Sunday, December 15, 2019

Editorial

Narrow donor base raises doubts about Green Climate Fund’s global role

Conceived at the 2009 climate summit in Copenhagen and launched five years later, the Green Climate Fund has struggled to establish itself as a major channel for climate financing for developing countries. The fund bled billions of dollars during its first period, and the USD 9.8 billion secured at the GCF’s replenishment conference one week ago is a drop in the ocean compared to at least USD 1.6 billion a year that is needed to limit warming to 1.5 degrees C.

The loss of USD 2 billion in funding due to President Donald Trump’s decision to pull out of GCF, combined with currency fluctuations meant that GCF had USD 3 billion less to invest during its first period. On top of this, governance problems delayed the replenishment by over a year, resulting in an additional estimated loss of USD 4 billion.

Oxfam and the World Resources Institute tried to put pressure on donors to contribute more by presenting funding scenarios with formulas for each country’s “fair share”. Oxfam called for “a bare minimum” of USD 15 billion to be raised. Norway and Germany doubled their pledges this spring to create momentum. It was anticipated that UN Secretary General António Guterres might add to this pressure by announcing a concrete target for the replenishment at his climate summit in September. But he only urged donors to be “ambitious.”

In the end, with the United States and Australia out of the equation, GCF reached almost USD 10 billion as the result of substantial increases from just five donors – Sweden, Norway, Germany, the United Kingdom and France - in addition to a USD 1.5 billion from Japan, the same amount given back in 2015. These six countries stand for 83 per cent of all money raised. The rest was divided among the other 21 contributors.

Such a narrow base of donors raises questions about the GCF’s sustainability and its credibility as a leading global finance mechanism of climate projects. Currently, the World Bank has a much larger role due to its significant financial resources and focus on climate.

Canada was the biggest disappointment, giving less this year than it did five years ago. According to the “fair share” calculations, bigger pledges from Canada, Italy, Spain, the Netherlands and Switzerland might have generated as much as USD 3 billion more. Had Japan increased its pledge, this might have raised another billion dollars. And – most important of all – if the United States and Australia had stepped up, the total replenishment result might well have been doubled.