Climate Public Expenditure and Institutional Review: A Study of Hebei Province, China ——基于河北省的研究 中国气候公共支出分析与评估 Climate Public Expenditure and Institutional Review: A Study of Hebei Province, China Research Team, Chinese Academy of Fiscal Sciences Team Leader LIU Shangxi, Director General, Chinese Academy of Fiscal Sciences Coordinator SHI Yinghua, Director, Center for Macroeconomic Studies, Chinese Academy of Fiscal Sciences Members PAN Liming, Ph.D. candidate, Chinese Academy of Fiscal Sciences LUO Hongyi, Ph.D. candidate, Chinese Academy of Fiscal Sciences Experts GAO Zhili, Director General, Ministry of Finance, Hebei YAO Shaoxue, Deputy Director General, Ministry of Finance, Hebei LI Jiegang, Deputy Director General, Ministry of Finance, Hebei LIU Qisheng, Director, Hebei Research Institute of Fiscal Sciences and Policies ZHANG Shuo, Researcher, Hebei Research Institute of Fiscal Sciences and Policies Reviewers Thomas Beloe, Governance, Climate Change Finance and Development Effectiveness Advisor, Bangkok Regional Hub (BRH), UNDP Asia Pacific Regional Centre Sujala Pant, Senior Advisor, Bangkok Regional Hub (BRH), UNDP Asia Pacific Regional Centre Yuan Zheng, Economist, UNDP China Preface Climate change issues have become increasingly serious, and tackling climate change is a task faced by the international community. China has been adopting an ecological civilization construction strategy and has actively participated in the global movement to combat climate change and promote sustainable development. In 2016, the Chinese Academy of Fiscal Sciences (CAFS) undertook the second phase of its Climate Public Expenditure and Institutional Review (CPEIR). This project, as of CAFS’s completion of the first phase from 2014 to 2015, is also funded by the United Nations Development Program (UNDP). In the first phase, CAFS experts established a statistical methodology for China’s climate public finance, and made a statistical analysis of the climate public expenditure incurred directly by the central government. The research achievements are highly recognized by the relevant institutions of the United Nations, the relevant divisions of Ministry of Finance and the National Development and Reform Commission (NDRC). The second phase will be advanced in depth, and will prioritize China’s climate public expenditure and institutional review at the local level. By using case studies, experts will launch the provincial climate public expenditure and institutional review and explore the climate expenditure cost-benefit analysis approach. CAFS is responsible for this research project and attaches great importance to the study of climate public expenditure. It has set up a research group headed by Liu Shangxi, Director General (DG) of CAFS, who has been selected as a member of the third National Climate Change Expert Committee (NCCEC). Gao Zhili, DG, Yao Shaoxue, Deputy Director General (DDG), Li Jiegang, DDG, Liu Qisheng, Director and Zhang Shuo, Associate Researcher of the Department of Finance in Hebei are invited as experts. The tasks of this project were preliminarily clarified in July 2016. Specifically, Hebei will be taken as the sample in the provincial CPEIR, and typical overcapacity reduction cases will be used in the cost-benefit analysis. In the course of the project, the project team conducted in-depth literature review and data collection, held a project kick-off meeting, went to Hebei two times to conduct intensive surveys, and regularly held discussions with UNDP and other international experts. On October 10, 2016, the project team held a “Provincial Climate Public Expenditure and Institutional Review” kick-off meeting in Shijiazhuang City, Hebei. Among those present were experts from the Department of Finance (DOF), Department of Water Resources (DWR), Department of Forestry (DF), Health and Family Planning Commission (HFPC), Department of Environmental Protection (DEP), Development and Reform Commission (DRC), Department of Industry and Information Technology (DIIT), Department of Agriculture (DOA), Bureau of Meteorology (BOM) of Hebei, experts from the CAFS research group, officials from UNDP China. Liu Shangxi ,DG of CAFS and research project leader, Yao Shaoxue, DDG of the DOF of Hebei, and Dr. Zheng Yuan, Economist UNDP China, addressed the meeting. Researcher Shi Yinghua introduced the research background, research approach and the proposed methodology on behalf of the research group to the audience. The experts present shared their views and opinions. 