Expectations and the emerging picture of the GCF are creeping apart (source: UNclimatechange)

In advance of COP 17, the Green Climate Fund’s (GCF) Transitional Committee (TC) have passed the Parties a report, recommending it “take note” of the report’s findings. It is worth analysing this report since it  brings in to clearer focus the contrast between the expectations that some have for the fund – largely the private sector – and the the emerging picture of the fund.

Specifically, the overarching sentiment from the report is that the GCF will be a vehicle for aid-based disbursement. This is not necessarily consistent with the guiding principle of “catalyzing climate finance.” It is this apparent confliction – between the guiding principle of acting as a catalyst for climate finance, supposedly inclusive of the private sector, and the emerging picture of aid-based finance – that has recently attracted criticism from figures such as Yvo de Boer, and the frame in which we should view the suggested design of the GCF given to Parties at COP 17.

Sourcing the money

The report states that the finance will be delivered at a country level. This means that finance delivered by the GCF could, for example, be delivered to a sovereign-administered fund that lends to projects or programmes that aim to execute a particular objective arising from a national policy.

A natural consequence is that the GCF can be expected to deliver finance in much the same way as existing multilateral funds. Notably, it will place far more importance on public rather than privately sourced finance, since private investors would find it more difficult to contribute to a fund that’s lending criteria focus on promoting a particular national or regional policy, first and foremost, delivering returns as a somewhat more ancillary benefit.

The report, however, does state that the GCF should have a private sector facility that employs the private sector in fund contributions. It is unclear if the reference to a separate “facility” should be interpreted to mean that the privately sourced finance will be disbursed through mechanisms separate to those for public sector finance, nor if such a distinction should emerge, how the private finance will be delivered.

Disbursing the money

Inspecting the financial instruments recommended for disbursement of the funds gives perhaps no clearer demonstration of an aid-based picture. Disbursal will be focussed on grants and concessional lending. The instruments will be used to finance the additionality gap – taking the risky investments that the private won’t take alone in order to get a programme or project off the ground.

Clearly, grant-based disbursal limits the involvement of the private sector in the fund’s capitalisation. This also extends the earlier question: will concessional lending on a country level attract private investors to the fund, and if not, will the private sector facility employ delivery mechanisms that are different to grants and concessional lending.

A stark contrast

In contrast to the emerging picture of the GCF, the Green Climate Finance Framework (GCFF) suggested by BNEF is a manifestation of the expectations of the private sector. In this proposal the public sector contributions make up around 10% of the fund, are delivered by aid-based finance and used to leverage the remaining 90% from the private sector, i.e. fulfilling the mandate of catalysing finance for climate change from the outset.

It could be argued that the difference between the GCF and the GCFF is based largely on the level of the involvement of the private sector, and that both can catalyse finance by funding the additionality gap. This is true, but a design like the GCFF does far more catalysing from the outset, precisely because it is leveraging nine times more private than public sector capital.

The GCF, as it stands now, is the inverse of the GCFF – predominantly aid-based delivery of finance at a country level, with a small, but “non-negligible,” role for the private sector. This set-up, if justified properly, is not in-and-of itself objectionable. It is, however, of concern that the emerging picture of the GCF seems to contrast sharply with the expectations of the private sector, whilst also limiting the fund’s ability to catalyse private sector finance from the outset.

Underwater cabinet meeting held in the Maldives, to call attention to climate change in small island states. © Divers Association of Maldives

Article by Guest Contributor: Natalie Antonowicz

During the second week of the Cancun Conference, developing countries continued to express their unique vulnerability to climate change, and push for increased involvement and assistance from developed countries. Some progress was indeed made on this issue, but concerns remain about the ability of vulnerable states to address climate change.

Fiji, a member of the Alliance of Small Island States pushed for “an effective international cooperation mechanism that provides finance for climate change adaptation and mitigation, as well as capacity building and technology transfer”. Fiji, and its allies, have voiced concern about the slow pace of progress on delivering capacity building assistance to small island states. As a result of their poverty and ecologically sensitive locations, small island states are particularly vulnerable to the environmental and economic impacts of climate change. Tuvalu has called upon the Adaptation Fund Board “to provide greater capacity building for islands that are particularly vulnerable to the effects of climate change”.

Sweden and South Korea have voiced interest in adaptation partnerships and efforts. However, negotiations persist about how funding for adaptation, under the Ad Hoc Working Group-Long-Term Cooperative Agreement, is to be handled. Generally, developing countries favour integrating the management of both adaptation and mitigation funds into one institution, while developed countries prefer separate institutions.

Presently, many small island states are unable to fulfill the criteria necessary to receive funding from the Adaptation Fund Board, and are urging reforms to the board, that would make their qualification for funding easier. Tuvalu’s deputy Prime Minister stated: “[w]e also need capacity building in actually implementing projects in accordance to the criteria of the Board”, and that vulnerable countries require access to adaptation funding. Tuvalu and its allies argue that the criteria currently in place prevent them from completing projects such as seawalls that will protect them from rising sea levels. As such, small island states have called for a broader scope, in terms of the eligibility of projects for Adaptation Fund monies.

