Download Key steps in adaptation assessment for LULUCF sector

ASSESSING INVESTMENT & FINANCIAL FLOWS
FOR CLIMATE CHANGE
INTRODUCTION TO
THE TRAINING
Agenda
Day 1
 Introduction and project context
 Why conduct an I&FF assessment?
 UNDP I&FF methodology
 Sectoral working groups
Day 2
 Sectoral working groups
Day 3
 Sectoral working groups
 Reporting
 Elaboration of national workplan
Modalities and objectives
Training modalities
 Plenary sessions/presentations and group discussions
 Fully interactive and participatory
 Group work within sector teams
Objectives
 Train national teams on the I&FF methodology
 Agree on final workplan with clear deliverables &
deadlines
Preparations
Overview of preparations
 Sectors selected: … (list here)
 National Issues Papers on the selected sectors ready
 Draft workplan ready with key deadlines … (list here)
 Initial inter-ministerial dialogue on climate change
conducted
PROJECT CONTEXT
Why consider Climate Change in planning
Why consider Climate Change in development
planning
 Climate change impacts different sectors, cross-cutting
 If not addressed in long-term action, climate change
costs will be high
Countries may want to position themselves
 To ensure that the negotiation outcomes are coherent
with national interests & priorities
 To be able to participate in the mechanisms that will
be created
Context of climate change negotiations
Bali Road Map
Focus on 4 building blocks:
 Mitigation
 Adaptation
 Technology development & transfer
 Financial resources and investment
Adaptation & Mitigation
What is Adaptation?
Process of sustainable & permanent adjustment to changing
circumstances




Closely linked to development
Will require adjustments across every aspect of
society, environment & economy
Linked to economic development, poverty alleviation,
disaster risk management
Requires capacity for short- & long-term planning
Adaptation & Mitigation
What is Mitigation?
“An anthropogenic intervention to reduce the sources or
enhance the sinks of greenhouse gases.” (IPCC, 2009)


Bali Action Plan suggests nationally appropriate
mitigation actions by developing country Parties in the
context of sustainable development, supported and
enabled by technology, financing and capacitybuilding, in a Measurable, Reportable and Verifiable
manner (MRV)
International agreement will be major challenge
Context of climate change negotiations
Bali Road Map – Important outcomes
 Actions to address climate change are linked to
economic growth & sustainable development goals
 Shared understanding for the necessity of common
efforts, by all countries
 Deadline for negotiations by 2009
 New mechanisms & new demands to countries
Context of climate change negotiations
Key messages of negotiations
 Importance to show flexibility to support any new
agreement & new financial architecture
 Focus on national capacities for
 Broader participation of various decision makers
 Longer term planning
 Implementing broader programmatic approaches
 Understanding the finance & technology
opportunities
Project context
Importance of planning tools
 To identify national priorities
 To facilitate cooperation among different ministries
 To build strategies to deal with climate change
 To create a coherent base of information of climate
change impacts on and opportunities in key sectors
These points are addressed in the project
Why an I&FF assessment
An assessment of I&FF is important to
 Understand the magnitude & intensity of efforts needed
nationally to address climate change in key sectors
 Facilitate the integration of climate issues into national
development & economic planning
 Expand the information & knowledge base
 Contribute to the elaboration of negotiating positions for
international climate negotiations
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PROJECT STAGES
& SUPPORT
Project goals & outcomes
Goals
 Development of national policy options to address
climate change in key sectors
 Increased capacity to co-ordinate negotiating positions
at national level & participate in the UNFCCC process
Outcomes
 National awareness raised
 Investment & financial flows assessed for key sectors
 Web-based knowledge platform populated
http://www.undpcc.org/
Sequencing of national activities
Preparation stage
Pre-workshop
preparation
(2 months)
• Key line
ministries
engaged
• Key
sectors
identified
• National
issues
papers
prepared
National
workshop on
Bali Action
Plan,
national
issues
Implementation stage Reporting stage
Assessment of I&F flows to address CC
mitigation/adaptation options for up to 3
key economic sectors (6-8 months)
National workshop
on:
• Bali Action Plan
• Adaptation,
mitigation,
technology transfer,
financing +
LULUCF
• Key sectors
UNDP methodology
on assessing I&F
flows
Backstopping from
regional centres of
excellence
National
workshop to
present
results,
policy
options
• Update on
Bali Action
Plan
negotiations
• I&F flows
assessments
presented
• Post-2012
preparation
Preparation stage (1- 2 months)
Define & agree
 National objectives/goals
 Key sectors/scope
 I&FF team
 Capacities/needs: methods, information…
 Institutional arrangements
 On workplan/budget
 Available scenarios
Conduct I&FF assessment in key sectors selected by
the country using the UNDP I&FF methodology and
the sector specific guidance & reporting guidelines
Guidance & procedures for
 Documentation & archiving
 Spreadsheet management
 Quality control & quality assurance procedures
Reporting stage




