The slow growth of the Green Climate Fund

Posted by () on Jun 17 2011
VERTIC Blog >> Environment

Joseph Burke, London

The Executive Secretary of the UNFCCC, Christiana Figueres, said last year after the climate change negotiations in Mexico that ‘Cancún has done its job. The beacon of hope has been reignited and faith in the multilateral climate change process to deliver results has been restored.’ One of the most significant elements of the ‘Cancun Agreements’ was the creation of a ‘Green Climate Fund’ (GCF). On 28-29 April this year, the delegates chosen to design the fund gathered for their first meeting. There, they emphasised the importance of ‘clear accountability’ and ‘good governance’. But how are parties progressing towards these goals and what difficulties are likely to arise?

Creating the GCF
The fund is intended to provide coherence where a plethora of bilateral and multilateral initiatives currently exist to assist developing countries in tackling climate change. By streamlining climate funding, the opportunity to oversee financial flows will be greatly enhanced. The job of designing of the GCF has been placed in the hands of a ‘Transitional Committee’. Newly-formed for this purpose, parties agreed that the committee should be composed of 15 developed country and 25 developing country representatives. Its ongoing task is to make recommendations on GCF design for approval at the next UN climate change meeting in Durban, South Africa, in December 2011. Eventually, the GCF will have a permanent board comprised of an equal number of developed and developing countries. The fund is being designed within the broader context of an agreement by developed countries to mobilize 100 billion dollars per year by 2020, though it remains undecided what portion of this figure the GCF will work with.

MRV for climate finance
The ‘Bali Action Plan’, which parties agreed to at the 2007 UN climate conference in Indonesia, specifies that countries’ commitments or actions should be ‘measurable, reportable, and verifiable’ (MRV). Though both the UNFCCC and Kyoto Protocol contain numerous MRV procedures, negotiations on MRV under the Bali Action Plan have attempted to create an enhanced framework by building on, expanding and improving existing mechanisms. 

However, the divisive negotiations that took place in Copenhagen at the 2009 climate conference delivered a severe blow to confidence in the UN process. Nevertheless, during that difficult time the outline of a new MRV system was proposed. The Cancun Agreements that resulted from the negotiations held in Mexico the following year managed to overcome the mood of disappointment from Copenhagen and, crucially, lay the foundation for an enhanced MRV system.

Keeping track of billions of dollars in financial support is as important as it is difficult. And it needs to take place both at the national and international level. For developed countries it ensures that money is not wasted or misused, while gaining them recognition for the sincerity of their pledges to tackle climate change. Meanwhile, for developing countries it gives them greater ability to follow up on the financial commitments made by industrialised nations, and also makes it easier to identify funding gaps. For governments and civil society in these countries, MRV of climate finance is an indispensable tool against corruption and for ensuring that funds have their intended impact on the ground. As one Mexican activist told Tierramérica (a UN journalism project): 'What is missing is an explanation of how the new instruments are being implemented. Mexico needs to implement measures to reduce vulnerabilities. There is no system to ensure transparency around the use of resources, and our fear is that the same thing will happen with the new Green Climate Fund.'

Furthermore, the Terms of Reference for the GCF Transitional Committee calls for a mechanism ‘to ensure the application of social and environmental safeguards.’ MRV of such safeguards will be crucial to determine if and when mitigation and adaptation efforts are having unintended negative consequences on the most vulnerable. Again more detail is still needed.

The Cancun Agreements did, however, establish a registry to record developing countries’ proposals for actions that require international support and to ‘facilitate matching of finance, technology and capacity-building support for these actions’. The registry will therefore also record the support that developed countries make available and provide. The registry could offer substantial support to the GCF but its procedural details, and how it will interact with the GCF, have yet to be fully resolved.

Above all, MRV of climate finance faces two particularly challenging issues in the context of the GCF. First, the GCF will need to use innovative ways to source its funding. This is imperative if the fund is not to sit empty. In addition to public funding, private funding will need to be ‘leveraged’, that is, public funding instruments will be used to encourage private sector engagement. In a report released on April 8, the EU noted that this poses a significant test: ‘A new major challenge in the context of long-term climate finance will be the monitoring and accounting of private flows. There are no established monitoring procedures or accounting methodologies on climate-related private financial flows yet.’

Second, what expectations will be made of developing countries when it comes to climate finance accountability? Climate negotiations are often challenged with developing new ways to address new issues at a global level. When examining the options for how to design these new mechanisms and instruments, negotiators have to consider their overall aim, how feasibly they could be implemented within an adequate timeframe, and countries’ various interests – while always respecting the principle of countries’ ‘common but differentiated responsibilities and respective capabilities and their social and economic conditions’. This challenge will no doubt be present in discussions on MRV of climate finance.

Cautious steps
The creation of the Transitional Committee turned out to be more difficult than had been expected. The first meeting, scheduled for March, was postponed until April 2011 after a number of Asian, Latin American and Caribbean nations could not decide on their delegates for the meeting. In addition, much controversy arose from the perceived burgeoning role of the World Bank in the design of the Fund. Concern has been expressed over the decision to appoint the Bank as Trustee of the GCF for an initial three-year period. Given the World Bank’s record for funding carbon-heavy development projects, a number of parties were unconvinced of the Bank’s climate credentials.

Still, the Transitional Committee has shown demonstrable progress in recent weeks. The forty members of the committee have been selected and its three co-chairs named. They are: Trevor Manuel (Former Finance Minister of South Africa); Ernesto Arroyo (Finance Minister of Mexico); and Kjetil Lund (State Secretary for Finance of Norway). Asian countries were left a little displeased since they do not have a representative in trio. But the possibility of introducing a ‘vice chair’ position at a later date may be used to resolve this.

Looking ahead
If the GCF can ensure accurate, comparable and transparent recording of the financial support provided by developed countries and how these funds are used in developing countries, it will strengthen trust among parties and pave the way for greater collective action. Robust MRV systems will also help to increase the efficiency and effectiveness of these funds.

Four working groups have been set up by the Transitional Committee to manage the numerous issues that need to be addressed in order to operationalize the fund. Working group four is to be co-facilitated by Sweden and Bangladesh and will concentrate on mechanisms to assess the performance of the fund and its supported activities. It is in this group that verification procedures are most likely to be developed. Let us hope that progress can be made on these issues in the lead up to the second meeting of the Transitional Committee, scheduled for the first half of July in Tokyo.

Last changed: Jun 17 2011 at 3:36 PM