TWN Info Service on Climate Change (Jun13/03)
20 June 2013
Third World Network  

UNFCCC’s Finance Committee tussles over Green Climate Fund arrangements

Bonn, 20 June (Marjorie Williams) – After working two whole days and nights on a draft decision on arrangements to be concluded between the UNFCCC’s Conference of the Parties and the Green Climate Fund (GCF), the Standing Committee on Finance ended its fourth meeting in a tense stand-off between developed and developing country members of the Committee due to fundamental differences over key elements of the arrangements.

The meeting of the UNFCCC Standing Committee on Finance (SCF) took place on 15-17 June 2013, in Bonn, Germany.

The elements included the purpose of the draft arrangements between the UNFCCC Conference of Parties (COP) and the GCF, the role of the COP in the reconsideration of funding decisions/independent redress mechanism to be created by the GCF and the necessity and content of termination clause in the arrangements between the COP and the GCF.

(The governing instrument of the GCF mandates its Board to establish an independent redress mechanism that will report to the Board. The mechanism will receive complaints related to the operation of the Fund and will evaluate and make recommendations.)

At the 18th meeting of the COP in Doha, Qatar in 2012, Parties agreed to request the SCF and the GCF Board to develop the arrangements between the COP and the GCF. The arrangements are to be agreed by the GCF Board and the COP, by COP 19 in Warsaw this November.

The issue was discussed by the SCF at its third meeting and a proposal which listed the elements of the arrangements, procedural options and a timeline for the joint work was presented to the GCF Board which mandated its co-chairs to work on the arrangement with the SCF. A draft of the arrangements concluded by the SCF at this fourth meeting was to be presented to the GCF board for consideration in their upcoming meeting in late June 2013.

The members of the SCF deliberated on a revised co-chair’s text on the arrangements between the COP and the GCF that reflected inter-sessional work (via teleconference) by some members of the committee and which drew on submissions and discussions between the co-chairs of the SCF, Ms. Diann Black Layne (Antigua and Barbuda) and Mr. Stefan Schwager (Switzerland) and the co-chairs of the GCF, on the basis of elements submitted by the SCF. 

The SCF members’ preparatory work on the draft arrangements included submissions from members (Ms. Outi Honkatukia (Finland), Mr. Paul Bodnar (US), Mr. Gregory Andrews (Australia) and Mr. Paul Oquist (Nicragua) and Ms. Bernaditas Muller (Philippines) which seemed to have some common grounds on the arrangements.  During the initial discussions at the meeting there seemed to be much give and take on the draft arrangements with developing countries showing flexibility in seeking to arrive at a final text.

However, ultimately, the SCF members could not reach a consensus on the draft arrangements and there was no consensus either on sending the document with options to the GCF for consideration. In fact, developing country members of the SCF strongly objected to any such text being forwarded to the GCF.  Developed countries members on the other hand were comfortable with sending a non-consensus, text with options to the co-chairs of the GCF (who had indicated to the co-chairs of the SCF that they would like to receive a clean text, not a text with options).

Developing country members resisted attempts by developed country members, led by the United States and supported by Australia, to engage in what many saw as a de facto renegotiation of the GCF’s governing instrument, with the specific intent of narrowly circumscribing the role of the COP as well as ensuring as wide as possible latitude for the involvement of the private sector in the GCF.

Some developing country members expressed the view that they were being faced with a last minute package and explicit threats of the GCF not being funded, if the dictates of developed countries were not met.

This was in part a reaction to the triple stipulations by Mr. Gregory Andrews (Australia) that Australia could not accept: (i) anything that undermines the independence of the board of the GCF or asserts the authority of the COP over the GCF, (ii) pre-empting decision on things the GCF Board have not decided yet, and (iii) any role for the COP in determining GCF funding especially language about needs assessment and mobilization. Later in the discussion, he also made specific remarks that his government could not put money in the Fund unless it was consistent with Australian law.

Developing country members of the SCF argued that the purpose of the arrangements between the COP and the GCF was specifically laid down in the governing instrument of the GCF, which was agreed language viz that: “the purpose of the arrangements is to ensure that the GCF is accountable to and functions under the guidance of the COP to support projects, programmes, policies and other activities in the developing countries Parties…”. 

