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Multilateral politics

Another opportunity

by Liane Schalatek
Tanzania must prepare for rising sea levels: the port of Zanzibar’s Stone Town

Tanzania must prepare for rising sea levels: the port of Zanzibar’s Stone Town

The UN Climate Change Conference in Cancún last year decided to establish the Green Climate Fund. Negotiations on its structure are underway. They offer a chance to correct the shortcomings of the funding instruments that have been in use so far, including inadequate financing for adaptation to global warming and the unpredictability of cash flows. By Liane Schalatek

A few months before the Climate Conference in Durban, South Africa, the urgently necessary funding to help poor countries adapt to global warming and reduce carbon emissions is still being misused as a bargaining chip in the global politics over what rich and poor nations must contribute to stem global warming. This kind of politicisation is destructive and must be stopped.

To do so, the negotiations over the new Green Climate Fund in the context of the UN Framework Convention on Climate Change (UNFCCC) provide a perfect opportunity. The Cancún summit agreed on important decisions concerning international climate finance. They must be implemented without the irritating quid pro quo of linking them to emissions reductions in emerging markets like China, Brazil and India.

The serious impacts of climate change are already being felt. The poorest nations are affected in particular – and the hardest hit are their poorest people, including women and indigenous peoples. Global warming is threatening these populations’ future development opportunities and even their survival. Progress made in recent decades is at risk, and so is the achievement of the Millennium Development Goals by 2015.

Fundamental principles

The climate summit in Cancún confirmed the short- and long-term financial commitments industrial nations made to support developing countries in their efforts to reduce their greenhouse gas emissions and adapt to the impacts of climate change. Rich nations pledged $ 30 billion for the three years to 2012 as “fast-track funding” as well as an annual sum of about $ 100 billion by 2020 in long-term funding.

These amounts may look substantial, but they are below what the World Bank reckons is needed. According to its estimates, up to $ 100 billion will be required annually for adapation alone by 2030, plus up to $ 175 billion for reducing emissions. Nevertheless, the Cancún commitments were a significant improvement. Up to July 2011, various climate funding mechanisms only made available some $ 13.2 billion over several years, and that includes some of the fast-start money.

However, the international community still lacks an agreement on how to guarantee the increase in financial commitments between 2013 and 2020. There are no funding sign posts or precise goals. It would be good if the climate negotiations in Durban were to provide greater clarity, but that is unlikely to happen. Strained budgets mean that industrial nations, in particular the USA, do not have the political will to dedicate more money to official development assistance (ODA) and international climate protection.

This basic dilemma is leaving its mark on the debate over the money for the new global Green Climate Fund and the new institution’s objectives. On behalf of the international community, the Transitional Committee is negotiating these matters. It has 40 members (25 from developing and 15 from developed nations). The Committee met for the first time in April and is supposed to present its proposals in Durban, where a vote is to be held.

Important guidelines were already passed in Cancún:
– a “significant share” of the new multilateral adaptation funding is to be channelled through the new Fund,
– the Fund is to strive for a “balanced allocation” between financing for adaptation to climate change and emissions reduction,
– all climate money (not only those of the Green Climate Fund) must be additional to old commitments, and
– the flow of money must be predictable, corresponding to actual needs.

These guidelines address the essential weaknesses of climate funding as we know it. In the past, for example, far too little money was made available for adaptation to global warming. Relations between donor and recipient countries, moreover, are strained by the fact that rich nations often fail to fulfil their commitments on time and in their entirety (see box).

The Green Climate Fund could go some way towards changing this dismal situation. It should systematically tackle the existing weaknesses in the international architecture of climate funding. To do so, a fundamental re-think and a new global consensus are needed. While that is not in sight yet, there are some promising initial agreements. For example, all parties in the Transitional Committee want the new Fund to focus rigorously on results.

It is also clear that the Green Climate Fund will allocate funds not only through multilateral bodies like the World Bank or the UNDP, but will also grant recipient countries direct access, similarly as the Kyoto Protocol’s Adaptation Fund (AF) already does. This approach strengthens the ownership of developing countries. “Country ownership” as defined in the Paris Declaration on Aid Effectiveness thus applies to Green Fund disbursements too. The AF only started handing out money in early 2010, but its experience already shows the need for capacity development and technical assistance if least developed countries are to make use of direct access. The Green Climate Fund must bear these costs right from the start. It should, moreover, allow sub-national actors including civil society organisations to apply directly for funds for meaningful projects.

Effectiveness and efficiency

Agreement, however, has not been reached on many other issues, including, for example, the amount of public money the Green Climate Fund will be able to disburse. Developing countries argue that the major part of the long-term climate funding – $ 100 billion annually from 2020 on – should be channelled through the Fund. For this to happen reliably, most of the Fund’s money would have to come from rich nations in the form of compulsory budget payments. They would also have to provide the Fund’s initial capital from their public coffers.

In the medium-term, the private sector and innovative funding mechanisms such as carbon taxes will certainly be part of the financing mix for the Green Climate Fund. However, without core funding from public funds, balanced distribution (in the sense of at least half of the money being used for adaptation purposes in poor countries) cannot be guaranteed. Public funds are needed for adaptation because massive private-sector investments in measures of this kind – as opposed to clean energy technology – are unlikely.

Additionally, in order to have a truly transformative effect, the Green Climate Fund must set new best practice standards. This applies mainly to considering and involving a range of interest groups at the sub-national level. Fund disbursements should be based on national plans that are drafted in open and transparent participatory procedures, involving all relevant interest groups in the recipient countries. The affected communities and civil society representatives should be given a role as active observers on the board of the new Fund with a right to intervene in deliberations. Such an approach would help to boost the influence of women and indigenous people, who often get only very little say in decision-making on funding.

The Green Climate Fund, moreover, should set up an independent evaluation unit and a redress mechanism. This demand is in line with the current practice of multilateral development banks.

Finally, the Fund needs rigorous guidelines on social, gender and environmental issues. Otherwise it would be at risk of repeating old mistakes of development aid. The guidelines must be in line with existing human rights as well as environmental and labour-relations laws. This is not about imposing a new kind of conditionality, as some governments in the de­­velop­ing world fear, but about ensuring the efficiency and effectiveness of the Fund and the equitable allocation of its money.