CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 710-iii

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Environmental Audit Committee

The impact of UK overseas aid on environmental protection and climate change adaptation and mitigation

Wednesday 16 March 2011

Nick Dyer, MATTHEW WYATT and Ian Curtis

Evidence heard in Public Questions 107 - 153

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 16 March 2011

Members present:

Joan Walley (Chair)

Peter Aldous

Martin Caton

Zac Goldsmith

Simon Kirby

Mark Lazarowicz

Ian Murray

Sheryll Murray

Mr Mark Spencer

Dr Alan Whitehead

________________

Examination of Witnesses

Witnesses: Nick Dyer, Director of Policy, Department for International Development, Matthew Wyatt, Head of Climate and Environment Department, Department for International Development, and Ian Curtis, Head of Profession, Climate and Environment, Department for International Development, gave evidence.

Q107 Chair: I warmly welcome you to our session this afternoon. We are expecting a vote at 4 pm. There are three of you, and some of your answers may be lengthy. We want to address the questions from my colleagues, but try to be ready for a vote at 4 pm.

Mr Dyer, would you like to introduce your colleagues and perhaps give us a very brief overview of your overall responsibilities.

Nick Dyer: My name is Nick Dyer. I am the Director of DFID’s Policy Division, under which the Climate and Environment Department sits. Matthew Wyatt, on my right, is the Head of our Climate and Environment Department and Ian Curtis is the Deputy Head of that department and also our Head of Profession for Climate and Environment. So, Ian is responsible for all the environmental and climate professionals in DFID.

Q108 Chair: Thank you very much indeed for that. We want to start off by trying to understand whether your objectives are more to do with poverty reduction or more to do with climate change, where the balance is and whether it is one against the other or a win/win situation. If you could perhaps share how you approach that with us.

Nick Dyer: DFID is very clear that its overriding objective is poverty reduction. We are bound by the International Development Act 2002. We also are clear that ODA should abide by the aid definition of the DAC.

Within that, as you have seen over the last few years, there is also the increasing recognition and importance of climate change. Clearly, the projected impacts of climate change on development are quite stark. The World Bank in their 2010 World Development Report projected that a two degree increase in temperature would lead to between 100 million and 400 million additional people suffering from hunger, between 1 billion to 2 billion people being water stressed, and also a permanent reduction in per capita income by about 4% or 5% in Africa and Asia. So, clearly, climate change is going to have a big impact on development.

That said, there are also opportunities for those countries, those individuals, those firms that grasp the need for transformation and the opportunities that those drive, and it could stimulate a whole bunch of reforms, like improvements in crop insurance that we are seeing in some countries. But it is the recognition about the importance of climate change that has led to two things, I think, over the last few years: one is the need for the UK Government to get a deal in the climate negotiations that is both fair and equitable and addresses the challenge of climate change, and DFID is very much integrated into those discussions within Whitehall; and secondly, has led to this current Government’s commitment to allocate £2.9 billion over the next four years to addressing the mitigation, adaptation and forestry challenge. We can talk about that a bit later.

On the question about the link between growth and environment, there is clearly a recognition in development that you can’t get poverty reduction without economic growth. That is something that is very clear in our own minds, and the importance of leveraging growth and getting the private sector involved in wealth creation and promoting growth. There is also a growing recognition that growth at the expense of environment isn’t a real option. Low carbon growth is something that we talk a lot about, but we also recognise that low carbon growth isn’t the entire answer and that we also have to look at the issue of natural resources and the broader environment.

This takes us into the whole area of the green economy and green growth, which is something that we are increasingly putting our minds to and our attention to, in terms of what does that mean? How do we get the rest of the organisation to take climate change seriously and issues around valuation of the economy into consideration? So we are starting to put some thought and thinking into providing guidance for the rest of the organisation on how best we do that.

In my own part of the business I have a growth department and I am trying to bring together our thinking on growth, agriculture, social protection, resilience and resource scarcity into one place so we can start looking at these linkages between growth and resources.

Q109 Chair: I think we will be moving on to the growth bit shortly, but what we wanted to try and get an understanding of here is the way that the green growth fits in. Given the support that you gave to the joint Forum for the Future report, how has that influenced your trajectory? How much has this cross-cutting approach that you have just referred to been influenced by the Forum for the Future report and what is that likely to produce in terms of policy initiatives?

Ian Curtis: Yes, the Forum for the Future report on climate is a piece of work that we supported that has developed four scenarios: reversal of fortunes, age of opportunity, coping alone and the greater good. The purpose behind this is to get a much more imaginative approach to addressing climate change: looking at scenarios, horizon scanning. It has been important internally in enabling us to look in a more imaginative way at what climate change futures might look like, but it has also enabled us to use this in our discussions with country partners as well. So it has taken the blinkers off, in terms of the way that we see climate change making a difference.

Q110 Chair: So it has helped you. Were you not looking at that track beforehand?

Ian Curtis: I think it has enabled clearer thinking and better planning in the way that we approach climate change. So it is helping us internally, but it is helping us in terms of the way that we are able to engage with our partners in developing countries.

Q111 Chair: Are you confident that you have the resources to do what that report is suggesting, in terms of the expertise?

Ian Curtis: I think we do. This is quite an interesting story, and I think quite a positive story, since the last time the Department sat in front of this Committee. I took on this role as Head of Profession-initially for climate and now for climate and environment-almost four years ago, and at that time I think we could muster 16 environment advisors with a following wind. We now have over 50 accredited climate and environment advisors. In addition to that we have a number who are affiliated as well, so we are up to a total of just over 70. It is not just an issue of quantity; it is an issue of quality as well.

Clearly climate change has in part helped us in this. Soon after I came in I ran an accreditation process. A number within the organisation had already come forward with very impressive environment credentials, but there had been no opportunity for them to take up a job in environment so they had taken another job in DFID, as a generalist perhaps. As opportunities opened up, we accredited them and they are now working on climate and environment jobs.

In terms of quantity we are doing very well; in terms of quality we have a programme of continuing professional development in place. We have done a lot of internal learning around climate change, both for these advisors but also across the organisation, to increase the awareness of DFID as a whole about the challenges that climate change will pose to development.

