Green Climate Fund

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The Green Climate Fund (GCF) is a fund within the framework of the UNFCCC founded as a mechanism to transfer money from the developed to the developing world, in order to assist the developing countries in adaptation and mitigation practices to counter climate change. The GCF is based in the new Songdo district of Incheon, South Korea. It is governed by a Board of 24 members and initially supported by an Interim Secretariat.

‘The Green Climate Fund will support projects, programmes, policies and other activities in developing country Parties using thematic funding windows’.[1] It is intended to be the centrepiece of efforts to raise Climate Finance of $100 billion a year by 2020. This is not an official figure for the size of the Fund itself, however. Disputes also remain as to whether the funding target will be based on public sources, or whether "leveraged" private finance will be counted towards the total.[2] Only a fraction of this sum had been pledged as of July 2013, mostly to cover start-up costs.

According to the Climate & Development Knowledge Network, at the third meeting of the Board in Berlin, Germany, in March 2013, members agreed on how to move forward with the fund’s Business Model Framework (BMF). They identified the need to assess various options for how nations could access the fund, approaches for involving the private sector, plus ways to measure results and ensure requests for monies are country-driven.[3] At the fourth Board meeting in Songdo, South Korea, in June 2013, Hela Cheikhrouhou, a Tunisian national, was selected to become the Fund's first Executive Director.[4] "Resource mobilisation" (establishing a process for funding pledges) is expected to be the most contentious issue for the fifth Board meeting in Paris, France, in October 2013.[5]

History[edit]

The Copenhagen Accord, established during the 15th Conference Of the Parties (COP-15) in Copenhagen in 2009 mentioned the "Copenhagen Green Climate Fund". The fund was formally established during the 2010 United Nations Climate Change Conference in Cancun and is a fund within the UNFCCC framework.[6] Its governing instrument was adopted at the 2011 UN Climate Change Conference (COP 17) in Durban, South Africa.[7]

Organization[edit]

During COP-16 in Cancun, the matter of governing the GCF was entrusted to the newly founded Green Climate Fund Board, and the World Bank was chosen as the temporary trustee.[6] To develop a design for the functioning of the GCF, the ‘Transitional Committee for the Green Climate Fund’ was established in Cancun too. The committee met four times throughout the year 2011, and submitted a report to the 17th COP in Durban, South Africa. Based on this report, the COP decided that the ‘GCF would become an operating entity of the financial mechanism’ of the UNFCCC,[8] and that on COP-18 in 2012, the necessary rules should be adopted to ensure that the GCF ‘is accountable to and functions under the guidance of the COP’.[8] Researchers at the Overseas Development Institute state that without this last minute agreement on a governing instrument for the GCF, the "African COP" would have been considered a failure.[9] Furthermore, the GCF Board was tasked with developing rules and procedures for the disbursement of funds, ensuring that these should be consistent with the national objectives of the countries where projects and programmes will be taking place. The GCF Board was also charged with establishing an independent secretariat and the permanent trustee of the GCF.[8]

Sources of Finance[edit]

The Green Climate Fund is intended to be the centrepiece of Long Term Financing under the UNFCCC, which has set itself a goal of raising $100 billion per year by 2020. Uncertainty over where this money would come from led to the creation of a High Level Advisory Group on Climate Change Financing (AGF) was founded by UN Secretary-General Ban Ki-Moon in February 2010. There is no formal connection between this Panel and the GCF, although its report is one source for debates on "resource mobilisation" for the GCF, an item that will be discussed at the Fund's October 2013 Board meeting.[10]

The lack of pledged funds and potential reliance on the private sector is controversial and has been criticized by developing countries.[11]

Issues[edit]

The process of designing the GCF has raised several issues. These include ongoing questions on how funds will be raised,[12] the role of the private sector,[13] the level of "country ownership" of resources,[14] and the transparency of the Board itself.[15] In addition, questions have been raised about the need for yet another new international climate institution which may further fragment public dollars that are put toward mitigation and adaptation annually.[16]

The Fund is also pledged to offer "balanced" support to adaptation and mitigation, although there is some concern amongst developing countries that inadequate adaptation financing will be offered, in particular if the fund is reliant on "leveraging" private sector finance.[17]

Role of the private sector[edit]

One of the most controversial aspects of the GCF concerns the creation of the Fund's Private Sector Facility (PSF). Many of the developed countries represented on the GCF board advocate a PSF that appeals to capital markets, in particular the pension funds and other institutional investors that control trillions of dollars that pass through Wall Street and other financial centers. They hope that the Fund will ultimately use a broad range of financial instruments.[18]

However, several developing countries and non-governmental organizations have suggested that the PSF should focus on "pro-poor climate finance" that addresses the difficulties faced by micro-, small-, and medium-sized enterprises in developing countries. This emphasis on encouraging the domestic private sector is also written into the GCF’s Governing Instrument, its founding document.[19]

Additionality of funds[edit]

The Cancun agreements clearly specify that the funds provided to the developing countries as climate finance, including through the GCF, should be ‘new’ and ‘additional’ to existing development aid.[6] The condition of funds having to be new means that pledges should come on top of those made in previous years. As far as additionality is concerned, there is no strict definition of this term, which has already led to serious problems in evaluating the additionality of emission reductions through CDM-projects, leading to counterproductivity, and even fraud.[20][21]

A lack of stakeholder involvement[edit]

