TWN Info Service on Climate Change (Oct11/02)
22 October 2011
Third World Network

Mixed reactions to Green Fund design

Geneva, 21 October (Meena Raman) – Members of the Transitional Committee (TC) of the Green Climate Fund (GCF) expressed mixed reactions and concerns over the design of the GCF, which was finalized in Cape Town, South Africa on 18 October.

The United States and Saudi Arabia had withheld consensus to the adoption of the TC report and the non-consensus report was transmitted to the 17th meeting of the Conference of Parties (COP 17) to be held in Durban, South Africa in late November this year for its consideration and approval.

The report included recommendations of the TC to COP 17 which was in the main part of the report and the governing instrument for the GCF which was annexed to the report. The governing instrument sets out the design of the GCF.

Late evening of the final day of the TC meeting on 18 October, TC members were presented with a draft report by the co-chairs, Mr. Trevor Manuel of South Africa and Mr. Ketjil Lund of Norway.

Manuel, in presenting the draft report for adoption, said that the governing instrument document was a compromise document and invited members to give their general comments but called on them to be brief, repeatedly saying that the meeting room needed to be vacated to prepare for another function. While many countries took the floor to give their views, when Moroccan delegate Mr. Rachid Firadi raised his flag during the session, Manuel did not allow him to speak, saying that the list of speakers was closed and time was running out.

It was learnt from several developing country members of the TC that they were under the impression that changes to the document could be entertained and this was not a “take-it or leave-it” document. However, following the general comments, Manuel proposed the report with the annex to be adopted and it was then that delegates realized that there was no opportunity for further changes.

It was then that US and Saudi Arabia withheld consensus in the adoption of the report. It is learnt that had the US chosen to adopt the report with reservations and not block consensus, some developing countries would have also put in their reservations. (See TWN News dated 20 October).

Among the issues of concern raised by developing countries were the limited role of the COP in relation to the GCF; the Fund’s role in promoting coherence at the national level when this was the job of the national entities; the watering down of the role of the national designated authority (NDA) of the recipient countries in not approving all funding proposals; the private sector facility having direct access to the Fund for financing activities at the national level without the approval of the NDA; lack of clarity on the voting procedure to be adopted by the Board in decision-making in the event of no consensus among Board members and leaving this to the Board to decide; the authority of the Board to remove or modify funding windows without the approval of the Parties and the absence of providing the procedure for the selection of the permanent trustee and leaving this to the COP to resolve.

Dr. Omar El-Arini of Egypt said that he would like the COP to confirm the selection of the GCF’s Board members. (Paragraph 9 of the instrument does not provide any role for the COP in confirming or endorsing the composition of the Board, which was what many developing countries had called for.) He also wanted the appointment of the Executive Director of the secretariat to be confirmed by the COP. (Presently, this is not the case and it is the Board that appoints the ED and there is no role for the COP). He also wanted the selection of head of the evaluation unit to be confirmed by the COP. (There instrument does not provide for any role for the COP in this regard and leaves it to the Board to do the appointment).

El-Arini was also concerned that there was no provision for voting as regards decision-making by the Board. (The instrument in paragraph 14 states that “decisions of the Board will be taken by consensus of the Board members. The Board will develop procedures for adopting decisions in the event all efforts at reaching consensus have been exhausted.” The earlier version of the instrument in this regard had provision for voting in the event effort at reaching consensus was exhausted. It provided that “ …decisions will be taken by a two-thirds majority of the Board members present and voting, representing a two-thirds majority of Board members from developed country Parties and a two-thirds majority of Board members from developing country Parties. Developing country members of the TC had been concerned about a proposal by Japan which was supported by Germany for the voting procedure to be similar to that of the World Bank Board, the Climate Investment Funds and the Global Environment Facility (GEF) which is a weighted system of voting based on the contributions of countries to the Fund.)

