JUNE 2025 Acknowledgements This report was prepared by the World Bank under the ThirdPublic Financial Management Reform Program for the LaoPDR, financed by the European Union and Australia. The teamcomprised Abel Bove (Senior Public Sector Specialist and mainauthor),Elena Georgieva-Andonovska(Senior Public SectorSpecialist,task team leader and co-author),ViengmalaPhomsengsavanh(Public Sector Specialist,co-task teamleader).The team also benefited from the administrativesupport of Southida Salaphan (Program Assistant) and a peerreview by Richard Sutherland (Senior Governance Specialist)and Urska Zrinski (Senior Public Sector Specialist). The teamthanksthe Lao authorities for their collaboration andproductive discussions, especially at the Ministry of Planningand Investment (MPI), the Ministry of Finance (MOF) and theMinistry of Natural Resource and Environment (MONRE). Contents Acknowledgementsi Abbreviations iii Executive Summary1 Introduction and Background1. Climate Related Legal Framework2.10 Climate Coordination Mechanism3.17 Climate Change in Planning4.24 Climate Considerations in PFM5.27 Recommendations6.34 43References 44Annexes Annex 1. Lao PDR Governance Indicators 2003-2023 Annex 3. Sector Strategies Relevant to Climate Change 50Annex 4. Implementation progress of climate measures Abbreviations CCDRPEFACCIAPFMCVAPIMDCCPMDRMPMOEPFGCFGHGSOEUNFCCCIFMISITMOLTESMAFM&EMICMOFMONREMPIMRVNANAPNCCSNDCNECNGGSNSEDPCCDR Country Climate and Development ReportPEFA Public Expenditures and Financial AssessmentCCIA Climate Change Institutional AssessmentPFM Public Financial ManagementCVA Climate Vulnerability AssessmentPIM Public Investment ManagementDCC Department of Climate ChangePM Prime MinisterDRM Disaster Risk ManagementPMO Prime Minister’s OfficeEPF Environmental Protection FundGCF Green Climate FundGHG Greenhouse GasSOE State Own EnterpriseUNFCCC United Nations FrameworkConvention on Climate ChangeIFMIS Integrated Financial Management Information SystemITMO Internationally Transferred Mitigation OutcomesLTES Long-Term Emission StrategyMAF Ministry of Agriculture and ForestM&E Monitoring and EvaluationMIC Ministry of Industry and CommerceMOF Ministry of FinanceMONRE Ministry of Natural Resources and EnvironmentMPI Ministry of Planning and InvestmentMRV Monitoring, Reporting and VerificationNA National AssemblyNAP National Adaptation PlanNCCS National Climate Change StrategyNDC Nationally Determined ContributionsNEC National Environment CommitteeNGGS National Green Growth StrategyNSEDP National Socio-Economic Development Plan ExecutiveSummary The objective of the Climate Change Institutional Assessment (CCIA) is toanalyzethe institutional framework for addressing climate changechallenges, in the context of the preparation of the World Bank CountryClimate and Development Report (CCDR) for the Lao PDR.The CCIA is adiagnostic tool that uses a standard methodologydeveloped by the WorldBank and applied in over 50 countries, to evaluate organizational readiness torespond to climate change. This CCIA for the Lao PDR was undertaken fromNovember 2024 to February 2025, in parallel with the CCDR. The CCIA focuseson four aspects of readiness: the relevance and implementation of the legalframeworkfor climate change policy(section 1);the adequacy andimplementation of the climate policy coordination mechanism (section 2); theextentto which planning documents consider climate change risks andgovernment climate commitments (section 3); and the level of considerationsfor climate change risks in public financial management (PFM). It focuses onanalyzing the formal structures and processes that enable climate policymaking and implementation and does not assess informal constraints andenablers that affect climate related policies and arise from political economyincentives, public administration organizational behavior or capacity, or overallstate effectiveness and rule of law.1 Laos is highly exposed to climate change because of its dependence onagricultureand hydropower exports,and the high proportion of itspopulation living in flood- prone areas.Key climate risks relate to risingheat, more erratic precipitation, and a higher frequency and severity of floods,droughtsand storms.Climate change is projected to lower hydropowercapacity, change seasonal patterns of output, and increase the risk of damfailure. Laos’ readiness to cope with climate change impact is low. The 2019 Prime Minister’s Decree on Climate Change is the foundation ofthe Lao climate legal framework, complemented by other legislation.TheDecree covers the main areas expected in a climate framework law accordingto international good practice, setting the principles of mainstreaming bothadaptationand mitigation in national development;defining policyinstruments(climate vulnerability assessments,greenhouse gas emission(GHG) inventories and information system, and climate financing window), andassigninga coordination role to the Ministry of Natural