Nick Dyer: We have recently gone through a restructuring in DFID as well in terms of how we organise our professional cadres, and we have moved them to be under our chief scientist and Chief Economist in our Research and Evidence Division, principally, as a way of recognising the importance of increasing their professionalism and improving our knowledge of the evidence of what works and what doesn’t work. Our deputy chief scientist has 20 years’ experience in climate research, so we are very much investing in an increase in our capacity and also trying to improve capabilities across all the cadres, not just the climate cadre.

I would add as well, though, that issues around environment livelihoods are not just the preserve of the climate and environment group. We also have livelihoods advisors and we also have economists, we have health advisors, who are all dealing with issues around environment and environmental services.

Q112 Zac Goldsmith: DFID has a number of vehicles for supporting civil society groups, including, as I understand, the Civil Society Challenge Fund, the Programme Partnership Agreements and Global Poverty Action Fund. I am interested in how many civil society organisations, supported by DFID, have an explicit focus on environmental concerns?

Nick Dyer: DFID supports civil society in two ways. One is through our country programmes, so our bilateral aid programmes. Our country offices make individual decisions as to whether they are going to achieve a result through the Government or through direct support or through civil society. Also we run a number of central civil society funds that fall under my responsibility. Those include the Civil Society Challenge Fund, the Poverty Partnership Agreements-the PPAs-and a number of other funds.

In total, we have supported probably around 500 individual civil society groups across those areas. It is difficult for me to say here how many of them are directly climate and environment, but if you look at the central funding, on the Programme Partnership Agreements that we have recently had a competitive process for, at the moment there are two-the World Wildlife Fund and IIED-who have these PPA agreements. The new scheme hasn’t been finalised yet, but our Secretary of State is very clear that we need to ensure that we do have civil society organisations that do focus on climate and environment distinctly within our PPA portfolio. So it will be that some of those groups fall under that remit.

Also we were quite clear in our PPA negotiations that we want a climate and environment consideration to be taken into account by all those that apply for PPAs, so we have signalled that. In terms of the 500, I couldn’t quite tell you how many.

Q113 Zac Goldsmith: The number is likely to increase, though, under the new scheme.

Nick Dyer: I couldn’t say for certain but, yes, my expectation would be it would.

Q114 Zac Goldsmith: Given the difficulty DFID must have in terms of maintaining capacity in the recipient countries across the board at the grassroots, why does DFID not make more use of existing NGOs? Surely that is a better way to effect change at the grassroots?

Nick Dyer: We did a review of our civil society portfolio about 18 months ago, and about 16% of our bilateral programme is channelled through civil society groups. So it is bigger than you would expect. We do quite a lot through civil society organisations.

In terms of DFID’s own capacity, the recent bilateral review that has just happened, we are shrinking our global footprint. We are closing offices down around the world and we are concentrating our resources in a smaller number of countries; actually DFID’s capacity in those countries is going to grow. Civil society groups have a key role to play in terms of service delivery, advocating for policy change, building accountability and empowerment. We recognise that and I think the amount of resources we put through them does suggest that as well.

Q115 Zac Goldsmith: As you reduce your capacity in some of the other countries, presumably the choice you have is either delegating more responsibility to the multilateral agencies or investing more in the NGOs. Is it likely that we will see more of the latter than the former in the coming years?

Nick Dyer: The reason why the Secretary of State launched the Glo bal Poverty Action Fund was recognition of, I think, first, that there are an awful lot of civil society groups in the UK who find it difficult to access DFID funding. So I think he wanted to broaden that out to a wider group of smaller organisations. Secondly, also recognition of the importance of using civil society in terms of delivering services overseas. We haven’t finalised this but, again, will our central civil society funding grow? I would be surprised if it didn’t.

Chair: I think the way in which you are equipped to have that linkage with civil society might mean a new way of thinking, of looking at how to use that to best effect, but if you have any further thoughts on that we would be interested to have that from you.

Q116 Sheryll Murray: DFID supports the notion that growth is necessary to alleviate poverty. However, there can be a conflict between short-term growth and ensuring that development is sustainable in the long term. Where it is not possible to combine both of these objectives, which do DFID prioritise? Is it stimulating economic growth or safeguarding sustainable long-term development?

Nick Dyer: If you look at the definition of the International Development Act 2002, it talks about any development likely to have lasting benefits for t he population of a country. I mplicit in that is a sustainability concept and we have always recognised the issue of sustainability. I think there has been an increasing recognition over the years that capital is more than just labour and produced capital. It is abou t human capital, social capital, it is about natural capital as well, and recognising the importance of ensuring that all those capital bases are developed and sustained , or considering what the trade-offs are between them.

Sheryll Murray: W hich do you prioritise?

Nick Dyer: We are after lasting benefits for the population of the country. So we need to be ensuring that all our engagement is sustainable and everything that we do, in terms of the way we design and appraise projects, is designed to ask ourselves that question.

We will come on to this later I am sure. The recent introduction of the environment and climate assessments in the way that we design our projects is designed to ask that question. We are providing more guidance to all the economists in DFID to understand how to value natural capital. What are the appraisal mechanisms with which you can evaluate natural capital? We recognise that growth that undermines natural assets ultimately isn’t going to be sustainable and we are trying to ensure that we have the tools and skills set to be able to recognise that and do something about it.

Matthew Wyatt: The last point that Nick made about this question of valuing natural capital and assets is very important, because often it may seem, either to us or to a developing country, that there is a trade-off where in reality there may not be. If you value your natural assets and your ecosystems in a more sensible way rather than-as has sometimes been the case in the past-assigning a zero value and, therefore, mining natural resources. It is for that reason that our new assessments, as Nick mentioned, deal with that, but we are also supporting some initiatives globally to help countries to think through what the value of their natural assets are, to value them in their national accounting and so on, so that we can avoid a false trade-off.

Q117 Sheryll Murray: How does DFID engage with the private sector in developing countries on environmental issues?

Nick Dyer: The private sector is absolutely critical for development, and critical for growth, and I would say that there are three issues with respect to the private sector. One is generally how you create the right enabling environment to encourage the private sector to operate. This is about giving the right macroeconomic policies; it is about transparency of resource use; it is about trade reform; so it is creating the right enabling environment.

