect of drainage systems, and decrease in river channel capacity through encroachment of houses, 219 Annex 1: Unabridged Select Key Messages siltation from deforestation, and garbage have increased impacts from storms and typhoons during 2009-2012. x Ranking in the top 25 percent on greenhouse gas emissions compared to othe r low- to medium-income countries, and with e missions rapidly rising with income, urbanization and motorization, the Philippines has a role to play in halting e missions and gain a more visible role in the global climate dialogue. o The Philippines is the 24th largest emitter of greenhouse gases among low and middle income countries but is 71 st in terms of emission intensity indicating the potential to reduce its intensity. o Greenhouse gas emissions have been flat while greenhouse gas emission intensity has declined over the past decade largely driven by the push towards cleaner fuels and energy efficiency improvements. o An acceleration in economic growth coupled with the longer lead time needed to bring renewable capacity online, will lead to increased reliance in thermal generation over the coming decades. o GHG emissions are projected to quadruple in the energy sector and double in the transport sector by 2030. x Implementation of adaptation activities strengthens the rationale for public action as they also support sustainable development, reduce poverty, and gene rate jobs, in particular in vulnerable urban and coastal communities. o Public demand for climate-related investment is high with 79% of Filipino businesses surveyed reporting to be aware of climate risks, but also see opportunities for new business expansion opportunities. o Improving future climate resilience in agricultural practices and water resources management will ease current development issues including lessen the burden on the poor, alleviate food insecurity, ensure water sufficiency, reduce risks to human health, and decrease malnutrition. o Enhancing flood control, storm surge protection, and infrastructure decrease climate-related mortality and improve human security and ecological stability. o Implementing climate change adaptation measures to build resilience will also address current disaster risks and improve prevention of climate related disaster risks x Implementing climate change mitigation measures decrease the level of health damaging air pollutants, create jobs, increase energy security, and lower energy costs, which in the Philippines is the second highest in the region. o Opportunities with negative abatement- costs exist in the power, industry, transport and residential sectors where total mitigation potential in 2020 is estimated at 37% of emissions below a BAU scenario. o In terms of reducing greenhouse gas emission, wind and hydropower are particularly promising in the Philippines at present offering the lowest abatements costs, help reduce energy dependence and creates jobs. o With abatement costs of less than US$10/tCO2e, the public transport improvement, the congestions pricing, the bus rapid tra nsit system, and 220 Annex 1: Unabridged Select Key Messages motor vehicle inspection could achieve cumulative abatement of 206 MtCO2e by 2030. x The development benefits of imple menting the climate agenda and the losses in failing to do so make it imperative act now. o Philippines aims to accelerate annual economic growth to 7-8 percent during the current PDP period, growth that is inclusive and creates one million new jobs annually. o Building capacity and institutions to enact and implement reforms are inherently slow processes and failure to act now can lead to actions that are difficult or expensive to reverse. o Climate reforms make it easier to realize Philippine’s development goals through improvements and more effective infrastructure, more skilled workforce, and technological innovations. Part 2, Chapter 1: Select Key Messages x The Philippines’ new comprehensive climate policy agenda builds a foundation for consistent reforms at all levels of government having evolved from a fragmented approach to coordinated integration of climate change in policy formulation and development. o The Climate Change Act represents one of less than ten of such acts adopted in the world, which shows a clear desire for leadership and climate action. o The National Climate Change Action Plan (NCCAP) strategically established the first long-term climate agenda from 2011-2028, divided into three 6-year phases with each corresponding to the terms of the Administration and the Philippine Development Plan (PDP). Implementations of the activities set in the NCCAP are envisioned to be implemented by the sectoral agencies. o The current administration rightly aims to complete first-phase reforms focused on establishing readiness, and commence execution of the full agenda to prepare for the second phase. o The agenda is ambitious with over 90 percent of activities expected to begin during the first phase, of which three- fifths are planned to be completed as well. o The NCCAP appropriately identifies seven priority areas of which six are focused on building adaptive capacity and resilience signaling its relative importance while optimizing mitigation opportunities. o The NCCAP recognizes that climate change adaptation is an appropriate mechanism to address climate risk disaster prevention and many mitigation activities provide local benefits such as cleaner air and improved energy security. o The People’s Survival Fund (PSF) Act establishes the PSF to fill an important financing gap for adaptation at the local level, but leaves existing financing gaps for national, sectoral and regional adaptation and mitigation actions. 221 Annex 1: Unabridged Select Key Messages x Thematic priorities of the National Climate Change Action Plan and the sector- focused Philippine Development Plan, KRA-5, Department Work Programs, and local development plans are not aligned requiring improved coordination across the sectors in planning and policy development. o Scheduled updating of PDP in 2013 provides an opportunity to integrate and align the NCCAP in the PDP. o The ICC review criteria have not been updated to reflect climate risks raising the hurdle for financing climate PAPs. o With no national policy established on low-carbon development and green growth, initiatives across the government programs remain uncoordinated and incoherent across Departments. o Increased engagement of the private sector in the renewable energy and energy efficiency programs is achievable with the support of energy sector reforms. x Translating complementary sector reforms, targets and co-benefits into Department programs is necessary to develop sector readiness and establish cons istency in planning and prioritization of climate activities at the national level. o CCC is working to develop specific targets for the NCCAP without which Departments have limited guidance on prioritizing and determining the size and scope of the climate activities in Department work programs. o Department incentives for meeting and reporting on NCCAP results depend on how well the NCCAP goals are aligned with Departmental goals which presently remain limited. o While Departments have started to incorporate adaptation and mitigation activities, it is happening at rather varying rates. o Convergence between Department policies is necessary to deliver harmonized services to LGUs at a low cost. x The Climate Change Act requires the national government to provide technical assistance to the LGUs, but support re mains insufficient to enable LGUs to formulate and mainstream climate change actions into their locally mandated plans. o LGUs are the designated frontline agencies on climate change, with Municipalities and cities required to include climate change actions as a part of their work plans. o LGUs are required to set aside 5 percent of their total income for the LDRRMF of which up to 70 percent can be used for disaster prevention activities. o The climate policy agenda does not identify what an LCCAP entails nor identify the mechanisms by which the national government would provide support and how the development of such a plan would be funded. o The PSF Board has yet to establish mechanisms for LGUs to easily access PSF resources. 222 Annex 1: Unabridged Select Key Messages Part 2 Chapter 2: Select Key Messages x The Philippines has reformed its institutional structure by establishing centralized national institutions aimed at stronge r coherence and horizontal and vertical coordination of one climate change agenda thereby filling a critical gap in support of effective and efficient climate policy and financing. x The Climate Change Commission's broad scope of responsibilities limits its effectiveness as a policy coordinating body if steps are not taken to formalize, prioritize and streamline these roles. o Staffing capabilities in the Climate Change Commission is still lacking with staff dispersed across the spectrum of functions, which will be aggravated through added responsibilities related to the PSF. o The Climate Change Commission serves multiple roles in managing the People’s Survival Fund which may result in co nflicts. o The Climate Change Commission must balance its implementation role in the Ecotown pilot programs, which can provide lessons for policy making, with its major responsibilities related to policy making and coordination. x Formalized institutional collaboration between the Climate Change Commission and other national, sector and local Departments and Agencies, is an important, required next step to set a strategic direction and ensure that planning and prioritization of climate change activities is streamlined. o National and local planning: The Climate Change Commission needs to be formally equipped to coordinate with the National Economic Development Authority’s Board Committees and the Cabinet Cluster on Climate Change at the national level and the Department of Interior and Local Government at the sub- national level to ensure convergence of the climate agenda. o Climate change adaptation and climate disaster prevention: The MOU between the CCC and the NDRRMC lacks sufficient operational detail to clarify specific roles and responsibilities, highlight synergies and differences, and establish entry-points that can help address the overlaps and facilitate coordination on climate change adaptation and disaster risk reduction and management prevention at the local level. o Sector planning: Coordination, clarity and leadership on green growth between the Climate Change Commission and other Departments remain insufficiently developed. o Social contract KRA 5 planning: Identifying activities between the Climate Change Commission and the Cabinet Cluster on Climate Change is not consistent as the former focuses on the NCCAP and the latter on KRA-5. o Donor level: The Philippine Development Forum – Climate Change Working Group provides a venue for Development Partners to s hare information, developments, and priorities to decrease overlapping of activities. o Climate Finance: The People Survival Fund Board and the Climate Finance Group are expected to be established with a role in helping to provide strategic oversight and coordinate climate finance needs as well as 223 Annex 1: Unabridged Select Key Messages complement planning and prioritization, but neither has been established yet. x Monitoring and evaluation ensure efficiency and increase accountability and transpare ncy of institutions implementing climate change activities . o Institutional monitoring capacity is weak at all levels as systems to collect and report on progress, and share information, are not in place or adequately designed to support strategic planning and management. o Progress in implementing NCCAP is difficult to monitor due to the lack of agreed indicators and targets. o Decision- making, monitoring, reporting and advocacy at the highest level of government is not fully informed as the full Cabinet Cluster on Climate Change is often hampered by the non-attendance of the principals. o Civil Society Organizations have played an important role in demanding and formulating the climate agenda and have the opportunity to be actively engaged in the PSF and the LDRRMF, increasing the responsiveness of the agenda to community needs. x Execution of the policy agenda is hampe red by a lack of institutional capacity and climate knowledge at the national and local level. o The capacity of Local Government Units to integrate climate change adaptation and mitigation into local development plans remains low impeding the necessary progress of local action to transform the country into a climate resilient and low carbon economy consistent with NCCAP goals. o Departments are unable to recruit experts to enhance capacity on a permanent basis due to a lack of climate change knowledge. o Specialized research institutions and agencies as well as civil society organizations represent an important knowledge base on climate change, development and disaster risk management agendas. x Tools to assist with prioritization and planning are often too technical and complex to use. o Vulnerability and risk assessments combine sophisticated global climate models with detailed maps of local circumstances, making them difficult to understand and use even for technical staff in Departments and LGUs. o Environmental Impact Assessments are often carried out late in the project approval process after significant expenditures have been incurred and provide limited space for redesigning the PAP.. o Steps to formulate of low emission development strategies have begun for some sectors, but comprehensive strategies covering relevant sectors is challenging and requires consensus among multiple stakeholder on a broad array of topics and creating the monitoring, reporting and verification systems that underpin such strategies. 