What’s the meeting about anyway? The board of the Green Climate Fund (GCF) met last week in Bali to work out how to allocate, spend and disburse its donated money last week, amid criticisms of “corporate capture” and lack of any serious financial commitment so far.
Why does it matter? The GCF was established in 2011 to be the world’s major fund for responding to a changing climate. It is supposed to channel the $100 billion a year promised by developed countries in 2009 toward mitigating and adapting to climate change. It contains board members from both rich and poor countries, as well as observers from both the private sector and civil society. Given the ever gloomier projections of climatic doom coming from scientific and non-scientific institutions alike, its important the GCF gets its decisions right. Since climate change affects the world’s poorest the most, there are also close links with issues associated with international development, poverty, and who gets to decide how money is spent.
What was on the agenda? There were 8 decisions to be made, the mains ones including
- How funds should be allocated (between mitigation and adaptation, through the public or private sector)
- What form they will take (grants or loans),
- What level of “country ownership” will there be (how much say will recipient countries have)
- How projects will chosen be for funding
- Social and environmental safeguards of projects – ensuring there are no damaging impacts
- Evaluating the outcomes of projects
What was decided? Not that much. The board decided that there should be a 50:50 split between funding for mitigation and adaptation projects. They also agreed that half the adaptation funding should go to countries most vulnerable to climate change – namely the Small Island States (like Tuvalu and the Maldives) and the Least Developed Countries.
There was also, controversially, a decision to “maximise engagement” with the private sector by allocating a significant account through the private sector part of the fund.
Why is that controversial? The big debate about this promised $100 billion a year is where it’s all going to come from. Developing country governments and much of their civil society want the money to come from public resources of rich country governments. Ideally, they want countries to donate freely to the fund and then have the fund give out grants for climate adaptation and mitigation projects. This is because developed countries bear almost all the responsibility for carbon emissions and its consequences, and the $100 billion pledge was made in the spirit of compensation and conciliation. However, countries are now stepping back from this pledge and looking for other sources of cash, particularly since the rise of austerity measures across the Europe and the US – that means inviting the private sector.
That matters, because the private sector doesn’t do anything for free. Private sector involvement is naturally premised on gaining returns on its investment. That makes it more likely to offer its support in the form of loans, not grants. It also makes it less likely that the world’s very poorest will be reached by private sector adaptation measures, as they are not a segment of the market that has the capacity to generate profit in a short time scale. Loans are also criticised for increasing the debt burden on developing countries who are already struggling to afford their own development. This is particularly so in the context of the work done to slash developing country debt
What got left out? We still don’t know how much country ownership there will be – exactly how much will go to the private sector, how projects will be approved or how they will be evaluated. The rest of the big decisions were postponed to the next meeting in May, where an extra day has been added to deal with them
Bummer, so what happens next? The fact is that for all the discussions and talks, the GCF doesn’t actually have any money to spend yet. Indonesia put in $250,000, Italy $500,000, and Germany and Korea have thrown in a few million to pay the bills at the new HQ in Seoul. Without money to spend and without any real commitment from the private sector, it’s hard to know how seriously the talks will be taken unless there is some real dollar in the pot.
Any saving graces?
There’s been some serious talk this week by Francois Hollande and Angela Merkel about the Robin Hood Tax, a tax on financial transactions, which is alleged could raise $27 billion a year. 11 EU states and a range of celebrities back the tax, which, it is argued could put significant funds direct to the GCF and other poverty reduction programs. This could at least help get things going, although still falls far short of what’s really needed.
Who’s winning? The private sector (although we don’t know how they’re winning, or by how much).
Who’s losing? Too early to tell, it’s likely to be the budgets of developing countries.