How much money will the Green Climate Fund (GCF) contain, and who will provide it? In the first of a series of three blogs on critical issues facing the GCF, Oscar Reyes looks at how and when the Fund will be filled now that it has declared itself ‘open for business’. The second in the series looks at the role that international financial institutions and national governments could play in channeling funds. The third in the series considers whether the fund is likely to support fossil fuels and other forms of ‘dirty energy’.
The UN’s Green Climate Fund (GCF) is finally up and running, after close to four years of negotiations and a string of false starts. At a May meeting in Songdo, South Korea, the Fund’s Board agreed on a series of rules deemed essential to receiving significant pledges. That means it’s now up to contributors to meet and decide how they’re going to fill the fund.
At its recent meeting, the GCF Board agreed on a funding process that“stresses the urgency to reach pledges by November 2014” in advance of the United Nations climate change conference in Peru the following month. With international negotiators due to discuss a first draft of a new global climate treaty at that meeting, there is not a moment to lose.
The GCF Board did not agree to a formal target for financial contributions, but Christina Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), suggested that the Fund’s “initial capitalization… should be at least $10 billion.”
Héla Cheikhrouhou, Executive Director of the GCF, went further, stating that “It is realistic and totally feasible and expected that the exercise of mobilizing initial resources of this fund should conclude by the end of this year…. If we raised somewhere between $10 billion and $15 billion, this amount could easily be deployed within three years.” The $15 billion figure was subsequently echoed by the G77 (a grouping of 133 developing countries) and AOSIS (Alliance of Small Island Staets) in the context of UN climate talks in Bonn, showing just how politically realistic the majority of the world’s governments think the target is.
While $15 billion may sounds a significant figure, several devils lurk in the details that are yet to be ironed out. Developed countries are typically slow to deliver on climate finance pledges, and it is likely that a number of countries will make pledges in the form of loans. The timescale for disbursing “initial” pledges is similarly uncertain. With the USA and Japan blocking any moves to establish a replenishment timetable, it is unclear how long this “initial capitalization” is meant to last.
Many technicalities, some of them highly politicized, remain to be worked out at a series of contributors’ meetings, the first of which will take place in Norway on 30 June – 1 July. Subsequent meetings will be split into technical sessions focused on policies for contributions where civil society observers and two developing country board members will be present, and executive sessions, open to contributors only. It’s likely that these closed-door sessions will be the place where donor countries will argue over both the scale of their respective contributions and whether these should be indexed according to a burden-sharing (or “fair shares”) approach. Germany has been the most consistent advocate of devising a scale for developed country contributions, which could in practice be related to financial capacity and/or a country’s historical and present responsibility for climate change. The USA and Japan, in particular, are likely to resist such a move – mirroring their hostility to such “top down” approaches in UN climate change negotiations.
The USA (again) and the UK have also argued that Brazil, China, India and South Africa should contribute to the Fund – a controversial stance that goes against both the spirit and the letter of the UNFCCC (to which both are signatories). Under the climate convention developed countries are responsible for providing climate finance because of their disproportionate role in causing climate change. Developed countries are also pushing the GCF to develop a “business model” that places private sector sources and turning a profit at its center. That could skew the Fund’s priorities away the needs of people most affected by climate change.
Despite the remaining uncertainties, the scale of GCF financing is likely to be modest by global standards, whether compared with the recent $52 billion replenishment for the International Development Association arm of the World Bank, the $30 billion pledged for “fast-start climate financing” (both of which cover a 3-year period), the $100 billion that the UNFCCC Cancún Accords claim is needed annually for international climate finance by 2020, or the up to $1.5 trillion that independent estimates suggest is actually needed.
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