The second issue is asking ourselves the question: how do we crowd in the private sector? Can we use our aid resources to leverage private sector financing? So, for instance, in low carbon development it is not going to happen without large scale private sector financing. So how do we help support and stimulate that? Are there ways we can do that? Some of these are public policy choices, like use of feed-in tariffs, performance-based incentives; some of them are about providing guarantees and equity to promote the private investment.

The third issue, and I think this is slightly harder, is how do you engage the private sector on business models that recognise the importance of the environment? Over the last few years we have done a bit of work around business models that look at how to engage throughout the value chain in supporting development. We have had some challenge funds that try and promote this kind of thinking. So, for instance, it is in a company’s best interests to support smallholder farmers, both because it secures their supply chain but also it is good for development.

The next phase of that conversation is going to be around the question of how to engage the supply chain in environmental damage and what to do about that. I am conscious that that is probably the next frontier that we need to get into on that specific issue, because it is very tricky.

Q118 Mr Spencer: My question follows on from that in that the consumption practices of the UK and most of the Western world are unsustainable, and that drives unsustainability in production in some of our suppliers from the developing world. What are the UK Government doing to address that unsustainability in the UK in particular?

Ian Curtis: I think this would probably be more appropriately asked of DEFRA, so I will give a response but you may then want to refer to them as well.

Chair: We understand that the Government is cross-cutting, so we would expect you to have an answer to Mr Spencer’s question as well.

Mr Spencer: Both DEFRA and DECC have an interest in this. I just wondered what are we are doing, as the UK Government, and how are all three Departments co-ordinating with each other to address this?

Ian Curtis: I will refer back to DEFRA. It has been looking at sustainable consumption and production for some time. It finished a piece of work at the end of last year on this. That has now moved into looking more broadly at the green economy, and the broader issues that Nick was referring to earlier, which include looking at sustainable development, sustainable public purchasing, sustainable business and resource efficiency, sustainable products and consumers’ waste and recycling, natural environments, biodiversity, adapting to climate change and mitigating climate change. So it is looking at this issue in the round from a UK domestic perspective.

I suppose where the link comes for us in particular is products that are perhaps grown overseas and are imported into the UK, and the carbon footprint of those processes. The way we see this is that many of these products that are grown overseas are very important for building livelihood opportunities for poor people in developing countries. So, clearly, we have discussions with DEFRA about this, about the balance between MDG1 and MDG7; in other words, environmental sustainability and food security and poverty reduction. On balance we will often come out in favour of, for example, growing green beans in Kenya because of the benefits of that, recognising that where products are grown out of season in the north the carbon footprint is probably as large, because of the additional heating required to grow roses for example.

I would also refer you to UK aid: changing lives, delivering results that was issued very recently. There is a small article in there about green beans in Kenya, which helpfully sets out our position on this.

Matthew Wyatt: I hope this is relevant to your question, because what I am about to say links the UK market and the European market with developing countries, and that relates to forestry and the illegal timber trade where we have been involved in supporting and financing the Forest Law Enforcement, Governance and Trade project-a horrible name. It tries to match up two things. One is choking off the illegal trade in the European markets. We have supported the European legislation that has gone through, which has helped to do that, with the support of the timber trade here and a number of non-governmental organisations. So that is one side of it, choking off the demand for illegal timber. On the other hand, what it is doing in developing countries is help build the capacity of governments to be able to prevent illegal logging. Estimates vary but perhaps a third of deforestation that goes on is related to illegal logging.

By working through our resources in developing countries, but also through legislation and consumer education in developed countries, one can begin to address the problem of the trade. The results that we have had so far from that are quite impressive, in terms not only of reducing deforestation but also ensuring that where there is logging it is more likely to be sustainable and accrue benefits to the exchequers of developing countries as well. I thought that was an example of work that we do very much with DEFRA and other Government departments.

Q119 Mr Spencer: I hope you recognise it is not just about carbon, it is also about water, because where we are taking water from around the world is very important.

I am trying to be clear. You see an example of over-consumption in the UK that is directly affecting production overseas. Do you see that you have a role at all in addressing that consumption issue in the UK or do you hope or believe that DEFRA is addressing that? I am trying to get to the level of communication between the two Departments.

Ian Curtis: We have a joint DEFRA-DFID engagement looking at water footprinting issues, which is very live at the moment.

Nick Dyer: What distinguishes the UK’s approach to development from other countries is a combination of three things: DFID has a country footprint and it has seats in international agencies that it can use and also it has a seat in Cabinet. The whole point of having a seat in Cabinet is that it gives DFID the opportunity to raise issues that concern us across Government. We are part of the cross-Whitehall architecture on the National Security Council, and we are in the cross-Whitehall architecture on the climate strategy; we are in the cross-Whitehall architecture in a number of places. So we do have opportunities to raise things where we see they are of particular relevance.

Q120 Mr Spencer: Are there any other areas that come to mind where domestic UK policy contradicts what you are trying to achieve overseas?

Nick Dyer: There was a good example recently where positive change would be the introduction of the Bribery Act. So there is a positive change in legislation in the UK that could change the dynamic of corruption.

Q121 Peter Aldous: In DFID you have made climate change one of its main priorities in your business plan for the period from 2011 to 2015. Why doesn’t the plan give more attention to wider environmental issues?

Matthew Wyatt: First of all, yes, absolutely, we think and Ministers are convinced that addressing climate change is absolutely fundamental and the uplift in resources for addressing climate change issues reflects that. In terms of wider environmental issues, we work on the environment in a number of sectors. So I was mentioning the work that we are doing on forest governance, for example. We may count that as forestry and climate but it is also, of course, very much about the environment, and if it is successful then it will have a major positive environmental impact, not only in keeping carbon in the ground in forests but in protecting biodiversity, in protecting watersheds, water catchment areas and so on.

That is also true in some of the other pillars of our business plan. We have the climate change but also work that we are doing on broader economic growth. Nick has already mentioned some of the work that we are doing on livelihoods and agriculture, and so on, and the £1.1 billion commitment on agriculture, which we are on track to meet. Much of the work that we do in that will be working with people to have sustainable livelihoods and will have very positive environmental impacts.

