Fixing the Crisis of Confidence in the Green Climate Fund


By Jacob Waslander and Patricia Quijano Vallejos (*)

WASHINGTON DC, Oct 1 2018 (IPS) – The Green Climate Fund’s mandate couldn’t be more crucial: accelerating climate action in developing countries by supporting transformational investments in adaptation and emissions reduction.

Projects already financed by the GCF range from solar power in Mongolia and improved water management in Colombia, to climate-resilient agriculture in Ghana, Nigeria, and Uganda.

However, the GCF is facing a crisis of confidence.

Its most recent Board meeting, in July, was spectacularly unproductive, and its executive director left the organization. This is only the latest example of a broader problem—a GCF that in the eyes of many can be a lot more effective and efficient.

More resources and strengthened governance are fundamental to restoring confidence in the GCF, as we lay out in a new working paper, Setting the Stage for the GCF’s First Replenishment.

After speaking with 86 stakeholders—including board members from developing and developed countries—we have recommendations for strengthening key aspects of the GCF.

An Uncertain Future

In 2014, contributors pledged $10.3 billion to the GCF, making it the biggest multilateral climate fund. This money is used to stimulate environmentally sustainable economic growth in developing countries by funding projects like renewable energy facilities and storm shelters that reduce emissions and adapt a country to the changing climate.

Now, four years after the initial contributions were pledged, the GCF is getting close to allocating most of its resources and triggering a new round of funding (“replenishment”). However, given the GCF’s crisis of confidence, uncertainty looms over the process.

That is a problem, for the present as well as the future. Developing countries have prepared their nationally-determined contributions (NDCs, which are national climate plans) with the expectation that–in addition to their own domestic budget resources–they can count on financial support from developed countries, including through the GCF.

Given the longer-term objectives of the NDCs, good planning and timely implementation are key; this in turn requires predictable external financial support.

Hence, replenishing the fund and providing predictability to that funding is very important. The question is, how should contributing countries split the bill?

Splitting the Bill

How should the financial burden be allocated? The same way you might approach dividing up a dinner check among friends: agree on an objective, transparent, and fair way to determine who should pay for what.

In a similar manner, contributors might apply objective criteria to assess their contributions to the GCF. In our paper, to advance the conversation, we designed a formula that combines three objective criteria: gross national income (GNI), greenhouse gas (GHG) emissions and GHG emissions per capita.

This is just one suggestion; the important thing is that any way of thinking through what countries contribute should remain based on objective data. You can interact with our methodology using our Contributions Calculator:

As expected, applying the formula will require most developed countries to increase their contributions. For leading countries—Denmark, Finland, France, Germany, Japan, Norway, Sweden, Switzerland and the United Kingdom—each of whom exercised exemplary global leadership in the initial round of funding, giving more than the minimum—we recommend they at least match their ambitious contributions in the replenishment.

More details on what our formula would imply for each of the contributing countries can be found in our GCF Contributions Calculator.

To be sure, the elephant in the room is the United States. The world’s second-largest GHG emitter has made no contributions to the GCF since 2016, at which point it had contributed a third of its pledge.

Stakeholders we interviewed stressed the need to stay engaged with the United States, the country that our model suggests should make the biggest contributions to the GCF.

Another feature of the Calculator relates to other countries, which might join the mix of contributors; you can experiment with the possibilities in our Calculator.

If developing countries decide to contribute, especially those that are already major emitters, it must be clear that these contributions will be voluntary and will not count towards the international finance goal of mobilizing $100 billion per year from 2020 onwards by developed countries.

Strengthening Governance to Deliver Results

The most recent GCF Board meeting in South Korea in July 2018 ended in gridlock. The Board had $1 billion in projects in the queue, and shockingly approved none. Project proposals from countries all around the world (like Tonga, India, Guatemala, South Africa and Cote d’Ivoire) are still waiting their turn. The Board also failed to advance preparations for the replenishment process.

This is just a recent example of deficiencies in the GCF’s governance system, which undermine confidence stakeholders’ confidence in the GCF – including developing and developed countries.

This loss of confidence will potentially restrain contributors from making new funds available to fill the coffers of GCF, subsequently affecting developing countries’ ambition to contribute to the timely implementation of the Paris Agreement.