Ongoing activity, not starting at the end of the
assessment
Define outcome (decision making tool, policy tool),
target group (internal/external) to draft report
Ensure good drafter for preparation of report(s)
Purpose: documentation of steps and processes for
interpretation of outcomes & for later follow-up work
Guidance available + support provided
Support to the 3 stages of the project
 Work plan guidance
 Methodological guidance
 Reporting guidance
Regional Centres of Excellence
 Training on assessment of I&FF
 20 days of technical backstopping incl.
 Review of workplan, draft and final assessments
 Guidance on scenarios, data, approach
Guidance available + support provided
Knowledge platform
Public space
 Provides database of documents on climate change
 Provides information on the project
 Dynamic: Users can upload resources; results and
updates “pushed” to site visitors
Member space
 Faciliate sharing of experiences in groups (country
groups, thematic groups)
 Private access for national project activities
Country checklist
 Sectors selected
Major information background
 Draft work plan
Key deadlines?
Roles?
 Team
In place?
All recommended persons/groups in?
 Institutional arrangements in place
To share data
To collaborate
Team composition
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THE I&FF ASSESSMENT
Definition I&FF and O&M
Investment Flow
 An investment flow (IF) is the capital cost of a new
physical asset with a life of more than 1 year
 Limited to new physical assets, because of climate
change implications for the duration of the operating
lives of the facilities & equipment purchased
Definition I&FF and O&M
Financial Flow
 A financial flow (FF) is an ongoing expenditure on
programmatic measures; financial flows encompass
expenditures other than those for expansion or
installation o few physical assets.
 Primarily ‘operation & maintenance’ (O&M) costs:
salaries, raw materials, equipment maintenance,
depreciation, utilities, rent, insurance, taxes etc.
Definition I&FF and O&M
Operation & Maintenance (O&M) costs of new
physical assets
 The physical assets purchased with investment flows
will have operation & maintenance (O&M) costs
associated with them
 Can vary considerably among investment flow types
& have a significant effect on the total cost of an
investment
Entities & sources
Entities of I&FF
 Households
 Corporations
 Government
Sources of I&FF
 Domestic equity & subsidies
 Foreign debt
 Foreign aid
 Foreign & domestic borrowing
 Etc.
Scenarios
What is a scenario?
 An internally consistent & plausible characterization
of future conditions over a specified time period
 A baseline scenario reflects business-as-usual
conditions, describes what can occur without new
policies to address climate change
 A mitigation scenario incorporates measures to
mitigate GHG emissions
 A adaptation scenario incorporates new measures to
respond to the potential impacts of climate change
I&FF work
What questions does the I&FF assessment help
answer?
 What are the adaptation/mitigation options in
certain sectors in the next 25 years?
 Who is investing in the sector/major players &
sources?
 What shifts/increase in I&FF will be needed in the
sector?
 What will be the overall needs for additional I&FF?
Sources of information
Sources of information include
 National Communications (1st, 2nd)
 National Adaptation Programmes of Action (NAPAs)
 National strategies & plans
 System of National Accounts (SNA)
 etc.
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I&FF METHODOLOGY
STEP BY STEP
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Key Steps: Mitigation