Essentially environment is something that cuts across the work that we do in everything that we do. Well, not absolutely everything, but nearly everything that we do, and we certainly take it into account through the new climate and environment assessment, which is forcing us, if we weren’t already willing to do, forcing all of our staff to look at all the programmes and projects that we support. You may want to talk about this in more detail later, but each of those assessments will need to be signed off by a climate and environment advisor to say that these issues have been looked at and have been considered. So that we are looking not only, as we have done in the past, at the risks to the environment of any activities that we might be thinking about undertaking but also what opportunities there might be.

Q122 Peter Aldous: To what extent would you say your staff are experts on climate change rather than environmental protection?

Ian Curtis: I think it would be fair to say that we have a range of expertise within DFID on climate change, and then we have opportunities to go outside and draw on experts with particular expertise in important areas around climate change, such as climate science. As Nick mentioned, our deputy chief scientist is a world expert on one of the IPCC panels and provides a lead on the climate science within DFID.

Probably one-third of our climate advisors are experts on climate change issues. I think the other two-thirds are very competent on climate change, but we recognise that this is still a relatively new area in DFID and I think we are all learning. As I mentioned earlier, we have learning programmes within DFID, which is enabling us to up-skill across the organisation but also bring in new expertise as well.

Nick Dyer: Half the battle here is not for us as an organisation to assume the only people who do climate environment are climate and environment advisors. We need all our economists to be aware of what the methodologies are for assessing environmental impacts. We need our livelihoods advisors to be conscious of the livelihoods approach that takes into account all the key assets approaches, and recognises the importance of those.

So I think half the battle is to-I hate the word-mainstream climate and environment throughout the organisation. We are doing a better job of that. I don’t think we are out of the woods yet on it. I think we still have a way to go, but I think that is where we should be aiming and not think it is going to be just those 70 people. I would add that some of those 70 are economists, Governance advisors and social development advisors already in fact. They are not just people with environmental backgrounds.

Q123 Zac Goldsmith: Do you think the focus on climate programmes has happened at the expense of programmes in relation to ecosystems, marine protection areas, tree planting and so on, with a view to alleviating poverty? Is that a concern of yours?

Ian Curtis: If you look across the piece, I would say that we have maintained a consistent engagement in environment, biodiversity, ecosystems, but upped our game very significantly on climate change. I think what is now happening is that there is, as a result of that, an increased interest in ecosystems. We are going to feel climate change through environmental change. So I cannot imagine us addressing climate change adaptation, for example, without taking account of the environmental implications of that.

Q124 Zac Goldsmith: One of you I think it was Matthew, was talking about forests and if the project is a success it will have an impact. Are you able to describe what those forest initiatives are or are likely to be?

Matthew Wyatt: What the success will look like?

Zac Goldsmith: The implication is that there is a programme being developed at the moment around forests. I don’t know how much you are able to discuss that now, but it would be useful to know.

Chair: On exactly that point, I am reminded of a previous visit that this Select Committee took to Cameroon, where we saw environmental protection work under way with funding, but then we saw that being closed down because of the new climate change agenda looking at the issues of the tree logging. Now I read in the review that has just come out that support for Cameroon is being cut altogether. So it does have a bearing on it in terms of whether or not something is at the expense of something else, or whether it can be a win/win situation. Perhaps you could comment on that.

Matthew Wyatt: Yes , absolutely. Maybe I could first pick up on the first question you raised about whether there was a trade-off between the attention being given to ecosystems and climate change. I think it is rather the reverse ; that in a sense the major international attention and the UK funding around climate change is boosting the attention that is being given to work on ecosystems. So, for example, the international agreements and high level political a greements that have been ma de in terms of forest financing focus attention on forest s , not just as stores of carbon but as ecos ystems as well. T hat, certainly culturally within DFID , is a change that I sense as well. R ather than it being a trade- off, I think that the two reinforce each other.

In terms of the specific description of the way that the new programme will work, I characterised very briefly the way the previous programme had worked, but essentially in country it was very much focused on illegal logging and it was focused on initiatives in country-and I think this was one of the reasons it was successful, including in Cameroon where it got very good results-working very closely with forest communities, various stakeholders, non-governmental organisations, as well as government organisations, to help find ways in which local people would be able still to benefit from forests but would not be mining the forests. It aligned the incentives of everybody and ensured that the poor forest communities were active participants, not just passive recipients of whatever might be coming, but were actively engaged in the work.

I think that is why this programme, to which we contributed about £25 million1, got good results not only in terms of forest protection but it also got good results when we looked at the impact on the incomes of the very poorest people. We have 1.2 billion people worldwide who depend on forests, some of the very poorest people in the world, so it had a very good impact on their income as well as, as I already mentioned, to the exchequer, and so on.

In the programme that we are in the process of finalising at the moment, we are looking at how far we should broaden that out from simply a focus on logging to looking at other forest products as well: soya bean manufacturing and chopping down trees in order to be able to grow soya bean or palm oil or whatever. So one question is looking at widening the scope and also possibly widening the country scope. I think, as you mentioned, Madam Chairman, that there are countries that we may not be able, because we are focusing our aid programmes, to have bilateral relationships with, but through this kind of broader relationship we will be able to ensure that a greater number of countries is reached as well, so looking at the geographical and the sectoral work on those.

Q125 Mark Lazarowicz: How far did the Multilateral Aid Review incorporate an assessment of the performance of multilaterals that DFID funds?

Matthew Wyatt: The m ultilateral r eviews looked at a wide range of aspects, as you know, on the performance of multilaterals, but one of the things that it did look at was performance on climate and environment, and every multilateral was scored on its performance on climate and environment issues, not only those that are very much dire ctly involved in working on them.

Q126 Mark Lazarowicz: How important in the proportion of the total scoring for each multilateral was the environment and climate change aspect?

Matthew Wyatt: I am thinking from memory here, but we had about four or five broad categories and within that there were generally-

Nick Dyer: There are 10 criteria.

