## Review of the CMAP pilots and proposed way forward

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### Executive summary: purpose and high-level findings
- Reviews two Climate Macroeconomic Assessment Program (CMAP) pilots and proposes a way forward; builds on six CCPA pilots (2017-2020) and World Bank CCDR experience; accounts for early RST requests.
- Date on document: May 31, 2023.
- Main findings:
  - Pilot authorities valued the macro-fiscal section most, but comprehensive CMAPs can be burdensome with limited capacity.
  - A CMAP involves much higher resource cost than a typical CD mission and some tools can be improved.
  - CMAP complements CCDRs in Fund comparative advantage areas, with some overlap.

### Staff proposals and operational way forward
- Core proposal:
  - Streamline CMAP to focus on Fund comparative advantage areas: mitigation, public financial management (PFM), macro-fiscal impact of climate policies.
  - Provide a streamlined CMAP only in exceptional circumstances; expand targeted capacity development (CD), especially to support RST countries.
- Rationale:
  - Focused approach is more agile, allows Fund to serve more members within same resource envelope, and enhances synergies with other Fund products and World Bank CCDRs.

### CMAP design, tools, and pilot experience
- CMAP template features:
  - Seven-area structure focusing on core Fund competencies.
  - Macro-fiscal section leverages the DIGNAD model (accounts for feedback from ex-ante investment in resilient capital to growth and debt dynamics under various climate shock and financing scenarios; can be calibrated to country-specific circumstances).
  - Macro-fiscal section re-designed to use Sustainable Development Goals (SDGs) costing methodology to assess investment needs for climate resilience.
  - Mitigation section expanded to include distributional impacts using the Climate Policy Assessment Tool (CPAT).
  - National Planning/PFM section uses C-PIMA and Green PFM frameworks to assess adequacy of planning and PFM systems and budget reflection of climate expenditures.
  - Adaptation section streamlined to institutional assessment rather than sectoral policies, aligning with NDCs and NAPs.
- Pilot teams and modalities:
  - Samoa CMAP: team of 12 FAD, RES, APD staff; mission conducted virtually due to COVID-19; findings informed Article IV surveillance inputs.
  - Madagascar CMAP: team of 12 IMF staff plus three short-term WRI experts; comprehensive report valued as a starting point for proactive risk management.
- CPAT and related mitigation tools:
  - CPAT projects fossil and non-fossil energy use at country and sector level; estimates GDP and government revenue impacts; estimates household consumption impacts by income decile; simulates revenue recycling (e.g., reducing labor taxes, targeted transfers, public investment); analyzes carbon taxes, ETS, feebates, regulations.
  - Since FY 2021, CPAT supported five CD missions (including Samoa and Madagascar CMAPs), 14 Article IVs, and over 10 analytical projects.
- Climate PFM tools:
  - C-PIMA applied in 16 member countries; simplified C-PIMA used in Madagascar and Samoa.
  - Green PFM how-to note developed; stand-alone CD expected starting FY23.
  - PFM-related reform measures constitute about half of RSF reform measures in Bangladesh, Costa Rica, Rwanda pilots.

### Interaction with the Resilience and Sustainability Trust (RST)
- RST established April 2022 to help low-income and vulnerable middle-income countries build resilience to long-term challenges and support balance of payments stability.
- RST financing characteristics:
  - Maturities: 20-years, with 10½ -year grace period.
  - Tiered interest rate structure for affordability.
  - About three-quarters of the Fund membership (143 countries) are eligible to receive financing from the RST.
  - Members with concurrent, on-track UCT-quality IMF-supported programs can access resources through the Resilience and Sustainability Facility (RSF).
- Board approved first five pilot RSF-supported programs: Barbados, Costa Rica, Rwanda, Bangladesh and Jamaica.
- Demand for RST is high; many prospective RSF recipients expected to require extensive CD in diagnostic phase and reform implementation.

### Resource intensity, operational metrics, and suitability considerations
- Resource metrics from pilots:
  - Team size: a team of twelve for each mission.
  - Duration: missions took place over four to five weeks with multiple months of preparatory work.
  - Cost intensity: each pilot mission was about three times more expensive than a typical CD mission in terms of FTE.
  - FTE comparison: Samoa and Madagascar CMAP missions cost about 1.6 FTE while a typical CD mission costs about 0.5 FTE.
- Operational implications and coordination:
  - Missions required large multi-disciplinary teams covering tax policy, expenditure policy, PFM, macro-fiscal, and risk management.
  - Close FAD–RES and Area Department collaboration critical for integration with surveillance.
  - Engagement with non-traditional counterparts (Environment, Transport, Health, Education, Disaster Management) increased preparation and coordination needs.
  - Virtual modalities and large time differences extended mission durations; pre-mission questionnaires had low response rates.
- Suitability for Small Developing States (SDS):
  - High resource intensity is particularly difficult for SDS with limited administrative capacity (e.g., Samoa); targeted single-topic CD may be preferable.
  - Madagascar valued comprehensive CMAP but requested follow-up CD to implement recommendations.

### CMAP versus CCDR: coverage, complementarities, and differences
- CCDR rollout and coverage:
  - World Bank began first wave of CCDRs in 2022; plans to provide CCDR for all member countries every 4-5 years; first wave covered 28 countries.
- Comparative focus:
  - CCDRs: deeper sectoral adaptation analysis, national strategy, sectoral depth.
  - CMAPs: uniform seven-section structure; link climate policies directly to macro-fiscal framework.
- Complementarities:
  - Fund comparative advantage areas where CMAPs complement CCDRs: (1) mitigation (carbon pricing and distributional effects), (2) PFM (detailed policy assessments for Ministries of Finance), (3) macro-fiscal analysis of climate policies (DIGNAD-driven scenarios).
- Macro-fiscal modeling approaches:
  - CMAP used DIGNAD; CCDRs use a variety of models (Solow, CC-MFMOD, CGE models like MANAGE, ENVISAGE) with varying macroeconomic coverage.
- Adaptation coverage:
  - CCDRs provide more comprehensive, granular sectoral adaptation analysis; CMAP adaptation focuses on institutional assessment of adaptation plans and policies.

