Service on Climate Change (Mar16/05)
GCF: Intense discussion over Project Preparation Facility
Kuala Lumpur, 16 Mar (Hilary Chiew) – The Board of the Green Climate Fund (GCF) approved its first grant of US$1.5million under its Project Preparation Facility (PPF) at its 12th meeting held in Songdo, South Korea from 8-10 March.
The funding is for the project preparation of the programme titled “Rural Green Economy and Climate Resilient Development Programme” submitted by the Ministry of Natural Resources of Rwanda.
(The Ministry of Natural Resources of Rwanda, a direct access entity of the GCF had submitted the funding proposal. The programme will focus on four sectors critical to enabling Gicumbi, one of Rwanda’s poorest districts, to achieve its development targets and align with national green growth and climate resilient priorities: tea, forestry, construction and energy. The pilot programme comprises four interlinked projects: affordable, low carbon settlements and industries as growth hubs; climate-resilient production of tea; sustainable forest management and watershed management; and knowledge development and transfer.)
The PPF was established at the 11th Board meeting in Zambia in November 2015. However, confusion arose from the unclear language of decision B.11/11 which was described by several members as “hastily done”.
(In decision B.11/11, paragraph (l), the Board decided to “establish a PPF to provide funding of up to 10% of requested GCF funding with a maximum of USD1.5mil for any single proposal.” The Board also agreed that the PPF “…process would involve concept notes providing due justification of need from accredited entities, and that after an appropriate review and an initial assessment against the investment criteria and justification of need, the Secretariat will send its funding request for project preparation to the Board for approval.” The Board further decided that the PPF would be targeted to small-scale activities and direct access entities and that the Secretariat will review the PPF for consideration by the Board at its 14th meeting.)
In the 12th Board meeting decision approved Rwanda’s application and requested the Secretariat to present a document, “on matters related to the scope and functioning of the PPF, for consideration and adoption by the Board at its 13th meeting. The decision also noted that the Board will consider applications under the PPF once the guidelines are adopted.
The decision was adopted in the evening on the last day of the meeting, after considerable deliberation and an attempt by the United States to craft a decision on the guidelines and criteria for adoption at the meeting.
Initially, members were divided over approving Rwanda’s application with developing country members and some developed country members favouring the approval, while the United Kingdom and the United States were of the view that it was not appropriate to approve any proposal pending fleshing out details of the facility, and preferred to postpone the approval. Developing country Board members rejected the draft decision by the United States on the criteria proposed. (See the exchanges further below).
The item was first discussed during the informal meeting on 7 March where co-Chair Zaheer Fakir (South Africa) invited views on the five areas of discussion outlined in a co-Chairs’ note on their proposed guidance on the PPF circulated to members prior to the Board meeting.
The five cited were: the need to provide clarity on the language contained in B.11/11; the Board’s decision-making process related to the PPF request; Board guidance on the Secretariat guidance notes and concept notes template; the current PPF request at the 12th Board meeting; coordination and coherence between the PPF and the readiness programme.
On the second day of the formal board meeting on 9 March, Co-Chair Zaheer informed Board members that the Secretariat had reviewed the Rwandan proposal and the initial assessment of the underlying programme demonstrated the replicable potential of the project in other countries and found the programme to be one of Rwanda’s priorities for low emission development. He urged Board members need to take a decision on the application.
Omar El-Arini (Egypt) welcomed the attractive submission which has a holistic approach. He wondered if the application would be done in conjunction with other agencies either national or international entities and cautioned against double counting, adding that the proposal lacked mention on how monitoring of the project will be done.
Sally Truong (Australia) in supporting the proposal noted that Rwanda had received readiness funding last year and this new proposal would take the country to the next level and demonstrate that the readiness programme is working.
Andrea Ledward (United Kingdom) cautioned against setting a precedent and wondered if a decision should be deferred. “We should recognise it and appreciate the quality but defer the decision until we have done the methodologies for the PPF,” she opined.
Leonardo Martinez (United States) said the Board is coming to grips with the late night decision (referring to decision B.11/11). He suggested discussing the operational details of the PPF and get the basics in place first before taking up any proposals. He said that the facility should be accessed when the infrastructure has been built.