On the issue of the national designated authority (NDA), he wanted the approval of the authority for all funding proposals before they are submitted to the Fund. (Paragraph 46 of the instrument provides that the NDA recommends to the Board on funding proposals in the context of national climate strategies and plans, but the NDA will only be consulted on “other funding proposals for consideration prior to submission to the Fund to ensure consistency with national climate strategies and plans).

In relation to the private sector facility, El-Arini preferred to have a window for the private sector instead of a facility. He also wanted to add further recommendations by the TC to the COP as he said that this was missing in the instrument viz. (i) on the process to confer international juridical personality on the GCF and (ii) the procedure for the selection of the permanent trustee of the Fund.

Ms. Carol Mwape Zulu of Zambia on behalf of the LDCs said that in this process, members would not get all that they want and expressed satisfaction. She expressed concern over the power of the Board to modify or remove funding windows especially that for adaptation, adding that Parties should be consulted prior to any modification, removal or addition of funding windows. (Paragraph 37 of the instrument provides that the Fund will have windows for adaptation and mitigation and paragraph 39 provides that the Board will consider the need for additional windows and will have the authority to add, modify and remove additional windows and substructures/facilities as appropriate). Mwape also supported Egypt in relation to concerns over the NDA which she said must approve all funding proposals.

Mr. Dipak Dasgupta of India said that there was need for further balance in the instrument as regards the national entities at the country level. In relation to paragraph 34 which provides that “the Fund will promote coherence in programming at the national level through appropriate mechanisms”, Dasgupta said that it is not the Fund that promotes coherence at the country level but that was the job of the national authorities. He said that the same was the case with paragraph 36 in relation to “supporting programmatic approaches in accordance with climate change strategies and plans…” In relation to the “private sector facility that enables it to directly and indirectly finance private sector mitigation and adaptation activities…”, he said that this must be subject to the approval of the national entities. He also wanted the NDA role to be strengthened in approving funding proposals. India supported Egypt on the issue of decision-making by the Board (referring to the issue of voting).

Mr. Wu Jinkang of China said that the instrument was balanced in some areas but was less balanced in others. He referred to paragraphs 2 and 36 of the where there were references to “low-emission development strategies and plans” and that China had insisted that the language must be consistent with the Cancun decision which refers to “low-carbon development strategies or plans in the context of sustainable development”.

On the issue of decision-making by the Board, he said the final text took a step backward, as he thought that there was agreement among members to have the earlier language in the text referring to the need for a double majority in the event the Board did not have consensus. This issue was too important to leave to the Board and the principle of one-country one vote was important. If the Board could not reach agreement on this issue, the Fund would be in trouble.

On the funding windows, Wu said that there was no agreement to have a private sector facility and as a compromise and in the spirit of cooperation, he could support the facility if there were separate windows for capacity building and for technology transfer as this was important for developing countires. (The instrument does not provide for separate windows for capacity building and technology transfer but in paragraph 38, it provides that “the Board shall also ensure adequate resources for capacity building and technology development and transfer.”)

Ambassador Sergio Serra of Brazil said that he was unhappy with the instrument but recognized that it was big effort on the part of the co-chairs and vice-chairs in the preparation of the document. He pointed some areas of “unhappiness” where he said there was compromise. On the “legal personality”, he said there was no firm position reached. On some aspects of accountability between the COP and the Board, there was compromise (as Brazil and several other developing countries wanted the COP to play a role in the endorsement of Board members, in the selection of the head of the secretariat and the head of the evaluation unit). On the private sector facility, he said Brazil was very hesitant as regards this proposal and had compromised on that too. He also referred to reference to “low-emission development strategies and plans” and said that this was not the correct wording (in the Cancun decision) and the previous provision in the earlier text for a multi-year replenishment process for financial inputs “had gone down the drain”.

