Designing — and Funding! — the new Green Climate Fund « Climate Equity

Designing — and Funding! — the new Green Climate Fund

26. January 2011,

Now that the political decision was made in Cancun in December to set up a global Green Climate Fund, the task turns to the only seemingly more mundane and less glamorous work of figuring out what the GCF should look like and what it can and should do.  Provided, of course that there will be a significant chunk of money flowing through a new GCF.  However, this seems less than clear and might be the biggest of several major design challenges such as its governance facing the new fund….

Unfortunately, the sources of finance for the Green Climate Fund are precisely what the Cancun Agreements do not address.  The section on finance in the text of the working group on long-term cooperative action (AWG-LCA) only reiterates the promise, first made a year earlier in Copenhagen, that the US$ 100 billion per year by 2020 in funding for climate mitigation and adaptation efforts of developing countries will come from a “wide variety of sources, public and private, bilateral and multilateral, including alternative sources.”  No word on how much of this funding should come from the public sector, nor any specificity on how much of the USD 100 billion could or should end up being paid into the new Fund– except for a vaguely worded pledge that “a significant share of new multilateral funding for adaptation should flow through the Green Climate Fund”.  This could be quite a chunk of money, assuming developed countries stick to another, likewise pretty imprecisely worded pledge in the agreement for a “balanced allocation between adaptation and mitigation.”  This is by no means certain, however.  One year into Fast-Start-Finance, industrialized countries, evidence – for example from the EU’s 2010 fast start finance commitments – shows that adaptation financing still remains the poor step-child of climate financing, and up-to-now  fast-start promises for a balanced approach translate into a loop-sided allocation in overwhelmingly in favor of mitigation.  

Nor does the Transitional Committee, a new 40-member expert group tasked to design the new Fund in a series of working meetings until year-end, have any mandate to talk about the Fund’s potential finance sources.  Instead, negotiators in Cancun gave only a half-hearted reference to the findings of the work of the High-level Advisory Group on Climate Change Financing – but a clear message, especially coming from the developed countries: the decisions about where the money for the Green Climate Fund is to come from is too important (read: too political) to be entrusted to the UN climate process. At best, the G20 or the Major Emitters Forum will take the issue up soon. At worst, they won’t, given that 2011 will be another though year fiscally for most, if not all of the potential contributor countries.  This would make the Green Climate Fund – despite all the efforts and hard work the Transitional Committee will no doubt invest in the next few months to come up with the legal and institutional arrangements, the funding windows and access modalities the new Fund should have – nothing but yet another “placebo fund,” unless an adequate amount of start-up funding can be identified until Durbin. 

If GCF start-up funding is to rely primarily on industrialized countries’ budget contributions, then the future of the new Fund might be already cut short.  Instead, using the experience of the Adaptation Fund as a guide, either  an automated contribution (such as the 2 % levy on CDM projects that flow into the Adaptation Fund) or a mandatory revenue source (such as international taxation schemes) might be needed.  Some commentators have suggested to apply an essentially ready-for-application scheme for an International Solidarity Levy on Air Travel to generate funding for adaptation projects in a Green Climate Fund. They argue that such a levy could be jump-started by voluntary action of just a small group of willing contributor countries, while allowing for opt-in by more countries later on.  Just as the CDM-levy did for the Adaptation Fund, monies generated by such a scheme would allow the Green Climate Fund to begin operations independent of voluntary pledges by contributor countries that might or might not materialize in a timely fashion.  

Of course, such a “coalition-of-the-willing” approach outside of the official climate negotiations would not obliterate the need for serious negotiations on a multitude of possible financing sources for the Fund in the run up to Durbin.  Within the UNFCCC context, this is one of the tasks of a new Standing Committee agreed to in Cancun, which is to assist the parties of the climate framework convention in their efforts to mobilize financing, although its roles and functions are not yet clearly defined – and might not be in time for decisions in Durbin.  Thus, a voluntary levy, even if only applied by a few developed countries, would give the new Green Climate Fund a fighting chance to survive its birth and the first year of its infancy and thereby improve its chances to grow up strong and resource-full.

Photo: seannaber with Creative Commons License

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