Unresolved issues in the design of the Green Climate Fund
Willemien Viljoen, tralac Researcher, discusses unresolved issues in the Green Climate Fund
The Green Climate Fund (GCF) was created at the 15th Conference of the Parties (COP 15) in Copenhagen, Denmark to finance mitigation, adaptation, technology and capacity building initiatives in developing countries. At COP 16 at the end of 2010 in Cancun, Mexico the Conference of the Parties adopted the decision to establish the Green Climate Fund “to be designated as an operating entity of the financial mechanism of the Convention, to support projects, programmes, policies and other activities in developing country Parties.” The GCF forms a central part of financing climate change mitigation and adaptation actions in developing countries, but is also important for the successful operation of two other new institutions agreed to in Mexico, a Technology Mechanism for adaptation and mitigation and an Adaptation Framework, both to become fully operational in 2012.
The Transitional Committee is the body responsible for the design of the Fund, including the legal and institutional arrangements for the establishment and operationalisation of the fund, the financial instruments to be used to achieve objectives and the independent review mechanism of the fund. The aim is to present the various documentation for approval at COP 17 later this year in Durban, South Africa.
At the third meeting of the Transitional Committee, 11-13 September 2011 in Geneva, Switzerland some progress was made in the design of the fund, including advances on the intricacies of how the fund will function and a broad agreement on the importance of including the private sector in financing adaptation and mitigation actions. Although there has been convergence on some issues, including that funding decisions should be driven by and consistent with developing countries’ own national climate and development plans, there are still various outstanding and contentious issues that must be discussed (the Cross-cutting issues in the design of the Green Climate Fund is available here):
The overriding objectives and guiding principles of the GCF;
The limited amount of pledged funding which has been received: At the conclusion of COP 16 the member countries pledged US$ 30 billion for 2010-2012, to be increased annually from 2020. However, recent figures have shown that only US$ 12 billion of the pledged funding has been received. This has mainly been due to the global financial crisis;
The question whether the fund should or should not have any legal status: The legal status of the fund, will have an important impact on the governance and institutional arrangements of the GCF, including the relationship between the GCF and COP, the Board, the secretariat, financial inputs, transitional arrangements and operational modalities;
The relationship between the GCF, COP and other governance arrangements: Currently there are two main models proposed for the functioning of the fund, the first being a big fund controlled and overseen by COP which channels mainly public funds in the form of grants to developing countries according to each country’s needs. The second model focusing on using limited public funding inputs to create a small fund which is independent from COP with the primary objective of facilitating entry of private sector investments for developing countries to generate the necessary finance for mitigation and adaptation action;
The financial instruments which the fund will utilise, including whether the majority of the funds will be either public or private funds and whether funds will be disbursed through either grant or non-grant allocations; and
Key operational modalities, including countries’ eligibility for finance, thematic funding windows, earmarking of funds and the fund allocation process.
The fourth and final meeting of the Transitional Committee for the design of the fund, prior to COP 17, is scheduled for 16-17 October in Cape Town, South Africa. Although some progress has been made in the overall design of the fund, the Committee needs to intensify its efforts if it is not only going to submit an expanded version of the Draft Outline of the Report on the Transitional Committee to the Conference of the Parties for approval at COP 17 later this year (the Draft Outline is available here).
Business Day, South Africa,
Inter Press Service News Agency (www.ips.org),
Climate Equity (http://climatequity.org)