224 Annex 1: Unabridged Select Key Messages Part 3: Select Key Messages Climate Change Appropriations x Climate budget appropriations have increased reflecting a rise in leadership to address climate change through the country budget, heightened concerns, and a need to take action. o Climate budget appropriations have tripled for NCCAP activities and Departme nt’s work programs from 2008-2013, accounting now for about 2% of the national budget, while KRA-5 appropriations have doubled in the past three years. o The upwards trends were driven by investments in a few major PAPs for flood control protection, the National Greening Program, the promotion and development of organic agriculture and the creation of the e-trike project x Budget planning and prioritizing for climate PAPs is difficult as multiple methods for identifying and classifying climate activities is used across the Government (KRA-5, Department work programs, and the National Climate Change Action Plan), which results in a three-fold variation in climate appropriation. o Appropriations are lowest under KRA-5 because PAPs that provide co- benefits are categorized under other KRAs (e.g. flood control under KRA-3 aimed at economic/infrastructures). o A range of National Climate Change Action Plan activities are not incorporated into the Departments’ 2011 through 2016 work programs as the Action Plan was still being drafted by the Climate Change Committee during 2011; in turn the Departments’ work programs also did not feed much into the preparation of the National Climate Change Action Plan. o Comparison with independent classification systems such as those used by the MDBs show climate appropriations may be underestimated by 25 percent as some climate-related PAPs such as traffic decongestion may be left out. x The overall increase in climate appropriations mainly results from increases on a few major PAPs. o All Department climate appropriations have increased, but the share of budget allocated to climate PAPs varies across Departments -- exceeding 50% for the DENR, the DOE and PAGASA’s and account for less than 20% for the DPWH and the DA. o Most climate expenditures are managed by the Department of Environment and Natural Resources, the Department of Public Works and Highways and the Department of Agriculture which therefore appear as the current major actors on climate change. o The NCCAP priority area on water sufficiency has received the highest appropriations with most going to flood control and little to water harvesting, which did not secure a budget for 2013. o Capacity building accounts for a very small share of all Departments’ budget appropriations. 225 Annex 1: Unabridged Select Key Messages o Spending on energy efficiency and conservation account for the vast majority under the Sustainable Energy Thematic priority, while renewable energy technologies and sustainable transport account for very little. x While about three-fourths of climate budget appropriations are directed towards adaptation, appropriations for PAPs supporting GHG mitigation have increased twice as fast as appropriations for PAPs supporting adaptation in the past six years. o Despite the policy focus on adaptation, the share of climate appropriations for adaptation PAPs have decreased from 72 percent in 2008 to 64 percent in 2013, due to higher growth rates for mitigation PAPs, with NGP currently mainly classified as a mitigation PAP. o Budget appropriations for GHG emissions mitigation have risen primarily due to the rapid expansion of the National Greening (presented as a carbon sequestration program primarily) and e-trike programs. o The review underestimates the level of budget appropriations for mitigation PAPS as several of these are funded through Special Purpose managed by the DOE and private sector funding, both for which the appropriations are not available. o Flood control protection accounts for about three- fourths of the appropriation directed at climate adaptation, but with little coming from disaster risk reduction and management resources. Budget Implementation, Execution, and Sources of Funding x While budget imple mentation for climate PAPs is mixed, with Department average execution rates varying from 64 percent to 104 percent, there has been improvement between 2008 and 2011. o The DOE has experienced challenges with low utilization rates for Special Purpose Funds, which has resulted in rejection of newly submitted projects, but execution has improved due to use of catch- up plans and close monitoring of climate PAPs. o Under the Department of Public Works and Highways execution had slowed due to a review of all of its contracts in 2011; recent efforts to speed up execution have included pre-construction activities such as feasibility studies and design in the year prior to implementation of the PAPs. x Climate change activities are primarily funded from domestic sources including Special Purpose Funds, so the budget formulation, execution, transparency and accountability are key determinants of the effectiveness of climate PAPs in delivering climate results. o Government funding accounts for between 93-100% in funding for most Departments except for DPWH, where a third of funding for flood control stems from donor aid, and DOE where a third of funding is from Special Purpose Funds. o Special Purpose Funds may clearly offer some flexibility in managing resources, but can also weaken accountability for the usage and absorption 226 Annex 1: Unabridged Select Key Messages of funds and enable local project proponents to avail of different sources for the same programs. x Though policy reforms have aimed to relocate funding from disaster response and recovery to disaster prevention and preparedness, most funding is still channeled through the Calamity Fund, exacerbated by an increased need for disaster recovery funding in recent years. o Budget appropriations are very scarce to operationalize funding for climate disaster prevention and preparedness, partly because the NDRRMF is still not operational, making stronger integration of climate change adaptation and climate disaster prevention a strategic priority. x Donor funding play an important role in piloting initiatives and supporting investments to assist the Governme nt in developing climate actions at the central and local levels for infrastructure, energy, and environme nt focusing on capacity building, policy advocacy, awareness-raising and technology adoption. o Donor funding have in particular been an important source of financing for flood control under the Department of Public Works and Highways. o Fragmented donor support across several sectors can raise problems in scaling- up, up-take and in some cases result in dependency on donor- financed projects. Financing Gaps x While a few major climate PAPs have been fully funded compared to projected needs identified in the work program, financing gaps exists for some major PAPs managed by the DOE, as well as for small PAPs managed by the DA, the DENR and the DPWH, which are underfunded or not funded at all. o Funding for the National Greening Program and Flood Protection are fully funded in the PIP. o Funding for the clean fleet program and adoption of land- use and transport planning processes under the DOE has not secured 2013 budgets. o The ISAFI under agriculture and the Clonal Nursery project under DENR have not secured 2013 budgets. Local Climate Appropriations x Two factors appear to have contributed significantly to the relative success in funding and imple menting CC-adaptation and mitigation programs and projects of the case studies of Makati and Albay; namely mainstreaming of the climate change agenda in development and land-use planning and the presence of supportive local policies . o Province of Albay and Makati city provide specific examples of LGUs that have successfully integrated climate change into their development plans. o Both Albay and Makati spend a significantly higher share of their budget on climate change than the national government. 227 Annex 1: Unabridged Select Key Messages o Local co-benefits of mitigation is sufficient for LGUs to engage in mitigation actions. x Poorer LGUs have lowe r fiscal capacity and are often also the most vulnerable to climate risk. o Funding allocation from the National Government in the form of an Internal Revenue Allotment, based on LGU population and area, not vulnerability, is the primary source of income for most LGUs accounting for more than nearly 90 percent of resources. o The most vulnerable LGUs are also often the ones with the poorest population and the most dependent on external transfers. o Climate adaptation funding at the local level is highly fra gmented across at least nine sources, each of which has its own set of rules, which makes it difficult to access by LGUs. o Mainstreaming the climate change agenda and climate disaster risk prevention in development and land-use planning, and the presence of explicit local policies, would contribute to relative success in funding and implementing climate change programs at the local level. Public Financial Management x The Governme nt’s 2011 PFM reforms can re -enforce and boosts visibility and effectiveness in the implementation of climate actions, namely to identify, prioritize and monitor effectiveness. o New budget planning and management tools such as the Program Budgeting Approach, and the Zero Based Budget approach enable increased alignment and more effective management of climate-related PAPs. o The adoption of the Bottom-Up Budgeting approach offers unique opportunities to enhance climate outcomes, increase convergence, reduce duplications, and leverage additional resources. o The inclusion of NCCAP outcomes and strategies into the 2011 –2016 PDP and the inclusion of NCCAP priority programs and activities in the PIP are key entry points for integrating adaptation and mitigation activities in the budget planning process. o Only a few Departments and Local Government Units experiment with and use screening and other budget tools to facilitate mainstreaming of climate change in budget planning.. o An assessment of the M&E systems of two Departments (DENR and DA) showed numerous reporting requirements and limited capacity to use the data for strategic planning purposes. 228 Annex 2: Summary of Findings Underpinning Recommendations 229 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings 1.1 Strengthen the Budget 1.1.1 Integrate climate change into budget planning and management tools Planning and Execution Framework for Managing Implement and update the climate screening guidelines and to clearly define the scope of the Climate PAPs government’s climate program [DBM, CCC, Departments]. x Several approaches are in use for identifying climate activities in the budget including KRA-5, Department work program, and NCCAP. x The different approaches have some overlap but are not congruent leaving large differences. x A uniform approach to classifying would facilitate planning, prioritization and monitoring of climate PAPs. x The CCC and DBM have developed and piloted climate screening guidelines in the context of the CPEIR. Make systematic use of budget planning processes and management tools to improve the development and selection of climate programs, activities, and projects [CCC, Departme nts and LGUs]. x The budget process and management tools provide mechanisms to channel resources to more productive uses and to monitor how effective the allocated resources are in delivering results. x Climate screening guidelines provides a way to identify climate PAPs. x Budget tools can be used to focus on climate PAPs Utilize opportunities introduced by the broader set of public finance reforms to strengthen the identification, convergence, and funding of climate projects, activities and programs [DBM, CCC, and Departme nts]. New and innovative budget procedures included in DBM’s budget reform program can support better utilization of climate-directed resources. x DBM has introduced new reform initiatives aimed at tighter alignment with priorities (zero- based budgeting, alignment of budget with five KRAs, program budgeting approach, budget prioritization framework), faster budget execution (disaggregate lump sum, procurement innovation, account management team, one year validity of appropriations, budget release 230 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings document), performance budgeting (OPIF, results-based performance management, performance-based bonus, results orientation RBPMS), and transparency and participation (bottom up budgeting, mandatory disclosure, and transparency seal). x Program approach provides framework for intersectoral coordination, an important consideration because of the thematic focus of NCCAP priorities. x Performance-based bonus requires the use of indicators for measuring bureau performance and is useful for tracking climate progress on key PAPs and the major programs (e.g., 18 river basins). x Bottom-up budgeting targets impoverished communities that often have the least adaptive capacity and are most impacted by climate-related disasters. Support the development of off-line systems to enable selected Departments to more effectively track and report their climate expenditures [DBM, DA] . x DA’s climate PAPs are embedded in broader programs making it difficult to determine how much is being spent on climate. x The CPEIR assessment used an offline system for reviewing DA’s budget. x The DBM has new systems that are being put in place that may address this issue. Develop a climate prioritization tool for use in the Department budget planning process. [CCC, DBM, NEDA, DILG, Departments, LGUs]. x Practices in prioritizing climate activities in the Departments vary significantly and can be improved. x Much of the NCCAP policy reforms are implemented through the sectoral Departments. x Few tools exist or are in use to systematically prioritize climate adaptation in the Departments. An exception is DA, which has a multi-step strategic planning process. x DENR’s climate program is a collection o f activities that surfaces from its different programs. It is retrospectively rationalized, which results in uneven distributions of resources and a focus on climate outcomes. 1.1.2 Establish comprehensive coverage of all climate PAPs in national and sectoral plans, strategies, 231 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings and budgets Monitor ongoing reform efforts to increase budget transparency for climate programs, activities, and projects [DBM]. x The budget includes multiple sources of appropriations – in- year realignment, off-budget expenditure (SPF, donor funds, congressional allocations) 1.1.3 Strengthen reporting of climate PAPs to cover mid-year and end-year implementation Monitor budget execution of climate expenditures [DBM, Departments]. Climate change PAPs are not well identified in the budget planning process, creating difficulties in monitoring and reporting. x Departmental budgets have been organized around departmental goals, outcomes, and outputs, and are not focused on identifying climate PAPs. x Departments in the CCCC cluster prepared, for the first time in 2011, a work program that identified and planned climate PAPs for 2011 to 2016. This identification has not been updated in subsequent years. x Climate activities are just one small component of some PAPs, but comprise most or all activities in other PAPs. Some Departments reported the appropriation for entire PAPs, resulting in overestimates of climate expenditures. x NCCAP priority activities such as capacity building or knowledge are difficult to identify in the Department budgets as they are often merged with corresponding activities, making it difficult to monitor for prioritization and allocative efficiency across NCCAP priorities. 