The Green Climate Fund: What will it be able to contribute?
Author: Larry Rodman
Wednesday, December 3, the GCF held a side event called Deploying Resources of the Green Climate Fund: “What makes a good Project?” Later in the day, the GCF hosted a Q&A period at its pavilion at the conference center. Together, these events gave a picture of what the GCF has achieved so far.
After a slow start – the UNFCCC conceived the GCF 6 years ago in Copenhagen, and formally established it a year later in Cancun – the GCF has now approved 8 projects for funding, and in the last few days has even made a funds transfer for one project. The GCF has accredited 20 entities as funding conduits. Another 9 entities are in the last stages of accreditation, and as many as 60 others are in earlier stages of the process. The GCF has developed and put in place extensive procedures for ensuring that accredited entities and approved projects meet environmental, social and governance standards, and for conducting other entity and project due diligence. It appears that the GCF is well along the path to establishing itself as a well organized and managed bank.
The question remains, what will the GCF actually achieve? Last fall, developed countries made pledges of capital to the GCF totaling a little more than $10 billion, and some of those countries have now signed contractual commitments covering more than half of that amount. But the U.S. pledge of $3.0 billion is notably absent from those contractual commitments. A global-scale bank with just over $5 billion in capital will make barely a dent in the global funding needs, particularly as its capital must be split between adaptation and mitigation needs.
A question from the audience at the GCF side event suggested that part of the funds from donor countries will come from existing Official Development Assistance (ODA) budgets, and therefore does not represent incremental funding. Another question elicited an explanation by Hela Cheichkrouhou, Executive Director of the GCF, that approved mitigation projects may not sell carbon credits, as this would nullify additionality in emissions reductions from GCF funded projects. GCF management has plugged this potential hole for leakage of hoped for effects, but it may not anticipate all of the other potential holes.
The reports at COP 21 give some reason to hope that the GCF, by leveraging its capital through the private capital markets, will make a substantial contribution to funding the developing world’s needs for climate change mitigation and adaptation. But the jury is still out.