Matthew Wyatt: -10 criteria, so it was one in 10.

Nick Dyer: It is a portion of one in 10.

Mark Lazarowicz: I interrupted your answer.

Matthew Wyatt: Would you like me to amplify on the results or what we are going to do with the results?

Mark Lazarowicz: What I am trying to find out is what was your view of performance of, say, bodies like the World Bank and the other major multilaterals that you fund?

Matthew Wyatt: Most of the multilaterals that we scored did reasonably well. There were a few, five I think, of the multilaterals who scored high overall-so the kind of multilaterals that we would be thinking, "Well, maybe these are the ones that we should be thinking about increasing our support for"-but did not score well on the climate or environment scores. That obviously poses a problem for us, and we need to drill down a bit further with those organisations as to precisely why that was and what we want to see them do to improve on that.

I think there are two things really. We have the Multilateral Aid Review now, which as you know has recently been published-the reviews. The other thing we have is our own climate and environment assessment, and the new way in which we are dealing with climate and environment ourselves. The next step for us is to bring these two things together, and try to think about how we can have dialogues with the multilaterals that have not scored well on environment but that we still want to support, to see how they can up their game and do better. There is a very big prize for us if we can do that because, of course, it not only impacts on the value of our own contribution to those multilaterals but also the contribution everybody else makes to them. So we can get a real leverage effect if we can effect change in the multilaterals.

Q127 Mark Lazarowicz: What continuing influence do you seek to bring to bear on the multilaterals in this area to do precisely what you seek to do?

Matthew Wyatt: There are a number of ways that we seek to do it at the moment. We are on the governing bodies or on the board of a large number of the multilaterals, so we are able to challenge. If they are proposing programmes or projects that we think are not environmentally sustainable, or they haven’t looked enough to ensure that they are, we can always challenge at the board level.

Q128 Chair: Could you give us an example of when you have done that in the past?

Matthew Wyatt: I can’t think of one off the top of my head. Can you, Ian?

Ian Curtis: Abstaining, yes; challenging, no.

Matthew Wyatt: Yes. There have been some examples recently in the power sector where we have abstained in board discussions. The UK has abstained because we have not been entirely happy with the environment-

Q129 Mark Lazarowicz: Can you give more details of those examples ? W hich organisations were they?

Matthew Wyatt: One was with the African Bank and the World Bank. I think South Africa and Slovenia2 are two examples where we abstained.

Q130 Mark Lazarowicz: What did you do when you abstained; on what issue was it that you abstained?

Nick Dyer: The time to influence multilateral programmes and projects isn’t at the board. It is far too late once you get to the board and you have other shareholders there. Abstaining on a power project in a country is not going to make a great difference. It is still going to go through because others are going to vote for it. The real art of influencing the multilaterals is to work-whenever it is, upstream or downstream-at an earlier stage in terms of engaging with them in the project design.

So when I was running one of our offices in Africa, quite a lot of our work was about understanding what these banks-the World Bank, African Bank, the EC-were doing and trying to shape their work at that stage. In Malawi we would have a World Bank project where you were trying to get them to shift away from looking at just urban water to rural water, and to be looking at how you can improve the water services of a wider set of people I think that is where you get the big gains in the multilaterals.

Q131 Mark Lazarowicz: Can I take that a bit further? I understand what you are saying about influencing at an earlier stage than at the final decision stage, but you are obviously aware there has been a debate about the World Bank and its support, allegedly, for projects that lead to serious emissions and fossil fuel projects, and so on. I am sure you are aware of that debate and I am not asking you necessarily to comment on the details of whether that is right or wrong. How do you try and influence the World Bank, for example, on that particular issue and have you done so?

Nick Dyer: Let us look at the whole issue of coal power plants. Our Secretary of State’s starting point is to be predisposed to be against coal power stations. But there is a recognition that there is a whole set of practical questions you have to ask yourself before you get to the point of voting. Has the World Bank looked at all the alternative options beyond coal for clean power? What are the poverty and growth impacts? What are the costs? To run through a whole set of questions that you need to ask yourself before you decide whether this is the best option.

What we are doing across Whitehall now is trying to agree a set of principles that will ask those questions and help us to come to a decision? Again, the art here is not to ask those questions when the programmes come to the board but to ensure that those multilateral organisations are aware that these are our concerns, these are the kind of issues that we want to have addressed, and to make sure that they themselves are asking those questions at an earlier stage of the project development.

Q132 Mark Lazarowicz: I do get a bit of an impression that this is prospective work, rather than what has been happening to date. I am sure there have been impacts, but do I get the impression this wish to influence, say, the World Bank or other multilaterals on these issues is being ramped up much more now? Is that the case or not?

Nick Dyer: We influence multilaterals through our shareholder function, our seats on the board. So when they are coming with their new energy strategy-the World Bank is developing a new energy strategy-we have an opportunity to engage and shape that through the board. We operate in country with them, working further upstream, and my teams in the Policy Division engage with them on the policy function. So we have a number of entry points with the banks. I think on the fossil fuels these sets of principles are new. We are trying to get a grip on how we are going to address this on a consistent basis.

Matthew Wyatt: One example of where we are trying to shift the way in which energy investment is done is through the climate investment funds, and particularly the Clean Technology Fund, which we have been supporting now for about three years, I suppose, which is now coming to fruition. These are managed by the multilateral development banks, so the World Bank, the African Development Bank, and so on. They provide resources that support clean energy and clean technology, generally for initiatives that we think are going to have a demonstration effect, be transformational, be catalytic in future, so to make clean energy and clean technology both more affordable and more attractive and also to create incentives for the private sector to come in and develop new technologies, which can then drive the price down of new technologies.

By engaging with the multilateral banks on that, we are hoping to get a double win. The first win, of course, is to implement the programmes and see the projects happen, but secondly also to change the way in which their staff are thinking about access to energy, so that they are more knowledgeable of and able to deal with clean technologies rather than the traditional dirty ones.

Q133 Zac Goldsmith: As I understand it, BIS has given its definition of what constitutes dirty fossil fuel investments, and it has reduced it, as I understand it, to unabated coal and nothing else. Is that a definition that you as a Department are also using, or are you developing your own definition, which hopefully will be a little broader?