### Lessons learned on CMAP content and methodology
- New template features that worked well:
  - DIGNAD customization captured feedback from ex-ante adaptation investment on growth and debt dynamics to support climate finance mobilization cases.
  - Distributional analysis of mitigation policies provided recommendations on revenue recycling.
  - Climate-responsive PFM assessment produced actionable roadmaps to integrate climate change in PFM practices.
- Integration gaps and overlaps:
  - Adaptation and risk management sections could be better integrated with PFM; risk management overlapped significantly with other sections.
  - Different pilot emphases (Samoa on public mechanisms, Madagascar on sectoral measures with WRI inputs) affected integration.

### Proposed streamlining, core focus areas, and delivery modalities
- Proposed core focus areas for a streamlined CMAP (Fund’s comparative advantage):
  - (1) Mitigation and distributional impact analyses.
  - (2) PFM to assess institutional capacities and readiness for climate actions.
  - (3) Macro-fiscal implications of climate policies to build resilience.
- Delivery modalities:
  - Shorten or absorb sections not backed by analytical tools or where Fund has limited expertise.
  - Structure assessments around three core areas and integrate adaptation and risk management to reduce overlap while preserving interlinkages.
  - Offer targeted, stand-alone CD or sequenced support (assess → develop reform program → implement) aligned with country priorities and capacity.
  - Combination of a streamlined CMAP and targeted CD enables more agile, less resource-intensive delivery and allows more countries to benefit within existing resources.

### Options considered and resource comparisons
- High-level options:
  - Option 1 (preferred): Streamline CMAPs and deliver them only in exceptional cases (1-2 CMAPs a year) while expanding targeted CD.
  - Option 2: Streamline and scale up delivery (3-5 CMAPs a year) — resource-intensive; content truncated in source.
  - Option 3: Discontinue CMAPs and only provide targeted climate CD.
- Resource cost comparison (text estimates):
  - mitigation: 0.2 FTE
  - PFM: 0.45 FTE
  - macro-fiscal: 0.55 FTE
  - streamlined CMAP: 1.1 FTE per mission
- Pros and cons (summary):
  - Option 1 pros: complements CCDRs, serves more countries within same resource envelope, supports RST demand; cons: streamlined CMAP still resource-intensive and limited marketing potential.
  - Option 2 cons: crowds out focused CD needed for RSTs, staff capacity risks.
  - Option 3 pros: serve more countries with targeted CD; cons: loses holistic diagnostic capability for RST candidates without CCDRs and undermines Fund-wide climate mainstreaming.

### Prioritization criteria and selection guidance
- Key principles:
  - Country ownership and demand-driven delivery.
  - Strong engagement by authorities necessary due to cross-ministry scope and data burden; Ministry of Finance as central coordinator.
- Selection criteria post-pilots:
  - Avoid overlap with CCDRs via coordination with World Bank.
  - Prioritize low-income countries vulnerable to climate change and Small Developing States (SDS).
  - Streamlined CMAP criteria: countries combined with an RST request but not eligible for a CCDR or where CCDR/diagnostics are outdated.
  - For FY24, estimated number of such countries is 2-3.

### CMAP template and streamlined CMAP structure (Annex I and II highlights)
- Full CMAP (seven sections) core questions include:
  - Climate Change Risks and Impact (1, 1a, 1b).
  - National Strategy for Climate Change (2, 2a–2c).
  - Mitigation Plans (3, 3a–3i).
  - Risk Management (4, 4a–4f).
  - Adaptation Plans (5, 5a–5c).
  - Macro-Fiscal Implications (6, 6a–6d).
  - National Planning (7, 7a–7c).
- Streamlined CMAP (restructured to introductory climate impacts & risk management plus three Fund CD areas):
  - Climate impacts and risk management: standardized risk profiles and review of NDCs.
  - Mitigation and distribution: focus on carbon pricing using CPAT and distributional impacts; complement WB sectoral work.
  - Macro-fiscal impacts and adaptation: FAD tools for costing, financing, growth-debt sustainability; draw on CCDRs for sectoral project analysis.
  - PFM: continue C-PIMA and Green PFM frameworks; subsume disaster risk financing, climate fiscal risk analysis, and planning content.

### Macro-fiscal tools under development and guidance principles
- Current tool limits and developments:
  - DIGNAD: suitable for acute natural disaster shocks; less suited for slow-moving climate change and does not quantify adaptation investment needs.
  - Tools in development:
    1. SDG-climate macro framework: quantify growth and fiscal impacts of weather shocks, slow-moving climate change, and resilient capital investments by financing source.
    2. Climate change fiscal risk assessment tool: examines mid- to long-term fiscal impacts and discrete climate-related fiscal risks; pilot applications cited (Georgia May 2022; Armenia Oct 2022).
- Analytical principles from Staff Climate Notes:
  - Consider both weather shocks and slow-moving climate change; distinguish natural variability from long-term changes.
  - Define adaptation as autonomous or policy-driven responses; value adaptation investments as avoided climate damage costs including externalities and multipliers.
  - Use cost-benefit analysis complemented by distributional analysis to prioritize adaptation programs within development strategy.

