A crisis of confidence at the Green Climate Fund?

In July 2018, the 20th board meeting of the Green Climate Fund – the UN climate finance initiative established in 2010 to support developing countries’ responses to climate change – ended in failure. Following an extremely long discussion of the agenda, negotiators left having made no essential decision nor considered any funding proposals. Observers have highlighted a number of procedural and substantive issues to explain what has been described as a ‘meltdown’.

In the lead-up to the next board meeting, scheduled for 17–20 October 2018 in Bahrain, this commentary reflects on some of the underlying shifts within the Fund and its environment.

Old tensions over new issues

The July meeting, held in Songdo, South Korea, certainly had some major procedural problems. Managing the contentious and consequential agenda was no easy task for Lennart Båge, the single acting chair, whose colleague Paul Oquist had to withdraw due to anti-government protests in Nicaragua, his constituency.

Observers have also highlighted disputes over the replenishment process. The Fund will soon have allocated all of its USD 7.1 billion and is in need of a new round of capitalisation. At the intersessional negotiations of the United Nations Framework Convention on Climate Change (UNFCCC) in Bonn, Germany, in May, the co-chairs had anticipated that replenishment would be an important next step. The matter became a stumbling block at the board meeting in July when some developed countries attached conditions to appease their constituencies.

All of these are longstanding issues, however. The Fund’s eighth board meeting, held in Bridgetown, Barbados, in 2014, was one of the most contentious in the Fund’s history. It had a similarly ambitious and politically-loaded agenda, and one of the co-chairs, José Salceda, had to drop out due to natural disasters in the Philippines, his home country. The board tried to establish procedures for decision-making in the absence of consensus. Several developed countries proposed a system based on voting rights weighted according to financial contributions. This, they argued, would incentivise higher pledges. The ensuing discussion was hampered by disagreement with developing countries.

Financial contributions have been used quite frequently to bargain at the board meetings. While contributing countries would not directly threaten to withhold funds if their demands were not met, they have often framed favoured policies as necessary conditions for leveraging private investments or convincing their treasuries to sign off on contributions.

Certainty through commitment: a fundamental premise eroded

So the challenges the Fund encountered at its last board meeting in July were by no means new – but never had the negotiations collapsed quite to that extent. What had changed?

Importantly, a fundamental premise underlying the board’s work has been eroded. Previously, delegates had a clear mission to operationalise and manage the Fund. Profound differences notwithstanding, they were constrained by the fact that the board meetings are post-agreement negotiations: their governments had already made a political commitment. ‘No deal’ was not an option.

Even though the board was divided over key issues and sometimes postponed important decisions, parties and stakeholders alike could always be confident that it would persevere to produce at least some outcome that would keep the Fund going.

Several factors have now reduced that confidence. The United States, under its current government, has no stake in the future of the Fund. In fact, it is withholding money that had been pledged by Barack Obama. Its board member, Geoffrey Okamoto, insisted on closing the July meeting on time despite failure to reach agreement: apparently, returning home without having made any decisions was an acceptable outcome for him.

As the board makes decisions by consensus, deadlock becomes a latent threat under these circumstances. Tensions over substantive issues are all the more concerning when they may actually lead to stalemate.

In addition, there is now less political pressure for agreement. In anticipation of the 2015 UNFCCC COP 21 summit in Paris, delegates were determined to bring the Fund into operation. This created an approach of getting things started and sorting out the details later: building the plane while flying it, to paraphrase Leonardo Martinez-Diaz, a former US delegate. While this approach was frowned upon by some, it illustrates the expectations under which the board used to operate.

Today, international climate finance is still urgently needed, and the upcoming COP 24 meeting in Katowice, Poland, will provide an important opportunity to take stock. The UNFCCC agreements of Cancún (2010) and Paris (2015) commit developed countries to collectively mobilising at least USD 100 billion annually by 2020 in public and private support for developing countries. But the centre of gravity for climate action has shifted in recent years – somewhat in the spirit of the Paris Agreement – towards subnational and non-state actors like cities or companies.

Lastly, the weakened political momentum has also affected the conduct of board members. At the July meeting, veteran delegates sought to resolve disagreements in small groups and informal consultations, as they had many times before. Newer delegates insisted on plenary deliberations and decision-making transparency, as prescribed in the Fund’s governing instrument. The old understanding between delegates before COP 21 in Paris has not fully endured. Diplomatic practice at the board is no longer shaped by the same necessities that existed before.

Re-establishing confidence

No doubt the Fund can push on through. In the short term, this will require skilful management on the part of the co-chairs and a sense among board members of the need to prioritise and compromise. This will be even more important after the Fund’s Executive Director, Howard Bamsey, unexpectedly resigned for personal reasons at the last board meeting in July. In the long term, the Fund must make its decision-making more robust. The lack of procedures for how to operate in the absence of consensus – a problem that has dogged the Fund for many years – is an obvious challenge that needs to be overcome. Doing so will not be easy, particularly if linked to the issue of replenishment, but it would go a long way to re-establishing confidence. The Green Climate Fund is no longer just an arena for negotiations, but also a financial institution that can only succeed if investors and recipients are able to rely on it.

Dr Marian Feist is a senior research associate at the United Nations University in Bonn, specialising in global environmental politics and international climate finance. He completed his PhD at the Grantham Research Institute and LSE’s Department of International Relations.

The views in this commentary are those of the author and do not necessarily represent those of the Grantham Research Institute.