Chapter 7 - Engineering and Leveraging the Finance

Summary

Leveraging and engineering are two sides of the same coin. While leveraging pertains to the raising of capital, the engineering is a plan for deploying it. The more efficient the deployment model, the more likely it is to leverage larger amounts with less seed capital.

Developing a financing model for a NAMA is a process that must be integrated with the NAMA development itself. Further emphasized by the ‘official’ guidance for NAMA development, the financing model for the NAMA will help shape the NAMA design, determine its implementation modalities and ultimately establish the viability of the proposed action.

The first step is to acknowledge that the basic financing for any NAMA, supported as well as unilateral, will originate in the national – or lower administrative level – budget. NAMAs tend to be revisions of current policies within current budgets, rather than the creation of entirely new ones. Therefore, familiarity with the national budget is crucial to the way in which NAMA financing comes together. The ‘official’ NAMA guidance is blunt on this message. While this is positive, it may be difficult to find sufficient resonance among policymakers in NAMA host countries. Nevertheless, for the transformational NAMAs envisaged, such budget analysis is crucial.

Current public budget lines contain essential information about present priorities in sectors relevant to emissions reduction, including those pertaining to undesirable conduct in terms of emissions reduction, like fossil fuel subsidies. Analysing the national budget, even at the sector level, may be a challenge, although most administrative bodies would have a relatively good impression of their own sector budget. Potential NAMA developers outside the public administration may have difficulties in getting a precise picture of the sector finances, but when it comes to assessing the current climate finance, or the finance related to the subsectors relevant for emissions reduction, even the administration may face a challenge.

To assist in budget analysis in search of public climate expenditure, UNDP and the Overseas Development Institute (ODI) presented the Climate Public Expenditure and Institutional Review (CPEIR) in 2012. This built on the approaches of recent years to assess public expenditures in developing countries for environmental purposes (PEER) (Swanson and Lunde, 2003; Lawson and Bird, 2008).