1.2 Align Plans and 1.2.1 Establish a shared climate change program Strengthen Implementation to Achieve Climate Change Align National Climate Change Action Plan priorities with plans, programs, strategies and Goals climate activities of oversight agencies, Departments, Agencies, and Local Gove rnment Units to establish a clear formulation of goals and targets to be achieved. 232 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings Ensure a consistent set of climate outcomes when updating the Philippine Development Plan and National Climate Change Action Plan 1 [CCC, NEDA]. Consolidate the approach to align climate activities identified under Key Results Area-5 and National Climate Change Action Plan. [DBM, CCC, Departme nts]. Align Departme nts’ work programs with National Climate Change Action Plan priorities to ensure strategic sector planning in line with national priorities [Departme nts, CCC, NEDA]. A common understanding of climate priorities and activities do not exist across Government, creating difficulties in planning and prioritization. x NCCAP defines the climate change agenda for the country. It identifies 19 immediate outcomes, 42 outputs, 92 activities, and 328 subactivities to be carried out over three administrations. x Most of the NCCAP immediate outcomes are included in the PDP, but the extent of their inclusion varies. x The NCCAP identifies lead and supporting Departments/Agencies for implementing each output area. Implementation is led by Departments for most outputs. CCC jointly leads on nine outputs. x Departments are required to formulate their own climate change plans consistent with NCAAP. x Very few departments have sectoral goals or main final outputs that are based on NCCAP. x The NCCAP does not have targets or indicators to measure achievement of outputs or outcomes. x The KRA5 identifies a subset of PAPs that support the climate adaptation and mitigation goals. The PIP Results matrix serves as a guide in aligning PAPs to sector outcomes and relevant major final outputs (MFOs). The PIP includes only four outcomes (one on Agriculture and three on ENR) that contribute to KRA5. Specifically, they do not include any outcomes related to climate-proofing infrastructure or mitigation x Classification of PAPs by KRA including KRA5 provides greater focus and higher visibility for 1 See Guidelines for the Revalidation of the 2011-2016 Philippine Development Plan ˗˗Results Matrices , March 2013 233 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings selected climate change PAPs. Formulate Comprehensive Development Plans, Comprehensive Land Use Plans and Annual Investment Plans based on a strategic reference frame work that is consistent with National Climate Change Action Plan objectives, outcomes, and outputs, [DILG, CCC, LGUs]. Climate actions that are guided by NCCAP or support NCCAP outcomes and activities are difficult to identify in the LDIP and AIP. x LGUs are frontline agencies in formulating, planning, and implementing local climate change actions plans consistent with the NFSCC and NCCAP, and the LGA. (CCA) x Municipal and city governments are required to consider climate change adaptation as one of their regular functions. (CCA) x LDRRMC and CCC are tasked to ensure that disaster risk reduction and climate change adaptation are integrated into local development plans, programs, and budgets as a strategy in sustainable development. (NDRMMA) x DILG is tasked with providing technical assistance to LGUs and ensuring that they comply with national policies. (CCA, NDRRMA) x Integrated CDPs and CLUPs prepared by LGUs, which include LLCAPs, largely focus on disaster response and not disaster preparation. They do not refer to the NCCAP. Develop an operational business plan to be ready for the second and subsequent phases of the National Climate Change Action Plan [CCC, NEDA]. x There are no targets for overall climate goals that are to be achieved in a given year making it difficult to link to budgets. x Annual reporting by CCC on the achievements of the past year is not assessed on set goals and are only indirectly linked to overall NCCAP goals. x There is no coordinated implementation strategy on the NCCAP. 1.2.2 Adopt complementary sectoral reforms Formulate, enact, and imple ment complementary sector policy reforms to enable 234 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings transformative climate actions [Departme nts, CCC]. x Sector policy reforms are included in NCCAP activities x Departments are responsible for implementing NCCAP at national level 1.2.3 Reform design, and execution of selected climate change PAPs Improve the design and monitoring of climate Programs, Activities and Projects [CCC, NEDA, Departme nts and LGUs]. x Systematic climate screening, and EIA facilitate the management of climate risk. x Robust decision making frameworks are not in place to address uncertainty and disagreement about the outcomes of alternative projects under uncertainty x Climate PAPs do not have climate indicators and targets to measure progress. Update ICC review crite ria and analysis to reflect climate change scenarios for all major large investments and for programs, activities and projects included in the Philippine Investment Plan [NEDA, CCC]. x The ICC Review criteria were last revised in 2005. They do not explicitly include climate change criteria. x The EIA which is a requirement for ICC review does include some climate considerations but comes too late in the project cycle to make a difference in project design. Adopt a policy frame work for robust decision making unde r uncertainty in conjunction with developing supporting tools. [NEDA, CCC]. x Significant uncertainties surround the impacts and decision making around climate change. x Traditional approached to decision-making can Ensure project design and revie w criteria for PSF funded programs, activities, and projects are aligned with the ICC review criteria [PSF Board, CCC, NEDA]. x 1.2.4 Converge climate change adaptation and climate-related disaster risk reduction and management Improve convergence of Climate Change Adaptation and Disaster Risk Reduction and 235 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings Management at the national and local levels [CCC, NDRRMC, NEDA, Departments, LGUs, and DILG]. There is increasing convergence on (a) the importance of disaster prevention to address disaster risk and (b) developing climate resilience as the appropriate mechanism for disaster prevention. NDRRMP, NCCAP, and PDP have created a strong overlap between CCA and DRRM, as well as gaps and duplications in the execution framework. Assigning clearer institutional responsibilities for addressing disaster risk prevention and climate resilience building: (a) planning and implementation at the local level and (b) national-level planning and coordination to reduce confusion and avoid gaps and duplicative efforts that require coordination with higher transaction cost. x NDRRMC is responsible for disaster risk management activities and manages the NDRRMF and the calamity fund, while CCC is responsible for developing climate resilience. Both agencies are required to carry out their responsibilities jointly and/or in consultation with each other. x NDRRMC and CCC have signed an MOU reconfirming the overlapping roles and the need for joint action without further elaborating operational modalities. x In practice, NDRRMC continues to have a post-disaster focus as all funds that it manages are directed toward it. NDRRMC has a set of established local networks LDRRMC that can coordinate and develop integrated plans at the local level. It reports to the Office of Civil Defense, which is in charge of implementing the NDRRMC. x In contrast, CCC is a centralized policymaking body that reports to the CCCC and the President. x As such, CCC leadership for national- level coordination and policymaking on disaster prevention would have more visibility and effectiveness, whereas NDRRMC would be more effective at local- level planning and implementation of all aspect of disaster planning to build climate resilience. Simplify and integrate vulnerability and risk assessment tools, focusing on short- to long-te rm climate risk management [CCC, NDRRMC, DILG, LGUs]. 236 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 1: Strengthening the Planning, Execution, and Financing Frame work for Climate Change Objectives Recommended Activities with Supporting Findings Incomplete scientifically based vulnerability profiles for priority areas, sectors, and LGUs makes planning and prioritization of climate action at the LGU level difficult, especially for LGUs with low capacity. x Guidelines on vulnerability assessment and disaster risk assessment parallel each other and are distinct. x Standardized guidelines on integration of VA and DRR are not available. x LGU capacity for completing and using VA/disaster risk assessments are generally low. x Methods and tools to integrate results of vulnerability assessments planning, prioritization, and annual budget decisions are not available. 237 Annex 2: Su mmary of Findings Underpinning Reco mmendations 1.2.5 Adopt tools and strengthen low emissions development strategies Develop tools and approaches to strengthen the institutional frame work of REDD+ for more effectively managing forest resources [DENR, CCC]. x NR resources management has not been as effective due to weak institutional arrangements, poor enforcement, weak leadership, and limited engagement by communities. Develop tools that enable the formulation of Low Carbon and Low Emission Development Strategies and support their implementation [CCC, NEDA, DOE, and Departments]. x CCC has been working with a number of development partners to develop a LEDS for energy, transport, forestry and waste sectors. x Mitigation activities have been prioritized using sector-based tools and processes. They have not been prioritized across sectors at a national level using consistent methods and assumptions. x Comprehensive strategies do not exist. Develop, adopt and support monitoring, reporting and verification (MRV) systems for greenhouse gas emission reductions in key sectors [CCC]. x MRV for selected projects have been established for a number of different projects. x Standardized systems for completed sectors do not exist. x CCC has been working with development partners to develop MRV systems for selected sectors. Facilitate and build readiness for market based instruments [CCC, NEDA]. x GHG inventories have been constructed as part of National Communications x Systematic efforts to collect emissions data do not exist x Regulations and institutions are not in place to set baseline or for MRV Begin to establish a notional carbon price to signal the value of reducing emissions. [CCC, NEDA]. x Carbon prices have not been established in the market, by regulation of by policy. x The co-benefits of climate actions in terms of poverty reduction or employment creation have not been systematically examined. 238 Annex 2: Su mmary of Findings Underpinning Reco mmendations 1.3 Rationalize and 1.3.1 Streamline rules and eligibility criteria for local climate financing Harmonize Climate Financing Instruments Clarify the rules and appropriate financing instruments for climate change adaptation and climate disaster risk prevention at the local level [PSF Board, CCC, LDRRMF]. Climate finance for LGUs is fragmented; amounts available to an LGU from different sources is uncertain, and the access rules (e.g., cofinancing rules) can preclude access. x LGUs can use up to 70 percent of their LDRRMF for disaster prevention. Resources not used can be carried over for five years, after which it reverts to the General Fund. x LGUs have access to the newly created PSF to finance climate adaptation, including disaster prevention. The rules for accessing these resources are still being finalized. x LGUs have access to six other sources of funds (LDF, PCF, PDAF, BUB, devolved NGA, and donors) that can finance adaptation and DRRM each with its own rules, cost-sharing arrangements, and availability. x LGUs vary based on their fiscal capacity and vulnerability, with the more vulnerable LGUs also being the poorer ones. x The need to provide co-financing limits access to these funds for LGUs with low fiscal capacity. 1.3.2 Adopt reform of selected fiscal instruments after reviewing their climate change impact Identify and address Government policies and programs as well as fiscal incentives that may have unintended negative consequences on the achievements of climate adaptation and mitigation goals [DOF]. 