Nick Dyer: We are having a whole set of conversations across Whitehall on these principles and the questions we should ask, how we interpret the answers and how we come to these conclusions. I think that is the place at which we need to resolve-

Q134 Zac Goldsmith: The BIS definition is not the final definition?

Nick Dyer: The BIS definition is the BIS definition.

Q135 Chair: The further issue from that is where the final decision is made. Is that what you were referring to earlier on-the Cabinet table? Would those kinds of decisions get to the Cabinet table for resolution there?

Nick Dyer: I think with fossil fuels and the development banks, DFID sits on the boards and we are casting a vote at that point, but we don’t want to do that without assuring ourselves that the rest of Whitehall, the rest of the Government, is happy with our decision. That is why we are developing these principles, to help us to be able to make that decision.

Q136 Zac Goldsmith: You would imagine that at some point soon, hopefully, there would be a single, coherent Government position in relation to this definition, and so the BIS definition at the moment, one would hope, is an interim one in the absence of a clearer Government decision. Is that how you understand it?

Nick Dyer: Yes. I can’t speak for BIS.

Q137 Simon Kirby: If we can move on to bilateral aid now. Why is it that only a third of the country programmes chosen for future funding have climate change identified as a factor, whereas nearly all have wealth creation, governance and security identified?

Matthew Wyatt: When you say "identified as a factor", you mean as an area for spending?

Simon Kirby: As a reason presumably for spending.

Matthew Wyatt: First of all, climate change is going to affect all of us, both developed and developing world, and we know that all developing countries are going to need to do a lot to address it and are likely to need support. Obviously, through the support we give through the multilaterals and the multilateral system, or maybe not multilateral institutions but multilateral initiatives, such as the forest one I mentioned earlier, we can support a large number of countries.

In terms of the countries where we have bilateral programmes focusing on climate change, I think I have the list somewhere here. I am surprised that you have a figure of a third, because I think there is more planning to do.

Simon Kirby: There are 27 countries.

Matthew Wyatt: Twenty-seven countries, yes.

Simon Kirby: Twenty-seven countries, in nine of which climate change is a factor.

Matthew Wyatt: It is a factor in all of them, but whether or not we have bilateral programmes dealing with climate change is a slightly different issue. On that, some of our country offices, as they have been developing their operational plans, have already identified clear climate programmes that they will want to finance. So they are already putting them forward.

Nick mentioned earlier we have a total Government commitment over the four-year spending review period of £2.9 billion on climate change. Not all of that has been identified as to exactly where it will be spent and country offices will be able to bid for resources from that fund to carry out more programmes. So, subject to checking the list that is in front of you, I would say don’t assume that that list is the only countries that we will be working on climate change in. It is the ones that we know we will be working on climate change in now.

The other thing perhaps I should also say is that, in terms of the publications that have been put out so far, as Nick mentioned earlier, there is a joint inter-ministerial committee. There is a Whitehall committee of officials but also Ministers are meeting to take decisions on how the International Climate Fund is to be spent. So, whereas decisions on some other areas have already been made, Ministers will still need to be taking decisions on proposals on climate change. I think there will be more information coming in the next month or so on that.

Q138 Simon Kirby: I am slightly confused by the answer.

Matthew Wyatt: I’m sorry.

Simon Kirby: Are you saying that the multilateral aid is a more appropriate mechanism for delivering a change to climate change, rather than bilateral arrangements?

Matthew Wyatt: No, not in principle. What I am saying is that we have a various number of instruments that we can use. We can use bilateral aid, particularly in the 27 footprint countries, but if we want to reach a broader range of countries then the multilateral system gives us access to a wider range of countries. What I think Ministers will want to ensure, as we develop proposals for spending the International Climate Fund, is that we are using the most appropriate instrument in each case to get the biggest bang for our buck and to have the best impact at the lowest cost. So there is no ex-ante assumption that multilateral aid is better than bilateral aid, which I think was your question. So the answer to that is no, just to not be confusing on my second answer.

Q139 Simon Kirby: Is there a figure within the bilateral aid budget that is there to be spent on environmental programmes? I am trying to establish why it seems to have dropped in significance within the bilateral programmes.

Matthew Wyatt: No, we haven’t said, or Ministers haven’t said, at the beginning of this process there should be so much for each of the different pillars. What I think our Ministers wanted to see was, "Well, what can we come up with through the multilateral aid review process, the bilateral aid review process? What are the best results we can get so we can use this money in the best way?" What there is is the budget that has been set aside for the International Climate Fund. So that is a fixed budget that will be spent on climate-related activities, many of which will have-nearly all of which I anticipate-wider environmental impact, so that pot of money has been allocated.

It hasn’t all been allocated to specific programmes. Through the bilateral aid review process some of the country offices have made bids, and that I guess is what you may be looking at, and said, "We want X amount of money to deliver this and to deliver these results". There will be other country offices that will be coming forward with bids in the future, so that list is not exhaustive, I think.

Nick Dyer: When we make decisions at a country level about where to put our aid and what to focus on, it is a function of need, challenge, our experiences and how we see our comparative advantage in that country, but also what other donors are doing as well. Just because in any particular sector the UK Government isn’t itself focusing doesn’t mean it isn’t being addressed. So I wouldn’t necessarily interpret that the conclusion of that is it has been under-addressed; it may well have been addressed by other people.

One of the things that we are doing is introducing the Strategic Climate Reviews in all our country programmes, which we are piloting now, to ensure that our country offices are thinking through what the challenges are of environment and how to address them.

Q140 Chair: Can I check in respect of the question that Mr Kirby asked about level of resources: is that all transparent? If there is time we will be coming on to the International Climate Fund later with Mr Murray, but I think we are very keen to know what transparency there is about what resources are directed for which programmes. It might be that we will invite you to give us a little bit of further clarification about that.

Nick Dyer: Yes. One thing I would stress on that is that £2.9 billion has been allocated to climate change: £1.8 billion DFID, £1 billion DECC and £100 million DEFRA. We have a cross-Whitehall board where we come together and make joint decisions on, first, what the strategy is going to be and, secondly, what the individual projects will be. Not all of that money has been programmed. We can’t tell you now how all that £2.9 billion is going to be spent, because it is going to happen over a four-year period and we haven’t programmed it all just yet.

