ODI was requested to undertake a range of activities for a UNEP Poverty and Environment Initiative in Malawi and Rwanda, including conducting technical reviews of environmental fiscal policy and expenditure analyses, and providing training and capacity building on the integration of environment and sustainable natural resources management issues into budgetary processes.

Specific outputs were:

• Guidelines on the integration of the environment into budgetary processes in Malawi

• Training on the integration of the environment into budgetary processes in Malawi

• Review of Public Environmental Expenditure Review and associated training manual in Rwanda

• Review of Environment Fiscal Reform in Rwanda

• Study on environmental sustainability of Rwanda’s Crop Intensification Programme

Lessons learned from this project include:

On environmental policy and budgetary processes,

• Coherence between environment objectives and sector/national policies is essential.

• The social impacts of environment fiscal reforms need to be taken into account when proposing reforms.

• Capacity and institutional constraints challenge the quest for closer cooperation between environment domain stakeholders and strong leadership in drawing a coherent environment policy message.

• Sector working groups are potentially an important mechanism for developing a coherent approach to the implementation of environment policy.

• The definition of public environmental expenditure review is difficult to establish (international COFOG definition is restricted to environmental protection activities, not considering environmental promotion) and there is often a lack of political interest in having a comprehensive estimate of environmental public expenditure.

• Cross sectoral comparison of public expenditure reviews would be valuable as some sectors, such as agriculture or water are closely linked to environmental management.

On environmental sustainability of Rwanda’s CIP,

• Soil conservation practices and sustainable agriculture are profitable but the CIP only partially incorporates targets that are compatible to sustainability issues.

• In a country where there is a huge funding gap for the CIP, the adoption of more cost effective measures against soil erosion would allow to use cost savings for other CIP targets such as investments for irrigation or the purchase of fertilizers.

• Policies aimed at promoting carbon sequestration and conservation practices could generate immediate gains in the current voluntary carbon markets or in the future if land use practices should be formally included in post – Kyoto emissions reduction agreements for carbon markets.

• A wide research effort is needed to explore the best actions to decide when, where and how much to spend to promote the right policy measure in agriculture and other economic sector with a forward looking sustainable perspective. The future of the Rwanda economy will strongly depend on the full reconciliation between environmental and productivity targets.