The Green Climate Fund gained momentum during the international climate negotiations here in Lima, Peru, surpassing the $10 billion mark and securing landmark financial commitments from both developed and developing countries. Now the race begins to assess and finance the first projects, including possibly REDD+, ahead of the Paris climate talks in December 2015.
This article was originally published on Ecosystem Marketplace.
12 December 2014 | LIMA |Peru | It was a heavy lift to get countries to pledge the $10 billion seen as a crucial source of early financing for the Green Climate Fund (GCF) by the end of this year's Conference of Parties (COP 20) in Lima, Peru. Now comes the even harder part: the race to commit some of that funding to projects that will prove the GCF works ahead of the climate talks in Paris in 2015.
The GCF was established during COP 16 in Cancun, Mexico to support projects, programs, policies and other actions that contribute to low-carbon and climate-resilient development in developing countries. Funding under the GCF will be split 50-50 toward adaptation and mitigation activities, including REDD+ (reducing emissions from deforestation and forest degradation) projects.
The GCF is designated as an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC). Funding for the GCF materialized very slowly, but UNFCCC Executive Secretary Christiana Figueres challenged countries to provide initial funding of $10 billion by this year's COP. Countries finally met that challenge this week with a flurry of commitments, including new pledges from Peru, Colombia and Austria that increased total committed funding to nearly $10.2 billion.
"That capitalization does send a strong signal," said Mary Robinson, UN Secretary-General Special Envoy for Climate Change. "This capitalization, though, is just a start. Most people understand that this is still a long way short of what will be needed."
Developed countries have committed to provide $100 billion per year by 2020 to support climate initiatives in developing countries.
"The Green Climate Fund looks likely to transform the landscape of climate finance," said Heru Prasetyo, head of Indonesia's REDD+ Agency. "It is vital that we start discussing how we can most effectively use this new institution to leverage its transformative potential as much and as rapidly as possible."
The pressure is on the GCF to quickly launch its operations now that it has received this $10 billion in pledged financing, namely by assessing and securing board approval for projects ahead of COP 21 in Paris next December.
Countries are concerned about the speed at which projects will navigate the GCF process, acknowledged Héla Cheikhrouhou, GCF's Executive Director.
"If GCF is not moving as fast as private commercial banks, then people will say 'how come--this is something that's so urgent, so important, yet so slow'," Prasetyo said.
Small island countries are particularly concerned that the GCF application process may be cumbersome and that they might be bypassed by the GCF as they have been by other funding mechanisms because they are classified as middle-income countries.
There needs to be a way to fast track and build capacity so that these countries are not left behind, said Tony de Brum, Minister of Foreign Affairs of the Republic of the Marshall Islands, who advocated a theme of "less process, more access" for the GCF.
The GCF will have to accomplish in nine months what it would normally take three years to do, such as accredit entities, complete portfolio details and assess proposals, Cheikhrouhou observed.
"Our task together is going to Paris with some sample of projects already approved by the board," she said.
Developing countries can submit funding proposals to the GCF through National Designated Authorities (NDAs), with 70 countries already nominating an NDA or a focal point to oversee such submissions.
"We're looking for countries to put forward their best, highest-performing institutions," she said.
REDD+ projects could be among those fast tracked ahead of the Paris talks as forest management and land use have been defined as a key area of focus and funding by the GCF.
"I would be more than delighted if some of the projects approved include forestry projects," Cheikhrouhou said. But given the short time frame to Paris, she warned: "Don't bring us concepts that will take years to develop."
Norway sees the GCF as an important channel for financing REDD+ projects, said Henrik Harboe, Deputy Director of the Norwegian Ministry of Foreign Affairs and Co-Chair of the GCF Board.
"Now is the time for countries to come forward with good proposals for REDD projects and programs," he said. The GCF board adopted a specific model and measurement framework for REDD+ results-based payments in October, which was of "great significance" in the view of Indonesia's national REDD+ agency, Prasetyo said.
The GCF could help Indonesia's interim financing mechanism called Financing REDD+ in Indonesia (FREDDI) become a useful and effective fund, he said.
"The government of Indonesia looks forward to building a strong relationship with the Green Climate Fund," Prasetyo said.
Clean Development Mechanism (CDM) projects could also be funded under the mitigation component according to the GCF rules, but assurance is needed that the projects meet the GCF's investment criteria and results-based management framework, Cheikhrouhou said.
The GCF is looking for trend-setting projects that have significant climate impacts and contribute to a paradigm shift in terms of the country's international pledges under the UNFCCC process and its economic capacity to implement mitigation activities on a national level. CDM project developers will have to evaluate their projects to see if they fit the GCF's criteria, she said.
The key feature of the GCF is the private sector facility, which will allow direct and indirect funding for private-sector activities, because it is the only way to mobilize funds at the necessary scale, Harboe said.
"Ten billion US dollars is a very impressive figure, but it is a very small compared to the needs for finance in developing countries," he said.
The advantage of the GCF is that it can work with the private sector in ways that other funds cannot because it can provide project and program financing through a variety of mechanisms, including grants, loans and equity, Cheikhrouhou said. The fund is also ready and willing to take on risks that other facilities cannot, which can help engage the private sector.
"We are ready to hit the ground running and we think we will have to run very fast and will only be able to do that as fast as partners are running with us," Cheikhrouhou said.