1.3.3 Establish Climate Finance Group to coordinate climate finance Create formally the Climate Finance Group (CFG) with responsibility for mobilizing resources and establishing modalities to support specific climate finance needs [DOF] Dedicated funding is not available for national- /regional- level climate resilience building or disaster risk prevention activities (including national- level policy coordination), making it difficult to 239 Annex 2: Su mmary of Findings Underpinning Reco mmendations support these activities. x PSF supports adaptation at the LGU and community levels. x Up to 70 percent of the NDRRMF can be used to support disaster prevention activities at the national level. However, the NDRRMF has not been operational. Instead, the calamity fund continues to be funded with all resources directed toward post-disaster operations. x Departments are expected to finance disaster prevention and resilience building out of their regular budgets providing little space and incentive for significant evolutions. Develop tools to support risk sharing and transfer initiatives [CFG, DOF]. Though the magnitude of the financing gap at the national level is difficult to determine, a number of major PAPs remain unfunded or were delayed while others have seen their funding well increased. x Budget estimates are not available for NCCAP activities in sufficient detail to carry out a detailed financing gap analysis focused on NCCAP. x Lack of consistency between PAPs included in the PIP, the Department’s work programs, and the budget creates difficulties in a financing gap analysis. x Many PAPs have been fully funded or exceed identified funding needs: water sector (e.g., flood protection), ENR sector (e.g., NGP, most medium-scale PAPs), and energy sector (e.g., Etrike). x A number of PAPs remain unfunded or underfunded have been delayed: water sector (e.g., small-scale climate change PAPs), ENR sector (e.g., Clonal Nursery project and some small- scale PAPs), and energy sector (e.g., ocean thermal energy, small scale PAPs). x Some key climate change PAPs in the agriculture sector are not included in the PIP (e.g., related to composting, SSIPs, mitigation and adaptation technologies and strategies, the insurance system). In addition, the National Farmers Registry System and Inventory System of Agriculture and Fishery Investments PAPs were in the PIP but remain unfunded. The financing gap at the local level will partially be filled by the PSF; the extent of the remaining gap is uncertain. x Almost the entire LDRRMF/calamity fund has gone toward responding to disasters in the past; disaster prevention has not been explicitly funded. 240 Annex 2: Su mmary of Findings Underpinning Reco mmendations x The PSF provides a new source of funds at the local level, but both the demand and the extent to which the PSF will meet it are unclear. While steps have been taken toward climate finance readiness, significant gaps remain. x The ability to access international climate finance depends on the readiness for it. There are four aspects: (a) institutional readiness to comply with the fiduciary standards, (b) readiness to spend efficiently and effectively, (c) readiness to plan new climate activities and mainstream additional climate PAPs into development plans, and (d) readiness to leverage private sector investments. x The operationalization of the PSF provides a model for compliance with fiduciary standards. x Processes are not in place currently to plan and prioritize climate activities in the Departments and LGUs. x The NCCAP has provided a planning framework but has to be fully integrated and aligned with KRA5 and PDP to be fully effective. x Deregulation of the energy sector provides specific examples of the potential for leveraging. 1.3.4 Strengthen donor support for climate reform agenda Establish a regular forum, supported by a secretariat to strengthen the alignment between Development Partners’ support and the Governments’ climate change agenda [DOF, CCC, and Development Partners in coordination with sector Departments and LGUs]. Donor support is fragmented and not fully aligned with the government reform agenda and main programs. x The established PDF Climate Change working group provides a venue for dialogue among donors. x Donors have not been coordinating systematically with each other, and the types of support that they are providing result in overlaps and the development of competing approaches. x Donor support is not fully aligned with the reform agenda of the government. x CC and DRM not yet well coordinated and integrated under the PDF. 241 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities Objectives Recommended Activities with Supporting Findings 2.1 Enhance CCC’s role in 2.1.1 Strengthen the annual CCC review of climate change policy implementation reviewing and Monitor and publicly report on the financing mobilized to support NCCAP and the climate communicating Climate change results realize d against the climate targets [CCC]. Change performance x Consolidate reports on the goals, achievements, strategies to achieve the goals and risks are not systematically prepared. Consolidate monitoring and reporting of all climate-related disaster prevention to increase accountability [CCC, NDRRMC]. x Reporting climate-related disaster prevention is spread out across different national and local agencies (LDRRMO, LDRRMC, NDRRMC, DILG) Establish system for review of CDP and CLUP [CCC]. x System is not in place to send, receive and review LCCAP or local plans that integrate LLCAPs. 2.2 Strengthen Coordination 2.2.1 Operationalize the terms of reference for all CCC Advisory Board members between CCC and Oversight Agencies and Departments Clarify the relationship between the CCC and the Advisory Board Members [CCC]. General ad hoc arrangements between agencies leave them susceptible to change and reversal. x CCC is responsible for many tasks jointly with other agencies. Many of these responsibilities are currently often carried out in ad-hoc manner. These include: o CCC and NEDA on inclusion of NCCAP outcomes in PDP, and on the integration of climate criteria in ICC reviews. o CCC and DBM on scope of KRA5 in relation to NCCAP, budget screening of climate PAPs, and the identification of points along the budget cycle where CCC will provide inputs or will review information. o CCC and DOF on climate finance readiness, including market-based instruments readiness. 242 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities Objectives Recommended Activities with Supporting Findings o Lead Agencies on integration of NCCAP output into sectoral programs, monitoring, and reporting. o LGUs on consultations on developing LLCAP. x Lack of clarity on specific responsibility can lead to non-achievement of goals or high transaction cost to reach them. 2.2.2 Convene a Champions Group x CCC, NEDA, DBM and DOF are the key oversight agencies overseeing governance of key policeis related to climate x Fragmentation and lack of coordination is a barrier to NCCAP implementation 2.2.3 Establish CCC coordination with the national and local DRRM Councils Revise and expand MOU between NDRRMC and CCC to include operational guidelines that better reflect the policy convergence with a clear focus on the specific responsibilities on climate related disaster risk prevention [NDRRMC]. x The calamity fund is usually allocated for relief and emergency response, not on DRR initiatives, as it alone is insufficient to undertake DRR or adaptation initiatives, especially in poorer LGUs. 2.2.3 Operationalize CCC responsibilities relative to the PSF Establish a speedy, transparent approval process for projects submitted to the PSF board [PSF Board]. x IRR has been finalized and is awaiting approval. 2.3 Strengthen Monitoring 2.3.1 Reform departmental M&E systems and link to climate change M&E requirements in the Departments and LGUs Existing M&E systems must be redesigned to fit with the National Climate Change Action Plan priorities across all levels of the government [CCC, DBM, Departments, NEDA, DENR, LGU]. x Climate indicators have not been established and system are not in place to monitor against them. 243 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 2: Enhancing Accountability through Monitoring, Evaluation, and Review of Climate Change Policies and Activities Objectives Recommended Activities with Supporting Findings Develop and adopt tools to docume nt and inform about the co-benefits of climate actions and integrate them into the climate prioritization tool [CCC, NEDA, Departments, LGUs]. Climate budget monitoring and reporting systems are weak, and senior management does not use them in support of strategic resources allocation and planning. x Monitoring expenditures relative to original appropriations is difficult because of multiple sources of the appropriation structure (approved, automatic, continuing, and supplemental appropriations) and in- year alignment designed for flexibility. x Understaffing and manual processes at the regional levels, delayed reporting from reporting units, understaffing, and the numerous formal and ad-hoc reporting requirements have resulted in weak and unvalidated budget reports. The operational effectiveness of specific climate PAPs, the portfolio of climate PAPs, and the NCCAP are difficult to determine without a consistent monitoring and evaluation system. x NCCAP does not have operational indicators to measure and monitor overall implementation progress. x Climate outcomes, outputs, and indicators are not clearly defined for many activities especially for adaptation. x Departments and LGUs have limited capacity to develop climate indicators or monitor climate results. x Guidelines are not available for LGUs and Departments to consistently monitor and report in a manner that can be aggregated horizontally and vertically. 244 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 3: Building Capacity and Managing Change Objectives Recommended Activities with Supporting Findings 3.1 Build Skills and 3.1.1 Establish climate change database and learning system Knowledge-base on Climate Change Developing able staff in all as pects of climate policy, financing, and institutions is a cross- cutting recommendation to both strengthen capacity through training and to build and share local and global knowledge [Departments]. x The calamity fund is usually allocated for relief and emergency response, not on DRR initiatives, as it alone is insufficient to undertake DRR or adaptation initiatives, especially in poorer LGUs. Make quality information and data available in a timely manner to support and comple ment imple mentation of climate-related tools [PAGASA, NAMRIA]. x 3.1.2 Develop climate change training programs Prioritize, finance, and carry out capacity-building programs that supplement mainstreaming of the National Climate Change Action Plan into policies, budgets, and financing [CCC, DILG, CICT, DBM, NEDA, DILG, LGA, Departme nts]. x Implementation of Rationalization Plan has been slow and has constrained building staffing capacity. x Departments do not have the needed knowledge and sufficient capacity to implement climate change activities into the work programs. Streamline content manage ment systems within and across Departments and Local Government Units [Departments, LGUs]. x A broader reform agenda includes the rationalization plan, which attempts to relate to staffing capacity to agency output and budget allocation. x Implementation of the rationalization plan has been slow due to the high transaction cost of negotiating and reaching an agreement on the appropriate size and skill mix of units. x LGUs have not been able to build adequate staff in a timely manner even when they have budgeted their own resources for building the needed staff complement due to the 245 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 3: Building Capacity and Managing Change Objectives Recommended Activities with Supporting Findings rationalization plan. LGUs have limited capacity to plan or monitor climate adaptation. x Climate adaptation is almost always addressed by the same units that address DRR. x LGUs vary significantly in their capacity and readiness to address DRR and CCA. x Few LGUs have DRRM and LCCAP plans and strategies, as local actions are often not well articulated and funded. x The structure and staffing of local DCCs address emergency and relief response mechanisms, but may fall short for a comprehensive DRRM approach. x Capacity building and training activities and tools targeting local DCCs are geared toward preparedness for response. 3.1.3 Create a virtual network of practitioners Organize periodic symposium of experts to support a virtual network of practitione rs that help capture, analyze, and coordinate knowledge [CCC]. Global best practices can guide increase the effectiveness of NCCAP implementation. x International benchmarks have been used by the Government to highlight the importance of addressing climate change (e.g., country vulnerability ranking). x More extensive benchmarking can identify opportunities for mitigation potential (e.g., Peru). x The operationalization of global and national climate funds provides a rich set of relevant experiences for operationalizing the PSF. 3.1.4 Establish centers of excellence on climate science Establish Centers of Excellence [CCC]. x Academia and the research community, much of it supported by Government (DOST, PCARRD, PCIERD), has developed a limited amount localized knowledge on climate. 3.1.5 Establish an information portal on climate change Establish a knowledge repository or information portal on climate change that is easily accessible to Departments, Local Government Units, and communities [DENR]. 246 Annex 2: Su mmary of Findings Underpinning Reco mmendations Pillar 3: Building Capacity and Managing Change Objectives Recommended Activities with Supporting Findings Information gaps including participatory and science-based baseline data, consistent with PDP, lead to discrepancies and uncertainty about the robustness of plans and decisions. x Comprehensive and accessible information management systems necessary for coordination across climate-sensitive sectors are not available. x Data collection methodologies are not synchronized to support planning and budgeting. Mechanisms to enable consistent updating and harmonization of raw data are not in place alongside the sharing of such data among relevant stakeholders. 3.2 Raise Public Awareness 3.2.1 Strengthen public support for climate reform agenda through enhanced civil society participation of Climate Change Raise public awareness and maintain high civil society participation in national and local planning and priority-setting processes at the grassroots level [NGO, PSF Board, and DILG]. The continued support and engagement of CSOs is essential to maintain transparency, especially in the allocation of climate resources such as through PSF. x CSOs are very active on the climate agenda in the Philippines. They have made significant contributions to establishing the current climate laws, policies, strategies, and in establishing the PSF. x Community participation is stated as one criterion for prioritizing funds; community participation, through community representatives or NGOs, is stated as a means for ensuring transparency and the participation of vulnerable and marginalized groups. x For example, there are well-established NGOs in the area of procurement monitoring that can be helpful in ensuring the funds are applied to their intended purpose. There are also NGOs that can mobilize the vulnerable and marginalized in order for their voices to be heard. Low awareness of Filipino community about disaster risks has left communities unprepared. x Only half of Filipino people and communities claim to be aware of disaster and climate risks. x The majority of businesses are aware of climate and disaster risks. 