Using the money in the right way in order to enforce actual change on the ground is one of the biggest challenges ahead. Many academics argue that, in order to do this in an efficient way, all stakeholders should be involved in the process, instead of using a top-down approach. They point to that fact that, without their input, it is harder to achieve targets set. Moreover, projects often even miss out on their actual purpose.[17][22][23][24][25] A group of researchers associated with the Australian National University,[26] call for the foundation of so-called ‘National Implementing Entities’ (NIE) in each country, that would become responsible for ‘the implementation of sub-national projects’.[26] This would avoid national governments getting too involved, because in the past, they ‘often hindered the flow of international support to subnational scale reform for sustainable development’.[26] Overall, this view on the need for more stakeholder involvement can be framed within the movement in environmental governance calling for a shift from traditional ways of government to governance.[27] The Climate & Development Knowledge Network is funding a research project that aims to help the GCF Board, by analysing how best to allocate resources among countries. The project will research and present four case studies of how federal or central government money is presently distributed to sub-national entities. Chosen for the diversity in their underlying political systems, these are: China, India, Switzerland and the USA.[28]

Further reading[edit]

References[edit]

  1. ^ UNFCCC. "Transitional Committee for the design of the Green Climate Fund". Retrieved 23 November 2011. 
  2. ^ Institute for Policy Studies (2013), Green Climate Fund,A Glossary of Climate Finance Terms. Retrieved 23 July 2013
  3. ^ NEWS: Board members sketch out an operational framework for the Green Climate Fund, Climate & Development Knowledge Network, 27 March 2013
  4. ^ Green Climate Fund (press release) (2013), Green Climate Fund Board selects Hela Cheikhrouhou as Executive Director. Retrieved 31 July 2013
  5. ^ Institute for Policy Studies (2013), Green Climate Fund: 5th Board meeting: A Background Briefing, Retrieved 4 October 2013
  6. ^ a b c UNFCCC. "Report of the Conference of the Parties on its sixteenth session, held in Cancun from 29 November to 10 December 2010". Retrieved 23 November 2011. 
  7. ^ UNFCCC. "Green Climate Fund - report of the Transitional Committee". Retrieved 23 July 2013. 
  8. ^ a b c IISD (13 December 2011). "Summary of the Durban Climate Change Conference: 28 November - 11 December 2011". Earth Negotiations Bulletin 12 (534). 
  9. ^ Schalatek, L., Stiftung, H., Nakhooda, S. and Bird, N., February 2011, The design of the Green Climate Fund,Overseas Development Institute. Retrieved 7 April 2012
  10. ^ UN. "UN Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF)". Retrieved 13 December 2011. 
  11. ^ Sethi, Nitin (6/12/11). "A green climate fund but no money at Durban". The Times of India. Retrieved 13 December 2011.  Check date values in: |date= (help)
  12. ^ Brandon Wu (2013), Where's the Money? The Elephant in the Boardroom,Huffington Post. Retrieved 24 July 2013
  13. ^ Oscar Reyes (2013), Songdo Fallout: is green finance a red herring?,Foreign Policy in Focus. Retrieved 24 July 2013
  14. ^ Annaka Peterson Carvalho, 3 ways country ownership is being put to the test with climate change funding,Oxfam America. Retrieved 24 July 2013
  15. ^ Emilio Godoy (2013), Civil Society Pushes for More Active Participation in Green Climate Fund,Inter Press Service. Retrieved 24 July 2013
  16. ^ Assaad W. Razzouk (2013), Why We Should Kill The Green Climate Fund, "The Independent". Retrieved 8 December 2013
  17. ^ a b Abbott, K.W., Gartner, D. (2011). "The Green Climate Fund and the Future of Environmental Governance". Earth System Governance Working Paper No. 16. 
  18. ^ Oscar Reyes (2013), Songdo Fallout: is green finance a red herring?,Foreign Policy in Focus. Retrieved 23 July 2013
  19. ^ Friends of the Earth USA (2013), Pro-poor Climate Finance: Is There a Role for Private Finance in the Green Climate Fund?,Friends of the Earth USA. Retrieved 24 July 2013
  20. ^ Wara, M. W.; Victor, D. G. (April 2008). "A Realistic Policy on International Carbon Offsets". PESD Working Paper (74). Retrieved 7 November 2011. 
  21. ^ International Rivers. "Failed Mechanism: Hundreds of Hydros Expose Serious Flaws in the CDM". Internationalrivers.org. Retrieved 7 November 2011. 
  22. ^ Easterly, William (May 2008). "Institutions: Top down or Bottom up?". The American Economic Review 98 (2): 95–99. doi:10.1257/aer.98.2.95. 
  23. ^ Bond, Patrick (2006). "Global Governance Campaigning and mdgs: from top-down to bottom-up anti-poverty work". Third World Quarterly 27 (2): 339–354. doi:10.1080/01436590500432622. 
  24. ^ Altieri, Miguel A.; Masera, O. (April 1993). "Sustainable rural development in Latin America: building from the bottom-up". Ecological Economics 7 (2): 93–121. doi:10.1016/0921-8009(93)90049-c. 
  25. ^ Richardson, K., Steffen, W. & Liverman, D. (2011). Global Risks, Challenges and Decisions. Cambridge: Cambridge University Press. p. 524. 
  26. ^ a b c van Kerkhoff, Lorrae; Ahmad I.H., Pittock J. and Steffen W. (2011). "Designing the Green Climate Fund: How to Spend $100 Billion Sensibly". Environment: Science and Policy for Sustainable Development 53 (3): 18–31. doi:10.1080/00139157.2011.570644. 
  27. ^ Evans, James P. (2012). Environmental Governance. London: Routledge. p. 247. 
  28. ^ NEWS: Guiding allocation of resources from the Green Climate Fund, Climate & development Knowledge Network, 17 December 2012