Green Climate Fund
|This article's factual accuracy may be compromised due to out-of-date information. (April 2012)|
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 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’. It’s got the objective to raise $100 billion a year by 2020. To kick-start environmental projects, a Fast Start Funding of the GCF was agreed, encompassing $30 billion for the period 2010-2012. According to the Climate & Development Knowledge Network, at the most recent 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. Papers analysing these elements in more detail will be presented at forthcoming Board meetings in June and September 2013.
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. Its governing instrument was adopted at the 2011 UN Climate Change Conference (COP 17) in Durban, South Africa.
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. 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, 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’. 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. Furthermore, the GCF Board was given the task to develop rules and procedures for the distribution of the money in the GCF, and for the cooperation with the national governments of the countries where subsidized projects will be taking place. The GCF Board was also charged with establishing an independent secretariat as soon as a decision was made on its host country. Finally, it also needs to select the permanent trustee of the GCF, doing this through an open and transparent procedure.
Fast Start Finance 
In Copenhagen countries agreed that to kick-start the GCF, a Fast Start Funding would be put in place, which meant a collective pledge of $30 billion for the period 2010-2012. This money would be used ‘for enhanced action on mitigation (including Reducing Emissions from Deforestation and Forest Degradation (REDD)), adaptation, technology development and transfer, and capacity building.’. The aim of this Fast Start Funding was to encourage developing countries to take immediate action on climate change, and to help them in their adaptation and mitigation efforts. Moreover, it can help in operationalizing the fund’s design, and valuable lessons can be learned for the post-2012 period and Long Term Financing.
Assessing whether this Fast Start Finance pledge has been fulfilled (in an adequate way) is very difficult because there is a lack of reliable and verifiable data, as the only information available comes from voluntary reports made by the donor countries themselves. Moreover, they each use very different benchmarks and baselines in the data supplied, which makes a general assessment even harder, if not impossible. However, several sources talk about a figure somewhere between $27 billion and $29.2 billion that’s so far been pledged in total by developed nations. Some caution applies though because, as of September 2011, only $11.3 billion had actually been delivered (i.e. been transferred to the account of the GCF), so a lot of the pledges still need to be put into practice. There are also a lot of discussions going on whether the conditions these funds have to meet have actually been met (e.g. additionality, cfr. infra).[clarification needed]
Long Term Finance 
The Long Term Financing of the GCF has got the goal to raise $100 billion per year by 2020. Since there was a lot of uncertainty where this money would have to come from, a High Level Advisory Group on Climate Change Financing (AGF) was founded by UN Secretary-General Ban Ki-Moon in February 2010. Its task was to investigate potential sources of revenue for the fund. It delivered its report on the 5th of November 2010, and concluded that it would be a tough challenge to raise such an amount of money, particularly because of the global financial crisis. However, it remained optimistic, identifying several potential sources of new and additional revenues:
1. Public sources: The national governments could generate new incomes through the introduction of several new taxes, the removal of subsidies for fossil energy and the auctioning of emission allowances. These new forms of income could be added to the direct budget contributions by the national governments.
2. International development bank loans: These would form a leverage by channelling the funds that were raised by the other (potential) sources specified. They should be seen as a 'secondary source/channel for generating additional flows, rather than as a separate source in their own right'.
3. Carbon markets: purchases of offsets in developing countries: 'The potential scale of these resources is dependent on the stringency of the emissions reduction commitments of developed countries, on carbon market design and on the availability of eligible emissions reductions in developing countries.'
4. Private sector flows to developing countries: 'The magnitude of flows would likely be higher, the better the investment climate in the developing country.'. Furthermore, 'developed country policy actions, as well as the multilateral development banks, the United Nations and the investments and instruments of bilateral agencies, can catalyse and foster additional private sector flows'
The report also strongly recommended a carbon price of somewhere between $20 and $25 per ton in order to collect enough revenues and make the market work in the right way. Apart from that, it didn’t really go into details on how the mechanisms would exactly work, stating that ‘further discussion on the design and implementation should depend on the decision by [the] Parties’.
