In work carried out for the Centre for Economic Transition Expertise (CETEx) at LSE, Manning et al. (2024) call for a system-wide response to climate change in recognition of the interactions between physical, societal, and financial risks and, more generally, of the systemic nature of the problem.
This response would be operationalized via an effective national transition plan (NTP) with government at the center, to help set the direction and provide incentives, finance, and support to actors across the economy. The framework is presented under five “pillars”: foundations, implementation strategy, engagement strategy, metrics and targets, and governance (the same five as the frameworks for private sector transition plans of, e.g., the UK Transition Plan Task Force and the Glasgow Financial Alliance for Net Zero [GFANZ]).
- An NTP would involve a clear national strategic ambition to be integrated into a government-wide strategy, a costed action and investment plan with a targeted allocation of public funds to crowd in private capital at scale, and communication and coordination with private actors, while remaining accountable to citizens and other stakeholders.
- Aligning the framework proposed for the NTP with private-sector transition plans is meant to support the emergence of an integrated transition planning ecosystem with information flows and policy feedback between national and private sector plans.
- It is important to have both a clear strategic ambition to anchor all actions of the plan and to outline the government’s vision for the transition and the sectoral pathways aligned with this vision. The latter can be used to inform policymaking and further provide a reference point for private-sector transition plans and financing activities. Brazil’s Ecological Transformation Plan is a recent example of an NTP, while France and Japan are developing detailed sectoral pathways.
- A national investment plan is a valuable tool for implementation, in which Ministries of Finance play a crucial role. The plan should set out the financing needs to achieve the national strategic ambition, the gap between need and expected public and private sources of capital, and the policy instruments to fill the gap. Engagement with the private sector can be helpful here. Emerging examples of such an investment plan include South Africa’s Just Energy Transition Investment Plan and Kenya’s Energy Transition Investment Plan.
For MoFs seeking to develop investment plans, the Green Climate Fund (GCF) and the NDC Partnership have developed a framework to emphasize three phases of investment planning to support finance mobilization: (1) investment planning and mobilization capacity, (2) identifying and prioritizing investment needs, and (3) setting a financing strategy.
Keywords
climate financeinvestment needspolicy processsystem dynamicstransition
