1. International Climate Change Financing: The Green Climate Fund (Congressional Research Service)

Authors: Richard K. Lattanzio; Congressional Research Service

Published: April 2013

What it is about: The paper analyses the impact and open issue of the Green Climate Fund for the U.S. Congress. The U.S. congress through its role in authorizations, appropriations, and oversight will have significant input on U.S. participation in the green climate fund regarding e.g. whether and when to participate in the green climate fund, whether and how much to contribute to the fund, and with what source or sources of finance; whether fund contributions would carry specific guidance in distribution and use; how contributions to the fund would relate to other U.S. bilateral, multilateral, and private sector climate change assistance; and whether and when to consent to negotiated treaty obligations, if submitted. This is provided in the context of outstanding challenges for the Green Climate Fund. The paper focuses on outstanding challenges that must be decided either by the Board or by the Parties to the UNFCCC, e.g. Relationship of the Fund to the Convention, the World Bank as Trustee, mobilization of Funds, Operational Modalities. Section “Relationship of the Fund to Other U.S. Climate Finance Commitments” analyses whether other U.S. commitments e.g. UNFCCC Fast Start Financing Pledges, UNFCCC 2020 Pledges, Bilateral Aid and Other Multilateral Aid, will source the GCF or interfere with existing assistance. The last chapter illustrates that the members hold a mixed view about the value of international financial assistance to address climate change and presents concerns of the congress, e.g. the cost, purpose, direction, efficiency, and effectiveness of the UNFCCC and existing international financial institutions.

Why we recommend this: The paper provides an overview of the open issues for one important contributor regarding their opinion on 1) outstanding challenges of the Green Climate Fund 2) analyses the relationship of the Green Climate Fund to other U.S. Climate Finance Commitments and 3) the open Issues for Congress.

2. Private sector engagement in climate change adaptation in least developed countries: an exploration, German Development Institute

(For a complimentary copy, contact the author)

Authors: Pieter Pauw and Ann Pegels

Published: September 2013

What it is about: The private sector is increasingly engaging in climate finance. If the opportunities are easy to identify for mitigation-related activities, they are less clear for adaptation to climate change – particularly in developing countries. The authors assume that private sector engagement is inevitable and could play a significant role. In this context, the paper explores the different roles the private sector can play in adaptation in developing countries, and how the governments can create enabling environments to increase private sector engagement. The research entailed a semantic analysis – counting the number of occurrences for keywords like ‘banks’, ‘private sector’, ‘investments’ - in the 47 National Adaptation Programmes of Action (NAPA) submitted by least developed countries. The paper concludes that private sector finance and activities are seldom mentioned or included in NAPA. 22 NAPAs do specify the private sector’s role in adaptation, but refer to the energy sector in particular – which relates to mitigation also. 22 NAPAs also mention the need to create ‘enabling environment’ to increase private sector adaptation but do not explicit the intent. The authors identify a few possible reasons for this disconnect between NAPAs and private sector finance: lack of awareness on the potential of and experience with private sector finance, lack of focus on the private sector in the NAPA guidelines or a strategic choice by countries to keep the focus on public finance. The paper concludes that developing countries should explore further the options to attract private sector finance for adaptation although this does not weaken the need for developed countries to scale up public finance for adaptation.

Why we recommend this: As one of the key issues up for discussion at the GCF meeting is resource mobilization, it raises another question: which kind of resources for which kind of action? It is crucial that all parties improve their common understanding on what private sector can and cannot provide for, and under which conditions. This paper feeds into this discussion by analysing the concept of private sector funding for adaptation and providing a sound analysis of expectations from recipient countries in this regard.

3. Operationalizing a gender-sensitive approach in the Green Climate Fund, Heinrich Boell Foundation

Authors: Liane Schalatek and Katya Burns

Published: April 2013

What it is about: Climate change affects both men and women. Women do not have equal access to political power, economic resources, legal rights, land ownership, bank credit, and technical training. Therefore, these gender inequalities make women highly vulnerable to the impacts of climate change and it also affects their ability to contribute to adaptation and mitigation efforts. Recent decisions by Conference of Parties of the UNFCCC and by the governing instrument of the Green Climate Fund specify the need for a gender sensitive approach for climate change. By addressing gender inequality issues, women can better contribute to economic and social development. To strengthen this case, the paper looked at different sectors such as; agriculture, forest/REDD+, water, disaster risk management and reduction, energy and transport. In each of these sectors it shows how gender can be successfully integrated in climate actions. In addition, it calls for a systematic gender sensitive approach in the GCF so that both women and men benefit from the fund by increasing their participation, identifying possible challenges and enhance their outreach. Finally the paper recommends the GCF board takes ‘gender sensitive approach’ as a priority issue to be addressed in its work plan and gender is integrated into GCF components (Structure and Organization of the Fund, Private Sector Facility, Results Management Framework, Funding Approval Criteria and Funding Cycle and Audits) to achieve better and more effective benefits.

Why we recommend this: Even though there are gender guidelines and checklists for many climate relevant sectors prepared by multilateral development banks, international agencies and non-government organizations, their operations are often still not gender-sensitive in practise. Since gender is on the agenda for the next Board meeting in Paris, it is crucial that the Board make progress on how to effectively achieve gender balance in different operations. The GCF can make use of lessons learnt and existing systems to promote gender equality and operating procedures that include both women and men in decision-making roles, respond to the particular needs of women for climate- related financing, and enable women’s enterprises to benefit from new low-carbon technologies and economic opportunities.