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Define detailed scope of the sector
Identify preliminary mitigation (or adaptation)
measures
Specify assessment period & base year
Select analytical approach
1. Establish key
parameters of
assessment
Define detailed scope of the sector
Criteria for scoping the sector
 National priorities
 Pre-work from National Communications, NAPAs etc.
 Data availability
1. Establish key
parameters of
assessment
Identify preliminary mitigation or adaptation
measures
Preliminary mitigation/adaptation measures
 Selection of measures should be based on
National & sectoral country priorities
 Prior work on mitigation/adaptation
 Feasibility of implementation
 Benefits of measures (environmental, economic, & social)

1. Establish key
parameters of
assessment
Identify preliminary mitigation or adaptation
measures
How to scope a sector
 Determine specific subsectors that will be included
e.g. within agriculture: crop cultivation, livestock, fishing
…
Determine which processes, activities, entities and
geographic regions are included in the sector


1. Establish key
parameters of
assessment
Define detailed scope of the sector
Potential sectoral overlaps
1. Establish key
parameters of
assessment
Define detailed scope of the sector
Addressing additional benefits
 The methodology does not provide for quantitative,
but qualitative analysis, examples:
 Change of crop type helps to adapt & emits less
GHG
 Enhanced water management to adapt to climate
change can also have positive health effects
 Job creation through a new policy
1. Establish key
parameters of
assessment
Specify assessment period & base year
Assessment period & base year
 Base year 2005 recommended (or latest available)
 Assessment period of 2005-2030 recommended
Cost accounting issues
 Constant 2005 US$ are recommended
 Costs for assets should be reported in the year in
which they are expected to be incurred
 Discounting of costs should be done
1. Establish key
parameters of
assessment
Identify preliminary mitigation or adaptation
measures
Preliminary mitigation/adaptation measures
 Measures can be obtained from
Existing sectoral or national plans
 National Communications
 Technology Needs Assessments (TNAs)
 National Adaptation Programmes of Action (NAPAs)

1. Establish key
parameters of
assessment

Select analytical approach
Any of these analytical approaches can be used to
develop scenarios, & associated streams of annual
I&FF and O&M costs
 A suitable sectoral model
 A sectoral plan
 A projection of sectoral trends
 The current situation in the sector
 A combination of those approaches
1. Establish key
parameters of
assessment
Checklist step 1
At the end of step 1
 Sector scope defined in detail, avoiding overlaps with
other sectors
 Base year & assessment period (~2030) specified
 Preliminary mitigation (or adaptation) measures
identified
 Analytical approach selected (model or spreadsheet
exercise)
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CLARIFICATIONS
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Key Steps: Mitigation



Compile annual I&FF data, disaggregated by
investment entity, source, & investment flow
versus financial flow
Compile annual historical O&M data,
disaggregated by investment entity & source
Compile other input data for scenarios
2. Compile historical I&FF
data and other input data
for scenarios