### Coordination with partners and across the Fund
- Coordination with World Bank:
  - Country selection and timing coordination to avoid overlap (e.g., not covering same country within 2 years).
  - Information sharing of preparatory notes and near-final reports with at least one week for comments.
  - Opportunities for cross-participation at country level.
  - Current gaps: macro-fiscal frameworks in CCDRs mostly not shared; limited direct Fund contributions to draft CCDRs.
- Coordination with other partners:
  - Samoa: engaged ADB regional office, PFTAC CD experts, PCRAFI; useful in absence of resident representative.
  - Madagascar: WRI provided sectoral inputs; some inputs not fully integrated due to structure differences.
  - Challenges: differing timelines and analytical priorities across partners.
- Coordination across IMF departments:
  - FAD–RES collaboration operationalized DIGNAD for user-friendly platform.
  - Area Departments ensured integration with surveillance and program work.
  - CMAP pilots did not extensively cover climate finance nor involve MCM; fuller coverage would broaden CMAP scope.
  - Planned continued coordination on climate-related data, analytical tools, legal reform/anti-corruption measures (STA Climate Change Indicators Dashboard, ICD modeling/TA, LEG work).

### Enterprise risk assessment and top risks by option
- Top risks if scaling up full CMAPs (Option 2) or discontinuing CMAPs (Option 3):
  - #1 Failure to adapt to changing membership needs (Option 3).
  - #2 Quality of policy and technical advice (Option 2 and 3 — crowding out focused TA or lack of support for RST requests).
  - #3 Reputational risks from lacking diagnostics for RSF candidates (Option 3).
  - #4 Reputational/resource constraints from launching CMAPs at full scale causing staff burnout and lower quality (Option 2).
- Top risks with streamlined CMAPs (Option 1):
  - #1 Human capital resource constraints: coordinating with WB on country prioritization could lead to many exceptional CMAP requests.
  - #2 Quality of policy and technical advice: reliance on other non-standard diagnostics could affect Fund advice quality.

*Source: ppea2023025 — Review of the CMAP pilots and proposed way forward (selected excerpts).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview and purpose
- Reviews the two Climate Macroeconomic Assessment Program (CMAP) pilots and proposes a way forward.
- Builds on experience of the six Climate Change Policy Assessment (CCPA) pilots (2017-2020) and the World Bank’s Country Climate and Development Report (CCDR).
- Accounts for early experience with countries requesting support under the Fund’s Resilience and Sustainability Trust (RST).
- Date on document: May 31, 2023.

### Main findings
- Pilot country authorities find the macro-fiscal section of the CMAP most valuable, but such a comprehensive assessment can be burdensome when there is limited capacity.
- A CMAP involves a much higher resource cost than a typical CD mission and some of its tools can be further improved.
- The CMAP complements CCDRs in the areas of the Fund’s comparative advantage, while there are some overlaps.

### Staff proposals and way forward
- Streamline the CMAP to focus on the Fund’s comparative advantage in the areas of:
  - mitigation,
  - public financial management (PFM),
  - macro-fiscal impact of climate change policies.
- Provide a streamlined CMAP only in exceptional circumstances.
- Expand more targeted capacity development (CD), in particular in support of RST countries.
- Rationale:
  - A focused and tailored approach is more agile,
  - Allows the Fund to serve more members within the same resource envelope,
  - Enhances synergies with other Fund products and the World Bank’s CCDR.

### Background and context
- CMAP is a diagnostic climate assessment conducted by the IMF and is a successor to the CCPA.
- CMAP aims to assess:
  - a country’s vulnerability to climate;
  - preparedness in mitigation, adaptation, risk management, public financial management (PFM) and financing;
  - macro-fiscal impacts of climate change.
- Directors requested staff to test-run two CMAP pilots and report back to the Board after the CCPA review.
- The CMAP template was tested in collaboration with partners including the World Resources Institute (WRI) and regional MDBs.

### CMAP design and tools
- CMAP template:
  - Consists of seven areas and focuses on core Fund competencies.
  - Macro-fiscal section strengthened by leveraging the DIGNAD model (accounts for feedback from ex-ante investment in resilient capital to growth and debt dynamics under various climate shock and financing scenarios; can be calibrated to country-specific circumstances).
  - Macro-fiscal section re-designed to use the Fund’s Sustainable Development Goals (SDGs) costing methodology to assess investment needs to strengthen climate resilience.
  - Mitigation section expanded to include distributional impacts of mitigation policies, leveraging the Climate Policy Assessment Tool (CPAT).
  - National Planning/PFM section strengthened with the Climate-Public Investment Management Assessment (C-PIMA) and green PFM frameworks (launched in 2022) to assess adequacy of planning and PFM systems and whether climate-related expenditures are accurately reflected in the budget.
  - Adaptation section streamlined to focus on institutional assessment rather than sectoral policies, aligning with NDCs and NAPs.
- Coordination intent:
  - Shift focus toward Fund strengths and away from areas where the World Bank has greater expertise to enable coordinated and complementary assessments.
  - Staff coordinated country selection with the World Bank to prevent overlap with CCDRs and cooperated with other institutions.

### Interaction with the Resilience and Sustainability Trust (RST)
- RST established in April 2022 to help low-income and vulnerable middle-income countries build resilience to longer-term challenges (climate change, pandemic preparedness) and contribute to balance of payments stability.
- RST financing characteristics:
  - Maturities: 20-years, with 10½ -year grace period.
  - Tiered interest rate structure for affordability.
  - About three-quarters of the Fund membership (143 countries) are eligible to receive financing from the RST.
  - Members with concurrent, on-track UCT-quality IMF-supported programs can access resources through the Resilience and Sustainability Facility (RSF).
- Financing through the RSF is conditional on completion of reviews that assess implementation of reform measures (RMs).
- The Board approved the first five pilot RSF-supported programs: Barbados, Costa Rica, Rwanda, Bangladesh and Jamaica.
- Demand for the RST is high; many prospective RSF recipients are expected to require extensive CD both in the diagnostic phase and in reform implementation.

### Lessons from the two CMAP pilots
- General takeaway: CMAP could be usefully streamlined around the Fund’s comparative advantage; some countries would benefit more from focused topical CD than a comprehensive CMAP. Streamlining would facilitate closer coordination with Bank CCDRs and enable the Fund to provide more support to countries seeking RST-financing.

