Finance for developing countries is a perennial issue in international climate negotiations. Progress on that front will be critical to a successful outcome in Paris next year, when countries hope to conclude a new global climate agreement.
Many are hoping developed countries will come forward with new financial pledges at a leaders summit being convened this fall by U.N. Secretary-General Ban Ki-Moon, providing momentum heading into Paris. Their willingness to do so depends heavily on the outcome of a meeting next week in Songdo, South Korea.
The board of the new Green Climate Fund, which will channel finance from developed to developing nations for mitigation and adaptation, is meeting May 18-21 in hopes of breaking earlier impasses on the fund’s basic operating rules.
Under the 2009 Copenhagen Accord, developed countries agreed to mobilize $100 billion per year in climate finance by 2020, from both public and private sources. The Green Climate Fund was established a year later as a principal vehicle for delivering this funding.
The board of the Green Climate Fund comprises representatives from 24 countries, with an equal divide between developed and developing nations. Since the first board meeting in August 2012, the goal has been to organize the fund’s institutions so it is ready to receive financial pledges and distribute funds.
However, progress thus far has been slow and countries are divided on numerous issues. For example, donor nations believe that recipients need to increase their capacity to receive funding before they put forward pledges. Conversely, many developing nations argue they should not allocate resources toward this without concrete promises of funding. There is a similar split over the extent to which funding received by the Green Climate Fund should include private sources as opposed to solely government grants.
The current priorities for the Green Climate Fund are eight “essential requirements” that developed countries believe are prerequisites to finalize before they will announce funding contributions. At the sixth board meeting in Bali in February, the board reached consensus on only two of these eight essential requirements. Most importantly, they agreed on parameters for allocating the initial level of funding and on a goal of distributing funds evenly over time between mitigation and adaptation.
However, six other requirements still need agreement. These include key cogs in the Green Climate Fund’s machinery, such as managing the risks of projects and programs that it funds, a structure to incentivize private investors to participate in the fund, and metrics for the board to evaluate how its investments perform over time. Solutions to these issues are necessary for the Green Climate Fund to function, as it can only act using the procedures and rules it receives from board decisions.
Next week’s meeting is the final board meeting before the Ban-Ki Moon summit in September. Some developed countries want to provide financial pledges at that summit, but will be reluctant to do so without decisions on the essential requirements. After Songdo, the next opportunity to finalize these will be at the eighth Green Climate Fund board meeting in October, in the lead-up to the next round of United Nations Framework Convention on Climate Change (UNFCCC) negotiations in Lima, Peru, in December.
For many developing countries, finance is an important consideration in the development of a 2015 agreement. The sooner there is clarity on both the Green Climate Fund’s structure, and developed country pledges to the fund, the better the prospects for a good outcome next year in Paris. The pressure is on to get substantial progress next week in Songdo.