The UN climate change convention's Green Climate Fund (GCF), aims to help countries adopt "transformational" pathways to low carbon, climate resilient development. Its 6th board meeting last week in Bali yielded mixed results for the world's most poor and climate vulnerable countries.
Good news for adaptation
The board reached an important agreement, aiming to allocate equal funding to projects that help countries adapt to the impacts of climate change and those that help them mitigate the problem by reducing greenhouse gas emissions.
This is good news for the most vulnerable countries, which need to adapt, as most climate finance to date has been for mitigation. Almost half of the adaptation money is expected to go to the Least Developed Countries and the Small Island Developing States.
The board agreed to ensure geographical balance in access to the fund, while maximising scale. But this proved contentious. Large developing nations opposed its proposal to limit the amount any country could access to five per cent of the total.
India and China said 'country limits' would prevent large economies from starting the 'paradigm shift' needed to develop low carbon and climate resilient economies.
But the Least Developed Countries see country limits as a way of protecting their interests. Without them they fear the fund will be unfair, and that the bigger emerging economies would get most of its resources, as happened with the Clean Development Mechanism (CDM).
To bridge these divided opinions the Board agreed to set guidelines instead of hard targets, and said it will assess risks of resources being concentrated unfairly.
Private sector engagement
As well as funding adaptation and mitigation projects directly, the Fund will have a third funding channel, which aims to encourage the private sector to invest in action on climate change.
But what proportion of the fund's resources should this Private Sector Facility get? The board's initial proposal was to allocate 20 per cent. Some industrialised nations said this was not enough to encourage sufficient engagement from the private sector.
Other countries argued that as the Private Sector Facility's scope was undefined, it made little sense to set targets at this stage. They expressed concern around the risk that most of the private sector funding may direct its support to mitigation rather than adaptation projects (for which it is harder to make a business case). Civil society also expressed concerns that private finance should not be seen as a substitute for public finance.
In the end, the Board acknowledged it hadn't clearly set out its vision for the private sector facility and set no specific targets, but stated the funding should be "significant" to incentivise the private sector to engage in climate change actions.
The fund has "readiness support" — money to help countries set up the systems they need to access, manage and use its finance effectively. But the board made no formal decisions on how this programme will work. There was consensus though that countries should not duplicate existing plans to receive and spend international climate finance.
The Board also said local institutions should be engaged to support this, but the United States and some other countries objected, saying this was against international procurement rules. It was agreed that the board will provide procurement guidelines as a next step.
The board spent much time discussing how to measure the results of climate adaptation actions, but made no final decision.
A clear message from delegates was that countries should have flexibility to define their indicators in line with their own national plans and priorities. Some board members, including UK representatives, said indicators should refer to the specific resilience outcomes countries want to achieve, instead of adding complex layers of sectoral indicators that may not represent national priorities.
Board members from Zambia and India called for a simplified results framework and said the fund should allocate finance to enhance the capacity of countries to monitor and evaluate projects.
Another issue with the Fund's performance-based funding framework is that while it may be effective at gauging efficiency it could encourage countries and the private sector to focus on results that are easiest to measure instead of promoting 'transformational' actions.
By measuring progress in terms of overall outcome and impact it could help keep the focus on developing innovative projects that can lead to the major changes the Fund aims to bring about.
The board meeting ended with a few concrete decisions but a long list of suspended or side-stepped agenda items. Among the big questions are: What structures will the fund set up to support adaptation and mitigation projects? And, how will countries own and access the funds? These must be agreed at the next board meeting in South Korea in May to ensure the Green Climate Fund can get off to a strong start.