247 Annex 3: Three Year Work Plan Annex 3: Three year Work Plan 248 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators 1.1 Strengthen the Budget Planning and Execution Framework for M anaging Climate PAPs 1.1.1 Integrate climate change into budget planning and management tools DBM Implement and update the climate Climate tagging complete (%); Issuance of DBM , CCC, screening guidelines and to clearly adaptation criteria defined; "Screening Departments define the scope of the mitigation criteria defined guidelines for government’s climate program taggin climate expenditure" in April/ M ay 2013 in time for the preparation of 2014 Budget which differentiates CC adaptation PAPs from CC 1.1.1.1 mitigation PAPs which requires departments/ agencies to breakdown their PAPs into sub- activities (if necessary) so as to allow them to disaggregate the CC-related sub- activities from the non-CC-related sub-activities M ake systematic use of budget Climate PAPs identified and DBM , planning processes and reflected in budget management Departments management tools to improve the tools, processes, reports 1.1.1.2 development and selection of climate programs, activities, and projects 249 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators Utilize opportunities introduced by Climate PAP s included in the DBM , CCC the broader set of public finance BUB, Programs Approach, ZBB. reforms to strengthen the Additional Program Approach 1.1.1.3 identification, convergence, and on CC funding of climate projects, activities and programs Support the development of off- Systematic tracking and DBM ,DA line systems to enable selected reporting of CC PAPs through 1.1.1.4 Departments to more effectively combination of online and off- track and report their climate line systems expenditures. Develop a climate prioritization Prioritization tool developed for CCC, DBM , tool for use in the Department Departments and for LGUs NEDA, 1.1.1.5 budget planning process DILG, Departments, LGUs 1.1.2 Establish comprehensive coverage of all climate PAPs in national and sectoral plans, strategies and budgets DBM M onitor on going reform efforts to Report on share of climate DBM increase budget transparency for expenditures covered within climate programs, activities, and budget; 1.1.2.1 projects Screening guidelines for tagging CC expenditures linked to Unified Accounts Code Structure 1.1.3 Strengthen reporting of climate PAPs to cover mid-year and end of year implementation DBM M onitor budget execution of Report on budget execution DBM , 1.1.3.1 climate expenditures Rates for CC PAPs Departments 1.2 Align Plans and Strengthen Implementation to Achieve Climate Change Goals 1.2.1 Establish a shared climate program CCC, NEDA Ensure a consistent set of climate NCCAP and PDP aligned by CCC, NEDA outcomes when updating the defining PDP and NCCAP PAPs Philippine Development Plan and and outcomes, particularly 1.2.1.1 National Climate Change Action important for agriculture, and Plan2 fishery and infrastructure chapters of PDP and for water 2 See Guidelines for the Revalidation of the 2011-2016 Philippine Development Plan ˗˗Results Matrices , March 2013 250 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators sufficiency priority of NCCAP Consolidate the approach to align Approach to identify PAPs for DBM , CCC, climate activities identified under NCCAP and KRA-5 Departments 1.2.1.2 Key Results Area-5 and National harmonized Climate Change Action Plan. Align Departments’ work programs Departments, with National Climate Change CCC, NEDA 1.2.1.3 Action Plan priorities to ensure strategic sector planning in line with national priorities Formulate Comprehensive Number of LGUs with CDPs, DILG, CCC, Development Plans, CLUPs that include CC Actions LGUs Comprehensive Land Use Plans Plans and Annual Investment Plans based 1.2.1.4 on a strategic reference framework that is consistent with National Climate Change Action Plan objectives, outcomes, and outputs, Develop an operational business Business Plan for NCCAP phase CCC, NEDA plan to be ready for the second and 2 prepared on a consultative 1.2.1.5 subsequent phases of the National basis including targets and Climate Change Action Plan indicators. Adopt complementary sectoral reforms Key 1.2.2 Departments Formulate, enact, and implement Strategic sectoral plans updated Departments, complementary sector policy for key sectors (energy, CCC 1.2.2.1 reforms to enable transformative transport, water, agriculture, climate actions forestry , ENR, health) Reform design and execution of climate change PAPs NEDA,CCC 1.2.3 DBM , Depts Improve the design and monitoring All climate PAPs contain targets CCC, NEDA, of climate Programs, Activities and and indicators; Departments 1.2.3.1 Projects All PIPs include assessment of and LGUs Climate risks and opportunities. Update ICC review criteria and CC considerations incorporated EIA made a NEDA, CCC, 1.2.3.2 analysis to reflect climate change in ICC evaluation requirement for DENR. scenarios for all major large ICC evaluation to 251 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators investments and for programs, help ensure that activities and projects included in CC vulnerabilities the Philippine Investment Plan are identified, adaptation options are formulated to address the risks Adopt a policy framework for Adoption of a policy framework NEDA, CCC robust decision making under on robust decision making 1.2.3.3 uncertainty in conjunction with developing supporting tools Ensure project design and review Harmonized approaches PSF Board, criteria for PSF funded programs, CCC, NEDA 1.2.3.4 activities, and projects are aligned with the ICC review criteria Converge climate change Integrated guidance for CCC adaptation and disaster risk mainstreaming CCA and DRRM DBM 1.2.4 reduction and management in CDP/ CLUP issued; LGUs trained on use of the same Improve convergence of Climate CCC, Change Adaptation and Disaster NDRRM C, 1.2.4.1 Risk Reduction and M anagement NEDA, at the national and local levels Departments, LGUs, and DILG Simplify and integrate vulnerability CCC, and risk assessment tools, focusing NDRRM C, 1.2.4.2 on short- to long-term climate risk DILG, LGUs management Adopt tools and strengthen M arket Readiness Plan CCC 1.2.5 processes to optimize mitigation completed opportunities Develop tools and approaches to DENR, CCC strengthen the institutional 1.2.5.1 framework of REDD+ for more effectively managing forest resources 1.2.5.2 Develop tools that enable the CCC, NEDA, 252 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators formulation of Low Carbon and DOE, and Low Emission Development Departments Strategies and support their implementation Develop, adopt and support CCC monitoring, reporting and 1.2.5.3 verification (M RV) systems for greenhouse gas emission reductions in key sectors Facilitate and build readiness for CCC, NEDA 1.2.5.4 market based instruments Begin to establish a notional 1.2.5.5 carbon price to signal the value of reducing emissions. 1.3 Rationalize and Harmonize Climate Financing Instruments 1.3.1 Streamline rules and eligibility criteria for local climate financing DOF Clarify the rules and appropriate PSF operations M anual adopted PSF Board, financing instruments for climate and PSF is operational CCC, change adaptation and climate Establish eligibility criteria for LDRRMF disaster risk prevention at the LGUs wishing to access the PSF local level and design of counterpart funding arrangements that take into account fiscal capacity of the proponent LGUs vis-à-vis their exposure to CC hazards/ risks and ; formulation of criteria that will 1.3.1.1 guide the evaluation/ prioritization of projects submitted by LGUs for funding under the PSF; these funding arrangements and project evaluation/ prioritization criteria are harmonized with those for the PCF, BUB and NDRRMF to preclude financing from multiple sources for the same activity 1.3.2 Adopt reform of selected fiscal instruments after reviewing their climate change impact DOF 253 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 1: Strengthening the Planning, Execution, and Financing Framework for Climate Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators Identify and address Government Report on CC impacts of fiscal DOF policies and programs as well as instruments fiscal incentives that may have 1.3.2.1 unintended negative consequences on the achievements of climate adaptation and mitigation goals 1.3.3 Establish the Climate Finance Group to coordinate climate finance planning DOF Create formally the Climate CFG develops resource DOF Finance Group (CFG) with mobilization for phase 2 of responsibility for mobilizing NCCAP 1.3.3.1 resources and establishing modalities to support specific climate finance needs Develop tools to support risk CFG, DOF 1.3.3.2 sharing and transfer initiatives 1.3.4 Strengthen donor support for climate reform agenda DOF Establish a regular forum, establish joint support for the DOF, CCC, supported by a secretariat to programmatic approach to climate and strengthen the alignment between change planning, financing and Development 1.3.4.1 Development Partners’ support M &E. Partners and the Governments’ climate change agenda. 254 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 2: Enhancing Accountability through M onitoring, Evaluation, and Review Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators 2.1 Enhance CCC’s role in reviewing and communicating climate change performance 2.1.1 Strengthen the annual CCC review of climate change policy implementation CCC M onitor and publicly report on CCC the financing mobilized to support 2.1.1.1 NCCAP and the climate change results realized against the climate targets Consolidate monitoring and CCC, reporting of all climate-related NDRRM C. 2.1.1.2 disaster prevention to increase accountability Establish system for review of CCC 2.1.1.3 CDP and CLUP. 2.2 Strengthen Coordination between CCC and Oversight Agencies and Departments 2.2.1 Develop terms of Reference for all CCC Advisory Board members CCC Clarify the relationship between CCC issues resolution on the CCC 2.2.1.1 the CCC and the Advisory Board TOR for advisory board members M embers 2.2.2 Convene a Champions Group Develop terms of reference CCC including targets, roles and 2.2.2.1 responsibilities, can accountabilities 2.2.3 Establish CCC coordination with the national and local DRRM Councils CCC Revise and expand M OU between MOU identifying working plan CCC, NDRRM C and CCC to include for coordination and cooperation NDRRM C operational guidelines that better 2.2.3.1 reflect the policy convergence with a clear focus on the specific responsibilities on climate related disaster risk prevention 2.2.4 Operationalize CCC responsibilities relative to the PSF Board CCC,PSF Establish a speedy, transparent PSF Board 2.2.4.1 approval process for projects submitted to the PSF board 2.3 Strengthening M onitoring in the Departments and the LGUs 2.3.1 Reform departmental M &E systems and link to climate change M &E requirements CCC 255 Annex 3: Three Year Work Plan Annex 3: Three Year Work Plan Pillar 2: Enhancing Accountability through M onitoring, Evaluation, and Review Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators Existing M &E systems must be CCC, DBM , redesigned to fit with the National Departments, 2.3.1.1 Climate Change Action Plan NEDA, priorities across all levels of the DENR, LGU government Develop and adopt tools to estimation of co-benefits CCC, NEDA, document and inform about the institutionalized in ICC LGUs 2.3.1.2 co-benefits of climate actions and evaluation process integrate them into the climate prioritization tool 256 Annex 3: Three Year Work Plan Annex 3B: Three Year Work Plan Pillar 3: Building Capacity and M anaging Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators 3.1 Build Skills and Knowledge-base on Climate Change 3.1.1 Establish climate change database and learning system Departments Developing able staff in all Departments aspects of climate policy, financing, and institutions is a 3.1.1.1 cross-cutting recommendation to both strengthen capacity through training and to build and share local and global knowledge M ake quality information and M ake localized/ more granular [PAGASA, data available in a timely manner climate data and hazard maps NAM RIA]. to support and complement available a) preparation of implementation of climate-related localized more granular climate 3.1.1.2 tools data and hazard maps for high risk areas; (b) LGUs/ local communities trained on the use of the localized climate data and hazard maps 3.1.2 Develop climate change training programs CCC Prioritize, finance, and carry out CCC, DILG, capacity-building programs that CICT, DBM , supplement mainstreaming of the NEDA, 3.1.2.1 National Climate Change Action DILG, LGA, Plan into policies, budgets, and Departments. financing Streamline content management Departments, systems within and across LGUs 3.1.2.2 Departments and Local Government Units 3.1.3 Create a virtual network of practitioners CCC Organize periodic symposium of No of institutions and experts CCC experts to support a virtual participating in virtual network 3.1.3.1 network of practitioners that help capture, analyze, and coordinate knowledge 257 Annex 3: Three Year Work Plan Annex 3B: Three Year Work Plan Pillar 3: Building Capacity and M anaging Change Output/ Outcome Performance Pillars/Objectives/ Activities Baseline Status 2014 2015 2016 Lead A gency Indicators 3.1.4 Establish Centers of Excellence on Climate Science CCC Establish Centers of Excellence No of centers established and CCC 3.1.4.1 operational 3.1.5 Establish an information portal on climate change DENR Establish a knowledge repository DENR or information portal on climate 3.1.5.1 change that is easily accessible to Departments, Local Government Units, and communities 3.2 Raise Public Awareness of Climate Change 3.2.1 Increase civil society participation in climate change policy and review CCC Raise public awareness and NGO, PSF maintain high civil society Board, and 3.2.1.1 participation in national and local DILG planning and priority-setting processes at the grassroots level 258 Annex 4: Framework for Analysis 259 Annex 4: Framework for Analysis Select Key Messages: x A CPEIR is a systematic examination of the factors that determine the ability of public institutions, policies, financing, and related processes in a country to translate its climate agenda into desired climate results. x The CPEIR builds on the analytical framework of traditional PERs, further adapting it to the Philippine context. It includes a quantitative and qualitative assessment of public expenditures and qualitative assessments of climate policies, institutions, and the PFM system at national and local levels based on desk studies, key informant interviews, and consultations. x The scope of the CPEIR— timeframe, departments, LGUs, policies and processes — examined was based on the availability of data in consultation with the Government. x The CPEIR is based on a policy-based identification of climate expenditures with the NCCAP constituting the main policy reference document. x The main challenges for the public expenditure review are the absence of CC function in the chart of accounts and economic budget classification and the difficulties of identifying the incremental cost in an adaptation intervention. x The short duration since the enactment of new climate laws/policies/strategies and the Overall Approach 1. A CPEIR is a systematic examination of the factors that determine the ability of public institutions, policies, financing, and related processes in a country to translate its climate agenda into desired climate results. It aims to identify ways to increase the efficiency and effectiveness with which public resources are utilized to achieve the climate objectives and to identify mechanisms for mobilizing sufficient resources for this purpose. A CPEIR also has an important process function as a starting point for longer-term Government- led stakeholder dialogue involving the departments, LGUs, other public sector institutions, the private sector, international DPs, and civil society. 