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Development Account Projects

Improving management of resource allocation for the
environment in Latin America and the Caribbean

Background:

The 1992 United Nations Conference on Environment and Development in Rio (Earth Summit) as well as the 2002 United Nations Conference at Monterrey drew special attention to the financial constraints to the achievement of sustainable development in developing countries. The Millennium Summit in 2000 also highlighted the urgency of financial resources to achieve the Millennium Development Goals and the need for fair trade.

At the Conference on Sustainable Development in Johannesburg, ECLAC and the UNEP (UNEP) presented an assessment of financing flows for the environment to Latin America and the Caribbean. The assessment also examined the situation and trends of both public and private domestic environmental expenditures and investment based on selected country studies. Some of the conclusions were: (a)financial constraints play against the achievement of environmental goals; (b)countries do not systematically keep track of the amount of resources allocated to environmental management and investment; (c) macroeconomic and sectoral policies and incentives are not coordinated, and frequently run counter to environmental policy goals; (d) there are opportunities for the gradual introduction of "green" taxation and economic instruments for environmental management; (e) the private sector increasingly plays a more prominent role in environmental management (f) the growth of the environment sector can be an economic opportunity, if new innovative financial mechanisms are implemented to support its development; (g) there are few, if any, national or regional efforts to address the environmental issues on a permanent and comprehensive basis to support environmental policymakers.

Countries lack accurate data on, among other things, actual expenditure on environmental management and infrastructure, in particular in relation to the distribution of these expenditures among environmental items, the costs of adaptation to climate change and from the impact of natural disasters, the share of environmental expenditures in budgets, and the degree of efficiency and efficacy for these resource allocations.

A number of national case studies conducted by ECLAC during the period 2001-2005 provide empirical evidence that policy coordination failures are prevalent in countries of Latin America and the Caribbean. In particular, macroeconomic and sectoral policies frequently create incentive structures that run counter to the environmental and sustainability policy goals that the same countries have enacted. These make countries of the region suffer from severe fiscal constraints in finding ways to allocate resources to achieve their environmental goals.

There is an evident gap in Latin America and the Caribbean between the expectations enshrined in constitutional and national legal mandates for environmental sustainability and the persistence of current trends of environmental degradation and inadequate resources of environmental authorities. Improving policy coordination in sectors with environmental incidence provides decision makers with an opportunity to enhance the economic efficiency and efficacy of current environmental policies.

This background indicates the need for strengthening the environmental institutions in the countries of Latin America and the Caribbean, and calls for closer cooperation and coordination among the Ministries of Environment and Finances, development banks and international financial institutions. Overcoming obstacles for environment-friendly investment and promoting social corporate responsibility are also priorities for achieving environmental sustainability.

 

 

Objective:

To improve the knowledge and management of financial resource allocation and coordination mechanisms for environment of the governmental institutions in the countries of Latin America and the Caribbean region, in particular, the Ministries of Environment and Finance.

Expected accomplishments:

  • Improved information on national environmental expenditures (environment management and infrastructure expenditure and its distribution among environmental items/concerns, the degree of efficiency and efficacy for these resource allocations).
  • Existing policy coordination gaps among sectors and levels of government are diagnosed and alternative policy coordination mechanisms proposed to improve the design of integrated policy responses to achieve sustainable development goals of selected countries, with special attention to climate change mitigation and adaptation.
  • Improved knowledge and management of governmental institutions (Ministries of Environment and Finances, and development banks) of current trends and opportunities in international financing sources for the environment, including climate change, available for countries in the Latin American and Caribbean region

Implementation status:

The objective of this project is to improve the knowledge and abilities of governmental institutions collaborating on environmental management in Latin America and the Caribbean, in particular, the Ministries of Environment and Finance, to more effectively identify, allocate and manage financial resources dedicated to the environment.

The following activities have been carried out in 2011: Agreement between OECD-ECLAC regarding the use of the same methodology for the region on environmental management; three documents have prepared and published in reference to the stated objective; regional seminar coordinated with the government of Spain and ECLAC’s divisions (DE & DDSAH) with the attendance of 7 member country officials(from Colombia, Mexico, Ecuador, Chile, Dominican Republic) in relation to environmental management of financial resources in Spain on October 3- 6, 2011; technical coordination with statistics division; two formal requests (Chile and Ecuador) and three informal (Colombia, Mexico, and Dominican Republic) from the possible selected countries for technical assistance from ECLAC; and regional preparatory meeting for Rio+20. A few of the highlights in 2012 were: the environmental performance review of Colombia in collaboration with the OECD; the fourth regional meeting on the analysis of public policies in Ecuador; the workshop on environmental accounts and expenditures in Mexico; the launch of the interagency document, Sustainable development 20 years on from the Earth Summit; and ECLAC’s participation in Rio+20 United Nations Conference on Sustainable Development. It is as yet difficult to measure the impacts of these activities but we have received many requests for assistance in development of policies as well and letters of gratitude from various constituents. These are noted later in this report.

In order to achieve the stated objective, this project will seek to strengthen capacities in Latin America and Caribbean countries for tracking current and potential resources available for the environment at global, regional and national levels. This includes the identification and dissemination of best practices for: i) tracking the flow of current financial sources for environmental management and; ii) formulating and generating the adequate economic incentives to pursue environmental objectives.