Since its release, the report has often been criticised, most notably by some developing countries, i.a. because of the big role awarded to International Development Banks and the fact that most of its proposals burden the private sector. Nevertheless, during COP-17, which took place in Durban November–December 2011, the negotiations continued based on some of the proposals of the AGF. Most in particular the idea of carbon pricing appealed to the developed country Parties. However, countries couldn't find a final agreement on the funding of the GCF, which might become problematic as, up to date, there haven't been made any pledges for the period after Fast Start Funding ends.
The design and working of the GCF might bring up several difficulties, either procedural, practical, or because of differing views between countries or other people involved. One might highlight a few of them, based on the discussions that have been taking place under the UNFCCC, or the problems and frailties of funds that already existed before the GCF was founded.
Negative (side-)effects of projects 
Projects might have adverse (side-)effects, that can have a negative impact on the environment, society, systems or other social groups. This might even go as far as that the total benefits end up being smaller than the total costs, leading to a negative impact of the project overall. This risk might be ‘minimized with appropriate laws, horizontal and vertical integrative mechanisms, and independent accountability institutions’. Furthermore, making impact assessments of the projects that are being considered for funding, doing frequent follow-ups on their performances and working with licenses is also recommended in literature. The COP charged the GCF Board with working out many of these protective measures.
Additionality of the funds 
The Cancun agreements clearly specify that the funds provided to the developing countries through the GCF should be ‘new’ and ‘additional’ to existing development aid. 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. However, in the context of the GCF, it's supposed to roughly mean that funds can’t be shifted from other (development) projects. It were the developing countries who insisted for this statement to be inserted in the agreements, as diverting money from already existing development projects doesn’t lead to a general increase of the total development budget, and can even have detrimental effects, leaving the countries most in need behind. The fact that the funding of the GCF has to be new and additional, should also avoid that existing development projects can be labelled as climate change projects. However, given the vagueness of these concepts, a lot of debate is going on between the developed and developing world, who have conflicting and divergent views on the exact definition of additionality. Obviously, developing countries try to keep the definition of this concept as narrow as possible. The developed nations on the other hand have been interpreting these concepts as broadly as possible, which makes it a lot easier for them to meet their pledges. A study performed by Bloomberg New Energy Finance (a research company specialised in clean energy and carbon markets) and published in September 2011 revealed that the majority of the pledges made to Fast Start Financing are in fact aid money (both development and climate change aid) that has been re-packaged.
As is suggested in academic literature, one way to avoid problems like these is to reduce the vagueness of concepts by building a strong legal framework. But because the meaning of the concepts has to be adjusted over time, for example because of technological advancements or environmental changes, it is advised to adopt a form of adaptive governance. This would imply that the definitions and rules that make up the legal framework would be assessed and – where necessary – revised frequently.
Insecurity of funds 
Another issue threatening the GCF is the insecurity of its funding. It does look as though the Fast Start Funding goal of $30 billion for the period 2010-2012 will be made. This is when only looking at the pledges though, because so far, only $11.3 billion has actually been delivered (i.e. been transferred to the account of the GCF). It seems as if ‘the global economic crisis and national austerity measures have reduced the willingness of rich countries to commit to filling the coffers of the fund with public monies’. As far as the Long Term Funding is concerned, funding might be secured through the implementation of the proposals of the High Level Advisory Group on Climate Change Financing. However, these are somewhat controversial because they place the major part of the burden of funding the GCF on the private sector. This has been criticized by the developing countries, who think that most of the promised money should still come from the developed nations’ governments themselves. They have been supported in this view by UN Secretary-General Ban Ki-Moon. There hasn’t been taken a final decision on the funding of the GCF during COP-17 in Durban, which is why there remains a lot of uncertainty about where the funds should come from.