2. The CPEIR builds on the analytical frame work of traditional PERs, further adapting it to the Philippine context. The key dimensions of a PER include fiscal sustainability, strategic resource allocation, the role of government, the efficiency and effectiveness of spending, the incidence of spending, and capability of institutions and alignment of incentives. Adapting the framework to the Philippine context, the CPEIR focuses on: a. Current policy priorities and strategies on climate change b. Institutional capacities and arrangements to promote the integration of climate change priorities and strategies into the decision-making process 260 Annex 4: Framework for Analysis c. The alignment of the Government’s stated climate change priorities with public spending d. The management of climate actions, including the allocative efficiency of climate resources, implementation performance, and M&E effectiveness to track and evaluate climate expenditures. 3. Prior CPEIRs have identified several conceptual challenges. They include the absence of climate change function in the classification of the Functions of Government (COFOG), difficulties in identifying the incremental cost of an adaptation intervention (e.g., upgrading of public infrastructure), and difficulties attributing adaption and mitigation co-benefits to expenditures within a program/project. The WB is currently developing a Sourcebook documenting best practices in addressing these challenges. This analysis has both contributed to and learned from that effort (see also the assessment in section on limitations and caveats). 4. Similar to traditional PERs, this CPEIR includes (1) quantitative and qualitative assessment of public expenditures and financial manage ment and (2) qualitative assessment of climate policies and institutional arrangements. It draws upon: 1. Primary data collected from the DBM, CCC, NEDA, selected Departments, agencies, and LGUs. 2. The documentation available in the sectors (e.g., sector strategies, plans, reporting documents, and analytical work). 5. For the qualitative analysis, interviews and consultations were carried out with the respective agencies at national and local levels through workshops and technical meetings. Policy Review Methodological Overview 6. The policy review is a qualitative assessment of the laws, strategies, and plans that define the climate change agenda of the Philippines. It describes the evolution of the laws and policies that have been enacted to address climate change at national and local levels, culminating in the adoption of the NFSCC, NCCAP, and PSF, and a. analyzes the extent to which the climate agenda is clearly demarcated by the existing body of laws and policies. b. identifies the synergies and overlaps with other existing national, sectoral, and local development plans, national policies on DRRM and green growth, and sectoral and local policies and strategies. It sets the context for the institutional review. 261 Annex 4: Framework for Analysis 7. The assessment is based on information collected through: a. a desk review of the current and past laws, policies, strategies, and action plans specifically focused on climate change at national and loca l levels; b. a desk review of the current and past developments, sectoral strategies, and local government plans; and c. key informant interviews from select departments. 8. The scope of the review is limited to the laws, strategies, and policies related to environme nt and climate change enacted since 1999, with a specific focus on those enacted and imple mented since the adoption of the Climate Change Act of 2009. Limitations and Caveats 9. The primary limitation of the revie w arises from the short time perio d since the enactme nt of the laws, strategies, and policies. As a result, many of the implementation issues have yet to be discovered. In addition, the short implementation period creates difficulty in assessing the effectiveness of the laws, strategies, and policies in achieving the stated objectives, especially for CC, where actions are undertaken with the intent to affect outcomes decades into the future. Institutional Review Methodological Overview 10. The institutional review is a qualitative assessment of the institutional arrangements for delivering results on the climate agenda. It is carried out in a dynamic framework consisting of: a. A brief historical review to set the context b. A description and analysis of what currently exists c. An identification of the gaps leading to recommendations. 11. The institutional review uses a variety of instrume nts including a desk study, key informant inte rvie ws, focus group inte rviews, and in-depth intervie ws (see Table A.1). The desk study includes a review of the literature (including theoretical and methodological contributions and international experiences where relevant) and agency documents (rationalization plans, policies, programs, field reports, M&E accounts). In addition to the key questions of interest, the key informant interviews include a skills inventory, and the collection of key organizational characteristics, values, wants, and needs from self-assessment reports. Semi-structured focus groups are an alternative instrument provided to agencies, for their convenience, to elicit responses to the same set of issues covered in the key informant interviews. 262 Annex 4: Framework for Analysis In-depth interviews included follow- up discussions with key informants to deepen the analysis on a subset of the key questions. 12. The institutional review has two foci— roles and responsibilities of institutions for implementing the climate agenda and the implementation of the climate agenda from a functional pe rspective. The description and analysis of roles are presented for coordination and oversight agencies and the implementing agencies at the national and local levels. Brief descriptions are also included for supporting specialized agencies and non-state actors. The functional review describes and analyzes mechanisms for setting strategic directio ns, planning and prioritization, financing programs, executing programs, and finally, the monitoring and reporting of performance at program and aggregate levels. 13. The assessment of the coordinating bodies that are designed to address climate change includes a qualitative review of the overall institutional arrangements for the climate agenda, the roles and responsibilities assigned to each coordinating body, the current capacities, and capacity gaps benchmarked against the assigned responsibilities of the coordinating bodies. 14. The assessment of the imple menting agencies at the national level focuses on selected Departments and attached Agencies identified as lead gove rnment Agencies for some of the NCCAP priorities. The key areas of focus include: a. Processes and approaches to align sector strategy, work progra ms, and budget plans with NCCAP. b. Processes and tools for including climate considerations in project design c. Institutional arrangements for implementing NCAAP respons ibilities within the department. d. The role CSOs and the private sector play in the agency’s CC -related activities. e. Processes to monitor and report on the performance of NCCAP implementation. f. The adequacy of staff capacity to implement NCCAP and processes to identify and fill capacity gaps. 15. The assessment of the implementing agencies at the subnational level is more illustrative on account of the diversity of LGUs in their vulne rabilities, the potential mitigation opportunities they can engage in, their fiscal capacities, and their development priorities. The key areas of focus are mechanisms and processes for 263 Annex 4: Framework for Analysis a. Horizontal coordination across functions and services b. Vertical coordination with national agencies. 16. Horizontal coordination centers on CLUPs and the coordination between DRR and CCA activities, while vertical coordination centers around service convergence arrangements and hub-and-spoke systems. 17. The functional review of the implementation of the climate agenda includes a qualitative description of a function, the Departments and Agencies engaged in providing the function, the context in which they provide it, and an analysis of their effectiveness in doing so. The strategic direction function focuses on three issues: integration of the climate agenda into the development process and development plans, synergies between CCA and DRR, and synergies between green growth and CC. The planning and prioritization function focuses on the approaches taken to plan at the sectoral level, intersectoral coordination, and planning at the local level. The finance function focuses on the processes for mobilizing financing for climate actions, the fragmentation of climate finance, the governance of climate funds, the identification and prioritization of climate actions, processes and tools to address climate risks, and monitoring of the performance of climate actions that are publicly funded. The execution function focuses on the capacity and tools needed to deliver results. The monitoring and reporting functions focus on the capacities and systems for providing transparent and timely progress reports on the implementation of the climate agenda. Scope 18. Resource constraints limited the scope of the institutional review to the following : 1. Coordinating bodies (CCC, NDRRMC, and CCCC) and oversight bodies (DBM, DOF, and NEDA). 2. Implementing line Departments (DA, DENR, DOE, DOST, and DPWH). 3. Implementing LGUs (Albay and Makati). All climate-relevant coordinating and oversight bodies are included in the review. The line Departments and the LGUs are the same as those selected for the public expenditure review to provide a comprehensive picture about the selected Departments and Agencies. 264 Annex 4: Framework for Analysis Table A.1: Instruments used in the Institutional Review Desk Key Informant Semi- Qualitative study Interviews or structured In-depth Semi-structured focus group Interview focus group Legal yes CCC, DENR Policy yes NEDA (ag) CCC, DILG, Pres.’s climate change Adviser Coordinating yes CCC, NDRRMC body Oversight body yes DBM, NEDA, DOF National level yes DA, DENR, DOE, DOST, DA, DENR, implementation DOST, DPWH, DENR DPWH PAGASA, NIA Subnational yes Albay, Makati Makati level implementation Limitations and Caveats 19. The primary limitation of the institutional review arises from the short history and rapid evolution of the climate agenda. The enactment of the Climate Change Act in 2009 began the significant transformation of the policy and the institutional context for the climate change agenda. This includes the adoption of the NCCAP in 2010 and the PSF law in 2012. The IRR for the PSF approved in early 2012 is still not final. The short period of observation limits the ability of the review to draw a full set of lessons on the implementation of the climate agenda. 20. Lessons drawn from lead agencies for select NCCAP priorities may be of limited use or applicability to agencies that contribute to NCCAP implementation but are not leading the efforts. Departments and Agencies have begun the transformation process for integrating climate change considerations necessary for NCCAP implementation. The experiences of the lead agencies suggest that the scope, extent, and modality of their respective transformations varied based on the extent of climate integration prior to the introduction of NCCAP. While these lead agencies cover multiple approaches, the partial number of Departments reviewed may not reflect the full spectrum of circumstances. 265 Annex 4: Framework for Analysis 21. Like wise, the inclusion of the two LGUs in the study was based on their innovative approaches to addressing adaptation and mitigation and does not reflect the level of climate engagement at the sub national level. Albay is one of eighty provinces and Makati is one of 143 cities of the Philippines. They provide positive lessons on the integration of climate adaptation or mitigation into LDPs. However, they do not provide any insight into the numerous other barriers to greater integration of climate action in the many other municipalities, cities, and provinces. Public Expenditure and Financial Management Review Methodological Overview 22. The expenditure review at the national level consists of a quantitative and qualitative assessment. The quantitative assessment focuses on assessing climate change expenditures at central level by department, type of expenditure (adaptation versus mitigation, program versus projects), NCCAP priority area, implementation capacity (budgetary allocations versus actual spending level), and sources of financing (domestic versus foreign funded). The CPEIR will also take a look at the financing gap of current climate actions for the purpose of outlining areas that might not be sufficiently funded at central and local levels and identifying financial instruments (e.g., budget reallocations, transfers to LGUs, the PSF) to support climate interventions. 