So much disagreement, so little time: With three out of four scheduled meetings of the Transitional Committee (TC) tasked with designing the new Green Climate Fund (GCF) now completed after the recent one in Geneva, severe differences remain primarily, although not exclusively, between the 25 developing and 15 developed member countries about form and functions of the Fund. This despite the fact that some progress and convergence of opinions on some important matters is emerging, such as that funding decisions should be driven by and consistent with developing countries’ own national climate and development plans. However, the points of divergence and disagreement are too many and too fundamental in nature to simply hope for a rapid alignment or quick compromise between the TC members.
Given that there are just two full days of negotiations in the 4th TC Meeting in Cape Town on October 16th and 17th and a mere four weeks of behind-the-scenes hackling and drafting left to bridge that divide, it is hard to agree with the optimistic assessment of UNFCCC Executive Secretary Christiana Figueres that the TC “is now fully on track to conclude the design of the Fund for the approval by the UNFCCC’s Conference of the Parties in Durban” in late November. The road to Durban remains bumpy, and TC members have little time to cover a lot of distance.
These contentious issues include the legal status of the Fund, its relationship with the COP and other governance arrangements, the engagement of the private sector, key operational modalities (such as the number of windows and financing instruments to be used) as well as overriding objectives and guiding principles to ensure that the GCF is a new kind of climate finance animal, one that fills gaps in the existing climate finance architecture and surpasses existing instruments in ambition, scope, scale and transformational impact.
They do in fact juxtapose two extremely different visions and business models for the GCF – one that foresees a bigger Fund controlled and overseen tightly by the COP which channels largely public budgetary contributions predominantly in the form of grants to developing countries according to their needs and allows them direct access to and ownership over how to spend, implement and account for these sums (the developing country preference); the other focusing on using limited public financial input into a smaller Fund which functions largely independent of the COP with the primary objective to facilitate the entry of private sector investments for developing countries in order to generate the bulk of the US$100 billion in long-term climate finance annually, but which establishes tight accountability, efficiency, results-orientation and fiduciary standards for direct access of GCF financing of recipient countries (the developed country preference).
For sure, the TC will be able to present something to COP 17, even if – as a last-ditch effort – members will have to use the first few days of the Durban conference for a 5th TC Meeting (technically still within their Cancun mandate to have COP approval by the end of COP17 for the proposed Fund design). Unfortunately, that push by the TC to successfully complete its mandate could come at the cost of leaving most of the really tough questions to be sorted out by the future GCF Board – the as of yet unknown 24 men and (hopefully at least some) women, 12 from developing and 12 from developed countries, who will effectively operationalize the new Fund.
Theoretically, such a Board could become functional and start its work as of January 1, 2012; in reality it will take significantly longer, if the four months it took UNFCCC parties to agree on the members of the TC from its regional constituencies are any guidepost.
TC members, if unable to agree on a range of detailed recommendations, could end up sending to the COP little more than an expanded outline, consisting largely of the various headings and discussion points which will include only bullets on Fund objectives and guiding principles, Fund governance, operational modalities as well as monitoring, evaluation and stakeholder engagement to be filled with further life by the future GCF Board. What such a rough framework document with a minimum of agreed language (and some proposed options) could look like, shows the document that the three Co-Chairs (from Mexico, South Africa and Norway), two Vice-Chairs (from Singapore and Australia) and Co-facilitators of the previous thematic working groups of the TC (from Barbados, Spain, Pakistan, Sweden, Australia, Switzerland and the Democratic Republic of Congo) presented on the last day of the Geneva meeting as “draft reflections”. TC members have only until October 5th to further elaborate on or change and amend this draft, having to rely solely on telephone and email exchanges, leaving many developing country members worried about the transparency and inclusiveness of such a process. An updated version of this document incorporating TC members’ comments will then be circulated to all TC members as the draft report of the TC to the COP 17 on October 7th. It will form the basis of negotiations at the 4th TC Meeting in Cape Town on October 16th and 17th. Ideally, the TC members will agree on the draft report and adopt it, effectively sending it to the COP 17 for approval in Durban a few weeks later.