- Samoa CMAP (pilot 1):
  - Mission conducted virtually due to COVID-19 travel restrictions.
  - Team: 12 staff from FAD, RES, and APD.
  - Context: Small island economy exposed to cyclones, earthquakes, droughts, floods; tourism damage and limited fiscal space.
  - Authorities valued analysis of macro-fiscal impacts of adaptation investment and the support it provided for discussions with international donors to mobilize climate finance.
  - Country team participation helped integrate CMAP into surveillance; some CMAP findings informed the Article IV consultation (policy options on revenue measures, estimates of financing needs for climate-resilient infrastructure, incorporating climate risks into medium-term fiscal sustainability analysis).

- Madagascar CMAP (pilot 2):
  - Team: 12 Fund staff with inputs from three short-term experts from WRI (ecosystems, agriculture, water and sanitation).
  - Context: Larger island economy exposed to slow-moving climate change and natural disasters; pressures on labor productivity and production disruptions.
  - Authorities appreciated the comprehensiveness of the report (PFM assessment and macro-modeling) as a useful starting point for moving from reactive to proactive risk management of climate change implications.

### Structural and coordination considerations
- CMAP template evolution and mission selection were informed by CCPA review recommendations to:
  - continue with small developing states (SDS) but extend coverage to larger economies;
  - conduct the tool as a standalone CD product;
  - focus on macro issues; and
  - coordinate with the World Bank and other development partners.
- Collaboration with partners aimed to avoid overlap with CCDRs and leverage MDBs, UN, and research partners.

### Document structure (contents highlights)
- Main sections include: Introduction and Background; Review of CMAP Pilots (template, pilots, CMAPs and CCDRs, takeaways); Coordination with Partners and Across the Fund (World Bank, other institutions, across Fund departments); Three Main Areas of Fiscal Climate CD (Climate Mitigation, Climate PFM, Macro-fiscal Impact and Adaptation); Options and Way Forward for CMAPs (options with pros/cons, prioritization of countries, way forward); References; Annexes (I. CMAP Template; II. Streamlined CMAP; III. Document Risk Self-Assessment).
- Boxes and Figures include: Box 1 (history of the CCPA and the CMAP), Box 2 (RST), Box 3 (Fund’s Climate-Related Capacity Development), Box 4 (illustration of CPAT use), Box 5 (CMAP in Small Developing States), Figure 1 (Structure of the CMAP), Figure 2 (Coverage of CCDR vs. CMAP), Figure 3 (Climate PFM tools).

*Prepared by the Climate Macroeconomic Assessment Program (CMAP) Review Team; Approved By Ruud De Mooij and Kristina Kostial.*

### 14. Support from the IMF resident representative as well as the country team helped

### 14. Support from the IMF resident representative as well as the country team helped

### Program integration and operational support
- In March 2021, Madagascar requested a 40-month ECF arrangement program to support the recovery from the pandemic and anchor reform implementation to catalyze aid commitments.
- Area Department participation helped inform how the CMAP could support program objectives, especially on fossil fuel subsidy reform.
- The CMAP strengthened reform measures under the program through an analysis of mitigation measures using the CPAT.
- The resident representative facilitated communication with the authorities.

### Lessons learned on CMAP content and methodology
- New features of the CMAP template (Annex I) generally worked well:
  - The macro-fiscal section customized the DIGNAD model, accounting for a feedback effect on growth from ex-ante adaptation investment, yielding simulation results to support the case for greater climate finance.
  - Distributional impact analysis of mitigation policies provided useful policy recommendations on how to recycle revenues raised by proposed mitigation measures.
  - Climate-responsive PFM assessment provided actionable roadmaps to improve the institutional framework to integrate climate change in PFM practices.
- Integration gaps:
  - Adaptation and risk management sections could be better integrated with other sections; overlaps with PFM were noted.
  - Different pilot approaches: Samoa emphasized public mechanisms supporting adaptation planning (overlapping with PFM), while Madagascar discussed sectoral adaptation measures with WRI inputs and literature.
  - The risk management section overlapped significantly with other sections and could be combined into the PFM section.

### Resource intensity and operational implications
- CMAP missions required large multi-disciplinary teams spanning tax policy, expenditure policy, PFM, macro-fiscal, and risk management expertise.
- For the macro-fiscal section, RES and FAD collaborated to apply the DIGNAD model; close FAD–Area Department country team collaboration is critical to ensure CD integration with Fund surveillance.
- Pilot mission resource metrics and operational characteristics:
  - Team size: a team of twelve for each mission.
  - Duration: missions took place over four to five weeks with multiple months of preparatory work.
  - Cost intensity: each pilot mission was about three times more expensive than a typical CD mission in terms of FTE.
  - FTE comparison note: Samoa and Madagascar CMAP missions cost about 1.6 FTE (full-time equivalent) while a typical CD mission costs about 0.5 FTE.
- Logistical and coordination challenges:
  - Missions involved engagement with non-traditional counterparts (Ministries of Environment, Transport, Health, Education, Disaster Management), requiring greater preparation and communication.
  - In the absence of a resident representative (Samoa), on-ground coordination relied on other IFIs.
  - Virtual mission modality, large time differences, and technological difficulties extended mission durations.
- Authority-side challenges:
  - Main counterparts were in Ministries of Finance but coordination was required across line ministries, broader public sector, and the financial sector.
  - Pre-mission questionnaires had a low response rate, as they exceeded typical public finance areas.

