Navigating the Climate Just Transition in a low Growth Macroeconomic Context: The Critical Role of Ministries of Finance

Ministries of Finance can play a critical role in supporting climate action. Through the various fiscal policy tools at their disposal, they can join efforts with other areas of the government to create climate-resilient economies and lay the foundations for a sustainable development strategy.

The low-carbon transition is a complex and multidimensional transformation process that involves several opportunities and risks. Furthermore, this transition needs to take place in an international macroeconomic context of low growth, potentially high financial instability and increased geopolitical uncertainty that constrains the policy options that countries can leverage.  Ministries of Finance can contribute to reducing these risks and harnessing the opportunities by combining public investment, taxation policy, debt management and climate finance tools and by supporting other areas of the government in developing specific social, innovation and nature-related policies.

To adequately perform the crucial role, they are called to play, Ministries of Finance need analytical tools that support their decision-making processes. Economic and climate policy proposals need to be assessed by effectiveness and efficiency at achieving their climate/nature objectives and related socioeconomic consequences, alongside the capacity of public finances to address these challenges without putting macro-financial stability in jeopardy.

The Ministry of Finance of Brazil, The World Bank, the Coalition for Capacity on Climate Action (C3A) and CEPAL with the support of the Euroclima program, as part of the regional hub on capacity building in Latin America and the Caribbean, are partnering to organize a high-level conference aimed at exploring the role of Ministries of Finance in this renewed context.

What are the central climate policy issues faced by the Ministries of Finance? Which analytical tools have already been developed, and what are their advantages and limitations? Is there a need to create new analytical tools with features that the existing ones lack?

This workshop aims to share these key policy questions and existing technical experience within the LAC region. 

Outcomes:

•The Ministries of Finance of LAC countries share their main policy questions about climate change and a just low-carbon transition.

•Participants better understand existing analytical solutions and how new climate analytical tools could address the policy issues raised.

•C3A incorporates demands of the Ministries of Finance into its package of analytical tools.