3 The analysis includes PAPs that have (1) been identified in the Departments WP and PIP but not yet funded, or (2) are underfunded in the Budget and hence could not be further scaled up. The quality of the available data and coherence between climate actions assessed in the WP and the PIP will determine the depth of the assessment and potential policy implications. 23. The expenditure revie w at the central level is comple mented by a selected assessment of two LGUs (Albay and Makati). It consists of: 1. An assessment of local government finance arrangements (resource flow from central to local units and mobilization of local funds) and how these support the implementation of climate actions at subnational level. 2. The management of climate actions by Albay and Makati (including the level of funding, type of expenditures, and sources of financing). 24. The PFM assessment is a qualitative assessment. It focuses on budget planning and process (integration of Climate actions into budget proposals), use of strategic planning and screening tools (NCCAP, MTEF, PIP, work programs, guidelines), the decision-making process (budget call, stakeholder engagement, budget hearings), and procedures (programmatic approach). In addition, the assessment reviews budget transparency and execution issues (appropriation structure, allotment and cash release system, realignments) and these issues’ implications for the 3 The financing gap analysis seeks to identify the difference between, on the one hand , the desired funding presented in Depart ments’ Work Programs (WP) 2011 -2016 and the PIP 2011-2016, and actual allocations in the General Appropriations Act (Budget Appropriations) 2011-2013, on the other hand. 266 Annex 4: Framework for Analysis management of climate actions and takes a closer look at the tracking and monitoring of climate actions through KRA 5 and the Departments’ M&E systems (with a selected focus on DA and DENR) and tools (such as performance assessments/targets/outcomes). The public finance management assessment also examines the management and effectiveness of donor aid (coordination a nd off-budget management) as well as opportunities for the Philippines to access global climate funds. This assessment is closely coordinated with the WB’s ongoing cross -cutting PFM reform engagement and current efforts to assist the Government in enhanced budget monitoring and execution for key priority areas. The CPEIR consulted and builds on a number of analytical works that have been carried out over the past years in the Philippines. 4 Scope 25. The scope of the analysis is limited by resource constraints to five departme nts (DA, DENR, DOE, DOST, DPWH), some attached agencies, and two LGUs (Makati and Albay). The selected CPEIR departments support the implementation of the entire NCCAP across all priority areas. Priority was given also to agencies that are included in the budget of the OSEC as well as to several selected agencies that are not included in OSEC (EBM, PAGASA, PCCARD, PCIERD, PCHRD, PCIC, and BFAR). The financing gap assessment covers four sectors (agriculture & fishery, water, environment & natural resources and energy) selected based on involvement of the Departments/Agencies in the CPEIR and the availability of data. The two LGUs were selected based on their vulnerability to climate risk and potential for mitigation as well as their mandates and responsibilities relative to the NCCAP priorities (see Figure A.1). The LGUs were chosen based on several criteria (see Table A.2): 1. Fiscal capacity. 2. Poverty incidence. 3. Climate vulnerability. 4. Potential for learning. 4 Recent PERs and economic sector work include: Public Expenditure Review (June 2011), Public Expenditure and Financial Accountability (May 2010), Basic Education Public Expenditure Review (2010), Agriculture Public Expenditure Review (2007), Decentralization in the Philipp ines (2004), and Public Expenditure, Procurement and Financial Management Review (2003). 267 Annex 4: Framework for Analysis Table A.2: Selection Criteria for LGUs Crite ria ALBAY M AKATI Fiscal capacity Low – Income per capita is High – more than 3 55% lower than of average times as large as that of provincial government national average for all [2009] cities [2009] Poverty High [43% compared to Low [1.4% compared to incidence national avg. of 26.5% in national avg. of 26.5% 2009] in 2009] CC High – Low – limited exposure vulnerability to climate risk except 3–5 typhoons/year, severe for flooding in flooding, mudflows barangays along Pasig river and near creeks Potential for CCA & DRR integrated in Aside from flood learning PDP focusing on control activities, development of new mainstreaming of economic/settlement center climate change & DRR in less hazardous / low-risk response focused on areas mitigation activities promoting Makati as a [Considered innovative for green / more livable city adaptation intervention] [Considered innovative for mitigation interventions] 268 Annex 4: Framework for Analysis Figure A.1: S election Criteria for the Departments and attached Agencies A. Criteria based on vulnerability to climate risk and potential for mitigation B. Criteria based on inclusion in NCCAP priority areas N ATIONAL GOVERNMENT AG ENCIES RES PONSIB LE FOR T HE Departments, order ed by Degree of NCCAP PRIORITY NCCAP IMPLE MENTATION AREAS (in bold if included in the CPEIR) Lower Higher Food security CCC, DAR, DA, DAR, DEN R, DOH, DOS T, NCDA, Vulnerability (indicative) NEDA, LGUs, DILG, DTI, DepED, CHED, TESDA, Academic and training institutions, DSWD, DOF-M DFO, Lower LGUs Water sufficiency DAR, DENR, NWRB, DOH, DA, DPWH, NCDA, NEDA, NIA, CCA, DOS T, NCIP, DOH, DILG, DSWD, DOE, LWUA, NAPC, M WSS, PIA, PWP Ecosystem and DA, DOE, DENR, DOS T, NCC, NCDA, NEDA, DTI, En vironmental CCC, DAR, DILG, LGUs, PAMBs S tability Human S ecurity CCC, NDRRMC , PIA, LGUs, CHED, DOH, DepED, DSWD, DILG, HUDCC, Population commission Depa rtments (and att. a gencies) Climate-smart CCC, DTI, LGU, Cabinet cluster on Econ Dev, D ENR, DA (BSWM, BAR, ATI, BAFPS, RFUs) Industries and DOLE, DOF, NEDA, DOS T, TESDA, Academic Training DOST (PAGASA, PIVS) Services Institutions, DILG , DPWH, LGUs, HUDCC, NSWM C, DA, DepEd, MMDA, LM P, LCP, Ligangmga Barangay DENR (EMB) Sustainable DOE, DENR, DOS T, DTC, NEDA, NEA, CCC, DTI, DPWH Energy DOS T, DOTC, DOF, DILG, HADC Departments, order ed by Potential for Mitigation (Indicative) DOE Knowledge and DOS T, CHED, LGU Leagues, CCC, CICT, DILG, Capacity DepED, TESDA, LGA, CICT, DILG Development Higher Source: NCCAP Notes: CPEIR’s assessment of NCCAP’s food security included several additional attached agencies that are not listed in the NCCAP: PCIC, BFAR, BAR, BAFPS, ITAF, NIA, RFU (I, III, V, VI, X), ATI. 269 Annex 4: Framework for Analysis 26. The selection of the Departments for the CPEIR is also in alignme nt with the Departments identified by DBM for the Governme nt’s KRA 5, which tagged climate-related PAPs.5 Under KRA 5, which promotes the “integrity of the environment and climate change adaptation and mitigation� the Government identified PAPs in the 2011, 2012, and 2013 budget that are managed by several Departments, attached agencies, and executives’ offices. As shown in Figure below, the CPEIR covered almost half of the KRA 5 Departments (5 out of 11) and agencies (9 out of 22) that are included under KRA 5 (see Figure A.2). The CPEIR includes PAPs from 9 attached agencies that are, however, not covered by KRA 5. It is also noteworthy that transfers to LGUs are not tagged under KRA 5 Figure A.2: Tagged Departments and attached agencies under KRA 5 and CPEIR Departments and Attached Agencies tagged under CPEIR Departments and Attached Agencies tagged under KRA 5 2011 –2013 Depa rtments (and atta ched Depa rtments agencies) Atta ched a gencies DAR (a nd atta ched agencies) DA (BFAR, PCPDM) DA (PCIC, BFAR, ITAF, DOF, DOH, DILG, DSWD DA (BSWM, BAR, ATI, NIA) DND (OCD, Phil Vet Aff. Offi ce, Php BAFPS, RFU (I, III, V, VI, X), ATI) Army/Ai r Force/Na vy) DOST (PCCARD, PCIEERD, DENR (NAMRIA, MGB, NWRB, PCHRD) DOST (PAGASA,PIVS) DENR (EMB) PCSD) DPWH DOE Other ins ti tutes/exe c offi ces : NEDA, CCC, PRRC, MMDA, Bank of the Philippines, NRDC 27. In te rms of the timeframe, the CPEIR focuses on the years 2008 –2013 at the central level; a slightly different data set is available for the LGUs (Makati 2008 – 2011 and Albay 2008–2012). Despite concerns regarding the quality of the budget data (owing to multi- year appropriations, the limited information available with respect to budget realignments, and the inadequate in- year and ex-post reporting on budget execution) that led to the suggestion to focus only on the years 2010 –2012, 5 To imp lement the President’s Social Contract, the Govern ment identified five KRAs to support inclusive growth, equal access to development opportunities , and effective social safety nets. The five KRAs focus on (1) transparency, accountability, and open governance; (2) poverty reduction and empowerment of the poor and vulnerable; (3) rap id inclusive and sustained economic growth; (4) just and lasting peace and the rule of the law; (5) integrity of the environ ment and CCA and mit igation. [EO 43] 270 Annex 4: Framework for Analysis comprehensive data sets could be obtained by most departments for the period 2008 – 2013 and have been carefully reviewed and used for the expenditures review. 28. Due to difficulties in tracking some climate actions in the budget, the scope of government expenditures is confined to the national budget, excluding extra- budgetary spending and fiscal support. The analysis is limited to expenditures categorized under operations (excluding support to operations) and inscribed under the OSEC budget— with the exception of special accounts that were included in the review (such as the Fund “151,� which funded entirely both the NEECP and the household electrification project). Financing of donor projects and programs integrated in the national budget are covered in the CPEIR, but not projects that are funded directly by external donors and managed outside the national budget (for example, projects funded under GEF, UNDP, and the Clean Development Mechanism [CDM]). At the subnational level, the scope of the assessment is confined to the inclusio n of appropriations in the LDPs and AIPs. 29. Some other analytical dimensions of a CPEIR were not covered as they were either not a current priority for the Government or because of the study’s resource constraints. Fiscal support to climate-related activities— such as contingent liabilities, private investments through PPPs, and tax incentives —were not assessed, and neither were fiscal activities that increase GHG emissions (for example, subsidies on petroleum products). This was not a priority for the Government at this stage and therefore little traction was expected from this dialogue. The review will, however, discuss challenges and opportunities of a fiscal analysis, which can be the subject of a follow-up phase. Other areas that could not be covered by the CPEIR due to resource constraints include an assessment of the distributional consequences of policy interventions (“climate change winners and losers�) and a fiscal sustainability assessment (available fiscal space and merits of climate investments versus other development priorities). However, the contribution of such analytical work will be discussed in the context of the follow-up phase. 30. The financing gap assessment was carried out through a combination of analytical data work, a review of available docume ntation and consultation with the Departments and agencies. The gap is defined by the difference between funding requirements for climate change PAPs included in Departments 2011-2016 or the PIP 2011-2016, both of which express desired levels of funding, and allocations in the 2011- 2013 Budget. This analysis provides information about the adequacy of the climate change PAPs funding. Based on discussions with the Departments, the analysis was complemented by a qualitative assessment that focused o n the adequacy of funding of the NCCAP activities in the 2013 budget. The assessment also drew on past work carried out by the government, notably the National Environmental, Economic and Development Study (NEEDS) for climate change (2010). 31. A financing gap analysis can be complemented in the future by an efficiency assessment (value for money – VFM) focusing on the relation between a given input and maximizing benefits of selected major PAPs; s uch work could not be conducted in the context of the CPEIR but the contribution of such analytical work will be 271 Annex 4: Framework for Analysis discussed in the context of the follow up phase. Ensuring major climate related PAPs are managed efficiently is crucial in the context of budget constraints. Greater efficiency means achieving the same outputs using fewer inputs, or achieving more outputs (in terms of the quality or quantity of a service) for the same amount of inputs. An efficiency analysis (also called a Value for Money Assessment - VFM) focuses on unit costs by function - which requires measurable outputs and inputs. Unfortunately, it is in general difficult to obtain unit costs by function and to compare this across similar activities. Nonetheless, opportunities exist to assess efficiency aspects – such work will be recommended as part of the follow up work of the CPEIR. Classification of Climate Change Expenditures 32. The CPEIR is based on a policy-based identification of climate expenditures. Different approaches can be taken to classify climate change expenditures. One approach is a comprehensive broad assessment of climate expenditures, including an assessment of the budget to identify climate expenditures (e.g., institutions, programs, and sub- functional spending; pollution abatement in GFS; subsidies for fossil fuel consumption; grants or other transfers to subnational governments for climate change purposes; and PPPs for CC-related projects). At the request of the Government, the CPEIR uses a policy-based identification of climate expenditures with the NCCAP constituting the main policy reference document. The assessment of the NCCAP was complemented by the Government’s initiatives to classify climate change and DRR expenditures that together have served to establish a consolidated climate change classification (see Box A.1 below). 