Financing for future generations: managing biodiversity and the environment in the Kyrgyz Republic Policy brief December 2017
Policy pointers • The current approach to environment, biodiversity and climate change adaptation planning and budgeting results in inefficiencies, unclear results and a mismatch between stated environmental sustainability priorities and expenditure. • The high share of what has been assessed as support to measures that can have negative environmental impacts, particularly in energy and agriculture, creates opportunities for reforming the existing energy and irrigation water tariffs to deliver positive environmental, social and economic development outcomes. • The private sector is an important player both in terms of current impacts and expenditure and in finding positive solutions. To strengthen development outcomes the government needs to facilitate mechanisms to stimulate private investment in environmental sustainability.
In 2017, the State Agency for Environment Protection and Forestry under the Government of the Kyrgyz Republic and the Ministry of Finance of the Kyrgyz Republic joined with two global UN initiatives, UNDP-UN Environment PovertyEnvironment Initiative (PEI) and UNDP Biodiversity Finance Initiative (BIOFIN), to assess whether the country was managing its environment sustainably, with a particular focus on biodiversity and strategies for adapting to climate change. The team asked whether the country was investing the right amount of funds in the right places, whether existing policies were able to inform decisions on spending and priorities, and whether institutions were strong enough to provide support. The resulting Policy and Institutional Review (PIR) and Public and Private Environmental Expenditure Review (PPEER) found that although the government is committed to protecting environment and biodiversity and to increasing its efforts to adapt to the changing climate in Kyrgyz Republic, the expenditure in these areas is comparatively low.
Economic performance in sectors such as agriculture, energy, and tourism depends directly on the environment, and these sectors play a significant role in the Kyrgyz economy.
For further information about this work: www.biodiversityfinance.net www.unpei.org www.kg.undp.org
UNDP–UN Environment Poverty-Environment Initiative
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Environment important for Informal sector too
A significant amount of public money is spent on support measures that may have negative impacts. Examples identified in the Kyrgyz Republic are support for agricultural irrigation and chemicals, and energy (Figure 3 illustrates spending on such measures in the agriculture sector compared with other expenditure). Such expenditures certainly have the intention of supporting agriculture production and ensuring that people are able to pay their energy bills but their real effects are not well understood. Supporting costs of irrigation has led to land degradation, for example, which risks having the opposite effect to the one intended. Artificially reduced tariffs for energy results in continued use of old inefficient production and distribution systems and such support does not reach significant parts of the population, which are more vulnerable because they rely on firewood – an energy source that is not being subsidised. Similarly, state support to develop sectors such as roads and tourism can be regarded as potentially negative in cases when it does not consider environmental and biodiversity impacts enough.
The environment is important to the informal sector and when considering indirect contributions to productive sectors. There are no official national level statistics on use of natural resources for private use, but several assessments that evaluate the different “goods” that nature produces can be used to illustrate this. For example, data from one of the Kyrgyz protected areas, Chon Kemin, shows the economic significance of timber and non-timber products, pastures, as well as indirect values such as water supply and purification (Figure 1). Figure 1: Value of timber and non-timber products, pastures, water purification and supply services in Chon Kemin National Park Product or service
Net value (KGS/y)
Timber and firewood
10,684,200
Mushrooms, raspberries, 3,890,480 honey, sea buckthorn, nettles, rosehip and fishing Pastures
66,894,375
Water (drinking and irrigation)
30,811,898
Total
112,280,953
The environment can help the population and economic sectors to adapt to a changing climate, which is important because the Kyrgyz Republic is exposed to increased impacts, as demonstrated by a growing trend in natural disasters (Figure 2). There are significant knock on effects to the national economy: according to data from the Ministry of Emergency Situations, the annual average cost of damages for the period 1990 to 2016 was KGS 0.6 billion per year.
Are we investing enough and in the right areas?
Expenditure is not fully aligned with environmental priorities for different sectors contained in the National Sustainable Development Strategy. Most strikingly, environmental expenditure for development of environmentally sustainable tourism constitutes only 0.1 per cent, and for energy efficiency and renewble energies just 0.5 per cent of total environmental expenditure. There is no clear expenditure for low carbon development and for development of incentives for resource efficient industries. Figure 2: Number of natural disasters 1990-2016 100
Mudslides and floods
90
Landslides
80
Avalanches
70
Flooding
Despite the environment being one of the priorities of the National Sustainable Development Strategy, state budget expenditure for environment is low – some 0.5 per cent of the GDP.
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As an illustration, the average annual expenditure on protected areas management between 2011 and 2016 was KGS 67 million, or between KGS 40 and 45/ha/year. But the values reflected in Figure 1 (which reflect only some of the goods and services provided by Chon Kemin) are equivalent to approximately KGS 900/ha/year or 20 times more than is currently invested in protecting this value.
30
22
20
13
50
54 47
41
40 20
0
6 1990–1999
14
19
10
8 2000–2009
Annual average environmental spending with a clear intention of contributing to climate adaptation was KGS 254 million – less than half of the average annual cost of damages caused by natural disasters.
