Climate Related Fiscal Risk

This review is the first in a series of three reports prepared in support of a Knowledge for Development and Diplomacy (K4DD) evidence and policy clinic on public financial management (PFM).

The first part of the review addresses the proactive management of fiscal risks, public asset management, and liabilities associated with climate change for PFM. Given the wide range of fiscal risks associated with climate change, which are context dependent and subject to uncertainty, and which may also be compounded or modulated by a country’s natural hazard exposure, economic development and activity, credit rating, debt and access to external financing, among other factors, this chapter is not systematic but is instead intended to serve as an introduction to some of the key discussions in the literature on PFM related to managing climate-related fiscal risks.

The second part of the review provides brief overviews of five examples of approaches to managing fiscal risks associated with climate change. The third part of the review deals with how differences in geography, economic development and governance impact how governments approach climate-related fiscal risk management.