Pledges in Paris were a start, but not yet enough to signal real GCF replenishment ambition

$9.77 billion in pledges allow for a familiy photo at the end of the pledging conference in Paris. Photo: GCF Board, license: CC-BY-NC-ND 4.0

With USD 9.77 billion pledged by 27 countries at the Green Climate Fund’s formal pledging conference in Paris last week, the first GCF replenishment period (GCF-1) is off to a decent and some would even say better than hoped for start.

This amount, overwhelmingly pledged in grants with only 6.2 percent committed as loans, is slightly higher than the USD 9.3 billion outcome of the Berlin pledging conference in 2014 – and this despite a number of developed countries, most importantly the United States and Australia, not coming to Paris with their checkbooks.

When the GCF started its first formal replenishment process just a year ago, the outcome was deeply uncertain. While optimists hoped for an ambitious finance mobilization result showing a clear growth trajectory for the Fund that would surpass the USD 10.3 billion raised overall during the past five years of the initial resource mobilization process (IRM), pessimists pointed to the absence of the United States, which under the Trump Administration had reneged on its initial USD 3 billion pledge after just USD 1 billion was paid in under the Obama Administration.

This immediate outcome from Paris – better than feared – falls nevertheless short of what civil society organizations active in the GCF had collectively pushed and advocated for, namely a doubling of all individual developed country contributions and collectively at least a doubling of the actual IRM outcome Ultimately, with the US shortfall and also due to cumulative currency exchange losses, the IRM had only netted USD 7.2 billion in funding available despite the USD 10.3 billion in overall pledges.

Developed country contributors: the good, the not so good, and the absent

In Paris, quite apparently, not all developed country contributors were performing equally well as the detailed pledging table released by the GCF Secretariat reveals.  While a significant number of countries such as early announcers Germany and Norway (who had already committed at COP 23 in Katowice) as well as France, the UK, Sweden and Denmark at least doubled their IRM contribution in their respective initial pledging currencies, this amounted to less than double in US dollars. And quite a number of countries pledged less than they could and should have.

The announcements by Canada (which also gave a third of its contribution as loans, besides France the only other contributor country to do so), Belgium, Austria, Spain, Liechtenstein, Ireland, Iceland, New Zealand, Portugal, Hungary and even Poland underwhelmed to varying degrees. Portugal even halved its already miniscule IRM contribution in Paris by pledging just EUR 1 million, and Hungary only committed 20 percent of what it had pledged in 2014 with a tiny USD 0.7 million contribution. Both countries were outclassed by new contributor Slovenia, which despite its much smaller size and economy committed EUR 1 million. In their excuse, several countries including Belgium, Ireland or Austria cited an inability to commit increased resources under current interim governments or to prejudge the funding decisions of new and incoming governments as reasons to basically stay with their Paris pledge at the IRM-level. Ireland was only able to commit funding for 2020, but voiced confidence that additional pledges were likely in the coming years.

Not surprisingly, in particular Sweden and Norway were the leading performers in Paris when calculating their GCF contribution on a per capita basis based on a country’s gross domestic product and using GDP as a proxy for a country’s ability to contribute. Followed by Luxembourg and the United Kingdom, which with USD 1,851 billion was the largest single contributor in Paris, these few countries continued to outclass many other developed countries with what some would call generosity and others would call coming close to delivering a fair share contribution, ‘in accordance with their common but differentiated responsibilities and respective capacities’ (UNFCCC Article 3.1.).

The absence of the United States and Australia was the most noticed and consequential.  However, they were not the only developed countries who contributed to the IRM but did not take a seat at the pledging table in Paris.  Bulgaria, Estonia, Cyprus, Malta, Latvia or Lithuania, all smaller scale supporters over the past five years, were also no-shows, as was the Czech Republic, which had previously paid USD 5.3 million to the GCF Trust Fund. Lastly Russia, which had contributed USD 3 million during the IRM, was not yet ready to pledge in Paris, stating instead that its government would look into making a contribution later.

From the developing country side, so far only South Korea, which hosts the GCF Secretariat in Songdo just outside Seoul, doubled its IRM contribution to USD 200 million, thus putting a number of European countries to shame. Mexico and Chile, which pledged during the IRM, attended the Paris pledging conference and have indicated interest in contributing and might do so before or at COP25. It is also rumoured that China is considering a contribution. In contrast, an expectation about a contribution by Qatar, which also attended one of the replenishment consultation meetings, did not materialize.