Compile annual I&FF data
3-10 years of historical I&FF data should be collected
Data should be
 Compiled for each investment type
 Annual
 Disaggregated by investment entity & source
 Divided into investment & financial flows
Reminder: What are the data sources? They determine
data compilation!
2. Compile historical I&FF
data and other input data
for scenarios
Compile Historical I&FF Data & Other Input Data
for Scenarios
Template for 1 Year of Historical I&FF Data (simplified)
Category of
Investment
Entity
Source
Funds
Households
Domestic
of
I&FF
Domestic
Corporations
Foreign
Total
Funds
Corporation
Domestic
Government
Foreign
Total
Funds
Government
Investment Type 1
(IF, FF, Total I&FF)
Investment Type 2
(IF, FF, Total I&FF)
Investment Type 3
(IF, FF, Total I&FF)
Total Investment
I&FF
2. Compile historical I&FF
data and other input data
for scenarios
Compile annual historical O&M data
Compile annual historical O&M data,
disaggregated by investment entity & source
 Annual O&M costs for the physical assets that are
in operation during the historical period
 Collect for 3-10 years
 Information about the expected lifetimes of the
assets in operation during the historical period
2. Compile historical I&FF
data and other input data
for scenarios
Compile annual historical O&M data
Template for Historical Annual O&M Data for an Investment Flow
Category of
Investment
Entity
Households
Corporations
Government
Investment Type 1: 2003 Investment Flow & Associated Annual O&M
(in 2005 US$)
2003 Investment Flow
Source of IF Funds
Associated Annual O&M During Historical Period
IF
Source of O&M Funds
Domestic
Domestic
Total Household IF
Total Household O&M
Domestic
Domestic
Foreign
Foreign
Total Corporation IF
Total Corporation O&M
Domestic
Domestic
Foreign
Foreign
Total Government IF
Total Government O&M
Total Annual O&M (2005 US$)
2003
O&M
2004
O&M
2005
O&M
2. Compile historical I&FF
data and other input data
for scenarios


Compile other input data for scenarios
Other historical & non-historical data relevant to
the sector might be necessary
Depends on analytical approach, sectoral scope, &
whether mitigation or adaptation focus
 For a model: e.g. basic socioeconomic &
technological data
 For scenario development: information about
current, past, & expected future GHG emissions &
expected impacts & vulnerabilities
2. Compile historical I&FF
data and other input data
for scenarios
Checklist step 2
At the end of step 2
 Necessary data identified & access located
 Arrangements for data-sharing made
 Annual I&FF data compiled (3-10 years),
 Annual historical O&M data compiled (3-10 years)
 Other input data for scenarios compiled
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Key Steps: Mitigation
Describe:
 Socioeconomic trends
 Technological change/advances
 Business-as-usual investments

Define model/spreadsheet to be used for the assessment
Define baseline scenario

Characterizing the sector over the assessment
period under business-as-usual conditions, in the
absence of new policies on climate change
 Expected socioeconomic trends
 Technological change
 Expected investments in the sector, including the
nature, scale, & timing of those investments
Define baseline scenario


Should be consistent with trends reflected in the
historical data collected in the previous step
Current or past climate change activities are
considered in the baseline scenario
Checklist step 3
At the end of step 3
The baseline scenario is developed
 Agreed which policies & measures go into it
 Socioeconomic trends described
 Technological change/advances estimated
 Business-as-usual investments defined
 Exact model/spreadsheet to be used defined
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Key Steps: Mitigation


Derive annual IF & FF estimates, disaggregated
by investment entity & source
Derive annual O&M estimates, disaggregated by
investment entity & source
Derive annual IF & FF estimates
Example step 4: Energy sector
 Labeling the activities, measures and policies that are
considered to go into the baseline scenario (step 3)
with their costs
 Sticking to the current energy mix - label it with
expected costs for power plants etc.
 Government to expand the current grid – label it
with expected costs for infrastructure etc.
 …
Derive annual IF & FF estimates
Compile annual estimates disaggregated by
 Investment entity
 households, corporations, government
 Source
 domestic or external
 Investment flow
 facility/technology type 1, type 2…
 Financial flow type
 practice/measure type 1, type 2…
Derive annual O&M estimates

Annual estimates of O&M costs for the baseline
scenario are needed, including
 O&M costs for assets purchased during the
assessment period
 O&M costs for assets purchased before the
assessment period & that are expected to still
be in operation
Checklist step 4
At the end of step 4
 Annual I&FF estimated - each of the policies &
measures of the baseline scenario is calculated
 Annual O&M costs estimated – for each of the
investments the O&M costs are calculated
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Key Steps: Mitigation
Sector is selected for Adaptation
 A baseline scenario & an adaptation scenario will
be developed for that sector
Sector is selected for Mitigation
 A baseline scenario & a mitigation scenario will be
developed for that sector
Define mitigation/adaptation scenario
Criteria for the mitigation/adaptation scenario
 Contains predefined measures and policy options
 Is consistent with the baseline scenario regarding
background information (assumed population
growth etc.)
 Is based on available data
Checklist step 5
At the end of step 5
The baseline scenario is developed:
 Agreed which policies & measures go into it
 Socioeconomic trends described
 Technological change/advances estimated
 Business-as-usual investments defined
 Exact model/spreadsheet to be used defined
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Key Steps: Mitigation


