Will divisions in the board delay the Green Climate Fund?

Guest post by
and Neha Rai
Blogs, 18 November 2014
Britain says it will donate 'strongly' at this week’s Green Climate Fund (GCF) pledging meeting. But there are arguments within the board on how countries can access and spend the fund.

A maize farmer near Alauca, Honduras, takes a break from digging irrigation channels.  Climate change is expected to have a big impact on Central American crops and farmers and decision makers need information on climate change adaptation.  (Photo: Neil Palmer/CIAT via creative commons)

Developed countries are responding to pressure to pledge money to the Green Climate Fund (GCF — set up to help developing countries respond to climate change). But they are also pushing for measures that, to developing countries, seem to overlook the fund's ultimate vision — which was to build capacity in developing countries and so empower them to tackle climate change.

With the GCF set to open for business in a few months, initial resource mobilisation was high on the agenda at the latest board meeting in Barbados (October 2014). Almost US$7.5 billion has been pledged so far.

Sweden has pledged an ambitious contribution of US$550m. US (PDF) and Japan (PDF) are the recent game changers pledging $3 billion and $1.5 billion ahead of the pledging meet, and Britain says it will donate 'strongly' at this week's meeting in Berlin (19-20 November).

Deciding where the money goes, and who can spend it

The October board meeting had plenty of disagreements. One was over 'earmarking' (PDF). Developed countries pushed for control over where 20 per cent of their contribution goes. But such earmarking clashes with the principle of 'country ownership' for GCF projects.

Developing country negotiators felt they would rather have no decision than one including earmarking. Their solidarity on this point meant that the issue was ultimately parked until next time.

But accreditation was the main sticking point. This is the process of selecting 'implementing entities' — institutions within developing countries that will funnel money and implement projects. The draft decision from the board meeting, though still formally pending, is expected to say that any institutions meeting accreditation requirements can apply to become an implementing entity.

'Fit for purpose' and 'fast track' access

So what are those accreditation requirements? The board discussed the 'fit-for-purpose approach' (PDF), which would allow the fiduciary standards required of an implementing entity to be varied according to the nature, scope and risks of the proposed activities.

But the possibility of fast track (PDF) direct access to the fund for institutions from contributing countries (bilateral entities) proved to be a thorny issue. Developing countries fear this might reduce their 'ownership' and indirectly impede their access to the fund (because using bilateral agencies does little to empower developing countries or develop skills and capacity within those countries).

Furthermore, fast tracking (PDF) would take account of an institution's track record. This essentially favours established developed country institutions (bilateral, multilateral and private) over those from developing countries, which have less capacity.

The board did decide that institutions accredited by other relevant organisations or funds (such as those accredited by EuropeAid, the Adaptation Fund or the Global Environment Facility) are eligible for fast-tracking. These will have to show that they comply with any GCF standards not assessed by the other fund. Once again however, developing countries dissented; saying that national-level entities should be given priority in the spirit of country ownership, and that efforts should be made to build the capacity of institutions coming from the poorest countries.

The board had hoped to agree the whole accreditation process before GCF becomes operational in early 2015, but the disagreements were so strong that this has yet to be finalised.

Voting rights on the Green Climate Fund board

The board also disagreed on its own decision-making procedure. Developed countries, which have pledged the most, were keen to see voting linked to contributions, thereby giving them more clout. But developing countries, who are not obliged to contribute, vehemently resisted this departure from consensus decision-making and its inevitable lessening of their own influence.

Maintaining country ownership

But setting earmarking, voting issues and accreditation aside, who will actually decide whether GCF funded projects or programmes go ahead in a country?

Developing countries favoured an explicit 'no-objection procedure' that would require each country's national designated authority, the organisation granted responsibility to authorise and approve participation in clean development mechanism projects, to approve projects/programmes.

Board discussions were at stalemate for a while, with developed countries and private sector observers warning of overly complicated procedures. They called instead for an 'implied non-objection procedure', where approval is presumed after a set time (to be determined by each country).  

Eventually, the board settled on requesting a letter of approval from the National Designated Authority. If the secretariat does not receive such a letter within 30 days, it will suspend the project submission. The developing countries won this point largely by sticking together.

But it wasn't their only triumph. The board also decided to pilot an Enhanced Direct Access phase for the GCF that will delegate authority so that regional, national and some sub-national implementing entities can approve individual activity proposals, thus maintaining the principle of country ownership as a central feature of GCF programming.

United they stand

Developing countries have shown willingness to remain steadfast, achieving some important 'victories' as a result. But while the situation is not quite Machiavellian, the political economy dynamics emerging between developed and developing countries may still have a significant bearing on the fund's ability to help developing countries propose and run their own programmes.

These disputes may exert even more influence as the GCF finalises how it will operate. Can the differences be reconciled? They must be if the board is to maintain a country driven approach that puts the most vulnerable at the heart of the fund's design and programming.

Neha Rai (neha.rai@iied.org) is a senior researcher with IIED's Climate Change GroupBarry Smith is an independent consultant working with IIED's Climate Change Group.

Why is the Green Climate Fund's pledging meeting important? IIED Director Camilla Toulmin quizzes Pa Ousman Jarju, The Gambia's Minister of Environment, Climate Change, Water Resources, and Parks and Wildlife and the first Special Climate Envoy to be appointed from a Least Developed Country, about the importance of the GCF summit and what it means for the world's vulnerable nations at COP20 in Lima and beyond.