### Suitability for small, vulnerable states (SDS) and follow-up CD
- High resource intensity is particularly difficult for SDS:
  - Samoan authorities noted limited administrative capacity to accommodate large missions and implement CD recommendations.
  - Given SDS institutional capacity constraints and climate vulnerabilities (e.g., sea-level rise, natural disaster frequency/intensification), a CMAP may not be an ideal CD tool for SDS.
  - A more tailored delivery approach (e.g., single-topic climate CD) may be preferable for supporting SDS climate agendas.
- Follow-up CD:
  - Malagasy authorities valued the comprehensive CMAP report but indicated they would benefit from follow-up CD to implement policy recommendations.

### CMAPs versus CCDRs — coverage and complementarities
- CCDR rollout and purpose:
  - The World Bank rolled out the first wave of CCDRs in 2022 and plans to provide a CCDR for all member countries every 4-5 years.
  - The CCDR links NDCs with national development policies and economic strategies and draws on multi-sectoral expertise.
  - The first wave covered 28 countries.
- Comparative coverage:
  - Overlaps exist, but focuses differ:
    - CCDRs cover climate risks and impact, national strategy for climate change, and adaptation more broadly and at greater sectoral depth.
    - CMAPs link climate change policies directly to the macro-fiscal framework.
  - Structure:
    - CMAP: uniform structure consisting of seven sections, facilitating cross-country comparison.
    - CCDR: depth and sectoral focus vary by country.
- Complementarities:
  - Areas of complementarity include (1) mitigation, (2) PFM, and (3) macro-fiscal analysis of climate change policies.
  - On mitigation: CMAPs focus on carbon pricing and distributional effects; CCDRs focus more on sector-level regulations, urbanization, and employment-related issues.
  - On PFM: CMAP PFM sections provide detailed policy assessments for Ministries of Finance; CCDR coverage of climate PFM is less consistent.
- Macro-fiscal modeling differences:
  - CMAPs integrate climate policies into macro-fiscal modeling and used the DIGNAD model.
  - CCDRs use a variety of models across countries (e.g., Solow growth model, Climate Macro-Fiscal Model (CC-MFMOD), CGE models like MANAGE, ENVISAGE) with varying coverage of macroeconomic variables.
- Adaptation coverage:
  - CCDR adaptation sections are more comprehensive with granular sectoral analysis, regional/spatial perspectives, and in-house sectoral expertise.
  - CMAP adaptation focuses on institutional assessment of adaptation plans and policies.

### Takeaways and proposed streamlining
- Key staff findings:
  - The CMAP can usefully complement the CCDR in mitigation, PFM, and macro-fiscal analysis.
  - The CCDR better covers sectoral-level adaptation measures.
  - The CMAP can be streamlined to avoid overlap between sections and reduce resource costs.
  - CD should be better tailored to country-specific circumstances and paced to country progress on climate work.
- Proposed core focus areas for a streamlined CMAP (the Fund’s comparative advantage):
  - (1) Mitigation and distributional impact analyses.
  - (2) PFM to assess institutional capacities and readiness for climate actions.
  - (3) Macro-fiscal implications of climate policies to build resilience.
- Delivery modalities:
  - Shorten or absorb sections not backed by analytical tools or where the Fund has limited expertise into main sections.
  - Structure assessments around three core areas and integrate adaptation and risk management to reduce overlap while preserving interlinkages.
  - Offer targeted, stand-alone CD in key areas or sequenced support (assess → develop reform program → implement) aligned with country priorities and capacity.
  - A combination of a streamlined CMAP and targeted CD would enable more agile, flexible, and less resource-intensive climate CD delivery, allowing more countries to benefit within existing resource envelopes.

### Coordination with partners and across the Fund
- Coordination with the World Bank:
  - Country selection: each institution will update the other on planned country coverage and timelines via point persons; CCDRs and CMAPs aim not to cover the same countries at the same time (e.g., within 2 years).
  - Information sharing and review: CCDR teams expected to engage with Fund country teams on macro-fiscal discussions and DSA projections; CMAP teams expected to engage with WB country teams on sectoral studies and expenditure estimates.
  - Drafts of preparatory notes and near-final reports should be shared with at least one week provided for comments, with best efforts to address comments.
  - Opportunities for cross-participation (WB staff in CMAPs, IMF staff in CCDRs) could be agreed at country level.
  - Current practice and gaps: Fund and WB teams exchanged drafts for comments and held technical meetings; IMF Area Department teams were systematically invited to WB review meetings though engagement varied. Macro-fiscal frameworks in CCDRs were mostly not shared, and there has been little direct Fund contribution to draft CCDRs.
- Coordination with other institutions:
  - Samoa: interaction with ADB regional office, PFTAC CD experts, and PCRAFI for disaster risk assessment and financing information; useful given absence of resident representative.
  - Madagascar: WRI experts provided sectoral inputs for adaptation; some inputs could not be fully integrated due to CMAP structure and differing analytical approaches.
  - Collaboration benefits: obtaining data and local/regional context crucial for macro-fiscal modeling and adaptation priorities.
  - Collaboration challenges: differing timelines and analytical priorities across partners impose costs.
  - As CMAP standardizes, teams will more clearly guide partners on useful inputs and expected issues.
- Coordination across IMF departments:
  - CMAP development involved multiple functional departments scaling up climate CD in public finance, financial sector resilience, macro-climate modeling, legal systems and anti-corruption, and data.
  - Area Departments’ collaboration (APD, AFR) ensured integration between surveillance/programs and CD; CMAP informed subsequent APD and AFR surveillance and program work.
  - FAD–RES collaboration enriched macro-fiscal analysis and operationalized DIGNAD for a user-friendly platform.
  - Climate finance and MCM: CMAP pilots did not extensively cover climate finance nor involve MCM; fuller coverage would broaden CMAP scope and move away from streamlining objectives. The inter-departmental Task Force on Catalyzing Private Financing through the RSF led by MCM could explore closer collaboration through the CMAP.
  - Continued coordination planned on climate-related data work, analytical tools, and legal reform/anti-corruption measures, leveraging STA’s Climate Change Indicators Dashboard, ICD modeling and TA initiatives, and LEG work on climate-related financial and fiscal law reform and corruption vulnerabilities.

