Foreign Policy In Focus

By refusing to make any firm commitments at the Doha summit to deliver money over the next decade, industrialized countries are effectively relegating the GCF to irrelevance.

Cross-posted from Responding to Climate Change.

For those of us (wonks, admittedly) interested in the fate of the Green Climate Fund – potentially the most important multilateral institution to deal with climate change in the near future – the outcome of 2012 Doha climate summit was a disappointingly mixed bag.

The 194 countries assembled there made promising statements about the importance of the fund in the international climate financing architecture and outlined their work for the year ahead.

But by refusing to make any firm commitments in Doha to deliver money over the next decade, industrialized countries threatened to relegate the GCF, at least temporarily, to irrelevance.

No new money in the mid-term

Three years ago in Copenhagen, developed countries agreed that by 2020 they would make sure $100bn reached developing countries each year to address the impacts of climate change and support their shift from dirty energy to low-carbon development strategies.

They also promised to move $30bn right away – what’s come to be known as “fast start financing.” They left unfunded the years between 2012 and 2020.

Thus commitments from wealthy countries for specific amounts and deadlines for medium-term financing became a key ask for developing countries at Doha.

Wealthy countries did not, in the end, agree to funding targets or benchmarks to ensure the delivery of climate finance from now through the end of the decade. 

The Doha decision weakly “encourages” developed countries that had already pledged to provide some climate money before 2015 to increase their efforts to at least what they had promised in the fast-start period, and “urges” the remaining developed nations to make pledges “when their financial circumstances permit.”

Hardly the display of urgency or mandate for action that any of us were hoping for.

The decision document also invited (but didn’t require) wealthy countries to submit their strategies for moving $100bn by 2020, and granted a one-year extension to a process meant to help indentify pathways for scaling up climate finance in the long term.

In other words, while governments say they’re anxiously awaiting the opening of the Green Climate Fund, there appears to be little enthusiasm for making public money actually flow.

Moving forward on GCF infrastructure

Despite a lack of political will to fill the fund, there was some forward movement on building an institution worth putting money into. The following four issues are some of the most important pieces of the Doha decision that the GCF’s board will report on when nations reconvene at the 2013 climate summit.

1. Secure funding

Seeing little money materialize in Doha, the board of the Green Climate Fund was tasked with securing funds from industrialized country governments as well as a variety of other public and private sources.

The economic crisis and budget shortfalls are pushing contributor countries to call on the private sector to be more involved in climate funding – even promising to funnel money directly from the Green Climate Fund to private investors for projects in developing countries.

But while the private sector has played a significant role in providing finance to energy and other climate-related projects, experience shows that left to its own devices, the private sector often doesn’t put the needs of people at the center of its investments.

For instance, money channeled through the private arm of the World Bank – the International Finance Corporation – tends to bypass impoverished countries and marginalized people within middle-income nations.

These are the countries and communities least responsible for causing the climate crisis, but most impacted by its effects.

GCF board members will have to establish rules for effective, appropriate engagement for the private sector to make sure that projects and policies prioritize the goals of the Green Climate Fund rather than those of investors.

At the same time, leaders should harness the popular narrative of fiscal hardship to implement innovative ideas for funding national budgets – like a carbon tax or a financial transaction tax. These policies are good for the climate and financial stability, and raise revenue that can be used beyond climate.

2. Develop a ”no-objection” procedure

Calling for a ‘no-objection’ procedure was one way that the Green Climate Fund’s founders tried to ensure that both private and public investment serves the needs of impacted people.

The procedure should help ensure genuine developing country ownership of activities within its own borders by giving any government the power to nix a project or program supported by the GCF headed for their country that doesn’t meet national goals.

Also, securing “no-objection” at the national level should help people living within a country – particularly individuals and communities affected by a GCF project – reject an activity that might be well-intentioned, but could ultimately undermine their development.

If designed right, the no-objection procedure could help filter out projects that are incompatible with national strategies, conflict with better programs and projects, or impose undue harm or costs upon host communities and their environment.

3. Balance support for adaptation and mitigation

Given the emphasis on pulling private sector investors into the fund, the GCF board will need to implement clear standards to ensure that programs and policies to build resilience to climate change impacts receive the resources they need.

Investors, not surprisingly, look for a return on their investment, and as a result support for profitable mitigation and large-scale projects dwarfs that for adaptation.

According to recent studies, only 15 percent of all climate finance goes to adaptation – for private climate finance that shrinks to a mere 5 percent.

The GCF board will have to go beyond setting rhetorical guideposts for allocating finance and establish concrete directives based on the goals of the fund and the needs of developing countries.