1 Liu Shangxi pointed out that the project is to assess fiscal expenditure’s impact on mitigation and adaptation to climate change. Climate public expenditure is vital to the optimization of the fiscal expenditure structure. Expenditure is optimized only when it is evolving in favor of mitigation and adaptation to climate change. Climate change has a great impact on the survival and development of mankind and research in this regard is of great value. China is obliged to explore a new path to deal with climate change. This is what China should do as a major responsible country. If the research is carried out on a national scale, the workload will be heavy. Hebei Province, as an important member in the Beijing-Tianjin-Hebei region, is bold to be carrying out system reform and holds a leading position in combating climate change. Therefore, taking Hebei as the example in our research will help generate larger-scale effects. UNDP has extended great support to this project and deems it reasonable to target Hebei as a case study. This study is going to sum up experience from the concept, policy and institutional mechanism perspectives. Experts should not be content with existing practices, but need to continuously learn from emerging cases to thereby build up a model for developing countries. At the first research seminar, the project team exchanged views with experts from authorities directly under provincial jurisdiction, including the DWR, DOF, HFPC, DEP, DRC, DIIT, DOA and BOM, and held in-depth discussions on climate public expenditure and budget systems with experts from the functional divisions of the DOF of Hebei, including the Bureau of Management and Budget, Economic Construction Division, Division of Resource Conservation and Environmental Protection, Agriculture Division, General Office, Taxation Policy Division, Social Security Division, Public-Private-Partnership Office, Procurement Office, and Scientific Research Center. Given that overcapacity reduction has been one of the important initiatives taken by Hebei to curb climate change in recent years, the project team used some overcapacity reduction cases in Hebei for research. From April 24 to 26, 2017, the project team, led by DG Liu Shangxi, went to Hebei for case research related to climate public expenditure cost-benefit analysis; Li Jiegang, deputy chief of the DOF of Hebei, provided guidance throughout the whole process. During the investigation, the project team had heated discussions with leaders and experts from the DRC, DOF, DIIT, DEP, DHRSS, and other authorities directly under the jurisdiction of Hebei; the provincial industrial associations, including the Metallurgical Association and the Coal Association; the BIIT of Shijiazhuang City and its subordinate Pingshan County; DRC, BOF, BIIT, BHRSS, BEP and other authorities directly under jurisdiction of Tangshan City; as well as the DRC, BOF, BHRSS, Government Office, BIIT directly under jurisdiction of Fengnan District; the team also visited a cement enterprise in Pingshan County, Tangshan Iron & Steel Group Co., Ltd. the largest subsidiaries of HBIS Group Co., Ltd., and Bainite Steel Group Co., Ltd., to explore the status quo of overcapacity reduction in Hebei, and the benefits, the challenges and problems thereof. From September 5 to 9, 2016, the team members, including Shi Yinghua, Researcher and Director of the Macroeconomic Research Center, CAFS, Zhang Shuo, Associate Researcher from the Hebei research institute of Fiscal Science, and Dr. Zheng Yuan, Economist UNDP China went to Pakistan for a bilateral exchange meeting, “Integrating Climate Change Finance in Planning and Budgeting Systems”. During their stay in Pakistan, the project team held discussions with 2 Pakistan’s top think tank, Leadership for Environment and Development (LEAD), on CPEIR, involving its goals, elements, methods, data acquisition, measurement index and time sensitivity, and met with Mr. Pated Ghazanfar Abbas Jilani, Assistant Minister of the Ministry of Finance of Pakistan, to learn about the progress of the government’s CPEIR application, and Ms. Sujala Pant, Senior Advisor, Bangkok Regional Hub, UNDP Asia Pacific Regional Centre. The team also visited the UNDP Pakistan, Ministry of Climate Change, General Accounting Department, Department of International Development of Pakistan, and participated in the CPEIR kick-off meeting held by LEAD in Lahore, Punjab. This bilateral exchange would help to deepen the understanding and consensus on the CPEIR-related approaches, the application of cost-effectiveness and in climate expenditure, thereby accelerating the progress of China’s climate public expenditure review. The research has yielded good results. Team members have been invited to the relevant climate change public expenditure policy research and consultation workshops as experts. On September 30, 2016, the project leader Liu Shangxi, a member of the 3rd NCCEC, participated in the inaugurating meeting and the first working meeting of the 3rd NCCEC. The project team