*Source: ppea2023025 - 14. Support from the IMF resident representative as well as the country team helped*

### 44. Fiscal policy to mitigate climate change has been a main pillar of the Fund’s climate

### 44. Fiscal policy to mitigate climate change has been a main pillar of the Fund’s climate

### CPAT (Carbon Pricing Assessment Tool): purpose and capabilities
- CPAT is a spreadsheet model that projects fossil and non-fossil energy use at the country and sector-level to evaluate climate, local environmental, macroeconomic, and distributional impacts of various carbon pricing scenarios.
- Capabilities explicitly described:
  - Assess stringency and coverage of carbon pricing policies needed to achieve emissions reduction targets.
  - Estimate impact of policies on GDP and government revenue.
  - Estimate impact on household consumption across the income distribution (purchasing power by income decile).
  - Estimate increase in costs for firms at the sectoral level.
  - Simulate revenue recycling methods (e.g., reducing labor taxes, targeted transfers, public investment) to analyze equity and competitiveness outcomes.
- CPAT can analyze carbon taxes, emission trading systems (ETS), feebates, and regulations.
- Developed jointly by IMF and World Bank staff and evolved from an earlier IMF tool used in IMF (2019a and b).

### Use of CPAT in CD, surveillance, and analytical work
- CPAT has been used to inform country teams and authorities on environmental taxation, fossil fuel subsidy removal, energy pricing, and tax reform.
- CPAT has supported analyses of climate policies and informed tax policy CD; it has been used to inform program conditionalities and assess macroeconomic risks related to energy pricing.
- Examples of CPAT applications (Box 4):
  - Since the beginning of FY 2021, CPAT supported work on five CD missions (including the Samoa and Madagascar CMAPs), 14 Article IVs, and over 10 analytical projects.
  - CD, Korea (2021): mission evaluated three separate packages of economy-wide and sector-level policies, including an ambitious ETS, expenditure-based building and transportation policies, and a transportation feebate; assessment estimated impacts on growth, fiscal balances, air pollution, and emissions gap relative to Korea’s net zero pledge.
  - Surveillance, Denmark (2020): CPAT indicated that an economy-wide carbon tax of USD 70 per ton is not sufficient to meet Denmark’s emissions reduction target, implying the need for reinforced sectoral policies in addition to more ambitious uniform carbon pricing.
  - Analytical work, Getting on Track to Net Zero (2022): CPAT used to show emissions reductions under various global carbon pricing scenarios, partly building off IMF proposals for an international carbon price floor and differentiated pricing by development level.

### Fossil Fuel Subsidies dataset and related tools
- FAD’s Fossil Fuel Subsidies dataset:
  - Provides country, sector, and fuel-level estimates of explicit and implicit subsidies.
  - Covers seven types of fuels at the sectoral level for over 180 countries.
  - Used to calculate economically efficient fuel prices (accounting for direct financial costs and environmental externalities) to assess policy adequacy and guide energy price reform.
- The dataset serves both as input for CPAT and as a standalone tool to guide carbon pricing.

### Extractive industries and mitigation policy tools
- Fiscal Analysis of Resource Industries (FARI):
  - Complements carbon pricing policy advice for resource-rich countries.
  - Provides fiscal regime design advice for extractive industries (oil, gas, mining).
  - Can be used to model a per-unit charge on greenhouse gas emissions during extraction to incentivize reductions in emissions-intensity of petroleum and mineral production.
- CMAP pilots to date have been conducted in non-fossil fuel producers; FARI would be applicable if CMAPs extend to fossil fuel producing countries.

### Demand, delivery, and internal coordination for mitigation-focused CD
- Provision of FAD’s climate mitigation-focused CD, analytical work, and country team support is growing.
- Tax, expenditure, and new climate policy divisions collaborate to design comprehensive, evidence-based reform pathways to reduce emissions and mobilize domestic revenue while supporting vulnerable households and export competitiveness.
- Increased collaboration between country teams and FAD is operationalized through direct participation of FAD fiscal economists in country teams and indirect review of Policy Notes and Staff Reports.
- CD demand has grown with climate mitigation efforts, fiscal pressures, and rollout of RST programs.

### Climate Public Financial Management (Climate PFM): C-PIMA and Green PFM
- Climate PIMA (C-PIMA):
  - Adds a climate lens to the PIMA framework to assess institutional readiness and gaps in Public Investment Management (PIM) for green and resilient infrastructure.
  - Helps identify improvements in public investment institutions and processes to build low-carbon and climate-resilient infrastructure.
  - Has been carried out in 16 member countries, with a rapidly growing pipeline; a simplified C-PIMA was used in Madagascar and Samoa CMAP pilots.
- Green PFM:
  - Provides a holistic assessment of climate-responsive PFM systems with a focus on the budget cycle.
  - Aims to adapt PFM practices to support climate-sensitive policies across budget stages and ensure transparency and coordination with state-owned enterprises and subnational governments.
  - A how-to note has been developed; stand-alone CD on Green PFM expected to be rolled out starting in FY23.
- Demand signals:
  - Several RSF pilot countries (e.g., Bangladesh, Costa Rica, Rwanda) requested CD in climate PFM to inform climate-related program conditionalities prior to formal program requests.
  - On average, PFM-related reform measures constitute about half of the number of RSF reform measures across those three RST pilots.
  - C-PIMA recommendations have been formulated as RST reform measures (examples include integrating climate elements in project appraisal, developing climate budget tagging, including climate-related risks in fiscal risk analysis, disaster risk financing strategy, spatial planning and building codes integration).