However, while the procedural roadmap for the TC is clear, how to get there in substance still remains a big question and an – at the moment – seemingly insurmountable challenge. TC members had intense discussions – and severe disagreements – on several key issues, five of which were proposed by Norwegian Co-Chair Kjetil Lund for special focus in Geneva as central questions with the potential to “unlock” other open questions. These key issues with significant linkage to other open questions are the following:
1. The Fund’s relationship with the UNFCCC COP: While the Cancun Agreements specify that the Green Climate Fund is under the guidance of and accountable to COP, there is no clear understanding what this means with respect to the role of the COP in selecting Board members, in determining the permanent trustee of the GCF or the head of the Fund’s independent Secretariat and in evaluating and monitoring the Fund’s progress and accomplishments. Developing countries such as Brazil, the Philippines, Pakistan, India, China or Egypt argued largely for a very direct relationship, with the COP approving Board members, giving the direction for the Fund’s programs and strategies and evaluation its effectiveness in a continuous manner. The United States, representing the other end of the spectrum, argued that this would bring the Fund under the authority of the COP in violation of the Cancun mandate. In their view, supervision of the GCF through the COP should only come as part of the COP’s periodic supervision of the financial mechanisms of the UNFCCC. Instead, sole decision-making power for the Fund would rest with the Board as executive authority.
2. The establishment of an independent secretariat: The Terms of Reference for the design of GCF had stipulated the establishment of an independent GCF Secretariat. In the Geneva discussion, a number of developing countries (Egypt, Nicaragua, Brazil, Barbados, India, Pakistan, China, and Burkina Faso) felt the need to clarify that they understood the GCF Secretariat’s independence to mean independence from existing institutions and structures (for contrast, secretariat services for the Adaptation Fund are currently still provided by the Global Environment Facility (GEF)), but not from the Fund’s Board or the COP. Several developing countries indicated that the Fund’s Secretariat should be relatively small (Egypt, Philippines, Singapore) as most implementation and oversight would occur in the recipient countries. Members suggested the Secretariat should be staffed with experts from a variety of backgrounds and be geographically and gender-balanced (Nicaragua, Barbados, Korea), while avoiding a potential conflict of interest by drawing staff from Multilateral Development Banks (MDBs). TC members agreed widely that the position as head of the Secretariat should be merit-based and selected internationally according to a set of criteria; but they disagreed who (the Board or the COP) should draw up these criteria and make the selection.
3. Funding windows and earmarking: Most members seemed to agree that initially there should be only a small number of windows, primarily for mitigation and adaption with a balanced funding allocation, but that the GCF Board should have the capacity to create, augment or delete windows and delegate some decision-making power sub-committees. Several other windows were proposed, most commonly for REDD+ (supported by Belize, Spain, Germany, United Kingdom, USA, Peru) and for LDCs and SIDS (DR of Congo, Samoa, Belize). Other speakers suggested windows or a special financing facility for capacity building (Korea, Brazil), technology transfer (Saudi Arabia, Brazil) or transformational change (Spain, Germany, Peru and Italy) respectively, although the majority of TC members saw the need to integrate capacity-building and technology transfer as cross-cutting issues into all eventual funding windows. Members disagreed on the utility or desirability of earmarking of contributions for strengthening the allocation system of the Fund, with some rejected earmarking as contrary to the concept of country-ownership (Brazil, Philippines, Zambia, Peru and Saudi Arabia) and others seeing it as necessity to ensure that enough funding will be flowing to disadvantaged country and population groups (Belize) as long as some specific criteria and conditions would be observed (Egypt and Korea), or to increase the volume of funding for the GCF (Spain, United Kingdom, United States).
