By Ersin Merdan
Financing Climate Change

 - The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabanc─▒ University.

Climate financing has come to the fore in recent years utilizing various tools with the aim of tackling climate change in line with mitigation and adaptation policies. Although no internationally agreed climate finance definition exists, the term generally denotes resources that catalyze low-carbon and climate resilient development. This financing covers the costs and risks of climate action, the increase in capacity for adaptation and mitigation, and supports research and development as well as the deployment of new technologies. Under the UN Framework Convention on Climate Change (UNFCCC), the flows of funds ranging from developing countries to developed countries, as part of the fight against climate change, has been administered in recent years.   

Climate financing governance has been widely debated internationally. At the Durban Platform of a climate summit that took place in Copenhagen in 2009, developed countries pledged to allocate US$30 billion over the following two years from 2010 to 2012 as a quick-start financing tool. While there is no clarity on mid-term finding targets after 2012, industrialized countries pledged an additional $100 billion in funding from 2020 onwards.

Climate finance can be mobilized through a range of instruments including multilateral climate funds for both domestic, international, and both public and private projects. Several developed and developing countries have also set up climate finance instruments ranging from grants and loans to guarantees to private equities, in addition to internationally available climate finance initiatives that have been established in recent years.

Among all the climate funds established, the Global Environment Facility (GEF) was the first of its kind in 1991 as a $1 billion pilot program under the World Bank. Following the Rio Earth Summit in 1992, GEF was restructured as a permanent independent organization and has become an operating financial entity of the United National Framework – Convention on Climate Change (UNFCCC). With the aim of providing global environmental benefits, the GEF is tasked with providing additional grants to cover the increasing cost of climate mitigation and adaptation projects mostly for the benefit of local and national projects.  With its 32 members, the GEF Fund has been replenished every four years since its establishment. Its most recent replenishment ended back in 2015 to cover funding up until 2018. Since its foundation, within the GEF framework, projects as various as renewable energy-to-energy efficiency to technology transfer for low emission urban systems to land usage have been realized.

Under guidance from the conference of the parties and the administration of the GEF, two different funds; the Least Developed Countries Fund (LDCF) and Special Climate Change Fund (SCCF) were established on a relatively smaller scale with different needs and targets.

The main objective of the creation of the LDCF was focused particularly on the needs of the national adaptation programs of actions (NAPA’s) of the least developed countries under the umbrella of the UNFCCC back in COP7 in Marrakesh. Since its inception, the fund had received a total of $1.1 billion worth of contributions from 25 developed countries.

The SCCF, on the other hand, received relatively smaller contributions, totaling $351 million from 15 developed countries. Under the SCCF, funding has been given for the management of disaster risks, the management of coastal zones as well as enhancement of infrastructure resilience.

The central element of climate change from the outset has been channeled with dedicated funds in the form of the GEF and Least Developed Country Fund and Special Climate Change Fund administered within the framework. However, many developing countries have become critical of the GEF over the years because developed countries have been dominant in its management. The search for a new institutional framework paved the way for the establishment of a new organization in 2010, the Green Climate Fund (GCF). Along with the GEF, the GCF has become the second financial mechanism through which climate funding will be operated under the UNFCCC. 

Although little tangible progress has been made in the climate financing since the formation of the GCF, by mobilizing public and private finance at the national and international level, the Fund received contributions that have capitalized $10.3 billion. To promote low-emissions growth and climate resistant-based technological development, the GCF also gives support to private sector facilities for their adaptation and mitigation policies. The fund also supports activities such as technological development, and capacity building for carbon capture and storage. The headquarters of the fund is based in South Korea and is represented by a Board, whose representatives originate equally from both developed and developing countries. The GCF began to fund programs as early as 2015 and up to today, $2.3 billion was pledged to the program, which can be accessed through UN agencies.

Following the relative incompetence of the GEF’ fund management experience, several developing countries took initiatives to move further away from the dominance of developed countries role in international climate funding. The Indonesian Climate Change Fund and Brazil’s Amazon Fund are some examples of these nationally formed climate change funds.

Even the establishment of the GCF has not yet been able to shake off major criticism directed at climate financing. One of the major challenges is in the low access to the fund, which is not helped with the unexpectedly lengthy accreditation process that is also mired in bureaucracy.

Appropriate access to funds requires a fully-fledged, nationally designated authority that is responsible for delivering mitigation as well as adaptation policies.  The authority should have an independent committee responsible for planning projects to fight against climate change and should submit relevant guidelines. Furthermore, the authority needs to comply with the GCF’s gender policy and fiduciary standards.

To combat the hazardous impact of climate change and take up the challenges of mitigation and adaptation policies, the establishment of a variety of funds would be expedient. However, having easily applicable accreditation policies is perhaps just as important as the fund itself in achieving more effective results. However, wise counsel for the least developed countries in garnering experience to operate effectively to benefit from climate financing tools, along with developed countries that resist the simplification of the current complex legislation, would be beneficial.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.

08 May,2017