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Figure 3: Comparison of environmental expenditure and support to measures that may have negative impacts in agriculture sector in 2016
Recommendations for funding environmental protection, biodiversity conservation and adaptation to climate change Environment, Planning and budgeting, cross-sectoral coordination
Support to measures that may have negative impacts (71%)
Other (16%)
Environmental expenditure (13%)
Summary of key barriers to environmental funding Prioritization: Strategic documents on environmental protection, biodiversity conservation and adaptation to climate change often do not serve their purpose of indicating strategic priority areas. There is also no guaranteed budgetary or off-budget financing, negatively affecting implementation despite environment, biodiversity conservation and adaptation to climate change featuring as high priorities in the National Strategy for Sustainable Development. Institutions: Environmental protection, biodiversity conservation and climate adaptation are cross-sectoral, requiring strong institutional capacity for mainstreaming, coordination, implementation and enforcement. However, the analysis shows weak efficiency and effectiveness around implementing public initiatives and programs, law enforcement and using existing environmental safeguards (such as environmental impact assessments). This is coupled with limited incorporation of goals and targets for environment and biodiversity protection and for climate change adaptation in public policies.
The State Agency for Environment Protection and Forestry should lead with revising the strategic documents on environmental protection, biodiversity conservation and adaptation to climate change. Similarly, respective ministries should improve integration of these topics into key economic sector strategies, in particular, agriculture, energy, mining, tourism and transport. Monitoring the implementation of these strategies should take into account not only the planned measures but also environmental sustainability, on the basis of appropriate indicators, which should be integrated into the strategies while revising them. The Ministry of Economy and the Coordination Committee for Sustainable Development Adaptation, Implementation and Monitoring should lead this process, with support from the State Agency for Environment Protection and Forestry and the National Statistics Committee on the technicalities of developing the indicators. The same actors should lead on integrating environmental sustainability into the national development indicators. This will ensure that the development agenda is not driven by short term economic priorities but takes into account the long term interests of future generations. Sectors should be obliged to include the measures indicated in their programme budgets in the approved environment, biodiversity and climate change adaptation strategies. For that to happen, the Ministry of Finance should include the requirement in the annual budgeting instructions and subsequently insist on inclusion of the relevant measures and budgets in the programme budget proposals submitted. If necessary, the government should initiate revising the mandates of these institutions. The State Agency for Environment Protection and Forestry does not have the status of a ministry, affecting its ability to influence government decisions and those relevant to environment, biodiversity and climate adaptation. In view of this the government should identify an institution at the level of a ministry to lead with environment coordination and policy development.
Incentives: The private sector, through sectors such as energy, agriculture, transport, mining and tourism, is a significant driver of change for the environment, biodiversity and adaptation. Proper economic instruments and incentives for participating in environmental protection, biodiversity conservation and climate change adaptation activities are missing.
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Greening of state support The State Agency for Environment Protection and Forestry, together with the Ministry of Agriculture and the State Committee of Industry, Energy and Mining, should assess the effectiveness of the current state support in the agriculture and energy sectors, taking into account their social goals and developing and implementing economically, environmentally and socially viable reforms. This will both mobilize and save resources and reduce the burden on nature, favorably affecting, among other things, future budget expenditures.
Legislation and monitoring Legislation and enforcement should ensure that the environmental interests of the population are respected without an excessive burden on the economy. The State Agency for Environment Protection and Forestry, together with the Technical and Environmental Inspectorate, should strengthen the instruments currently used, such as Ecological Expertise and Ecological Control to control the effects of mining, transport, manufacturing, and potentially, in future, from uncontrolled tourism. The two agencies should perform an in-depth analysis of the viability of these and other control instruments. A system of environmental indicators is needed to monitor environmental trends, with the information being used for sound management, planning and budgeting decisions.
Effective use of revenues from use of environment and natural resources Kyrgyz legislation defines different payments related to the use of nature (pollution charges, fines, compensation, etc). The purpose of these payments is to reduce pressure on the environment — a purpose not achieved. The reasons are various and diverse but they mostly concern low values of payments (therefore the polluter is not incentivized to pollute less), poor control and enforcement (the polluters
are not forced to pay) and the revenues from these payments not being used to implement measures that would mitigate or reduce the pressure. The State Agency for Environment Protection and Forestry together with the Ministry of Finance should conduct a detailed assessment of the legal framework and the economic and environmental performance of these payments.
Private sector and green economy There are many ways in which the private sector can benefit from green growth in the Kyrgyz Republic, including jobs, export potential, eco-labelling, environmentally sustainable tourism. At the same time, private sector activities can affect the environment negatively, with consequences on economic performance. The Ministry of Finance and the Ministry of Economics should lead with introducing private sector environmental incentives and disincentives in government fiscal policy. The state must also guarantee mutually beneficial partnership conditions for environmentally sound interventions (for example, environmentally sustainable tourism) and ensure transparency and effectiveness of how the funds accumulated from the private sector are managed by the state to finance environmental protection measures. Particular attention should go to: Agriculture - adopt organic agriculture more widely, to develop more sustainable pasture management through the development of value chains and to apply more effective irrigation systems. The mechanisms should also consider the need to increase resilience to climate change Mining – adopt best international practices, social responsibility programmes and more effective use and management of mining recultivation funds Transport - implement greener transport solutions (including through the vehicle fleet) Energy - implement energy efficiency measures and use of alternative energy sources Tourism - promoting environmentally sustainable tourism.
PEI and Biofin work in the Kyrgyz Republic is supported by funding from the following:
Photo credits: left — Asian Development Bank/Vyacheslav Oseledko/Flickr via Creative Commons (CC BY-NC-ND 2.0); right — Nick van Praag/World Bank/Flickr via Creative Commons (CC BY-NC-ND 2.0)
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