On top of the difficulties in securing the funds, there’s also the risk of countries totally pulling out of their commitments and pledges, just like Canada did at COP-17 in Durban. Its environmental minister, Peter Kent, declared that his country wouldn’t ‘devote scarce dollars to capitalize the new Green Climate Fund […] until all major emitters accept legally binding reduction targets and transparent accounting of greenhouse gas inventory’. This was of course a serious setback for the GCF, and could prove to be a dangerous precedent.
Adaptation/mitigation debate 
Many of the debates concerning the GCF can be reduced to the long-standing adaptation/mitigation debate, which separates the Parties in roughly two blocks: the developing and the developed world. The developing countries are vulnerable and susceptible to the impacts of climate change, whereas they carry the least responsibility. They do need funds to increase their capacity to adapt, and thus see the GCF as a big opportunity to do this. Subsequently, they think the money that comes out of it should primarily be used for adaptation. The developed countries on the other hand like to focus on mitigation, as they believe that technologies might reduce emissions and prevent a deterioration of the situation. They also believe that mitigation actions might benefit everyone, since it adds to the public good, whereas adaptation only produces local benefits. Moreover, the 2006 Stern Review, that discussed the effects of climate change on the world economy, stated that investing in mitigation would, in the long run, be much less expensive than investing in adaptation. In other words, taking action now to reduce the impact on a later point in time, is much more cost-effective than dealing with the consequences later on. However, Stern also reiterated that adaptation measures are also necessary, to protect (weak) societies in order to bridge the period between the start of mitigation measures and the time when they start paying off. The IPCC stressed in its Fourth Assessment Report that there is a need to focus on both adaptation and mitigation, seeing them as interconnected. Following the IPCC’s reasoning, and trying to find the middle between the developed and the developing nations' stance, article 95 of the Copenhagen Accord stated that ‘a balanced allocation between adaptation and mitigation’ should be pursued, and that ‘funding for adaptation will be prioritized for the most vulnerable developing countries, such as the least developed countries, Small Island Developing States and Africa’. However, in September 2011, a study performed by Bloomberg New Energy Finance concluded that developed countries have failed in fulfilling this requirement, as ‘only 14% of the promised sum relates to adaptation-only activities’.
A lack of stakeholder involvement 
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. A group of researchers associated with the Australian National University, 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’. 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’. 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. 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.
Further reading 
- Abbott, K.W., Gartner, D. (2011). "The Green Climate Fund and the Future of Environmental Governance". Earth System Governance Working Paper No. 16.
- ClimateFund.info. "Climate Fund Info".
- Purvis, N. & Stevenson, A. "Climate Negotiations and International Finance".
- 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.
- UNFCCC. "Transitional Committee for the design of the Green Climate Fund". Retrieved 23 November 2011.
- Donner, D.S.; Kandlikar, M.; Zerriffi, H. (18). "Preparing to Manage Climate Change Financing". Science 334 (6058): 908–909.
- IISD (13). "Summary of the Cancun Climate Change Conference: 29 november - 11 December 2010". Earth Negotiations Bulletin 12 (498).
- NEWS: Board members sketch out an operational framework for the Green Climate Fund, Climate & Development Knowledge Network, 27 March 2013
- 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.
- IISD (13). "Summary of the Durban Climate Change Conference: 28 November - 11 December 2011". Earth Negotiations Bulletin 12 (534).
- Schalatek, L., Stiftung, H., Nakhooda, S. and Bird, N., February 2011, The design of the Green Climate Fund,Overseas Development Institute. Retrieved 7th April, 2012
- Faststartfinance.org. "Fast start finance". Retrieved 11 December 2011.
- UNFCCC. "Fast-start Finance". Retrieved 11 December 2011.
- Mulugetta, Y.; Stilwell, M.; Sokona, Y.; Ayalew, M. & Tekie, B. "Lessons from ‘fast start’ finance". ECA. Retrieved 11 December 2011.
- Polycarp, Clifford. "Climate Conversations - Have countries delivered on fast-start climate finance?". Retrieved 11 December 2011.
