CFAS Literature review

1) ODI, The effectiveness of climate finance: a review of the Global Environment Facility

Short description. As part of a series of briefings on the effectiveness of specific global funds, this paper looks at the Global Environment Facility – including its mobilisation capacity, governance structure, allocation system, risk management policy and monitoring and evaluation processes. It also looks for instance at the extent to which it helped in fostering national ownership, innovation and enabling environments. The paper provides valuable information on how the GEF works as well as lessons drawn from the GEF that can be useful in designing the GCF.

Authors: Smita Nakhooda with Maya Forstater

Published in: October 2013

What it is about. In this paper, ODI analyses the longest standing multilateral climate change fund as well as operating entity of the financial mechanism under the UNFCCC. The paper is part of a series in which the effectiveness of specific funds is assessed according to certain criteria. The authors discuss the development of (governance) processes within the GEF and the current state of play according to the criteria described below, and also assess the GEF’s effectiveness in this regard. The analysis builds on interviews with GEF stakeholders, a portfolio review, the “Fifth Overall Performance Study of the GEF prepared by the Evaluation Office as well as documentation developed to inform negotiations on its 6th replenishment”. The analysis focuses on the following aspects and criteria to assess its effectiveness. In a nutshell, the paper takes stock of the dynamics within the GEF: its approach to distributing climate finance, measurement of GHG emission cuts achieved through GEF projects, the emphasis on enabling environments and support for technology transfers and innovative practises (more details below).

Instruments

• Mobilisation: scale of GEF finance and the role of co-financing; replenishment rounds and distribution of contributions among donor countries (burden sharing)
• Governance: structure of the GEF; voting procedures; working modalities; transparency (i.e. NGO representation and their attendance of meetings, public availability of documents)
• Allocation: approach taken for resource allocation; project cycle; implementing partners; direct access
• Disbursement and risk management: efficiency and transparency of disbursement, safeguard policy; conflict resolution service
• Monitoring, evaluation and learning: expected outcomes; indicators for projects to report upon; project and GEF programme reporting

Outcomes

• Enabling environments: provision of support for the improvement of enabling environments
• Scale: involvement of local or sub-national institutions; (Implications) of provision of large and small scale support
• Innovation: financial support for “innovative technology deployment”; support for Technology Needs Assessments
• Catalytic impacts and sustainability: private sector engagement (i.e. public private partnerships); co-financing triggered
• National ownership: role of the national focal point; National Portfolio Formulation Exercises; engagement of stakeholders

Why CFAS recommends it. This paper can be of great value for current discussions under the Green Climate Fund. First, with the choice of criteria the authors provides suggestions for aspects that can influence a fund’s effectiveness. Second, the detailed discussion of each criterion provides valuable insights into what works well and what could be improved. Among the aspects covered in this paper and currently also discussed in the GCF are for instance: indicators, country ownership, safeguard policies as well as accreditation rules for national implementing entities. Taking these experiences into account in Green Climate Fund discussions can be very helpful. Furthermore, this document provides in a condensed way a lot of information on the GEF governance structure and is therefore a valuable document to learn in short time more about the GEF.

2) ECBI, Least Developed, Most Vulnerable: Have Climate Finance Promises Been Fulfilled for the LDCs?

Short description. This paper includes a systematic review of the reports filed to the UN Framework Convention on Climate Change (UNFCCC) in 2012 of the nations that promised to provide this US$ 30 billion in Fast Start Financing over the period, in particular, on the extent to which wealthy nations are meeting their obligations to the world’s 48 Least Developed Countries (LDCs). It paves the way to improve disbursement practices through direct access to funds; funding in phases; and greater transparency.

Authors: David Ciplet, Timmons Roberts, Mizan Khan, Spencer Fields and Keith Madden

Published in: April 2013

What it is about. To deal with the current and future impacts of climate change In Copenhagen in 2009 wealthy nations pledged to help developing countries transition to a lower-carbon economy. The pledges with a ‘balance’ of funding between mitigation and adaptation were US$ 30 billion of ‘fast-start finance’ (FSF) over three years from 2010-2012 which was to be ‘new and additional’.

