Green Climate Fund (GCF)

GCF Pledging Event: Success is more than just one big number!

Photo: Bill Brooks. This image is licensed under Creative Commons License.

The G20 Summit in Brisbane the past weekend brought on new high profile pledges as the US pledged up to $3 billion and Japan up to $1.5 billion bringing the GCF closer to crossing the $10 billion threshold. Taken together, pre-Berlin pledges already add up to USD 7.43 billion – three quarters of the pledge meeting goal. That last quarter, though, might prove to be the toughest to fundraise at the pledging event in Berlin.

What makes the GCF new and different – and thus requires an ambitious financial commitment of new and additional resources by the industrialized countries which have financial commitments under the UNFCCC – is its vision to affect the paradigm shift toward low-carbon and climate-resilient development in recipient countries. The new Fund sports an inclusive governance structure with half of the 24 Board seats held by developing country representatives. And as the first climate fund ever it takes a gender-sensitive approach from the outset.

The GCF is to become the main multilateral channel for the Copenhagen commitment to raise USD 100 billion by 2020 in support of climate action in developing countries. Crucially important for the poorest developing countries, including the small island developing states, least developed countries and African states, the GCF is mandated to spend 50 percent of all its resources to help developing countries to adapt to climate change, with half of this money reserved for the most vulnerable states. In contrast, globally, climate finance flows to developing countries at the moment focus overwhelmingly on emissions reductions. These benefit almost exclusively a handful of large emerging economies such as India, Brazil, South Africa, China or Mexico, but largely bypass poor developing countries, which have profited little so far from carbon-focused development but whose populations suffer already most severely from climate change impacts caused by the accumulation of historic emissions of the industrialized countries.

Although the GCF was conceived to address several shortcomings of existing funds, the greatest shortcoming of all international climate funding efforts – the absence of mandatory assigned contributions for those countries with financing obligations under the UNFCCC –continues on in GCF resource mobilization.  With only voluntary efforts by industrialized countries, there is no guarantee for a fair burden sharing of GCF inputs commensurate with an Annex II country’s economic strength, relative share of global emissions or comparable contributions to other multilateral climate funding efforts, such as the GEF or climate-relevant official development assistance (ODA). Yet the recent analysis from Oxfam can provide some rough guidance on what could be considered a fair share.

Ultimately, though, the numbers tell only half of the story. As important as how much money a developed country promises in Berlin will be in what form and how soon the pledge reaches the GCF trust fund as an actual payment. There is a world of difference between committing money to the GCF exclusively in grants as the American and German pledges are expected to be rather than in loans or capital contributions which is the form that a portion of the French contribution is expected to take (although most details of individual contributions are not yet known).  If the vast majority of pledges at the Berlin meeting are in the form of grants, then the GCF Board will have the most flexibility, not only to pass on grants to developing country recipients, but also to take some riskier investments that could be needed for sector-wide or private sector approaches. With loan or capital contributions, in contrast, the GCF Board will have to favor loan investments that guarantee a solid return to be eventually in a capacity to pay contributors back or out – but which might not necessarily be the most forward-looking or innovative investment decisions or those addressing the most urgent needs of developing countries especially for adaptation.  Likewise, it will matter how quickly and over what time-frame pledges are fulfilled.  For example, if the German contribution schedule could indeed span up to nine years, as has been reported (with just a minor first payment in 2015) , it could prove to be a lot less significant for the Fund early operations than a smaller pledge fulfilled very quickly. On the other hand, if a hostile parliament does not support a country government’s pledge – as could be the case with a Republican-led US Congress actively opposing a number of climate initiatives by American President Obama – concrete budget appropriations might be lingering or threatened by domestic renegotiation or scaling back.  Some industrialized countries might be tempted to prevent negative parliamentary reaction by turning to “targeting” – placing conditionalities on their contribution by stipulating that it might be only used for a specific purpose.

In the two previous meeting of potential GCF contributor countries in July and September leading up to the Berlin pledge meeting, a number of countries proposed that suggested future voting procedures for the GCF Board in the absence of a consensus could be tied to contributions and that countries could target contributions for mitigation, adaptation or private sector activities respectively. These are practices common in the Bretton Woods organizations, where donor governments hold most sway.  Although the full GCF Board had rejected any contributor conditionalities at its October meeting in Barbados, they might nevertheless make an unsavoury comeback in Berlin.  This would be a sad beginning for a new climate fund promising to be innovative and moving beyond “business-as-usual” by firmly putting developing country recipients in the driver seat.

Liane Schalatek/ Heinrich Böll Foundation North America

Read more: a more detailed analysis of Success is more than just a big figure!