Assessing Climate Finance Readiness in the Asia-Pacific Region

Abstract

Readiness is the current mantra in the climate finance discourse and is a key determinant for accessing climate finance. This study develops and applies an analytical 3-dimensional framework to appraise climate finance readiness in selected Asia-Pacific countries. Three dimensions of readiness are identified: (1) Policies and Institutions, (2) Knowledge Management and Learning, and (3) Fiscal Policy Environment. Using the Climate Public Expenditure and Institutional Review as the basis for such framework, the study uncovers a massive readiness gap between countries in the Asian sub-region and those in the Pacific sub-region. The study also found that readiness has a predictable, yet small, impact on the magnitude of climate finance accessed. This suggests that improving readiness alone is not sufficient to unlock climate finance, as access to climate finance is to a larger extent determined by other factors; this is critical to shaping readiness endeavors for the Pacific Small Island Developing States (PSIDS), as well as for donors. This study argues for a re-think in the PSIDS current readiness approach, reducing emphasis on multilateral and private flows and diversifying through practical and uncomplicated bilateral and remittance sources. These two sources of finances have a good track record of consistently mobilizing external finance to PSIDS despite their climate finance readiness status. Broadening readiness efforts towards these two alternative funding sources extends the feasibility of the current readiness approach. The present direction of climate finance readiness offers a continuing access dilemma to many of the PSIDS, especially the poorest and most vulnerable.