The paper analyses whether the wealthy countries are meeting their obligations to the world’s 48 Least Developed Countries (LDCs) by nine key questions related to contributor performance in fulfilling promises made during the FSF period: Has climate finance been adequate? Who is being transparent in reporting FSF? Who has contributed their fair share? Who is providing “Balanced” Funding for Adaptation? Which contributors are providing grants instead of loans? Are UN climate funds being supported? Whose funds are truly ‘new and additional’? Are the most vulnerable being prioritised? Who is actually delivering on pledges?

The paper concludes that the wealthy countries have not met expectations during the fast start period. Reports submitted to the UNFCCC in 2012 show that only two of the ten contributors committed their ‘fair share’ of fast-start climate finance. Contributors have surpassed their commitment of US$ 30 billion during the period but less than a third of this money is ‘new and additional’ and only US$ 603 million has been pledged to the LDCF since its founding. Therefore, fundamental changes in the disbursement process will be needed for LDCs to be able to access funding.

Why CFAS recommends it. The paper provides an attempt to give facts to support the LDC arguments to improve disbursement practices through direct access to funds; funding in phases; and greater transparency.

3) Climate Strategies, Research to assess impacts on developing countries of measures to address emissions in the international aviation and shipping sectors

Short description. This paper studies the potential impact on developing country economies of applying a global Market Based Measure to international transport (shipping and aviation sectors). It finds that the impact is very limited in most cases and can be addressed through tailored mechanisms. This finding is very helpful in the context of the on-going dialogue on the sources and pathways to mobilizing 100 billion US dollars by 2020.

Authors: Anger and al.

Publication date: February 2013

What it is about. International shipping and aviation transport account for 5% of global C02 emissions and will account for a growing share of global emissions by 2050. In this context, the ICAO and the IMO have been tasked in looking at the feasibility and design of Market-Based Measures (MBM) to reduce their carbon footprint, and possibly, raise revenue to further tackle climate change. However, the concern of the potential negative incidence of such MBMs on developing country economies has slowed down negotiations in both the IMO and the ICAO. The paper assesses whether applying MBMs to the aviation and shipping sectors could generate negative economic incidence on developing countries. The paper looks at a number of country case studies (Chile, Trinidad and Tobago, Samoa, Togo, China, India, Mexico, Maldives, Kenya and the Cook Islands) and finds that the impact is very limited in these specific cases and globally (impact on GDP of 0.01% on average). The authors do however conclude that the impact could be larger in a number of cases: in the case of a revenue-generating MBM, in the case of an aviation scheme because it plays a major role in the tourism sector and is more price-responsive, and in the case of countries highly dependent on trade and tourism from water and air routes (small islands particularly). The paper highlights that negative economic impact can be addressed through tailor-made measures (according to national contexts) through rebates, exemptions, investments in energy efficiency.

Why CFAS recommends it. These findings are particularly relevant to the ongoing discussions under the Long Term Finance Work Programme under the UNFCCC on the pathways and sources to mobilizing 100 billion US$ by 2020. Global MBMs have been identified as one of the promising instruments to raise and scale up volumes of public finance to tackle climate change. This report is the last of many recent publications laying out the options for global MBMs on international transport and supporting their feasibility and capacity to address CBDRRC.

4) Climate Analytics, Cashing-up at the end of Fast Start Finance: What can we learn for Long-Term Finance?

Short description. This policy brief assesses data provided in the developed country parties’ reports on the delivery fast start finance (2010-2012) and identifies lessons that can be learned for long-term finance. In addition, it looks at whether the fast start finance has met its objectives of allocating a balanced adaptation and mitigation finance by giving priority to the most vulnerable and proving finance from new and additional resources.    

Authors: Climate Analytics

Publication date: June 2013

What it is about. It is to be recalled that developed countries have committed 30 billion US dollars for the years (2010-2012) as fast start finance and also committed to mobilize 100 billion US dollars by 2020 from variety of sources for adaptation and mitigation actions in developing countries. This policy brief has identified key findings and also listed recommendations for long-term finance.