4. The engagement of the private sector: Should the GCF engage the private sector and if so, how would it do so more effectively than existing public climate finance instruments were questions which had been a strong focus of the TC discussions from their very beginnings, with equally strong opinions for and against among members. This became clear in the discussion about a possible private sector window at the Fund, with several countries such as Japan, the United Kingdom and the United States in favor, but the majority of members skeptical whether a separate window would be the right approach – albeit for different reasons. Countries such as Egypt and Nicaragua rejected its as outside the Fund’s mandate of enhancing the implementation of the Convention; several other countries (including Peru, Zambia, Burkina Faso and Nicaragua) felt the inclusion of the domestic private sector should be realized in the country-context of Fund recipients only, for example in the framework of public-private partnerships . Russia, Germany, France, Sweden, Singapore, Australia, the Netherlands and Denmark, while not supportive of a private sector window, called for a special set of engagement rules, financial blending instruments or a financing facility for the private sector in the Fund – a distinction between window and facility that will come down more to form than to function in the end.
5. The Fund’s legal status: That the GCF needs some sort of legal status seems to be in itself not in dispute. Most members have been convinced by the experience of the Global Environment Facility (GEF), which depends on its trustee, the World Bank, for support in matters requiring legal capacity, that the GCF must be independent of existing institution for jurisdictional issues, such as its capacity to enter into contractual agreements with recipient countries, a necessity for example for implementing a direct access modality. At question, however, in the TC discussions is what kind of legal status the Fund needs to fulfill its functions (does it need full legal personality or is legal capacity sufficient?); how it should be pursued or conferred (through an international treaty or via a host country government); if an interim solution might be needed in order to avoid delaying the operationalization of the Fund (the intent is for the Board to start its work in early 2012); and at what stage in the TC deliberations a decision on both an interim and a final solution should be made. Several developed countries (most vocally the United States, the United Kingdom, Germany, Spain and France) have consistently argued throughout the TC deliberations that “form follows function” and that thus a decision of the TC on the legal status of the GCF would be premature. However, another group of TC members have argued that being serious about ambitious objectives for the Fund means for members of the TC to support full legal personality for the Fund rather sooner than later, even if an interim solution might be needed (China, Brazil, Sweden, Pakistan, South Africa, Russia, DRC, Switzerland).
Co-chairs took pains to acknowledge many members’ concerns (including Saudi Arabia, Nicaragua and Philippines, but also the United States or India) that a focus of the Geneva discussions on these five key points would neither imply agreement on other issues not taken up in the meeting nor detract from their importance. Unfortunately, the list of contentious issue still awaiting agreement goes on: What to include in the list of principles and objectives for the Fund, an elaboration on the Fund’s “business model” to be used and its allocation criteria, what assessment and fiduciary standards to apply and if and how to account for the special situation of SIDS and LDCs remain issues fraud with the potential for further disagreement among TC members.
Whether all of these can be resolved in the short time left for the TC process remains doubtful. The facilitator group of 12 country members will no doubt attempt to put “members in a pressure cooker” in order to have a draft outcome for Durban, as Co-Chair Trevor Manuel from South Africa only half-jokingly threatened. What could be helpful at this point in breaking the deadlock and avoiding the last-minute political arm-twisting in the TC process that would undermine wide-spread ownership of and support for the Fund post Durban would be a positive signal.
This should come latest in Cape Town in the form of a concrete financing promise of the developed countries to ensure that the Fund will not start out with empty coffers and the new GCF Board has the financial security to convene in early 2012 in order to work out detailed operational guidelines for the Fund. Equally helpful would be a concrete offer from at least one member country to host the Fund and pursue a legal status on its behalf, ideally with some promised funding to support the seriousness of such an offer. So far, developed countries have not stepped up to the plate.
Photo: Liane Schalatek/Heinrich Böll Stiftung North America
Tags: Cancun Agreements, climate financing, COP 17, Green Climate Fund, Transitional Committee, UNFCCC, World Bank