6 33. Establishing the climate change classification required the development of a list of PAPs with the related appropriations, allotme nts, and obligations for 2011 – 2013 (and when available for 2008 –2010), which were identified based on the tagging of PAPs under KRA 5 in 2011–2013 and the tagging of climate-related programs and projects by the Departments in their 2011 –2016 work programs. The list was revised and further updated based on the identification of NCCAP activities in the budget and in consultation with the CCC and Departments. As a result, a final consolidated list was prepared covering activities in the NCCAP, the KRA 5, and the Departments’ work programs. 6 An assessment of how the appropriations identified by the CPEIR relate to the tagging initiat ives is presented in chapter 4. 272 Annex 4: Framework for Analysis Box A.1: climate change and DRM tagging initiatives conducted by the Government in Philippine Development Plan (PDP). In the context of preparing the 2011–2016 PDP, NEDA identified climate actions in several of the PDP’s chapters (agriculture and fishery, infrastructure development, and natural resource and environment sectors) which led to the integration of 61 climate-related projects in the PIP. Key Results Area 5. DBM identified in the 2011, 2012, and 2013 national budget programs and projects that support the KRA 5 objectives (promoting sustainable natural resource utilization and CCA and mitigation strategies). Total appropriations under KRA 5 amounted to 13 billion Php in 2011 and 24 billion Php in 2013. Departments’ work programs 2011–2016. Based on the request of the CCCC, the Departments pertaining to the cluster identified CC-related programs and projects in the GAA 2011 and NEP 2012 and prepared budget proposals for existing programs and projects as well as planned activities for 2012–2016. Out of the 10 Cluster Departments, 5 are part of the CPEIR. Total climate appropriations in the work programs of all Depart ments (including actual and planned programs and projects) were 38 and 101 million Php in 2011 and 2012 respectively but declined to 77 million Php in 2016. Identification of DRR-related programs and projects. In an effort to better track public expenditures on DRR, the Government with the support of the ADB identified and assessed programs and projects that support DRR. The study examined the budgets of several Departments (e.g., DPWH, DENR, DepED, DND, DILG, DA), several attached agencies (MGB, NAMRIA, PAGASA, PCIC), and special accounts (e.g., NDRRMF). Several of these Departments are also part of the CPEIR and a particular focus is paid in the CPEIR to CCA and DRM through a policy, institutional, and financial lens. The ADB study showed that DRR budget allocations increased from about 17 billion Php in 2009 and 2010 to 27 billion Php in 2011. 2011 273 Annex 4: Framework for Analysis Figure A.3: Consolidation of Climate Expenditures by Classification Es tablish knowledge management on CC informa tion for agri cul ture and fisheries Community-based Fores t Develop a national RE program and Mangrove Mana gement Project PHL EE Progra m Na tional RE Boa rd Na tional EE & Conserv Na tural Gas Vehi cle Legend: blue = NCCAP; red = Departments’ Work P rograms ; green = KRA 5 34. The climate change classification categorizes PAPs at central and local level based on whether they contribute to adaptation or mitigation. Using the Rio Marker on Climate Change as a reference, an activity was considered in support of (1) climate change mitigation if it reduces GHG emissions into the atmosphere or enhances GHG absorption from the atmosphere or (2) CCA if it reduces the vulnerability of human or natural systems to the impacts of climate change and risks related to climate variability by maintaining or increasing adaptive capacity and resilience. In the case of an activity contributing to both adaptation and mitigation, the respective projects or programs were documented separately to avoid double counting. 35. As part of the climate change classification, DRR-related activities are also examined. As disaster risk prevention and preparedness are increasingly integrated with climate change adaptation, efforts were made to identify related activities in the Departments’ budget, attached agencies, and the NDRRF. The NCCAP and the NDRRMP are used as guidance to identify respective DRR-related expenditures in the budget. Expenditures related to post disaster reconstruction were not considered as an adaptation expenditure as the NCCAP has not tagged these activities. 36. The climate change classification has been subject to a review based on a climate finance classification system recently developed by several Multilateral Development Bank (MDBs).7 In order to improve tracking and reporting of climate 7 The MDBs include the African Develop ment Bank (AfDB), the ADB, the European Bank for Reconstruction and Develop ment (EBRD), the European Investment Bank (EIB), the Inter-A merican Development Bank (IDB), the WB, and the International Finance Corporat ion (IFC). See http://climatechange.worldbank.org/content/world-bank- lending-doubles-adaptation 274 Annex 4: Framework for Analysis finance–related commitments and investments, several MDBs have developed a joint approach to establish a practical, harmonized climate finance classification system. This joint approach offers an opportunity for the MDBs and other organizations to gradually converge towards a harmonized climate finance reporting. Box A.2 below lists the criteria developed to classify if an activity contributes to adaptation or mitigation. Box A.2: Criteria to identify adaptation and mitigation contributions of an activity Adaptation Finance classification criteria An activity must fulfill all three adaptation criteria: (i) set out a context of climate vulnerability, (ii) include a statement of purpose or intent to address or improve climate resilience in order to differentiate between adaptation to current and future climate change and good development, and (iii) link project activities to the context of climate vulnerability, reflecting only direct contributions to climate resilience. Mitigation Finance classification criteria Consistent with the Rio Markers approach, activities are considered to contribute to climate mitigation if they “promote efforts to reduce or limit Greenhouse Gas (GHG) emissions or enhance GHG sequestration.� While MDBs are working on harmonizing approaches to GHG accounting, mitigation activities considered in this joint approach are assumed to lead to emission reductions, based on past experience and/or technical analysis. Source:http://climatechange.worldbank.org/sites/default/files/Joint%20MDB%20Repor t%20on%20Adaptation%20Finance%202011.pdf 37. Applying the MDBs’ classification criteria (using as a reference a detailed illustrative list of activities providing mitigation and adaptation co -benefits), all programs and projects in the budget of the CPEIR departments contributing to mitigation we re tagged. Projects and programs were tagged as an adaptation activity if the title of the project included a reference to CC, DRR, or adaptation—all other projects/programs (e.g., DENR’s soil and watershed management project and DPHW’s retarding basins and rainwater collector project) were not included as the scope of the study did not allow verification of the explicit intent or link to address climate vulnerab ility in the projects’ documentation. If a project or program was found to contribute to adaptation and mitigation, it was tagged for the exercise (see Chapter 5, Figure 6). At the subnational level, the classification of climate actions is based on an identification of CC-related appropriations in the Appropriations Ordinance (AO) based on discussions with LGU officials/staff and the articulation of climate change mainstreaming in LDPs and related documents. 38. Similar to the assessment at national level, programs and projects in the AO were assessed against the NCCAP priority areas. 275 Annex 4: Framework for Analysis Limitations and Caveats 39. Despite strong efforts and support by the DBM, departme nts, and agencies in the collection of budget data, the identification of NCCAP activities in the budget has been difficult because of a number of factors : x Needed detail of activities often not available in GAA. A number of NCCAP activities are merged with several other activities in the same budget line (e.g., activities related to capacity building or climate research are included with similar activities). Similarly, it is not possible to distinguish the incremental component related to adaptation within a PIP (e.g., the additional construction costs of irrigation systems or water infrastructure to render the investment more climate resilient) as these costs are not documented in separate budget lines and, in most cases, are included only in a few projects and programs. x One challenge has been to identify climate appropriations in DA’s budget as only a few activities are documented separately (e.g., promotion and development of organic agriculture) while for most others detailed information about the program/project’s components are missing (e.g., climate-related agricultural crop research and impro ved management of irrigation administration). A range of climate-related activities are implemented by the attached agencies—outside of OSEC. The main reference for the CPEIR has been the Department’s strategic document, prepared in March 2012 for the Senate budget hearing at the request of Senator Legarda, that reclassifies DA’s and its agencies’ budget appropriations according to its second strategic goal of “sector resilience to climate change risk s increased.� However, for this, the appropriations are available only for 2009–2011 while the 2012 budget data is based on the NEP. The 2013 figures are based on estimates and were therefore not included in the CPEIR; the respective data set is also not available on obligation basis. x A complete budget data set (appropriations and obligations) for CC-related activities could not be obtained for all Departments (DA and DOST’s attached Agencies PCCARD, PCIERD, PCHRD, and PIVS) and both LGUs. At the subnational level, reporting of actual obligation is done by office rather than by programs and as such details of actual obligation by LGUs on specific programs/projects are not available. As a result, an assessment of budget execution is limited to a few Departments and agencies. x A rough categorization of climate change expenditures by adaptation or mitigation co-benefits masks some distinct shortcomings. While for some sectors, the categorization as an adaptation- or mitigation-related intervention was straightforward (for example, most PAPs in the energy sector are considered mitigation interventions), for other sectors the analysis was not always obvious or was based on a rough estimate, notably for some programs of the DENR and DA. For the DA, most programs are considered to fall under adaption though some also have mitigation co-benefits (e.g., the development of farming practices that reduce GHG emissions or sustainable 276 Annex 4: Framework for Analysis land management that addresses land degradation) but this co-benefit could not be linked to a specific spending item. x The analysis does not use the concept of “climate finance additionality.� Instead, it includes traditional adaptation- and mitigation-related projects. The concept of “additionality� is based on the UNFCCC resolutions, in which developing countries have sought to distinguish between adaptation and development finance in order to ensure that the former are truly additional to the latter. There are pitfalls in defining adaptation as an activity that is distinct from development and in trying to assess its incremental cost at the project level. In the Philippines, the discussions of additional financing have in part focused on climate-proofing of the infrastructure and in part on distinguishing between funding activities considered regular (“business as usual�) and incremental/additional CC-related spending. It was decided to also include in the CPEIR regular activities, such as the improvement of flood forecasting and warning systems or the observation and acquisition of atmospheric- geophysical data from PAGASA. x A comprehensive data set of all climate change PAPs’ estimated funding needs and actual resources is not available; thus the gap assessment is limited to assessing the adequacy of funding of selected climate change PAPs. x The climate change mainstreaming has been limited to a small number of chapters of the PIP so far (notably chapter 4 on agriculture and fishery sector, chapter 5 on infrastructure development including water and energy, and chapter 10 on conservation, protection and rehabilitation) with d iscussions between NEDA and the Departments and agencies on climate change priorities only recently starting. 8 x A number of actual climate change PAPs cannot be found in the PIP, even in the chapters that are considered more climate change sensitive; more work is needed with NEDA and the Departments to understand why these PAPs were not included in the PIP x The lack of alignment between NCCAP activities and PIP which does not allow to reflect the financing gaps of a number of NCCAP activities that the CPEIR has found to be actually not funded or little funded, x The identification of small- scale activities (related to studies, capacity building or development of CCA plans) among several other budgetary items poses another challenge, rendering it more difficult to understand what is funded by the national budget. 277 Annex 4: Framework for Analysis 40. Given these limitations, the assessment of the financing gap is limited to a selected numbe r of PAPs that are comparable in the PIP, the Departments’ work programs and the budget. This suggests however that the assessment could significantly underestimate the actual financing gap. 278 Annex 4: Framework for Analysis 279