- World Resources Institute. "Summary of Developed Country Fast-Start Climate Finance Pledges". Retrieved 11 December 2011.
- Cuming, Victoria (5). "Have developed nations broken their promise on $30bn 'fast-start’ finance?". Bloomberg New Energy Finance White Paper: 10.
- UN. "UN Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF)". Retrieved 13 December 2011.
- The Secretary-General's High Level Advisory Group on Climate Change Financing. "Report of the Secretary-General's High Level Advisory Group on Climate Change Financing". Retrieved 13 December 2011.
- Perron, J. "High-Level Advisory Group on Climate Change Financing (AGF) Report to UN Secretary General Ban Ki-Moon". Retrieved 13 December 2011.
- Bird, N., Brown, J., & Schalatek, L. "Design challenges for the Green Climate Fund". Retrieved 15 December 2011.
- Palitza, Kristin (07/12/2011). "Carbon Pricing to Save Green Climate Fund". Retrieved 13 December 2011.
- LB (11/12/11). "De belangrijkste punten in de 'Durban deal'". De Morgen. Retrieved 13 December 2011.
- Eyassu, Mahlet. "What is needed on climate finance this year". Climate Action Network. Retrieved 11 December 2011.
- 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.
- Pittock, Jamie (2010). "A pale reflection of political reality: Integration of global climate, wetland, and biodiversity agreements". Climate Law 1 (3): 343–373.
- Hallegatte, Stéphane (May 2009). "Strategies to adapt to an uncertain climate change". Global Environmental Change 19 (2): 240–247.
- Pittock, Jamie; Hartmann, J. (18). "Taking a second look: climate change, periodic relicensing and improved management of dams". Marine and Freshwater Research 62 (3): 312–320.
- Wara, M. W.; Victor, D. G. (April 2008). "A Realistic Policy on International Carbon Offsets". PESD Working Paper (74). Retrieved 7 November 2011.
- International Rivers. "Failed Mechanism: Hundreds of Hydros Expose Serious Flaws in the CDM". Internationalrivers.org. Retrieved 7 November 2011.
- Fleck, Robert K.; Kilby, C. (2010). "Changing aid regimes? U.S. foreign aid from the Cold War to the War on Terror". Journal of Development Economics 91: 185–197.
- Sethi, Nitin (6/12/11). "A green climate fund but no money at Durban". The Times of India. Retrieved 13 December 2011.
- Kent, Peter. "Canada's Closing Statement at COP17".
- Abbott, K.W., Gartner, D. (2011). "The Green Climate Fund and the Future of Environmental Governance". Earth System Governance Working Paper No. 16.
- Agarwal, A. & Narain, S. (1991). Global warming in an unequal world: a case of environmental colonialism. New Delhi: Centre for Science and Environment. p. 34.
- Stern, Nicholas Herbert (2007). The Economics of Climate Change: The Stern Review. Cambridge: Cambridge University Press. p. 692.
- Metz, B., Davidson, O.R., Bosch, P.R., Dave, R., & Meyer, L.A. (eds) (2007). Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007. Cambridge: Cambridge University Press. p. 851.
- Easterly, William (May 2008). "Institutions: Top down or Bottom up?". The American Economic Review 98 (2): 95–99.
- Bond, Patrick (2006). "Global Governance Campaigning and mdgs: from top-down to bottom-up anti-poverty work". Third World Quarterly 27 (2): 339–354.
- Altieri, Miguel A.; Masera, O. (April 1993). "Sustainable rural development in Latin America: building from the bottom-up". Ecological Economics 7 (2): 93–121.
- Richardson, K., Steffen, W. & Liverman, D. (2011). Global Risks, Challenges and Decisions. Cambridge: Cambridge University Press. p. 524.
- Evans, James P. (2012). Environmental Governance. London: Routledge. p. 247.
- NEWS: Guiding allocation of resources from the Green Climate Fund, Climate & development Knowledge Network, 17 December 2012