This is E3G’s response to the consultation from The Coalition of Finance Ministers for Climate Action on strengthening the role of ministries of finance in driving climate action closing on 3rd February 2023.
Managing the net zero transition and increasing resilience requires significant changes in the way we structure and manage key economic activities. Some of the key tools to do so are under the purview of the ministries of finance as they are shapers of the national economies, the global financial architecture, macroeconomic norms and regulation. Their response to the economic risks of climate change has implications for the wider economy.
Furthermore, the mandate of the ministries of finance broadly speaking is: “to protect public finances and ensure the nation’s prosperity”. Climate is in many ways included in the broader mandate, in the sense of protecting prosperity.
E3G welcomes the framework proposed by the Coalition, and the two-pronged approach that explicitly refers to finance ministries’ core functions and capabilities. To ensure this framework informs how best to strengthen the role of the ministries of finance, E3G suggests:
- Emphasise the role of networks that the ministries are part of, such as MDBs, IMF, OECD, G20, G7, IPSF, FSB, NGFS. Ministries can access expertise through these networks to build their own capacities, while ensuring that other members also develop the thinking and capacities they might require as the transition unfolds.
- Design a self-diagnostic process, broken down across the different functions of ministers of finance. E3G has proposed some questions as a starting point to help kick start the process and inform different policies such as taxation policy. For example, understanding the share of the existing tax base that is exposed to the transition will help to anticipate shifts in the tax base and identify offsetting revenue sources.
- Create an implementation process for how finance ministries can deliver the required actions suggested in the report by providing a step-by-step approach. This is in recognition that ministries have yet to build the capacity and most of the necessary capabilities to take forward the suggested actions at the national level that will be necessary to effect this change.
- The Coalition is well-positioned to help facilitate learning and share best practice across their network, and act as an intermediary between various ministries of finance and international finance institutions. Consider establishing a learning hub within the coalition.