Green Climate Fund (GCF)

After the crisis at the GCF’s 20th meeting, new momentum is needed

GCF Building

The GCF building in Songdo © Brandon Wu, ActionAID

The Board of the Green Climate Fund (GCF) met at its headquarters in South Korea from 1 to 4 July 2018. The Fund’s 20th meeting will surely be recorded as one of its most difficult. It remains to be seen whether the events caused the Fund long-term damage or if they can be transformed constructively. The GCF’s political significance, along with the urgent need to tackle the climate crisis in developing countries, too, make it imperative for Board members to actively address the problems that have emerged and to seek viable compromises.

Procedural problems blocked decision-making

The first half of the four-day meeting was marked by procedural problems that made it more difficult to work through many items on the wide-ranging agenda and left little time to discuss and negotiate. The Co-Chair of Developing Countries from Nicaragua was not able to attend because of political unrest at home. Statements by Board members from some developing countries indicated that as a result it was difficult to conduct any substantive consultations and coordinate the group: At first neither the Co-Chair’s replacement nor the agenda could be agreed. In addition, some developing countries’ seats on the Board were unstaffed. This was because quite a few members were absent and a number of seats are vacant, largely due to political tensions within the group from Latin America. This situation led to the representatives of Saudi Arabia, Egypt and South Africa playing a stronger role than usual.

No decisions on project proposals or accreditations

These problems hindered decision-making on approving almost USD 1 billion to as many as 11 climate change mitigation and adaptation programs in developing countries. Accrediting nine implementation organizations – including five national institutions from developing countries – was also dropped from the agenda. This is regrettable because, according to civil society representatives, there were some good proposals, such as adaptation projects in the coastal regions of India and the highlands of Guatemala.

Civil society representatives were particularly critical of a Korea Development Bank (KDB) project to produce wooden pellets in Fiji and Papua-New Guinea for export, with some to be burned in Korean coal-fired power plants: Such a venture has little to do with transformative climate protection. Yet quickly “waving through” projects and accreditations because time was lacking would have been a violation of the Board’s duty of care. Before its next meeting in October in Bahrain, it is important to use the critical feedback to examine and improve project applications. The wooden pellet project in particular should be removed from consideration – as strongly demanded by the Secretariat and civil society representatives.

Funding shortages and replenishment as the main political issues

What had first come to light in the previous GCF meeting became more apparent in this one. Project approvals accelerated in the past year due to the great demand from developing countries and because the GCF procedures are now established. Core contractual regulations have been clarified so that disbursements to implementing organizations have started to speed up, although only USD 160 million have as yet been disbursed. The GCF can only budget just over USD 7 billion because although donor countries committed USD 10.3 billion in 2014. This is due to the approximately USD 1 billion lost as a result of exchange rate fluctuations and Trump’s refusal to pay USD 2 billion of the pledge made under the Obama administration. If all the applications had been approved during the 20th meeting, before the replenishment process is formally started only around USD 1 billion would have been left for other grants. Obviously it is important to avoid having to put off accepting projects and approving funding because it is not clear when the Fund will get more money: The preparation and preliminary work done by implementation organizations and governments are often very demanding. This is why it is urgent to begin the first replenishment process, which should have been formally started before the 20th meeting. Although substantive disagreements about this appear to be resolvable, they could not be bridged during the meeting because of the specific constellation of Board Members and the lack of time to negotiate.

One controversial point involved coupling the replenishment process with the adoption of particular policies and an evaluation of the GCF. The Secretariat proposed adopting policies still being discussed – including Board voting procedures, concessionality and co-financing, as well as gender equality – either before starting replenishment or simultaneously. Especially representatives of developing countries felt that they were pressured to make rapid decisions with “conditionalities”. Civil society organizations also perceive such a link not constructive. In some areas, such as gender equality, the fund is already working with interim policies which it can continue to do for some more time. In other areas there are still important gaps in its regulations. It should be common goal of the Board to have an effective and efficient Fund which disposes of sufficient financial means. Therefore it is necessary to close the Fund’s policy gaps and to replenish its funding base. Both can and needs to happen in parallel. But making a formal link between them is neither appropriate nor helpful as it would only create a blockage.

A conflict which is greater and far more difficult to solve, however, is reaching the right balance between the influence of the Board, which is the virtual representative of the Conference of the Parties (COP) and also the Fund’s decision-making body regarding replenishment – and the interests of major donors. Some donors want to decide on their own about how much money to make available under which conditions. The US representative’s statement that replenishment should be “donor-controlled” and requires no needs analysis was frankly criticized. Given the current American Administration’s attitude about paying, it is easy to see how the remark came across as both unhelpful regarding policy and intentionally provocative.

Civil society representatives consider that a sensible replenishment process requires thorough analysis of the following points:

  1. What has the Fund accomplished so far (given that setting up a fund always takes time)?
  2. What will it be able to accomplish in the next years through already approved programs?
  3. Which additional resources could significantly advance climate protection and adaptation needs in developing countries in the next four to five years?

The GCF Board should be the master of ceremony of the replenishment process, like already practiced by the Global Environment Facility (GEF) and the Global Fund – supported by the Secretariat and enhanced by high-profile members. Meetings of ministers, heads of state and governments could help achieve an ambitious outcome by ensuring sufficient political support and announcing commitments.

COP 24’s ambitious results require new impetus

Intensive preparation for the Board’s next meeting should make it possible to find the compromises needed to start an efficient and targeted replenishment process. In order to give the GCF planning security, this should be nearly finished by June 2019. That would also serve as an important signal for the 24th UN Climate Conference to be held in December 2018 in Katowice, Poland, where a lot will be at stake: refining the details of the Paris Agreement and increasing climate protection ambitions within the Talanoa Dialogue. Weak aspects of the GCF must be addressed, although like other funds it, too, is learning institutionally, and taking distance from it would be wrong at this time. Decision-makers in the German government should substantially replenish the Fund – and strive to at least double its contribution.

Sven Harmeling, CARE

Lutz Weischer, David Eckstein, Germanwatch

The preparation of this article and the attendance of the board meeting were facilitated with funding from the GCF CSO readiness project supported by the International Climate Initiative (ICI).