Derive annual IF & FF estimates, disaggregated
by investment entity & source
Derive annual O&M estimates, disaggregated
by investment entity & source
Derive annual I&FF & O&M estimates
Example step 6: Energy sector
 Labeling the activities, measures and policies that are
considered to go into the mitigation/adaptation
scenario (step 5) with their costs
 Changing energy mix to more renewables label it with expected costs for power plants
etc.
 Raising awareness of energy users – label it
with expected costs for awareness campaign
 Putting into place incentive system to avoid
emissions – label it with expected costs for
implementation etc.
Derive annual I&FF & O&M estimates
Compile annual estimates, disaggregated by:
 Investment entity
 households, corporations, government
 Source
 domestic equity, foreign debt, domestic
subsidies, foreign aid
 Investment flow type
 facility/technology type 1, type 2…
 Financial flow type
 practice/measure type 1, type 2…
 Use data to the degree disaggregated as available
Derive annual I&FF & O&M estimates


Annual estimates of I&FF for the mitigation/
adaptation scenario are derived
As in the baseline scenario, costs should be
 In real terms (ideally in constant 2005 US$)
 Discounted
 Reported in the year in which they are expected
to be incurred
Checklist step 6
At the end of step 6
 Annual IF & FF estimated – each of the policies &
measures of the baseline scenario is calculated
 Annual O&M costs estimated – for each of the
investments the O&M costs are calculated
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Key Steps: Mitigation


Estimate changes in cumulative I&FF
Estimate changes in annual I&FF
Estimate changes

Estimates the changes in I&FF needed to implement
the mitigation (or adaptation) measures in the sector
2 objectives
 To determine how cumulative incremental I&FF would
change
 To determine how annual investments would change
Estimate changes
projected
amount
of I&FF
(in US$)
Example how cumulative incremental I&FF
would change (all entities)
additional
investments
less
investments
baseline
scenario
mitigation
scenario

2005
Result:
By the chosen time horizon (e.g. 2030)
x (amount of money) needs to be invested
x (amount of money) will be saved
2030
time (in years)
Note: The graph is only a fictitious example to illustrate the methodology and does not imply any assumed trend
within the sector. Alternative examples could imply more additional investments needed in the future or less saved
investments. The trend will vary according to the sector analyzed, the national circumstances, etc.
Estimate changes
Example how cumulative incremental I&FF
would change (all entities)
projected
amount
of I&FF
(in US$)
adaptation scenario
less
investments
additional
investments
baseline scenario

2005
2030
Result:
By the chosen time horizon (e.g. 2030)
x (amount of money) needs to be invested
x (amount of money) will be saved
time (in years)
Note: The graph is only a fictitious example to illustrate the methodology and does not imply any assumed trend
within the sector. Alternative examples could imply less additional investments needed in the future or more saved
investments. The trend will vary according to the sector analyzed, the national circumstances, etc.
Estimate changes
projected
amount
of I&FF
(in US$)
in a year
Example how annual investments
would change (per year)
baseline scenario
mitigation scenario
additional
investments

additional
investments
less
investments
households
corporations
government
Result:
To reach the Mitigation scenario
x (amount of money) less of this source needed
x (amount of money) more of this source needed
investment
entity
Note: The graph is only a fictitious example to illustrate the methodology and does not imply any assumed trend
within the sector. Alternative examples could imply more additional investments needed in the future or less
saved investments. The trend will vary according to the sector analyzed, the national circumstances, etc.
Estimate changes in cumulative I&FF