At Cancun, a new Green Climate Fund was established, for the purpose of aiding developing countries address climate change. Additionally, the USD100 billion fund to aid developing countries in addressing climate change was renewed at Cancun. A committee was also created to address the details of the fund’s operation.

The agreement signed in Cancun “recognizes that well-intentioned efforts to address climate change can result in adverse impacts, and establishes a new process to consider those impacts”. Specifically, respecting human rights is noted as key in the process of combating climate change. Essentially, a link between environmental degradation and human rights has been forged at Cancun.

Pundits have labeled the progress made at Cancun a reaffirmation of the multilateral process. As president of the Alliance of Small Island States, Grenada has voiced its general support for the draft agreement produced at Cancun. Karl Hood, the country’s environment and foreign affairs minister stated that [i]t is not perfect and it is not a done deal, but let us accept it and let’s move forward”.

Overall, the second week of the Cancun Conference represents progress towards capacity building for vulnerable developing countries. However, details pertaining to funding criteria and fund management remain undecided.

Delegates to the Tawara Climate Chance Conference (Image by: Government of Kiribati)

Article by Guest Contributor: Natalie Antonowicz

Held in Kiribati from 9 to 10 November, the Tawara Climate Change Conference produced the Ambo Declaration, which was signed by Australia, Brazil, China, Cuba, Fiji, Japan, Kiribati, Maldives, Marshall Island, New Zealand, Solomon Islands and Tonga. Although Canada, the United Kingdom and the United States also attended the conference, they chose to adopt observer status, and did not sign the declaration.

Other observers in attendance included representatives from Food and Agriculture Organization of the United Nations, the Intergovernmental Panel on Climate Change, UNFCCC and the World Bank. NGOs present included Greenpeace and the World Wide Fund for Nature (WWF). This demonstrates significant attention to the issue from both intergovernmental and non-governmental organizations.

The Tawara Conference represents the second meeting of the Climate Vulnerable Forum, or V11, created in 2009, as part of the Bandos Island Declaration, which was signed in the Maldives in 2009. The V11 comprises Bangladesh, Barbados, Bhutan, Ghana, Kenya, Kiribati, the Maldives, Nepal, Rwanda, Tanzania and Vietnam. These small island states and least developed countries are especially vulnerable to the negative effects of climate change. They are also among the states least capable of adapting to the effects of environmental degradation.

In addition to its core members, the V11 also comprises the following observers: China, Denmark, France, Japan, the Netherlands, Norway, Russia, the United Kingdom, and the United States. Such meetings are key, as they highlight the above stated goals of assuring cooperation, dialogue and partnership between developed and developing states, on issues of climate change financing and adaptation.

Kiribati’s President Anote Tong expressed his country’s goal of having the Ambo Declaration “contribute hopefully to some positive steps forward in the Cancun negotiations”. Presented in 18 points, the Ambo Declaration emphasizes signatories’ “concerns on the urgency of the climate crisis calling for immediate access to adaptation funds to meet and address current and projected impacts of climate change”.

President Tong stated “[t]he message we are trying to make here very clearly is that we are running out of time and as long as the global community continues to debate, it may be too late for small countries”. This indicates the sense of urgency brought to the negotiating table by Kiribati and similarly vulnerable countries.

The Ambo Declaration represents partnership and communication between vulnerable developing countries and their economically advanced counterparts. This is important because it demonstrates developed countries’ support for the unique vulnerability and plight of small island states. President Tong has expressed optimism at China’s signature of the declaration, but feels discouraged by the United Kingdom and United States’ reluctance to do the same, as the participation of these two countries is crucial to the success of any international environmental agreement.

Signatories will present the Ambo Declaration to the COP at the Cancun Conference, with the intention that it will provide “some positive steps forward” for the negotiations concerning financing for climate change adaptation. The ultimate goal of the Tawara Conference was to encourage developed countries to contribute funds to adaptation projects. It remains to be seen at Cancun whether any new agreement to this effect will be concluded. This may be unlikely, as representatives from France and the European Union – major voices at COP16 – have expressed their reluctance to commit to the declaration.

Signatories to the Ambo Declaration called for “decisions on an ‘urgent package’ to be agreed to at the COP 16 for concrete and immediate implementation reflecting the common ground of Parties, consistent with the principles and provisions of the Convention, and the Bali Action Plan, to assist those in most vulnerable States on the frontline to respond to the challenges posed by the climate change crisis”. Parties “welcome[d] the growing momentum and commitment for substantially increasing resources for climate change financing and call[ed] on developed country Parties to make available financial resources that are new and additional, adequate, predictable and sustainable, and on a clear, transparent and grant basis to developing country parties, especially the most vulnerable States on the front line, to meet and address current and projected impacts of climate change”. Developed country support was urged, particularly in terms of capacity building and technology transfer.

Signatories also “call[ed] on parties to the UNFCCC to consider the need for establishing an international mechanism responsible for planning, preparation for, and managing climate change related disaster risks in order to minimize and address the environmental and economic costs associated with loss and damage”. Finally, timeliness and transparency were urged, in order to ensure “a balanced allocation of resources between adaptation and mitigation”, and the consideration of “unique circumstances of most vulnerable States in the frontline”.