In the light of the compromises made, Serra, supported India and wanted changes to be made as regards paragraphs 34 and 36 of the instrument as it was unacceptable for the Fund to promote coherence at the national level as this was for the national governments to do so. He said that for the private sector to have direct access at the national level, the funding proposals must be approved by the NDA.

Mr. Jorge Ferrer of Nicaragua expressed concern that the private sector could have direct access to funding without the endorsement of the NDA. In relation to paragraph 43, he said that the private sector facility should support private sector involvement “from” and not “in” SIDs and LDCs. He was also concerned with paragraph 46 where the NDA will only be consulted on other funding proposals and not to give its approval. He was also concerned that the Board has powers independent of the COP as for example in decision-making.

Ms. Bernarditas Mueller of the Philippines supported the views of developing countries and emphasized the weakness in the relationship between the COP and the Fund. She also had concerns over the weak language in relation to the NDA and stressed that it was the NDA that needs to be in control and not the Board. She also wanted provision on the procedure for the selection of the permanent trustee through an open and transparent process.

Mr. Farrukh Khan of Pakistan also drew attention to paragraph 43 in relation to the private sector facility which should support activities to enable private sector involvement “from” developing countries and not “in” developing countries. In relation to the quorum for the meeting of the Board, he expressed preference for the earlier text that what was in the instrument. (Paragraph 15 of the instrument states that “a two-thirds majority of Board members must be present at a meeting to constitute a quorum”, while the earlier text provided for “a simple majority of Board members from developed country Parties and a simple majority of Board members from developing country Parties must be present at a meeting to constitute a quorum.”)

Mr. Idrissa Ouedraogo of Burkina Faso said that the GCF was very important and there should be no room for it to fail. He also stressed the need for COP endorsement of the Executive Director of the secretariat and the head of the evaluation unit.

The representative from Gabon also expressed concern over whether the private sector should have direct access to the Fund for activities in developing countries when they should work with the national entities at the country level.

Mr. Tosi Mpanu-Mpanu of the Democratic Republic of Congo said that there were many issues of importance to the African Group which had not been taken into account in the instrument but he was happy to live with it as it was a good illustration of finding middle ground. Given that the Durban was an African COP, there was need for a concrete deliverable on the GCF.

Ambassador Ali’ioaigi Elisaia of Samoa representing the Alliance of Small Island States said that it would be naïve to expect all our issues to be reflected in totality in the document and as imperfect as it may be, he was prepared to live with the report and not disappoint his constituency.

Mr. Manfred Konukiewitz of Germany expressed unhappiness with a few provisions. He regretted that there was no window for reducing emissions from deforestation and forest degradation in developing countries (REDD-plus) and was not happy that carbon capture and storage could be eligible for funding by developing countries. He also was concerned that financial inputs for the Fund were restricted to only be from developed countries and was contradictory with indications of interest from various countries that are not developed countries to contribute to the Fund. He said this ignores major changes in world where a lot of wealth has moved to new regions and urged for this restriction to be lifted.

Mr. Jan Cedergren of Sweden said that the document was balanced with a lot of compromising. He did not like the reference in the selection of the staff for the secretariat to take into account geographical balance. He also said that need for geographical balance in paragraph 52 on the allocation of resources for adaptation contradicted the need to take into account the urgent and immediate needs of developing countries that are particularly vulnerable to the adverse effects of climate change, including LDCs, SIDS and Africa.

Mr. Nick Dyer of the UK congratulated the co-chairs for the document. He was however not in agreement with paragraph 22 where the selection of the host country of the Fund would be endorsed by the COP.

Mr. Per Callesen of Denmark said that paragraph 41 and 45 are inconsistent as paragraph 41 provides for the private sector to directly access the Fund while paragraph 45 states that access to the Fund’s resources would be through entities.

Mr. Bruno Oberle of Switzerland said that the document was not perfect but he appreciated the balance in the text.

Mr. Hyung-Hwan Joo of the Republic of Korea also said that the provisions restricted donations from developing countries.