### Macro-fiscal impact and adaptation analysis: current tools and development
- CMAP focus: macro-fiscal analysis of climate change policies—assessing adequacy of climate financing based on rough costing of mitigation/adaptation plans and consistency with debt sustainability.
- Current state:
  - Economic analysis on macro-fiscal impacts of climate change and adaptation is early-stage but a policy priority.
  - Uncertainty about climate trajectories and channels of economic impact make standard toolkits challenging; this remains an active Fund workstream.
- Tools described:
  - DIGNAD model: suitable to analyze impact of acute natural disaster shocks; less suited for slow-moving climate change (e.g., sea level rise, average temperature increase) and does not quantify adaptation investment needs.
  - Tools under development:
    1. SDG-climate macro framework: seeks to quantify growth and fiscal impacts of weather shocks, slow-moving climate change, and investments in resilient capital infrastructure, health, and education via different financing sources.
    2. Climate change fiscal risk assessment tool: examines mid- to long-term fiscal impacts of climate change and discrete climate-related fiscal risks (e.g., from energy transitions). This tool has been conducted in a few countries on a pilot basis.
- Pilots cited:
  - “Georgia: Technical Assistance Report—Updating the Balance Sheet and Quantifying Fiscal Risks from Climate Change” (May 2022).
  - “Armenia: Technical Assistance Report—Quantifying Fiscal Risks from Climate Change” (October 2022).
- Guidance and principles for macro-fiscal climate analysis (from recent Staff Climate Notes):
  - Consider effects of and adaptation to both weather shocks and slow-moving climate change; distinguish present natural variability from long-term changes in frequency/intensity.
  - Define adaptation as autonomous or policy-driven responses to minimize climate damages; value of adaptation investments equals avoided climate damage costs including externalities, secondary market effects, and investment multipliers.
  - Use cost-benefit analysis complemented by distributional analysis to prioritize adaptation programs as part of holistic development strategy aimed at maximizing long-term sustainable growth.

### Options and way forward for CMAPs (summary of proposed approach)
- High-level recommendation: deliver a streamlined CMAP only in exceptional cases while expanding targeted climate CD in mitigation, PFM, and macro-fiscal areas; prioritize climate-vulnerable members guided by country demand.
- Criteria for streamlined CMAP: countries combined with an RST request but not eligible for a CCDR or where CCDR or other diagnostics are outdated.
- Close coordination with the World Bank emphasized to avoid overlap and ensure consistency.

Option 1. Streamline CMAPs and deliver them only for exceptional cases (1-2 CMAPs a year) and expand targeted climate CD in the three areas of the Fund’s comparative strength
- Rationale and focus:
  - CCDR rollout means many countries already have or will receive comprehensive climate diagnostics; Fund CD should complement CCDRs and address RST-related demand.
  - Country authorities and AD teams viewed macro-fiscal climate CD as most valuable; toolkits including the SDG-climate financing framework are being developed.
- Pros:
  - Ensures complementarity with other CD providers, including the WB.
  - Allows the Fund to serve more member countries within the same resource envelope more efficiently and tailored to country-specific circumstances, especially for the RST.
  - Lessons learned from broader engagement could refine in-house climate expertise.
  - Streamlined CMAP available for countries considering RST financing requests but without a recent comprehensive climate diagnostic.
- Cons:
  - The CMAP as a Fund diagnostic CD product covering a comprehensive range of climate change issues would be less prominent.
  - Branding and marketing a product delivered on a small scale will be difficult.

Option 2. Streamline CMAPs and scale up delivery (3-5 CMAPs a year)
- (Content truncated in provided source; Option 2 heading preserved here as presented in source.)

*Italic: Source — ppea2023025 (selected excerpts) from the provided content unit.*

### 60. The Fund’s Climate Strategy envisaged, subject to this review, scaling up CMAPs to 3-5

### The Fund’s Climate Strategy envisaged, subject to this review, scaling up CMAPs to 3-5 a year over the medium run as expertise is being built and more resources become available.

### A. Summary of CMAP pilot review and options considered
- Context
  - CMAP cost is significantly higher than traditional CD.
  - The RST has led to surging and urgent demand for targeted (especially PFM) climate CD.
- Option 1: Provide a streamlined CMAP in exceptional cases while expanding targeted CD (preferred)
  - Pros:
    - CMAP could be developed into and promoted as a Fund flagship comprehensive CD tool assisting countries with climate-change related issues.
    - A streamlined CMAP version could serve more countries than the current CMAP template.
  - Cons:
    - Even streamlined CMAPs will require significantly more resources than focused CD, and take more time and resources to deliver.
    - Within a given resource envelope, scaling up CMAPs rapidly would crowd out resources for more focused CD urgently needed for the RST-supported programs.
- Option 2: Scale up full CMAPs (implied in earlier Strategy but resource-intensive)
  - Cons summarized above (resource crowding, timing).
- Option 3: Discontinue CMAPs and only provide targeted climate CD
  - Pros:
    - With the same resources, more countries can be served with targeted climate CD.
    - Climate CD would be mainstreamed into existing CD areas (PFM, tax policy, expenditure policy).
  - Cons:
    - Would not cater for a holistic view of climate change policies as part of a comprehensive macroeconomic framework.
    - Would not offer climate diagnostics to countries requesting an RST that have not received any broad climate policy assessment.
    - Could counter Fund-wide efforts to mainstream climate change holistically into the macro-economic framework.
- Resource cost comparison (as estimated in the text)
  - mitigation: 0.2 FTE
  - PFM: 0.45 FTE
  - macro-fiscal: 0.55 FTE
  - streamlined CMAP: 1.1 FTE per mission

### B. Prioritization criteria and country suitability
- Key principles
  - Country ownership and demand-driven delivery are critical.
  - Strong engagement by authorities is necessary due to the CMAP’s cross-ministry scope and data/coordination burden.
  - Ministry of Finance plays a central coordination role across ministries for CMAPs.
- Selection criteria to apply beyond pilot phase
  - Avoid overlap with CCDRs by continuing coordination with the World Bank.
  - Prioritize low-income countries vulnerable to climate change and Small Developing States (SDS).
- Small Developing States (Box 5) — key points
  - CCPA predecessor targeted SDS; survey found 20 SDS mission chiefs and EDs representing 11 SDS indicated a CCPA would be useful.
  - For Samoa, CMAP added macro-fiscal analysis, PFM advice, feedback on adaptation investment effects on growth and debt sustainability; CMAP was less effective in facilitating access to climate funds.
- Countries less appropriate for CMAPs
  - Countries that have received C-PIMA/PIMA (covers national planning in more detail) or a climate fiscal risk assessment may have limited added value from a full CMAP.
  - Focused climate CD can complement existing CD and be driven by support needs under an RST-supported program.

