On Friday, climate change efforts across the world reached a very important milestone: the release of $5 billion to begin the work of the Green Climate Fund, which will become the main financial operator of the UN Framework Convention on Climate Change. Initial climate financing disproportionately favored middle-income developed countries and mitigation over adaptation. Established in 2010, the Green Climate Fund is charged with distributing money equitably from the developed to the developing world in order to reduce overall emissions (50%) and adapt to climate change (50%).
Presently, 33 governments, including 8 developing countries, have pledged over $10.1 billion to the GCF. Agreements are already affirmed in whole or in part by 21 of these nations. The objective is for each pledge to be converted into a binding contribution agreement within one year from the time at which it was made. The board meets again before the Paris talks.
The Government of Japan just signed a contribution agreement on its pledge of $1.5 billion to the fund, bringing the total confirmed agreements since the GCF’s November 2014 Berlin meeting up to 58.5% of amounts pledged, and well over the 50% threshold required by the Fund’s governing board of 12 developed and 12 developing country representatives. The GCF’s progress is now a week ahead of the time scheduled last winter. So far, Japan’s is the largest signed agreement, although the pledge by the US is twice its size; Germany has second place.
The fund’s slow start since its introduction at the 2009 Copenhagen climate conference has upset many in developing nations, as well as strong environmentalists elsewhere. They see irony in bureaucrats being installed in a gleaming new headquarters before a penny has been released for the fund’s original purpose. Many, including UN Secretary-General Ban Ki-moon, feel that it took far too long to raise even the initial $10 billion from tardy developed economies.
That first-world foot-dragging only widened the credibility gap between the haves and have-nots, as was obvious during the 2014 20th Conference of the UNFCCC Parties in Paris (COP20) in Peru. Determined leadership there and a recognition of equity in common but differentiated responsibilities resulted in some forward progress, but the less-developed world still has ample reason to insist that richer nations now “walk their talk” on climate change and pony up faster to reach the announced $100 billion annual post-2020 goal.
Last December, the announcement of three high-tech coal power stations in Indonesia being funded under the banner of the Green Climate Fund only made matters worse. Japan, the nation responsible, excused its self-contradictory behavior by saying that because the Indonesia coal plants would use “clean” technology, their emissions would be lower than building “dirtier” traditional equivalents. That logic failed to impress anyone.
However, the current Japanese activation of its financial commitment will enable the GCF to begin actually allocating resources. GCF will regain some stature by initiating projects and programs in developing countries, especially the most vulnerable nations, which include small island developing states (52) and least developed countries (48). Its efforts will also be welcome for addressing currently identified but underfunded issues like efficiency, resilience of cities, and win-win land‐use management.
Initial projects financed through the Green Climate Fund may start up later this year. It’s a hopeful indication of operational progress before December’s COP21 in Paris. It also heightens trust among all participants. From the news release on the fund’s metamorphosis:
“GCF’s declared effectiveness today sends a strong signal to global financial markets. The corporate sector would easily have the capacity and liquidity to fund additional investments into mitigation and adaptation projects in developing countries. The Fund will likely be able to leverage some of its capital multifold with private‐sector cash, under measures aimed at reducing risks for investors, according to estimates made by Bank of America Corporation.
To accelerate private sector investment in low‐emission, climate‐resilient activities, GCF’s Private Sector Facility will work hand in hand with international businesses, capital markets, and the local private sector in developing countries. In order to be paradigm-shifting, the Fund is designed to provide concessional financing, to offer the full range of financial instruments to match project requirements, and to intervene at sub‐sovereign level. One of the Fund’s key innovations is its riskbearing capacity, allowing it to bear more risk and thus leverage other less risky financing, notably from the private sector.”
The table shows pledges and contributions made to the Fund as of May 21, 2015. GCF is continuing to mobilize initial resources and to accept new pledges on an ongoing basis.