Q141 Martin Caton: Mr Dyer, you mentioned a little earlier your new climate and environmental assessment process for approving investment. How is that an improvement on the Environmental Screening Note process that you used to use and I think was redesigned as recently as 2006?

Nick Dyer: I will ask Ian to answer that.

Ian Curtis: Since 2006 we have had two external reviews of the Environmental Screening Note process; the first in 2007 and the second was concluded in 2010. Following the first one, we issued new guidance. The second time around, we asked the consultants to address three questions for us: first, to what extent were we complying with the requirements of the Environmental Screening Note; secondly, to what extent is it fit for purpose; and thirdly, how does our approach stack up against other bilateral donors’ approaches?

On the first one-how are we doing?-we were doing pretty well in fact. In 2003-04 we were at 67% in terms of good or excellent for our ESNs with 17% assessed as poor, which was not particularly good. In 2007-08 we were up to 93% and we only had 2% poor, and this was the same external reviewer looking both times. On the second question-was the approach fit for purpose?-well, just about, I think, was her view of that. Some of the weaknesses were that the ESN process was too late in the project cycle; it was right at the very end, the last thing. It was not meant to be really but it so often came at the very end, "Oh, we’d better look at the environment implications." The second weakness was that progress was not monitored against the commitments made at the time of the Environmental Screening Note, and the third weakness was that it didn’t include climate change. I think a fourth weakness was that it was almost a one-size-fits-all approach as well, which was not particularly effective nor was it efficient.

We started a process of revising the ESN but at almost the same time DFID began a process for introducing a new project approval process, based on the Treasury’s business case, so we integrated our environmental screening into the new business case process. It is now an environment and climate assessment. It starts right upfront in the process, at the strategy stage as part of the strategy case, and it continues through the process.

We have introduced a categorisation of programmes, A through D. So A is where there is serious risk; B is where there are potential risks but they are probably manageable or significant opportunities; C is where there is no likely impact; and D is funding to multilaterals, which we discussed earlier, and that is something we are looking at along with the outcome of the MAR process.

We are confident that this is going to be an improved process. It is being piloted at the moment; the new business case process only launched on 1 January this year. We are in the process of reviewing this in real time. It covers now all projects over £400 in value. Whereas the previous process was only for projects over £1 million, this now goes right down to £400 expenditure. It is interesting the way it has been part of an ongoing process of review and revision, but that is the reason why, having reviewed it in 2006, we have now put a new system in place.

Q142 Martin Caton: How are you assessing the assessment process?

Ian Curtis: Sorry, how are we assessing the-

Martin Caton: It is a very new process. It sounded like you were trying to monitor how it was-

Ian Curtis: It is being piloted at the moment. In part this will be from feedback from our climate and environment advisors who have responsibility for contributing to the process and also signing off ultimately that they are content with the steps that have been taken and the measures that have been agreed.

Q143 Martin Caton: Will the assessment of the assessment be coming into the public domain?

Ian Curtis: It is not our intention to put that into the public domain because, as I say, we are trialling the process internally.

Q144 Chair: Might it be your intention to reveal it to our Committee?

Ian Curtis: We would be more than happy to do that.

Q145 Martin Caton: In your submission you told us that this new assessment process will identify opportunities as well as risks. What sort of opportunities were you talking about there?

Ian Curtis: I think one of the interesting aspects of environmental screening, a strict approach to environmental screening has been to look at the negatives. There are just so many positive opportunities in many of our projects and programmes to look at positive opportunities. Let me use as an example our approach to malaria. This is going back to the old ESN process, but back in the autumn I was asked to look at a proposal for support to a malaria initiative. So we looked at the environmental health opportunities that would contribute to a reduction in malaria, rather than just handing out tablets, or bed nets would probably be what this particular programme was about. In the area of health, it is looking for environmental health opportunities that reduce the exposure to the disease that we are looking to tackle.

Q146 Dr Whitehead: You mentioned the Strategic Climate Programme Review, and you mentioned that this has been rolled out from the pilots. I think you ran six pilots. What changes have come from those pilots so that you are able to implement that in the rollout?

Matthew Wyatt: We have carried out these reviews in six countries and we will be doing a review of the reviews. I see no reason why it shouldn’t go into the public domain or indeed be shared with the Committee when we have done that.

Chair: I am very pleased.

Matthew Wyatt: What we have done; let me take one example. I think you are looking in particular at Tanzania and taking some evidence from there. First of all, on the objectives of these reviews, the Secretary of State said in his speech in November that he wanted all our aid to be climate smart. So this is not just about the programmes specifically focused on climate, it is also about everything we do. Is everything we do climate smart? For example, in Bangladesh if we are building a school and it is near a river, are we building it to a specification where it is going to resist increased flooding? Secondly, are we building it to a specification whereby people will be able to use it as a shelter if there is flooding? So it has a dual purpose. That would be the kind of very practical thing that we would want to see happening throughout the programmes that we support.

Part of the Strategic Climate Programme Review is a process where, by enabling our country offices to look at all the dimensions of climate change, it is helping to build the capacity of our own staff and their partners to take account of climate change in the work they do. Also, through doing specific analysis, it enables us to identify opportunities and risks so that our programmes can be more robust in the face of climate change.

For example, in Tanzania, under this programme we did a poverty and vulnerability analysis to identify the people who were most at risk of climate change. There was a political economy analysis that was looking at the drivers of decision-making on climate-related issues: how are they made? What are the drivers of decision-making? There was a study on the economics of climate change and there was a study looking at the opportunities for taking forward low carbon development within Tanzania. As a result of all that, Tanzania has been putting together its bid under the bilateral aid review process. So it has drawn on the results of the review in putting together its bid under the climate head.

It will also enable it to design all the programmes that it puts forward under the other pillars in a way that is climate resilient. At that point the office shared half of a climate advisor with Kenya. It decided that it wanted to make this more of a priority so now there is a full-time climate and environment advisor in each of Tanzania and Kenya. That maybe gives an example of what has happened.