4. Set-up the structure

In order for the fund to meet its aim of providing climate finance for a climate-conscious paradigm shift, it needs a credible and effective infrastructure.

That’s why countries attending the Doha meeting asked the board to make arrangements for a permanent secretariat to take care of the day-to-day work of the fund, and to make a plan for coordinating with the other relevant bodies of the climate convention like the technology and adaptation committees.

The board was also tasked with establishing rules for an open, transparent and competitive bidding process to find a permanent trustee so that the World Bank – now holding the interim position – doesn’t automatically fill the post.

Many developing countries and climate campaigners are calling for an alternative to the World Bank because of its history of placing policy conditions on loans, racking up developing world debt, and supporting dirty energy around the planet.

On the bright side, Doha showed that both developing and developed countries are committed to getting the GCF up and running.

But for the Fund to meet the needs of climate-impacted communities, satisfy contributor countries, and achieve basic standards of fairness and effectiveness, its members have their work cut out for them this year.

Janet Redman is co-director of the Sustainable Energy and Economy Network at IPS.

Cross-posted from the IPS blog.

The UN climate talks held in Cancun late last year paved the way for a new Green Climate Fund to channel money for developing countries to build resiliency, protect forests, and bring low-carbon technologies and practices into mainstream use.

That marked a critical victory for developing countries, but the biggest fights have yet to come. In the coming year, a committee of 40 government representatives (25 from developing and 15 from developed countries) will be working furiously with the UN and other institutions, as well as finance, gender, community participation, and other experts, on making this fund a reality. They must do everything from creating a management structure to forging a global definition of "clean energy."

This ambitious task is meant to result in a Green Climate Fund that can handle the tens, if not hundreds, of billions of dollars a year developing countries will need in the coming decades to combat climate change and at the same time continue their fight against poverty.

It's fundamentally disturbing, however, that the World Bank — the planet’s leading cheerleader for a growth-without-limits development paradigm — is elbowing its way to the front of the line to help design the new fund, almost guaranteeing itself a permanent role in its management.

More than 90 environment, development, human rights, and anti-debt organizations from around the world conveyed this concern in a letter to the Secretary of the UN Framework Convention on Climate Change (UNFCCC) and the convener of the first fund design meeting.

In the letter, civil society leaders called for strictly limiting the World Bank's role in the design on the Green Climate Fund for the following reasons:

First and foremost, the World Bank continues to finance dirty coal, oil and gas projects. According to a World Bank Group Energy Sector Financing Update prepared by the Bank Information Center, the global lender supported fossil fuel projects to the tune of $6.6 billion in 2010, a 116 percent increase from the year before. That included $4.4 billion for coal power projects, more than it spent on all new renewable energy and energy efficiency projects combined for the year ($3.4 billion). So while the World Bank is undeniably increasing it renewable energy financing, the volume is still dwarfed by its fossil fuel lending.

Bobby Peek, director of groundWork/Friends of the Earth South Africa, an environmental justice group in Durban, South Africa, that endorsed the NGO letter, noted, “Only a year ago the World Bank made its largest loan ever to dirty energy, signing $3.75 billion over to the Eskom energy company to build a 4,800MW coal-fired power station in South Africa.” He asked, “Is this the institution we want to put in charge funding the solutions to the climate crisis?”

Bank officials say that the Eskom power plant — and similar coal projects in other countries — are important for bringing access to electricity for energy-poor families. But environmentalists and local activists argue that the project will benefit large mines and smelters, not the local community. In fact, in an independent review of the Bank’s 26 fossil fuel loans in 2009 and 2010, Oil Change International found that none of these clearly identify access for the poor as a direct target of the project. The Bank agreed that not a single coal or oil project could be classified as improving energy access.

To the World Bank’s credit, it may be about to change course to a degree. A leaked draft of its new 10-year energy strategy revealed plans to move away from supporting new coal projects in middle-income countries. But environment and development groups argue that the language used in that draft document is riddled with loopholes. The energy plan also includes a massive scale-up of hydropower mega-dams that threaten to displace communities, destroy fisheries, and release their own greenhouse gases.

The Green Climate Fund should remain fully independent from the World Bank. Its design committee should engage experts from UN agencies and all regions of the world. Experts on gender, sustainable development, poverty alleviation, renewable energy and efficiency technologies, indigenous peoples, human rights, and social and environmental safeguards should weigh in, too.

Janet is co-director of the Sustainable Energy and Economy Network, where she provides analysis of the international financial institutions’ energy investment and carbon finance activities.