Karsten Sach (Germany) said two things are missing: absence of criteria (in considering the project) and the lack of clarity of the project being related to climate change. In theory, he said, it is a project that should be encouraged but noted that there cannot be a real assessment without criteria.
In response, the Secretariat explained that the purpose of the feasibility studies (key supporting documents that are expected to be developed through the proposed PPF activities for the final funding proposal) is to give more figures and indicators behind the assumptions to implement the programme. The timeframe for implementation is four months starting in May. On monitoring, it said there will be a monthly review of the progress.
To this, Sach (Germany) said he is willing to go along (with approving the application), stressing the need to speed up the development of criteria.
Tosi Mpanu Mpanu (Democratic Republic of Congo) said the GCF has been operationalised for the past three years and countries are eager to get their hands on the resources and countries with scarce resources can use the money that is available.
“Rwanda has done its homework and showed its ambition and we should not punish Rwanda because the Board was not diligent enough itself. We are building the plane as we are flying it. We should try to encourage Rwanda; we should be more ambitious, bolder and give the benefit of doubt to this project,” he stressed.
He further said that one country pledged US$3bil (referring to the United States) but (has so far) signed agreement for US$500mil which is not a good message, adding that ‘we need some countries to be inspired by Rwanda.’
(At the Board meeting, the United States informed the Board that it has completed its’ contribution arrangement for US$500mil as a first instalment of its pledge.)
Richard Muyungi (Tanzania) said it is important to recognise that it is a learning curve as countries prepared their projects and the challenges should be understood and the Board should continue to support the process.
Martinez (United States) said he is prepared to approve the proposal but with a note that detailed criteria will be fleshed out and would only consider further applications after that. “We need to get our act together on this”, he added.
To this, Mpanu Mpanu (DRC) said if the Board does not penalise Rwanda, then it should not penalise others that are preparing to access the PPF.
El-Arini (Egypt) said he could go along with the suggested addition by Sach and Martinez.
Ledward (United Kingdom) was happy to approve the project subject to very clear learning and fleshing out of the details of the PPF.
Co-Chair Zaheer suggested approving Rwanda’s application and to get the Secretariat to prepare the criteria to be tabled at the 13th Board meeting.
However, Martinez (United States) said that given the urgency, he would like to have a decision on the criteria, suggesting that the co-Chairs could collect ideas from a quick round of comments to be assimilated into the decision.
To this, co-Chair Zaheer announced that Martinez will coordinate the work and those members interested can engage with him (Martinez) and bring the proposed decision language back to the Board for further consideration.
Colin Young (Belize) suggested approving Rwanda’s proposal first. Muyungi (Tanzania) supported saying that ‘in doing so, we show the outside world that we are committed to working on this issue’.
Mpanu Mpabu (DRC) noted strong convergence around the table and expressed confidence the Board can reach a decision. He said the Board took a decision in B.11/11 not long ago and a country has acted and he expected more countries to do the same.
The Board then adopted the decision to approve the Rwanda’s application.
On 10 March, Martinez (United States) reiterated that it was heard loud and clear there was no clarity as to which concept note should be used for applying to the PPF and there is need to fill the vacuum so countries can submit their proposal as soon as possible as a matter of urgency. He informed members that he had consulted eight board members and collected their feedback. He noted that while there is no complete agreement on the draft decision text that he was presenting, the Board should “leave with something” so the pipeline can continue.
The draft decision that was proposed read as follows:
“The Board, having reviewed decision GCF/B.08/11 and GCF/B.11/11 and taking into account discussions of the GCF strategic plan and project approval process:
(a) Acknowledges that further Board guidance is needed before the Project Preparation Facility (PPF), established by Decision B.11/11, can be fully operational.
