This paper explores the concept and substance of country-level institutional capacity in the context of future climate-related actions. The main thrust of the paper is that an institutional approach, based on capacity assessments, could provide useful insights, both at national and international levels, on the appropriate next steps for climate actions. Thus, the paper proposes a generic assessment of institutional capacity, with the aim to help develop a common understanding across countries of what institutional capacity actually is and what institutional capacity would be required for various forms of future actions. However, the paper fully acknowledges that country-level institutional capacity assessments are essentially country-specific and need to be undertaken in a national context. Some national case studies have been prepared together with this paper (see OECD, Institutional Capacity and Climate Actions, 3 case studies, 2003) to emphasise the country-specific aspect of this debate. To be sure, current capacities are not the only factor in deciding on future policy options. First, governments need not have all the capacity in place before taking steps to combat climate change. It may well be that, within the next decades, countries will be able to increase their capacity, either through their own means or with assistance from the international community. Second, to some degree, and in some instances, the adoption of a commitment --either domestic or international- may act as a driver for capacity building. This was the case for some industrialized and transitioning countries, whose commitments in Kyoto have provided an impetus for the development of the capacity needed to implement and adhere to them. Finally, institutional capacity needs are only one key consideration when assessing future climate policy options. Other considerations when evaluating different forms of future actions include environmental effectiveness, cost-effectiveness, the need to deal with economic and scientific uncertainties, and other domestic policy considerations. However, a pragmatic model for the evolution of climate actions might include a step by step approach, whereby countries in each step assess their existing capacities and select future actions that are consistent with the capacity level it can reasonably reach within a given time frame. While each new step is likely to involve some capacity development, capacity requirements should not be too large at each of these steps. If the gap between existing capacity and capacity that is required is too large for a particular policy option, it could become virtually impossible for a country to abide by what it has committed to do, either domestically or internationally. In this framework, the level of existing capacities in a country is likely to define the kind of next step that the country can take. However, it is also hoped that with each step, capacity will grow, so as to allow for a progressive strengthening of actions over time. Chapter 2 of this paper discusses the concept of institutional capacity and analyses the various dimensions of capacity that could be worth exploring when countries assess their own capacities. Chapter 3 analyses institutional requirements of a number of options for future actions, thereby giving some initial guidance as to how these options might differ according to their capacity requirements. A coherent view of institutional capacity In general terms, capacity can be defined as "the ability to perform functions, solve problems and set and achieve objectives" (Fukuda-Parr & al., 2002). What makes a country able to perform a function, solve a problem or achieve an objective? As already suggested, it is very country-specific, since a country's approach to a particular problem, such as climate change, is embedded in its complex history, institutional setting and social fabric.… [ABSTRACT FROM AUTHOR]