We have done six of these and they have all been done rather differently because they are pilots, but now the intention is to learn the lessons and then to roll them out to all our country offices by, I think, 2013.

Q147 Dr Whitehead: Does that lead to funding being halted in certain programmes or are those reviews in order to refine future programmes as they go on?

Matthew Wyatt: No, we haven’t said, "Stop everything, we are doing a review". Absolutely not, no. The ongoing programmes are ongoing. It may be that in some cases some of the lessons from the review might enable us to adjust ongoing projects-because obviously as we implement projects we don’t implement to a blueprint. If we get useful learning, for example, on the political drivers of climate change, or on the economics, then we may well integrate those into ongoing programmes, but the main purpose is to inform future programmes.

Q148 Dr Whitehead: Can I briefly ask you to expand on the question of energy production, and clean energy production. We discussed that to some extent earlier. To what extent, maybe through those programme divisions or other programmes divisions, does DFID help developing countries to leapfrog dirty development, or are you simply making a paradigm approach of cleaner development?

Matthew Wyatt: We do try. We are trying in a number of ways to help countries to develop either new technologies or customise existing technologies, so that they can work. I will perhaps give a couple of examples maybe, if that would be of interest, Madam Chairman?

Chair: We have one eye on the clock, so quick examples, please

Matthew Wyatt: Okay, just a couple. I suppose one at scale would be that through the Clean Technology Fund, that I mentioned earlier, we are part of an international process where a programme has been endorsed, a huge programme of solar power in the Middle East and North Africa, which, subject to the difficulties that there are in parts of North Africa now, we very much hope will go ahead. That is a very big programme for concentrated solar power. Through that we are hoping, not only that existing technologies will be deployed but also the programme will create the conditions through which it will crowd in a lot of private sector investment and innovation. So we would hope to see innovation. That is an example of big scale.

One example, as time is short, Madam Chairman, at perhaps a smaller level, is that we support a programme called the Global Village Energy Partnership, which works at community level. They have a challenge funding process that they have been running in Latin America and will soon do in Africa, which is coming up with innovative ideas for new ways of delivering clean energy to poor communities. One of those has involved a social networking site on energy efficiency, which I understand is now being taken up by one of the big energy companies here in the UK, so it links back to the reverse thing. That would be another example where we are trying to support innovation and creativity to generate new technologies or customise technologies so that they can help countries to leapfrog.

A final example might be mini-grids, things like solar mini-grids, and so on, where as an alternative model to extending the normal grid system to areas where it may be very expensive or difficult to do so, then the alternative of renewable mini-grids is one that we would be very keen to support and we have a number of initiatives that we are looking at that would enable us to do that.

Q149 Martin Caton: The previous Government classified climate finance to developing countries as Official Development Assistance. Will this approach be continuing under this Government?

Nick Dyer: Yes. The £2.9 billion that has been allocated for climate is already classified as ODA.

Q150 Martin Caton: Will you be keeping the 10% cap on aid expenditure that can be used for climate change?

Nick Dyer: If you look at the trajectory of our spend, in terms of the total spend and the allocation to climate, it comes in under the 10%. I think it is 7.5%.

Martin Caton: Is it a continuing policy to keep it-

Nick Dyer: We don’t see it as an issue because it is going to come in at under 10%.

Q151 Ian Murray: Mr Dyer, you mentioned a little bit earlier about the International Climate Fund, which is obviously managed by three departments. I think you said £1.8 billion from DFID, £1.1 billion from DECC and £100 million from DEFRA?

Nick Dyer: 1.8, 1, 100.

Q152 Ian Murray: The other way round, okay, great. I wondered how the decisions on allocating that spend are made , be cause obviously you have three D epartments there all with a veste d interest in their particular D epartments . I noticed , from your submission and the response to this, you also mentioned that the Chief Secretary of the Treasury is consulted on decisions. H ow are the decisions made and how much of the weight of the Treasury bears down on these particular decisions?

Nick Dyer: Ultimately the decisions are made by Ministers and the core Ministers who are involved are the Secretary of State for International Development, the Chief Secretary to the Treasury and Chris Huhne, the Secretary of State for Energy and Climate Change. DEFRA Ministers are consulted when relevant too3. Those Ministers are supported by this International Climate Fund board, which is chaired at an official level by the DFID Director General, and it brings together all the relevant Departments at a senior level, so I sit on it as well. At the moment that board is going through a process of identifying an implementation strategy: how would we go about identifying how and where to spend the money?

Going back to one of the questions that Mr Goldsmith raised, which concerned forestry, we are asking ourselves the question: well, if we are going spend money on forestry where would we spend it that would give us the biggest bang for our buck in terms of need, amount of forest, biodiversity, poverty reduction and the likelihood of it being spent well? So we are looking at those kinds of criteria in terms of how to spend the money and where to spend it.

That process is probably going to take another couple of months and then it will be sent to Ministers. Then individual projects that are proposed come to the board for approval, for recommendation, and eventually they are approved by the relevant Minister who has accounting responsibility. So ultimately it is a ministerial responsibility but it is a process of consensus and where it isn’t it just goes to Ministers for decision.

Q153 Ian Murray: I appreciate the answer to that question. The reason I asked specifically about the Treasury was because of their insistence on various aspects running through Government policy, and whether or not their position pushes those things. I wonder if I could ask you a very quick question. I mentioned the Treasury so the bell goes off. You see that is what happens in this place. What is the balance between mitigation and adaptation in terms of the decisions that are made for the International Climate Fund and, probably a bit of a philosophical question, but which is more pro-poor, adaptation or mitigation?

Nick Dyer: Well, the-

Chair: Excuse me. We are beaten by the division bell and I am sure my colleagues are going to leave us with a inquorate meeting. I think perhaps it would be helpful, rather than reply now, if you could give us a brief written response to that and perhaps include in it as well the issue of governance and how much, when it comes to bilateral bidding, the issue of governance is adjusting to it.

Nick Dyer: Sure, okay.

Chair: I am most grateful, and thank you very much indeed for your time this afternoon. It is much appreciated. Thank you.