New Climate Change Funds: Hurry Leads to Flurry
Article no: EN20080916-Article-5.3-2008
New Climate Change Funds: Hurry Leads to Flurry
Northern donor countries in the last 18 months have pledged billions of dollars in new financial commitments to fight climate change. More than a dozen new bilateral and multilateral environmental funding mechanisms have been proposed. While the provision of new financial resources to address the most urgent challenges of climate change is commendable, even if long overdue, the question arises if in the rush to do good the donor governments have really done well, writes Liane Schalatek from Washington, DC.
A new study commissioned by the Heinrich Böll Foundation and WWF, ???042ae69b1b104f613??? (see reference) describes an apparent ad hoc approach leading to a patchwork quilt of funding mechanisms which lack cohesion, coordination and risks an aggravation of dysfunction because of real and potential competition among the international lead agencies involved, specifically the World Bank and the Global Environment Facility (GEF).
* 14 new funding initiatives
Compiled by a research team from the London-based Overseas Development Institute with consultants in Washington, DC, the report is straight forward with its own omissions: by design, it does not address in much detail some of the long-standing issues such as equity, fairness, effectiveness, efficiency and moral obligations that should inform an intelligent and honest global discourse about climate change finance today and financial flows from the North to the South under any future post-Kyoto climate agreement. What constitutes ?new and additional? funding as opposed traditional overseas development assistance? What are the ?common but differentiated responsibilities? between North and South which the UN Framework Convention on Climate Change (UNFCCC) holds out as yardstick for action from all signatory states?
The report does not dwell on these principles ? mainly because the actual new funding proposals and mechanisms fail largely to take them into account. Instead it focuses on a detailed analysis and description of these 14 new funding initiatives, eight bilateral and six multilateral funds: What are their stated objectives? What their means of financing and disbursement? And how (and by whom) are they governed? This is vital and necessary information and an indispensable background for any normative debate about global climate finance and a North-South ?climate deal? beyond 2012.
The report describes the motivation for these new funds as a desire of donor countries to achieve more immediate impacts than the present global environment finance system up to know was able to deliver, and to achieve them fast ? even if that meant limiting the involvement of potential recipient countries in the design of these funds. G8 countries? impatience zeroed in on the preeminent institutions within the current architecture, the World Bank and the GEF, although the remedies dished out by the G8 to deal with their perceived malaise differed markedly.
* World Bank and G8 versus GEF
Particularly the GEF in its function as the financial arm of the UN climate negotiations and three other Rio Conventions sparked the scorn of some G8 countries; the US, Japan and the UK see the Facility as ineffective, slow and too narrow-minded in its approaches to affect true transformational change for the global environment. No surprise then that these three industrial countries were the driving forces behind a set of the new multilateral climate funds to be managed by the World Bank, not the GEF, thereby effectively (and possibly irrevocably) moving the locus for strategy development and funding decisions for climate-related international investments away from the GEF and toward the Bank.
Three new World Bank-managed climate investment funds (CIFs) signal the institution?s and World Bank President Zoellick?s ambition to morph the Bank into the global climate-finance powerhouse, or, as a World Bank fund officer offered propel the early actions piloted by the GEF to scaled up ?market take-off?. They intend to support low carbon technologies (Clean Technology Fund, CTF), pursue climate change adaptation efforts (Strategic Climate Fund, SCF, with a Pilot Program for Climate Resilience, PPCR) and reducing emissions from deforestation and forest degradation (Forest Carbon Partnership Fund, FCPF).
In Hokkaido, the G 8 industrialized countries pledged their willingness to support these funds with $6bn. While this funding is still far from secure ? for instance, the US contribution has to be confirmed by a new Congress after November?s presidential elections ? these financial pledges are significantly higher than the expected $500m by 2012 which the new UNFCCC Adaptation Fund will have at its disposal. It is far from clear if the G8 commitments for these climate funds constitute indeed ?new and additional? funding or are just redirected ?old? ODA ? in which case the G8 euphoria for the World Bank climate funds could be bad news for the GEF?s next replenishment negotiations.
What is more bad news for the GEF, all three new World Bank Funds mirror similar funding schemes currently managed by the Facility. The danger of duplication (of uncoordinated) efforts is further complicated by the involvement of bilateral funds in the same key areas, namely low carbon technologies, adaptation, and avoided deforestation such as the Japanese Cool Earth Partnership, the German International Climate Initiative or the Norwegian NORAD Rainforest Initiative. Not only is unclear how these will fit into a global climate funding picture, but new (bilateral) entrants ? and several initiatives are in preparation ? could increase the dysfunction among the various funding mechanisms.
* Contested emerging environment finance architecture
Proponents of the new climate funds, especially the CIFs, do not see this as a big problem. With their limited time-horizon ? most are designed to stop dispensing funds after 2012 ? they are sold as an important financial bridge to fill a current funding gap while offering the opportunity to experiment and ?pilot? new approaches. However, critics don?t paint such a rosy picture of these new funds and the emerging new environment finance architecture, worrying instead about the undermining of the UNFCCC process, a side-lining of the GEF and a shift away from the hard-won compromises between donor and recipient countries that for example the GEF secretariat embodied. Southern governments and critical civil society would instead prefer a harmonization process of these funds within the UNFCCC framework, thus guaranteeing that developing countries interests, perspectives and priorities are reflected in the design and management of any climate finance mechanisms from the very onset ? and not just as an afterthought as has happened in the case of the CIFs.
The study echoes these concerns, calling for ?complementarity and synergy among the various initiatives [... ] to be secured within the UNFCCC framework, underpinned by an understanding between those funding these initiatives and the national governments in countries where activities will be undertaken.? While GEF and the World Bank will remain undoubtedly the pillars of a changing environment finance architecture moving forward, both are in need of dramatic and immediate reforms. The study is clear that it would like to see a broadening of the mandate and strengthening of the institutional arrangements of the GEF and asks of the World Bank to reform its governance systems and its internal incentives to finally meet international environmental norms. Only then is it possible for these new funding mechanisms to serve the global good rather than primarily institutional and national interests.
Liane Schalatek is Associate Director of the Heinrich Böll Foundation North America, Washington, DC.
* Gareth Porter, Neil Bird, Nanki Kaur and Leo Peskett, ???042ae69b1b104f613???, 60 pp, Heinrich Böll Foundation and WWF: Washington, DC, July 2008.
Posted: 17 Sep 2008
Recommended citation: Liane Schalatek (2008) 'New Climate Change Funds: Hurry Leads to Flurry. Lack of cohesion and risks of dysfunction', World Economy & Development In Brief, Issue 5/Sep-Oct, Luxembourg (www.wdev.eu)