Paris as a sign-post, not the end of the pledging process

Despite a number of no-shows, non-contributors and under-performers, the chances are good that the overall pledged IRM amount will eventually be surpassed by cumulative contributions. At least this is what developing countries, which see the GCF as the main multilateral financing instrument for the implementation of the Paris Agreement, expect to see as a strong signal of commitment fulfilled by developed countries. Under the Paris Agreement, the grand bargain was that developing countries would take on an increasing share of global emissions reduction efforts in return for increased financial support provided by developed countries, first reaching USD 100 billion per year by 2020 and then increasing further with a with a new collective finance goal to be set by 2025. Thus, developing country climate negotiators will watch closely what happens with the GCF pledge level between now and the climate summit COP25 and where the tally will stand in Glasgow in 2020 (COP26), where developed and developing countries are expected to submit more ambitious new Nationally Determined Contributions (NDCs) than those initial ones they submitted for the 2015 Paris climate conference.

Thus, moving toward the COP(s), the message is that while the Paris Pledging Conference was an important first step, and probably the major sign post of GCF-1, it is by no means the end of the pledging period as the GCF Trust Fund can accept contributions until the end December 2023. It remains therefore important that the advocacy efforts of CSOs continue in those developed countries that have underperformed or might need that extra push to (re)join the community of GCF pledging countries, especially in the Unites States, Australia and Canada.  With the Trudeau government in Canada just confirmed for a second term, there is no impediment to increasing the Canadian contribution further, while over the next three years the administrations in both Washington and Canberra might be replaced with ones less antagonistic to multilateral climate commitments.

GCF IRM coffers almost empty

The new financing commitments come just in time, as the GCF is running out of money it can commit for projects. Of the USD 7.2 billion actual funding mobilized from the IRM, the GCF has already committed USD 5.2 billion for 111 projects in 99 countries since it became fully operational in October; a further USD 352 million are benefitting 126 developing countries in the form of readiness and preparatory support as well as project preparation measures.  During the same time, the administrative expenses for the Fund Board and its Secretariat, which has grown from only 27 staff at its humble beginnings in 2012 to an expected 250 staff at year’s end, have added up to a total of USD 410 million by end of 2019. If the Board approves the 14 projects and programs worth USD 485 million it is considering at its 24th meeting in mid-November, the last under the IRM period, there is just a little bit of financial wiggle room left.

It is therefore vitally important that those pledges are confirmed speedily into fully executed contribution agreements so that the GCF does not lose its ‘commitment authority” (i.e. its ability to make funding decisions). The commitment authority for GCF-1 is set at 25 percent of the pledges from Paris converted into signed contribution agreements.

Next Steps

According to previous Board decisions, the GCF Board will have to formally “consider and endorse” the outcomes of the replenishment meetings and the Paris pledging conference, including the Replenishment Summary Report which articulates the vision of contributor countries of how the GCF resources mobilized should be prioritized and directed over the next four years. The report urges the GCF to improve the impact, scale, quality and efficiency of its operations and to significantly increase the participation of the private sector and thus of private sector money leverages as well as resulting impacts measures, thereby drawing extensively on the findings from a comprehensive Forward Looking Performance Report by the GCF’s Independent Evaluation Unit mandated as part of the GCF replenishment process.

The discourse about the Fund’s future direction could be one of the more animated, if not controversial, discussions at the 24th Board meeting, as developing country GCF Board members are insisting that it is only up to the Board, not contributors, to set the strategic direction for the GCF over the replenishment period.  The GCF’s new Strategic Plan will then be formalized at the Board’s 25th meeting in March 2020.  Thus, the focus on the quantity of the GCF replenishment will morph increasingly into one about the qualitative direction of GCF programming over the next four years as well as whether the existing GCF business model is still – pending some required adjustments – largely “fit-for-purpose” or if the refilling of the GCF’s coffers needs to come with a larger organizational retrofitting.

Liane Schalatek, Heinrich Böll Stiftung, Washington office

This article was first published, in a slightly longer version, at https://us.boell.org/2019/10/29/pledges-paris-were-start-not-yet-enough-signal-real-gcf-replenishment-ambition