It finds that the volume of funding pledged in Copenhagen (30 billion US dollars) has been fulfilled or exceeded. However, the commitment was met using very different accounting methods, making it difficult to track additionnality of the 30 billion. To address this accounting issue, the paper recommends building on the common reporting format as part of biennial report that was agreed in COP 18 to enhance coherence and keep track of the origin and type of financing. To address the issue of additionnality and predictability of climate finance, the authors recommend a) making use of climate policy to generate finance and refer to Germany using a portion of the revenue collected from the European Trading Schemes (ETS) allowance for climate finance; and b) Ensure that long-term climate finance is predictable by agreeing an intermediate target.to avoid any finance gap. Another key finding of the paper is the imbalance between Mitigation and Adaptation as most of the FSF share (71%) went to mitigation and REDD+ and only 21% for adaptation and that vulnerable countries were not clearly prioritized by donor countries. To address these two issues, the authors recommend a) defining approaches and strategies to also appropriately, jointly and individually scale up adaptation funding and b) investing in readiness of developing countries to ensure better access for LDCs and SIDS and also increase efficiency in these countries. Another key finding of the paper is lack of a burden-sharing key among donor countries - some countries such as Japan and Norway contributed more than their share while others such as the US did less than their fair share (according to a calculation done on indicative fair shares). The authors propose that in the future, developed countries share the burden in a more equitable manner.

Why CFAS recommends it. Lessons from the fast start finance period are very important in shaping the decisions regarding long-term finance. As there is an on-going discussion on the substance and accounting of 2020 finance, recommendations from this paper are very useful and can also be taken up in the Warsaw decisions.

5) ECBI, Crowd-funding for Climate Change: A New Source of Finance for Climate Action at the Local Level?

Short description. This policy brief supports the use of crowd-funding as a source of climate finance for local climate action – for instance, enhanced access to energy. Crowd-funding is a very successful source of micro-finance which allows individuals to provide a community or another individual with financial support (in the form of grant or loan) to implement a project. However, crowd-funding is little used for climate action at this point, and the paper advocates in favour of its development as a climate finance mechanism and looks into the required enabling environments and possible linkages with the UNFCCC financial mechanism.

Authors: Konrad Von Ritter and Dianne Black-Layne

Publication date: May 2013

What it is about. This paper, officially submitted to the UNFCCC and the Standing Committee on Finance, proposes a new source of finance for climate action at the local level by utilizing the existing method of micro finance. Many stories of micro finance institutions have demonstrates it success in providing accessible funding for the poor people in developing countries. Unfortunately, the existing micro finance institutions have not yet reached the realm of climate mitigation and adaptation activities although they could play a major role. For instance, energy access is still a key concern for the poorest people in most developing countries. The poorest communities and governments are faced with two unequal options – that of investing in the business-as-usual-energy (fossil-fuel based energy), or in renewable energy, less affordable however. Crowd-funding could help choose the climate-proofed option by making renewable energy more affordable and accessible. Crowdfunding is a pool of fund, where individuals (mostly from OECD countries) could transfer their money to the fund, which will deliver the money to help a community meet its specific needs, either in the form of grant money or through soft loans. The idea is to link the local micro finance institutions to the crowd-funding, communities where the fund can be used to fund climate actions, such as mitigation actions as well as the adaptation.

This paper also identified several enabling environments that should be established in beneficiary countries. Among others are: shifting the energy subsidies from fossil fuels to those of renewables, and how to reduce the possible risks in developing crow-funding The paper also mentioned that this scheme could be considered under the Private Sector Facility of the Green Climate Fund (the paper does not go into details on the design of the proposed window).

Why CFAS recommends it. This paper proposes a very concrete source of innovative or alternative finance that could generate additional finance to help the poorest tackle climate change. This briefing is a contribution to the on-going discussion on the sources that should/could make up the annual 100 billion dollar commitment pledged by 2020.