This lack of progress corroborates concerns about the GCF’s governance interviewed stakeholders shared with us. We identified several shortcomings. We think three cross-cutting solutions can unlock the gridlock:

  • Apply consensus, not unanimity, to decisions. The GCF has interpreted consensus to mean each and every one of the 24 members has to agree with a proposed decision. Consensus is important, but not at all costs: if some Board members have reservations with a proposed decision, the Board should still be able to move forward through a mechanism for decision-making in the absence of consensus (as provided for in the GCF’s governing document.) This is essential to remain a reliable partner and to be able to accelerate climate action in developing countries.
  • Introduce a Board self-assessment mechanism. The Board needs to work in a collegial, structured and results-focused manner; it is important to assess from time to time whether deliberations are living up to these standards. Like many other institutions, we recommend both an external assessment and a self-assessment of Board performance.
  • Strengthen the Board’s role as a representative body. Most stakeholders noted a lack of clarity on what role Board members have, which countries selected them, and what responsibilities the hold. A more transparent system for selecting Board members, accounting for their positions on policy issues and clarity about their mandate, would rectify these ambiguities, as would better efforts to connect Board members with the countries they represent.

For the GCF to work, it needs predictable funding and governance reform. Predictable funding and governance reform can only come from committed leaders, who support climate action and from that perspective are willing to support a dynamic and transparent GCF, which can take risks for the sake of promoting bold action.

Time is not on our side, leaders need to act to make sure that GCF can make up its promise to support transformational change in developing countries.

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 (*) Jacob Waslander is a Senior Associate at World Resources Institute and a former board member of the Green Climate Fund & Patricia Quijano Vallejos is a lawyer and Research Analyst in the Finance Center at World Resources Institute.

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Annex

The Guardian view on climate policy failures: don’t give up

Editorial

The world is failing to combat the threat of climate change. Global carbon dioxide emissions from coal, oil and gas increased by 1.6% in 2017, after three years when they rose little or not at all. Demand for oil is increasing by around 1.5% a year. Last week one of the authors of a key United Nations climate report warned that governments are “nowhere near on track” to meeting their commitment, made in Paris three years ago, to avoid global warming of more than 1.5C above pre-industrial levels.

When it is unveiled next week, the report from the UN’s Intergovernmental Panel on Climate Change (IPCC) will give a clearer idea of the probable consequences of this failure. One recent study suggested the impact of a temperature rise of 2C could be more severe than previously thought, and include sea level rises of six metres by 2100. The relationship between climate change and specific weather events is complex, but modelling suggests global warming made this summer’s European heatwave twice as likely. The increased frequency and severity of tropical storms fit with longstanding predictions that warmer oceans will bring more chaotic weather.

Slowing the rise in temperature means taking steps towards decarbonisation that are more dramatic than anything achieved so far, such as the eradication of emissions from cars and air travel. Activists are hugely important in raising public awareness. So it was disappointing that three environmental activists were sentenced to between 15 and 16 months in jail for their part in a protest against fracking in Lancashire. This punishment, for causing a public nuisance, is unduly harsh and disproportionate. The 2008 Climate Change Act, committing the UK to an 80% reduction in emissions by 2050, was a world-leading piece of legislation. Now the advisory Committee on Climate Change says we are on track to miss legally binding targets, and that this looming failure is partly attributable to government. As well as transport emissions and the removal of incentives for insulation, it has raised concerns about the regulation of fracking. Fracking – or shale gas extraction – is unpopular in England (it is banned in France and Scotland). Campaigners are also opposing government proposals to smooth the planning process for frackers. We do not advocate breaking the law. But when the news on climate change is so alarming, the commitment of green activists around the world is one reason for hope.

The UN’s role in leading and coordinating multilateral action is also crucial. The crisis surrounding its environment chief, Erik Solheim, is all the more unfortunate given the timing. Questions over his $488,513 travel expenses, and his wife’s position at a company that has a contract with the UN, must be resolved as a matter of urgency. Governments must also start to take seriously suggestions such as the one made by the French president, Emmanuel Macron, that if the US eventually quits the Paris climate accord, other countries should refuse to trade with it. Donald Trump’s administration is a threat to global stability. Last week it emerged Trump officials argued that because global temperatures, on current trends, will be 7C higher by 2100, the US should not bother doing anything to inhibit global warming but instead ought to loosen restrictions on carbon emissions. This is absurd nihilism. Mr Trump needs to be convinced of his wrongheadedness, for the world’s sake. The UN’s report is expected to say it will be extremely difficult to meet the 1.5C goal – but not impossible. We should all hold on to that idea.