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TECHNICAL ASSISTANCE REPORT

PAPUA NEW GUINEA

Climate Policy Diagnostic

November 2024

Prepared By

Suphachol Suphachalasai, Junko Mochizuki, Karlygash Zhunussova, Sylke von Thadden Kostopoulos, and Danielle Minnett

Fiscal Affairs Department

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©2025 International Monetary Fund

The contents of this document constitute technical advice provided by the staff of the International Monetary Fund to the authorities of Papua New Guinea (the "CD recipient") in response to their request for technical assistance. Unless the CD recipient specifically objects to such disclosure, this document (in whole or in part) or summaries thereof may be disclosed by the IMF to the IMF Executive Director for Papua New Guinea, to other IMF Executive Directors and members of their staff, as well as to other agencies or instrumentalities of the CD recipient, and upon their request, to World Bank staff, and other technical assistance providers and donors with legitimate interest (see Staff Operational Guidance on the Dissemination of Capacity Development Information). Publication or Disclosure of this report (in whole or in part) to parties outside the IMF other than agencies or instrumentalities of the CD recipient, World Bank staff, other technical assistance providers and donors with legitimate interest shall require the explicit consent of the CD recipient and the IMF’s Fiscal Affairs department.

The analysis and policy considerations expressed in this publication are those of the IMF’s Fiscal Affairs Department.

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Contents

• Acronyms and Abbreviations

• Preface

• Executive Summary

• Recommendations

• I. Context

• II. Climate Adaptation Policy

• A. National Adaptation Policy Landscape

• B. Climate Resilience of Water

• C. Disaster Risk Management and Disaster Risk Financing

• D. Climate Resilience of Agriculture

• III. Climate Mitigation Policy

• A. GHG Emissions and Mitigation Targets in PNG

• B. Agriculture, Forestry, and Other Land Use (AFOLU)

• C. Energy Sector

• D. Methane

• E. Evaluating the Impact of Mitigation Policies

• IV. Enabling Institutions

• A. Legislative Framework

• B. Policy Framework

• C. Institutions

• D. Climate Finance

• Boxes

• 1. Rationale for Government Intervention in Climate Adaptation

• 2. Alternative Approaches to Pricing Water

• 3. Strengthening End-to-End Early Warning Systems Based on People-Centered Approach

• 4. National Disaster Risk Financing Strategy to Foster Financial Resilience Against Disasters

• 5. Bundling of Risk Management, Credit and Agronomical Knowledge/Inputs to Foster Climate Resilience

• 6. International Experience of Integrating Climate Aspects into Subnational Legislation

• 7. Some Key Conclusions from the Review of the First 29 Long-Term Climate Strategies Submitted to the United Nations Framework Convention on Climate Change (UNFCCC)

• 8. Strengthening the Role of Ministries of Finance in Driving Climate Action

• 9. Fiscal Policies to Incentivize Private Investment

• Figures

• 1. Average Annual Climatology (1991-2020)

• 2. Trends in Annual Temperature (left) and Precipitation (right) in Port Moresby

• 3. People Affected by Disasters

• 4. PNG’s Projected Climatology – Temperature (top) and Precipitation (bottom)

• 5. Global Sea Level Rise (Relative to 2000, meters, m)

• 6. Projected Sea Level Rise in PNG

• 7. Estimated Economic Cost of Sea Level Rise – No Adaptation

• 8. PNG’s Surface Water Streams

• 9. Percent Share of Urban (left) and Rural (right) Population with Access to Safe Drinking Water in the Pacific

• 10. Breakdown of AAL per Hazard (left), Percent of AAL Due to Climatic Disasters per Asset Category (right)

• 11. Disaster Risk Financing Instruments in PNG

• 12. Area, Production and Yield of Major Cereals (left) and Number of Undernourished (right)

• 13. GHG Emissions per Capita and GHG Intensity of GDP, 2022

• 14. GHG Emissions and Primary Energy Consumption

• 15. IMF Estimates of Historical and Projected GHG Emissions, 2019-2030

• 16. Land Use (left) and Historical GHG Emissions (right)

• 17. Drivers of Forest Degradation and Deforestation in 2001-2015

• 18. Electricity Generation and Capacity by Fuel Source, 2000-2022

• 19. PNG Electrification Potential

• 20. Additional Revenues and Avoided Losses, Compared to Baseline

• 21. GDP Growth Impact Decomposition in 2030

• 22. Impact on Emissions

• 23. National Regulations Governing NDC Sectors

• 24. PNG’s Climate Policy Framework

• Tables

• 1. Natural Disasters in PNG, 2000-2024

• 2. Potential Inundation Coverage for Five Provinces by 2100

• 3. Selected Climate and Development Indicators of PNG

• 4. Tariff for Urban Water Supply and Sewerage Service

• 5. Components of Volumetric Abstraction Charges

• 6. ICCC Service Level Indicators Reviewed and Selected Business KPIs by Water PNG

• 7. Selected DRM Legal Policy and Planning Documents and Key Gaps

• 8. Current Ex-Ante DRM Activities Taken by Selected Government Entities and SOEs

• 9. Projected Climate Change Impacts on Yields of Key Crops Relative to Present

• 10. Forestry Emission Factors

• 11. Electricity Tariffs

• 12. Planned and Proposed Projects (MW)

• 13. Proposed Carbon Levy

• 14. Impact on Energy Prices

• 15. Summary Table

• Annexes

• I. Disaster Response Expense in 2024

• II. Climate Policy Assessment Tool

• III. Options for Recycling Carbon Tax

Acronyms and Abbreviations

Preface

In response to a request from the Government of Papua New Guinea (GoPNG) for capacity development (CD) on climate policy diagnostic (CPD), a CD mission visited Port Moresby during July 2^nd—15^th, 2024. This mission of the International Monetary Fund’s (IMF) Fiscal Affairs Department (FAD) was led by Mr. Suphachol Suphachalasai and comprised Ms. Junko Mochizuki, Ms. Karlygash Zhunussova, Ms. Sylke von Thadden-Kostopoulos, and Ms. Danielle Minnett (all FAD).

The mission had engaging and productive discussions with the Secretary of Treasury, Mr. Andrew F. Oaeke; the Governor of Bank of PNG, Ms Elizabeth Genia; the Acting Managing Director of the Climate Change and Development Authority (CCDA), Ms. Debra Sungi; and senior officials from Department of Treasury (DoT), Bank of PNG (BPNG), Climate Change and Development Authority (CCDA), Conservation and Environment Protection Authority (CEPA), Papua New Guinea National Forestry Authority (PNGFA), National Fisheries Authority (NFA), National Energy Authority (NEA), Department of Agriculture and Livestock (DAL), Department of Petroleum and Energy (DPE), Department of National Planning Monitoring (DNPM) and District Development, Papua New Guinea Power Limited (PPL), PNG Water Limited, and National Disaster Center.

The mission is grateful for staff of the Economic Policy Wing of Department of Treasury, particularly Ms. Rhoda Karl, Mr. Swartz Buf, Mr. Ismael Sumb, and Ms. Herla Ato, for their efficient support provided in organizing and facilitating the discussions with the government stakeholders. In addition, the mission is grateful to the IMF Resident Representative, Mr. Sohrab Rafiq and his staff, Ms. Loa Anisi for the support and coordination provided before and during the mission.