### C. Recommended way forward
- Recommended approach: Option 1 (streamlined CMAP in exceptional cases plus expanded targeted CD)
  - Rationale:
    - Keeps a CMAP option for countries considering an RST but not eligible for CCDRs or with out-of-date climate assessments.
    - Limits CMAP use to allow expansion of targeted CD where there is strong demand.
    - Focused CD provides agile and targeted input to Area Department teams and RST work.
  - Exceptional circumstances note:
    - Assumes a country is considering an RSF and is not eligible for CCDRs or will not have one in the near term.
    - For FY24, the estimated number of such countries is 2-3.
    - These criteria will be reviewed as part of the Quinquennial review of the Fund’s capacity development strategy.

### D. CMAP Template (Annex I) — sections and core questions
- Climate Change Risks and Impact
  - 1. Overview of climate vulnerability profile; summarize potential impacts from existing studies.
  - 1a. Main climate risks and country risk profile with probability of occurrence; Table ‘Expected climatic developments and consequences’.
  - 1b. Potential impact of climate change on the economy.
- National Strategy for Climate Change
  - 2. Overview of preparedness to adapt and mitigate; consistency with NDC and long-term ‘net-zero’ target.
  - 2a–2c. Questions on NDC comprehensiveness/costing, alignment with SDGs, and consistency with ‘net-zero’ by midcentury.
- Mitigation Plans
  - 3. Assess quality and adequacy of mitigation plan (carbon pricing and other) versus NDC targets.
  - 3a–3i. Clean energy plans, carbon pricing regime, other carbon pricing strategies, expected impacts, tax system implications, distributional impacts, compensation for affected firms/regions, long-term infrastructure plans, sectoral decarbonization policy coverage, land use alignment.
- Risk Management
  - 4. Government identification/assessment of risks and risk reduction measures, financial buffers, insurance, contingent plans.
  - 4a–4f. Risk assessment procedures, self-insurance, risk transfer, public asset insurance, financial sector preparedness, transition-related macro/fiscal risks (stranded assets).
- Adaptation Plans
  - 5. Review policies and alignment with risk management; assess adequacy against NDCs and NAPs.
  - 5a–5c. Policies implemented, adequacy and gaps, non-investment public programs to strengthen.
- Macro-Fiscal Implications of Climate Policy
  - 6. Assess mitigation/adaptation needs vs available financing and consistency with fiscal and external debt sustainability.
  - 6a–6d. Costs of mitigation/adaptation investment; adequacy of financing; effects on growth and debt via DIG model scenarios; access to climate financing.
- National Planning
  - 7. Assess planning and PFM systems to support implementation and whether costing is accurately reflected in the budget.
  - 7a–7c. Integration into national planning, public investment management adequacy (PIMA), incorporation into budget cycle.

### E. Streamlined CMAP (Annex II) — restructured content and focus
- Structural change
  - From 7 sections to an introductory section on climate impacts and risk management, followed by three broad Fund CD areas: mitigation and distributional impact; macro-fiscal and adaptation; and PFM.
  - Intended to complement CCDR and support RST operationalization and imply marginal cost savings.
- Streamlined sections and focal content
  - Climate impacts and risk management: profile of risks/impacts using standardized indices and datasets; review of national strategy documents such as NDCs.
  - Mitigation and distribution: analyze decarbonization strategy focusing on carbon pricing (using CPAT as main tool) and distributional impacts; complement WB CCDR sectoral focus.
  - Macro-fiscal impacts and adaptation: use FAD tools on costing, financing, and growth-debt sustainability; draw on WB CCDRs for sector-specific adaptation project analysis.
  - Public financial management: continue use of C-PIMA and Green PFM frameworks; C-PIMA would subsume disaster risk management/financing, fiscal risk analysis with climate change, and relevant national strategy/adaptation planning content.

### F. Enterprise risk assessment (Annex III) — top risks by option
- Top risks to the Fund with scaled up CMAPs (option 2) or discontinuing CMAPs (option 3)
  - #1 Failure to adapt to changing needs of membership
    - Discontinuing CMAPs could counter Fund-wide climate mainstreaming efforts (Option 3).
  - #2 Quality of policy and technical advice
    - Crowding out focused TA from meeting high demand for CMAPs undermines timely policy advice to inform reform measures in RSTs (Option 2) or lack of support for RST requests (Option 3).
  - #3 Reputational risks
    - Reputational risk from lacking a climate diagnostics tool for RSF when no other climate assessment such as CCDR is available (Option 3).
  - #4 Reputational risks/Resource constraint
    - Launching CMAPs on a full scale can out-pace limited staff capacity, causing staff burnout and/or lower quality of assessments (Option 2).
- Top risks to the Fund with streamlined CMAPs (option 1)
  - #1 Human capital resource constraints
    - Challenges coordinating with the World Bank on prioritizing countries could lead to a large number of exceptional requests for CMAPs.
  - #2 Quality of policy and technical advice
    - Reliance on other non-standard climate diagnostics can impact the quality of Fund policy and technical advice.

*International Monetary Fund — Review of the CMAP pilots and proposed way forward (excerpts).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023025.pdf_