Where does the Green Climate Fund stand now?

Where does the Green Climate Fund stand now?

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Date: 12th January 2012
Author: Simon Maxwell
Type: Feature
Tags: climate finance, COP17, Durban, Green Climate Fund

A view on the prospects for the Green Climate Fund following agreements in CoP17, in Durban, by CDKN's Executive Chairman Simon Maxwell.

The agreement on the Green Climate Fund reached at CoP17 in Durban deserves some probing – not least because control over climate finance, and the uses to which climate finance is put, have been highly contested and political. Last year’s IDS Bulletin on the political economy of climate change remains an essential read on the tensions in this respect between the World Bank and the UN, between Ministries of Finance and Ministries of the Environment, and between developed and developing countries. Reading the agreement, a number of points stand out:

  • Most important, the agreement to establish the Fund, albeit so far with no actual money;
  • The Fund should be an operating entity of the Convention;
  • A Board made up of equal numbers of representatives of developed and developing countries, with two co-chairs, one from each group;
  • Developing country members appointed to represent both regional and ‘special-interest’ constituencies (e.g. small island states and LDCs);
  • A portfolio of grants and loans;
  • ‘Balanced’ as between mitigation and adaptation;
  • With developing countries able to access funds directly or through international organisations such as UN agencies and multilateral development banks;
  • With a private sector facility;
  • And with the World Bank to act as a trustee, at least initially.

It seems that Switzerland and Korea are vying to host the GCF, though Germany is also making early contributions. It would not be surprising if Germany wished to add the Fund to the portfolio of organisations - including the UNFCCC, where the Secretariat will initially be based - that they have attracted to Bonn.

The acid test of the GCF will be whether it is successful in attracting a significant share of the $US 100bn in climate funding promised by 2020 – though that number itself looks in doubt, with so little discussion in Durban of follow-up to fast start funding, which is supposed to end in 2012.

In the best case, the Fund will hoover up most or all of the money currently scattered across other funds and programmes, such as those listed by Climate Funds Update or the Climate Finance Tracker. This would include the substantial funding available through the Climate Investment Funds, currently managed by the World Bank. Whether that happens will probably depend on whether donors feel that funding is being channelled through Ministries of Finance and in support of national climate compatible development plans, rather than, as has up to now been the case with UNFCCC-controlled windows, to Ministries of the Environment, and for largely environmental projects.

That links to the other big issue, the scope of funding. The GCF documentation talks explicitly of funding mitigation and adaptation, which is probably regarded as a victory by those who feared that adaptation would be neglected. However, we have argued consistently in CDKN that a mitigation/adaptation framework is incomplete and misleading, given the scale of change in the global economy that will result from climate change or the measures taken to deal with it. This is not the place to repeat the many examples to illustrate the point, whether solar cells for export in China, development of lithium in Bolivia, or wind power as an industrial policy in South Africa. See my previous contributions on green growth, for example here and here. The main message is that there is much more to climate compatible development than simply domestically-focused mitigation and adaptation. This is a lesson being demonstrated in many national and regional plans supported by CDKN, for example in Eastern and Southern Africa and in Central and South America.

The risk is that the GCF will be constrained by governance through the UNFCC, and hobbled by UNFCCC terminology and priorities. It is to be hoped that the new Executive Director and Secretariat will be encouraged to take a broad view of climate compatible development. If they do, then an exciting possibility opens up, one I have long argued for in the context of work on UN reform – viz a significant source of loan and grant funding managed through the UN, rather than the World Bank and the other MDBs. It could have been interesting to have UNDP as the trustee of the new Fund – indeed, a case could have been made for making the GCF an organ of UNDP. Was this considered, I wonder?

The High Level Forum on Aid Effectiveness, which met in Busan the week before Durban, has mandated a review of multilateral development finance channels. It will be interesting to see how it treats the GCF and other climate funds.

Finally, none of this will lead to a single country adopting a new target in the short run, nor to a single windmill or solar panel being installed. Durban probably provides encouragement to those who today are setting targets and building windmills, and to those opposing coal-fired power stations or the development of tar sands. However, the world does need a global carbon price and more generous finance, and quickly, if warming is to be kept anywhere close to 2 degrees. It is a pity, maybe worse than just a pity, that we have to wait until 2020 for the fundamentals to be put in place. In the meantime, the running will continue to be made by progressive governments, local authorities and businesses, pushing the boundaries and hoping the regulatory regimes will soon catch up. On that, see my other contribution on the Durban Durbar.

Please comment on Simon's blog in the box, below.

Image of South Africa's presidency of CoP17, courtesy UNFCCC.

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