(b) Decides that, regarding operation of the PPF:
i. Support for individual proposals will be limited to a maximum amount of USD1.5mil not to exceed 10% of the total requested GCF funding volume of the proposal to be developed;
ii. The PPF will target support to direct access entities for the development of proposals for micro- and small-scale projects and programs. The PPF can also provide up to 30% of the initial PPF allocation to international accredited entities for preparation of micro- and small-scale projects and programs in situations in which a country has no direct access entity;
iii. Proposals require the submission of a no-objection letter from the National Designated Authority (NDA) before they can be deemed complete;
iv. Concept notes submitted to the PPF will be assessed against the GCF investment criteria as defined in Decision B.07/06 including criteria for country ownership;
(c) Requests the Secretariat to modify the concept note template, established by decision B.07/03 so that it can also serve as the concept note template for PPF applications as defined in Decision B.11/11;
(d) Requests the Secretariat to consider synergies between the PPF and the Readiness and Preparatory Support Programme as part of the review of the PPF at B.14, as per B.11/11;
(e) Requests the Secretariat to ensure that sufficient staffing and resources will be provided for effective operation of the PPF;
(f) Requests the Secretariat to provide an update on the PPF during its report to the Board on the status of the project pipeline, including analysis on the applications received and approved;
(g) The Board will be notified by the Secretariat when proposals are received and when they are approved;
(h) Decides to delegate the authority to approve proposals for PPF funding to the Executive Director;
(i) Decides to allocate up to USD50mil for the initial phase of the PPF;
(j) Requests the Secretariat to prepare a document for consideration by the Board at its thirteenth meeting clarifying how the PPF will operate, including a description of what the PPF will fund, modalities of support, eligibility criteria, the role of the Secretariat, and how the PPF differs from Readiness Activity Area 4, reflecting the decisions in para b;”
Co-Chair Zaheer asked how long “the initial phase” would be and the rationale behind the US$50mil.
Martinez (United States) said the idea is to lay out the skeleton based on the principle and the additional work the Secretariat will do in fleshing out the frame. The US$50mil is based on the Readiness phase and there is no time allocation as it would depend on when the allocation is exhausted.
Nauman Bashir Batti (Pakistan) questioned the rationale for the cap of US$1.5mil.
El-Arini (Egypt) said “We need to move gently on this issue. We were rushed into this because of the situation with Rwanda in a policy vacuum. We approved Rwanda’s request but this should not constitute a precedent.” He said that the Conference of the Parties (of the United Nations Framework Convention on Climate Change) has given guidance to the Board through Decision 7/CP.21, and a policy paper is needed as well as a robust discussion on this matter. He suggested a simpler procedural decision and not the detailed decision (as presented by the US).
Ayman Shasly (Saudi Arabia) said he was not comfortable with the proposed decision especially with the provision of up to 30% initial PPF allocation for international entities. “Do they really need it? Their strength is that they have resources to help out. I cannot see that this percentage is fair and just,” he noted.
Kamal Uddin Ahmed (Bangladesh) pointed out that the assessment of proposals against the GCF investment criteria as defined in Decision B.07/06 has very complicated criteria and will be difficult on the part of developing countries that need to prepare the proposal quickly.
Following the exchanges, Co-Chair Zaheer (South Africa) said that members will not be able reach consensus and proposed that the Secretariat prepare a paper and members could request the Co-Chairs with the Secretariat to work on a draft decision in between now and the 13th Board meeting (B.13) or to have the discussion at the 13th Board meeting.
Martinez (US) said he is perfectly content to have the discussion at the next meeting but the Board would not be able to approve any projects until then.
Co-Chair Zaheer raised the concern that there is still the decision taken at the previous meeting, referring to decision B.11/11 that still stands and there is a prospect of having applications that could not be approved.
Martinez (US) said if the Board cannot take a decision here then it needs to send a clear signal to NDAs and accredited entities that they should not prepare any proposals for the PPF until further guidelines (are developed). He warned against the state of ambiguity and urged members to issue at least one clarification to be fair, transparent and promote good governance. Sach (Germany) echoed similar concerns about good governance.
To this, Muyungi (Tanzania) said it is not a good idea to send the signal as there might be proposals that are already on the way.
Ayman (Saudi Arabia) concurred that sending out such a signal will create unnecessary noise given that it is only three months to the next Board meeting, adding that the GCF can deal with the request as they come by informing the applicants that the GCF is in the process of enhancing the policy.
Co-Chair Zaheer said that he was not going to force a consensus on sending such a message. He said the decision on this matter will be that the Board will develop the guidelines at 13th Board meeting and will consider applications after that.
The Board finally approved the Rwandan application and also requested “the Secretariat to present a document, taking into consideration the views expressed by the Board at its twelfth meeting, on matters related to the scope and functioning of the project preparation facility, for consideration and adoption by the Board at its thirteenth meeting; and noted that “the Board will consider applications under the PPF once the guidelines are adopted.”
Edited by Meena Raman