2 calculations to determine how cumulative
investments would change between the baseline
scenario & the climate change scenario
 1st calculation: Estimating total I&FF needed to
implement each investment type in the sector
 2nd calculation: Estimating total I&FF needed to
implement all the investment types in the sector
Estimate changes in annual I&FF

3 calculations to determine how annual investments
would change between the baseline scenario & the
climate change scenario
 1st calculation: Estimating the I&FF needed to
implement each investment type in the sector
 Shows how investments in individual investment types
would change over time
Estimate changes in annual I&FF
2nd calculation: Estimating I&FF needed to
implement all investment types in the sector, for each
source/investment entity
 Shows how investments by each source/investment
entity would change over time
 3rd calculation: Estimating I&FF (for all investment
types in the sector, & for all sources)
 Shows how total investments in the sector would
change over time

Checklist step 7
At the end of step 7
 I&FF of the baseline scenario subtracted from
adaptation/mitigation scenario:
 Changes in cumulative I&FF estimated – per
investment type & for all investment types
 Changes in annual I&FF estimated – per investment
type, per source & per sector
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Key Steps: Mitigation



Determine policy instruments & measures to
encourage changes in I&FF
Identify the entities that are responsible for the
significant incremental changes in I&FF
Determine the predominant sources of their
funds, important to distinguish between public
& private sources of finance
Evaluate policy options



Re-evaluate initial prioritization of mitigation/
adaptation measures from step #5, based upon the
incremental I&FF estimates
Determine investment entities responsible for most
significant changes in I&FF & predominant sources
of funds
Evaluate policy measures to implement proposed
measures & to change investment patterns, &
additional sources of funds
Checklist step 8
At the end of step 8
 Policy instruments & measures determined to
encourage changes in I&FF
 Former instruments & measures re-evalued
 Entities responsible for incremental changes in I&FF
identified
 Predominant sources of their funds determined
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Key Steps: Mitigation
9. Synthesize results and complete report



Integrate I&FF results, & evaluation of policy
instruments & measures, across sectors, & across
mitigation & adaptation
Summarize objectives of study, methodology, inputs,
& results in report
Complete reporting templates
Integrate I&FF results & evaluation of policy
instruments & measures



Sectoral results are compiled so that mitigation/
adaptation investments for each source & investment
entity, & for each year, can be compared across
sectors & across mitigation/adaptation
“Reporting Guidelines for the Assessment of
Investment & Financial Flows to Address Climate
Change” contains spreadsheets for this
Define purpose & target group to prepare report
accordingly
Complete reporting templates
Incremental Cumulative I&FF for All Investments
in All Sectors
Category of
Investment
Entity
Incremental Cumulative (2005-2030) Total I&FF
(million 2005US$)
Source of I&FF Funds
Energy
Equity & debt
Domestic
Households
Government
support (subsidies)
Total Household Funds (all
domestic)
Etc…
Mitigation
Forestry
Adaptation
Forestry
Public
Health
Complete reporting templates
Incremental Annual I&FF for All Investments
in All Sectors
Incremental Annual Total I&FF
(million 2005US$)
Year
Mitigation
Energy
2005
2006
Etc…
Adaptation
Forestry
Forestry
Public Health
Complete reporting templates
Documentation & Reporting during the assessment
Report will be used for
nd national workshop
 2
 Further follow up activities
 Note: Possible different audiences & different uses of
report
Checklist step 9
At the end of step 9
 I&FF results, policy instruments & measures integrated
across sectors
 Reporting of the I&FF assessment completed
regarding objectives, methodology, inputs & results
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
Steps in the
Sectoral
Assessments of
I&FF to Address
Climate Change
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Q&A
CLARIFICATIONS
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OUTLOOK &
NEXT STEPS
Way forward
What next?
 Nurturing links to national policymaking processes
 Leveraging international donor assistance
 Conducting sensitivity analysis/capacity assessment
 Preparing periodic updates to the assessments