Design Challenges for the Green Climate Fund

Climate Finance Policy Brief No.4

by Neil Bird, Jessica Brown and Liane Schalatek

One of the achievements of the UNFCCC negotiations in Cancun was the decision to establish a Green Climate Fund (GCF). The details of this initiative were described in the outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action (AWG-LCA). Many are looking to the establishment of this fund as the solution to adequately and appropriately address climate finance. Others caution that ambitious steps need to be taken to avoid the ‘Green Fund’ turning out to be an ‘Empty Fund’ whose function is limited to attaining the buy-in of developing countries into a binding international climate policy regime. Having been mentioned first in the Copenhagen Accord of December 2009, the intent is now to secure the design of the fund over the period March to November 2011. Approval to start up the fund is then expected at the seventeenth session of the UNFCCC in Durban, South Africa.

The design of the GCF has to address a large number of concerns, the details of which remain unresolved within the negotiations. Issues relating to what role it will play in providing sustainable finance at scale; how it will fit into the existing development assistance and climate financing architecture; how it will allocate finance to developing countries; and how finance will be delivered effectively, all remain to be clarified. This represents an ambitious agenda and much progress will need to be made quickly if a working proposal is to be put to the delegates at the next COP meeting.

This paper offers an early contribution to the debate by highlighting some of the more pressing design issues and describing the implications of these features. We assess the Fund according to the following three core functions:

Governance: how the funds will be managed
Sourcing: how funds will be raised – who will pay and how
Disbursement: how funds will be delivered and distributed

Click here for the full publication (8 pages, pdf, 551KB)