4. Quantity Performance Payment by Results: operationalizing enhanced direct access for mitigation at the Green Climate Fund, OIES

Authors: Benito Müller, Samuel Fankhauser and Maya Forstater

Published: June 28th 2013

What is it about: This paper looks at how the Quantity Performance Payment (QPP) funding mechanism could fund mitigation actions in developing countries in the context of direct access. This paper offers an overview of the concept of Quantity Performance Payments (QPP), and takes a closer look at the main design options and issues regarding to QPPs, as well as the list of actions the GCF Board needs to take to operationalize QPP. In short, QPPs reward countries for their mitigation performances, based on quantifiable indicators and set transaction quantities.

Some examples of QPPs are also elaborated in this paper, such as the Norwegian International Forest Climate Initiative (NICFI), the Energy+ Programme, and a scheme to reward accelerated transition pathways. The Norwegian International Forest Climate Initiative, for instance, was launched in December 2007 by the Government of Norway, and it aims both to support early action to achieve cost-effective and verifiable emission reductions, as well as to demonstrate how funding for REDD could work in practice. The Government of Norway in 2012 stated that “... ex-post payments for verified emission reductions provide the best way to incentivize emission reductions in any sector, including REDD+.” However, as none of the existing QPP mechanisms have applied in the context of fully operational enhanced direct access, the paper assesses these mechanisms in the context of enhanced direct access and concludes that QPPs are in line with the GCF’s main objectives: a paradigm shift towards low-emission and climate-resilient development pathways, economic efficiency and equitable distribution of resources.

Why we recommend it: In light of the question raised by the GCF board on modalities to further enhance direct access, including through which funding entities and with a view to enhancing country ownership, this paper provides a useful analysis with concrete examples o QPP results in other contexts.

5. The allocation of (adaptation) resources: lessons from fiscal transfers (OIES)

Authors: Benito Müller,

Published: September 2013

What is it about: The paper looks at how to allocate GCF resources most effectively, most efficiently but also most equitably. This paper assumes that the most politically contentious factor in allocation is actually equity/distributive justice and raises the question of what is a fair/just allocation of GCF funds to eligible countries? The author draws lessons on how central funds are distributed by national and even sub-national governments to address disparities, highlighting four very different country experiences (China, India, Switzerland and the United States).

In China for instance, fiscal transfers from the central government to local authorities are determined by factors such as the fiscal strength of the locality, its capacity to collect revenue locally, political considerations (which for example prioritize localities inhabited by ethnic minorities). India has been using the “Gadgil-Mukherjee Formula” which factors in several parameters, including both needs-based and performance-based parameters. These parameters don’t have the same weight: the population count in 1971 weighs in heavily (60%), per capita income has significant weight too (25%); performance (tax policy, fiscal management, progress in respect of national objectives) represents 7.5% and ‘special problems’ represent 7.5%. Switzerland has a fiscal equalization system that transfers more funds to the financially weak cantons to equalize out financial strengths and ensure wealth distribution to compensate geographic and socio-demographic disparities. The United States distributes grant money to individual States to ensure safe public drinking water. States are eligible to this money in two ways: half of the funding is divided equally among the eligible recipients, and the other half in proportion to their needs.

Several lessons were drawn from the four cases. Formula-based allocations are highly needed in order to form the resource allocations. According to the author, it is crucial that all eligible recipient countries receive some money (an equal floor allocation) and that adaptation funding be allocated in proportion with needs (number of vulnerable people exposed to climate change). An optimal formula could include a burden-sharing key for each country, based on the UNFCCC CBDRRC principle and poverty intensity of GDP.

Why we recommend this: In the light of the ongoing GCF discussion on how to effectively and fairly allocate GCF funding, this paper provides an operational solution to address very sensitive allocation issues.

6. Accessing the People’s Survival Fund (PSF): finding the right balance with access modalities and institutional arrangements for the PSF, Institute for Climate and Sustainable Cities

Published: September 2013

Authors: A.Kairos T. Dela Cruz, R.Hernandez and L.Bonifacio.

What it is about: In 2012, the Philippines established the People’s Survival Fund (PSF), a national climate fund designed to address national and local adaptation needs. The policy brief is ICSC’s contribution to the policy discussions within the PSF. It aims to address three concerns of the PSF: maintaining fiduciary standards, generating local ownership of the initiative, working along development plans and priorities of the local governments. This briefing focuses on direct access and proposes the modality of “enhanced access,” a localized version of direct access, in operationalizing the PSF. The paper looks at existing and successful direct mechanisms (for improved performance and social services) within the Philippines in order to formulate a best practise for the PSF. The paper compares these existing mechanisms with others national funds in Indonesia and Bangladesh (monitoring, governance, capitalization, fiduciary management, etc) and draws lessons from their experience. The paper also tests the readiness of two municipalities in accessing the PSF, in order to ensure the Philippines’ PSF is designed as a best practise. The authors conclude that responsive institutional arrangements for the PSF will be critical to deliver the right balance; that local authorities will need to collaborate particularly to ensure cross-cutting approaches and integrated use of the funding; that the PSF should work with regional offices and agencies to ensure the Fund’s fiduciary integrity and enhance direct access; that involving civil society is key to evaluate progress and outcomes of the PSF and provide technical support to local authorities; that the funding arrangements are innovative and fit the needs (for instance, in the case of water management - best done at provincial level- the PSF could encourage municipalities to cluster when applying for funding).

Why we recommend this: The ongoing discussions on the PSF are very comparable in some aspects to the discussions on the business model framework of the GCF, particularly when it comes to institutional and access modalities. This paper draws lessons from existing national and local mechanisms, and based on concrete experiences, contributes to the thinking on how to operationalize (enhanced) direct access.

Return to the CFAS October newsletter