Developed countries, however, in particular, the US and Australia, sought to qualify this with ambiguous references to the roles and responsibilities of the COP and the GCF.   They also did not want reference to ‘thematic funding windows’ in the section on the purpose of the arrangements. The US and Australia, in particular, argued that this would constrain the GCF.

In the section of the draft arrangements dealing with an independent redress mechanism, both countries also objected to reference to the COP having a role in reviewing (on the request of an affected Party) a particular funding decision after it had progressed through the independent redress mechanism and reported to the COP.

While upholding the understanding that funding decisions are the responsibility of the GCF and its board, developing countries favored inclusion of a provision that allowed a Party that availed itself of the independent redress mechanism and was not satisfied that its concerns were addressed in an open and transparent manner, to appeal to the COP to review the matter on its behalf [on the basis of Article 11, paragraph 3(b) of the Convention].  It further stipulated that the COP, after considering the request of the Party, may then take appropriate measures via the provision of further guidance to the GCF. However, the US and Australia raised objections to this provision, arguing that this would adversely impact investor rights, create political risks for investors and detract from investors investing in the Fund.

On this issue of the independent redress mechanism and the role of the COP, Mr. Paul Oquist (Nicaragua) noted that this ‘is not a north-south issue’. He said that in a world of audits and compliance and professional standards, it was not good practice to have a mechanism that is entirely formed and control by a board of directors as a redress mechanism. Such a mechanism, he argued, is not an independent mechanism; rather it is an internal compliance audit. He said that while an internal compliance mechanism is useful for CEOs and managing directors, for example, to optimize the performance of organization, this must be bolstered by an independent external mechanism. Mr. Oquist further noted that the policies that the GCF are implementing and applying emanate from the COP so the COP must be in the picture as to whether there is compliance with its directives.

The other two high priority items on the agenda of the SCF were briefly discussed: the fifth review of the financial mechanism and draft guidance to the operating entity of the Convention’s financial mechanism, the Global Environment Facility (GEF):

  • The matter of the review of the financial mechanism had some preliminary airing of views. The COP at Doha also requested the SCF to amend the guidelines for the review of the financial mechanism and to provide draft updated guidelines for consideration and adoption by COP 19, with a view to finalizing the fifth review by COP 20 (2014).
  • Draft guidance to the operating entity of the financial mechanism will be more substantively discussed in a future SCF meeting.  COP 17 had requested the SCF to provide to the COP starting in 2013, draft guidance for the GEF, based on the annual report of that entity to the COP and views submitted by Parties as well as to provide initial guidance to the GCF at COP 19.

The SCF also deliberated on issues arising from its third meeting, including measurement, reporting and verification (MRV) of support, expert input into the work programme on Long-term Finance, the Code of Conduct for the SFC, and linkages with the UNFCCC Subsidiary Body for Implementation (SBI) and the thematic bodies of the convention.

  • The SCF is mandated to tackle the issue of MRV of support provided to developing countries through preparing a biennial assessment, overview of the climate finance flows, including information on the geographical and thematic balance of such flows, drawing on available sources of information. COP 18 requested the SCF in its initiation of the first biennial assessment and overview of climate finance flow to take into account other works by other bodies and entities on MRV of support and the tracking of finance, and to consider ways to strengthen methodologies for reporting climate finance. At this meeting the SCF was to initiate consideration of the modality of work regarding MRV of support. There was some initial discussion on this item which will be taken up more substantially in future meetings.
  • The co-chair of the work programme on Long-term Finance, Mr. Naderev Sano (he Philippines), gave a brief update on the programme and participated in small group discussions of the SCF on the issue. The SCF also held discussion on its mandate to support the work programme on Long-term Finance by providing expert inputs on the design and conduct of the work programme through 2013.The extended work programme on Long-term Finance is aimed at informing developed country Parties in their effort to identify path ways for mobilizing the scaling up of climate finance to USD 100 billion per year by 2020 form public, private and alternative sources, and informing Parties in enhancing their enabling environments and policy framework to facilitate the mobilization and effective development of climate finance in developing countries.

The SCF also had discussions and a report back on the first forum of the Committee which was held in Barcelona, Spain, 28 May, 2013. Members of the Committee felt that the forum had been a successful event. It was noted that there was need for further discussion to draw on lessons learned in planning for the 2014 forum.

The next SCF meeting will be held in August 2013 coinciding with the GCF meeting in Songdo, the Republic of Korea.