Making the climate fund fit for purpose

Guest blog by
27 August 2015

With the Least Developed Countries Fund (LDCF) running on empty, and as the final stages of the negotiations leading up to the Paris climate conference (COP21) approach, climate negotiator Giza Gaspar Martins argues that the fund's future must be secured to support the world's 48 poorest countries.

The Ministry of Environment and Forests (MoEF) of Bangladesh won the Earth Care Award 2012 for spearheading the  Least Developed Countries Fund project 'Community-based adaptation to climate change through coastal afforestation in Bangladesh' (Photo: UNDP Adaptation Learning Mechanism)

The Least Developed Countries Fund (LDCF), established more than a decade ago to support the world's 48 poorest countries in responding to their most critical and immediate climate change adaptation needs, is empty.

As we approach the final stages in the negotiations leading up to the Paris climate conference (COP21), the future of this fund needs to be secured.

The lack of funds has meant that climate adaptation projects in some of the world's most vulnerable and least capable countries have been stalled. In June, the fund's secretariat reported that it was urgently seeking some USD $220 million for 29 projects that had been put on hold because of the lack of funds. I have no doubt that these figures have risen since then.

Governments have promised $100 billion per year for climate finance by 2020, but there is a common misconception that all this money must be channelled through the new Green Climate Fund (GCF). Of course, the $10.2 billion pledged to the GCF so far (of which more than half has been paid to date) is welcome, and future contributions are encouraged.

But as chair of the Least Developed Countries (LDC) Group in the United Nations climate negotiations, I also urge us all not to overlook the need to replenish smaller climate funds, including the LDCF, which provides support for LDCs and other vulnerable countries.

What is distinct about the LDCF?

There is no denying that the LDCs have raised a number of issues about the way the LDCF has been running over the years – my colleague from Nepal, Mr. Batu Uprety, chair of the LDC Expert Group at the UNFCCC (LEG), has touched upon some of them previously. But the fund's unique characteristics which were designed to respond to LDCs' needs should not be ignored.

The LDCF, as its name suggests, is the only climate fund set up specifically for the 48 countries classified by the United Nations as the poorest and weakest members of the international community.

LDCs typically do not have the institutional or human capacity to develop elaborate project proposals needed to compete for resources from large funds. The LDCF has been an important channel through which donors have provided grant-based finance to support our countries' most urgent adaptation actions.

Another vital characteristic is that the LDCF provides equitable access to resources for all LDCs, acknowledging the reality that, even within the LDC category, certain countries have more capacity to access and manage resources. The fund has avoided disbursing resources on a first-come, first-served basis and instead put in place a ceiling for the amount of funds each LDC can access, which is adjusted as the fund grows. As a result all of the LDCs have been able to benefit.

Securing a future for a 'fit-for-purpose' LDCF

One major challenge is that contributions to the LDCF are voluntary. This has meant that contributions have been unpredictable and the funding available has been far from adequate. Although conservative estimates of resources needed to fully address LDCs' urgent and immediate adaptation needs amount to $5 billion, the LDCF has received less than $1 billion to date.

Clearing the backlog of projects currently on hold due to the lack of funding is an immediate priority. But certain reforms might also be needed to ensure a secure future for the LDCF. For example, a replenishment cycle that allows resources to flow into the fund in a sustainable and more predictable manner, would improve the situation, as would a mechanism to enable contributions from alternative sources of funding.

A 'fit-for-purpose' LDCF might also demand a rethink as to the fund's remit as a key player for LDCs under the larger climate finance architecture. One interesting option could be for the LDCF to play a leveraging role for LDCs, allowing them to gain access to larger pots of climate finance. The fund could act as an 'incubator' for adaptation projects that could then be scaled up through other funds like the GCF.

We are at an important crossroads. The future of the LDCF can still be saved, but time is limited. Climate negotiators are now just two short meetings away from the seminal Paris COP, where governments are expected to adopt a new, universal and legally binding climate change agreement.  

The outcomes of Paris will lay the foundation for the future global climate regime, and therefore it is critical that thinking on the LDCF's future is further developed.

I welcome your views on the role you see for the fund.

Giza Gaspar-Martins is the chair of the Least Developed Countries Group (LDC Group) under the United Nations Framework Convention on Climate Change. This blog was originally posted by the Climate and Development Knowledge Network (CDKN).