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GCF approves $407 mln for climate projects

GCF approves $407 mln for climate projects

Songdo, 18 Nov (Indrajit Bose) — The Board of the UNFCCC’s Green Climate Fund (GCF) approved USD 407.8 million to 13 new projects at its 24th meeting in Songdo, South Korea, which included two projects from China and Palestine that saw controversy. The Songdo meeting was historic, in that the Board for the first time, in relation to the China proposal (which was eventually approved), resorted to using its voting procedure (which was adopted at its last meeting in July this year). This was because there was no consensus to approve the proposal, given objections from the United States (US) and Japan. When put to a vote, 19 Board members were in favour of approving the project, with the US and Japan opposing and Australia abstaining. The proposal was for catalyzing climate finance for a fund in the Shandong province, which sought a USD 100 million loan from the GCF.
In relation to Palestine, while the US objected to the funding proposal, it did not block the proposal from being approved as it abstained from participating in the decision. USD 26.3 million for the project was subsequently approved by the Board for a water and adaptation project in Northern Gaza.
Among the proposals which were approved included several projects relating to reducing emissions from deforestation and forest degradation (REDD-plus). (See details below on the funding proposals).
The Board met from 12-14 Nov, following a successful meeting of contributors held in Paris in late October, which saw 28 countries pledge resources to replenish the Fund for an amount of USD 9.7 billion, for the period 2020-2023.
In other decisions approved, the GCF Board accredited new entities who will be able to access the fund’s resources after an intense discussion on the matter, adopted an updated gender policy and gender action plan and a policy on co-financing. The Board also discussed at length the strategic plan for the 2020-2023 programming period.
The China and Palestine projects
The China proposal was submitted by the Asian Development Bank (ADB) as the accredited entity (AE) to the GCF and was titled ‘Catalysing climate finance (Shandong Green Development Fund)’ for a loan of USD 100 million from the GCF.
According to the proposal, the project aims to catalyse and leverage finance by blending government finance, concessional donor finance and private finance. The Shandong fund intends to undertake investments that maximise climate change impacts across the whole province. About 75 per cent of the sub-projects are expected to support mitigation action such as renewable energy, energy efficiency, sustainable transport and solid waste management, while the remaining 25 per cent would focus on people’s resilience building, in particular, infrastructure.
The GCF Secretariat informed the Board that Shandong ranks the highest in energy consumption among the provinces in China and is one of the most carbon intensive provincial economies driven by substantial use of coal, as a traditional energy source for its large industrial base. The Shandong government received a mandate from the central government to green its economy to meet its climate goal of peaking its emissions by 2027, but sources of public finance were limited, said the Secretariat further.
(The China project was first submitted to the Board for approval at its 21st meeting in Bahrain in 2018, but it was objected to by the US, thus leading to the proposal being deferred. See related TWN update.).
Japan and the US objected to approving the proposal on grounds that they did not see the proposal fit for GCF funding, and questioned the eligibility criteria of China to seek funding, saying that the GCF should focus on most vulnerable countries instead. Further, the US also objected to the technology development component in the proposal, raising concerns over intellectual property rights. (See below for further details).
Developing countries responded sharply to such comments and clarified that the eligibility criteria mentioned in the Governing Instrument (GI) of the Fund states that all developing countries to the UNFCCC are eligible for financing.
Expressing his objection to the proposal, Masahiro Takasugi (Japan) said that the GCF resources should be allocated preferentially to developing countries where climate change measures cannot be taken by their countries and also where mobilization of private finance is difficult. “This project is expected to be financed by development financial institutions such as ADB and a large amount of self-finance by the local government will also be injected. So, it is difficult to consider as a project that cannot be achieved without GCF finance”. He added further that the Board “should be very cautious about depriving vulnerable developing countries with higher needs of opportunities to support.”
Holly Kirking Loomis (US) said that “this proposal was approved on September 25 by the ADB Board based on a financing scenario that did not include GCF financing. Since the project is implementable without GCF financing, we question the necessity of GCF’s engagement here.”
She also added that the US had concerns about the “R&D and transparency aspects of this project, which also appears to not have carefully considered intellectual property rights considerations”. There are a number of references in the proposal to technology development, with very little transparency on what exactly will be financed, said Loomis. “What we do see in the proposal is the development of advanced technologies such as artificial intelligence, robotics, microgrids, solar roads and hydrogen cells. The GCF should prioritise financing proposals to the benefit of the most vulnerable populations, (and) not finance technology development and other activities that could and in fact will be financed and supported through other sources of finance. This project does not seem like an efficient use of limited GCF resources,” she added further, clarifying that the US would continue to oppose the proposal and would not join a consensus to approve it.
In a sharp response, Paul Ooquist (Nicaragua) said: “China is sitting at this table (the Board) as a developing country and according to the Convention and its rules, China is eligible for projects in the GCF”. He also said the technology transfer issue was lagging in the UNFCCC process and the Board should applaud when the technology development component is present in the projects. “We would, in fact, applaud if this project was not from China, but this is blatant political discrimination that has no place in this organization or in any other international climate change organization,” retorted Ooquist strongly. He added that it was clear that all efforts at achieving consensus had been exhausted and the Board should swiftly move to vote as per the procedures on decision-making in the absence of consensus adopted at the previous meeting.
Ayman Shasly (Saudi Arabia) said the situation was such that it was not about China anymore, nor about the funding proposal. It is about how we as governments sitting around the table are fulfilling the mandates from the UNFCCC Parties and the GI, said Shasly, adding that the Board must not determine which countries need finance or not, and to leave it to the sovereign governments to determine for themselves whether or not they need financing. He said that the project was “transformational” and that it is the GCF’s role to “bring everyone to the table to play a role in addressing climate change.”
Despite the pleas from developing country Board members, the US and Japan continued to oppose the project. The Board then went to vote with a show of hands, which was visible to all observers in the overflow room as well as those who were following the webcast of the Board proceedings. While Australia abstained from voting, 19 Board members voted in favour of the project. The project was thus approved.
Following the decision, Xia Lyu (China) thanked Board members, the Secretariat team and the project staff on reaching a decision and added that the project was a good one, with strong climate impact potential. She also said that the project had all the merits of emissions reduction, private sector mobilization and climate-resilient technology amplification, besides the potential for good practices from the project to be shared. She added that “China, as a major developing country, would continue to take action to combat climate change, deepen cooperation with all Parties and promote the multilateral governance process, including the GCF”.
On the Palestinian project, The US also expressed its reservation. The funding proposal was titled “Water Banking and Adaptation of Agriculture to Climate Change in Northern Gaza” submitted by Agence Française de Developpement (AFD).
Expressing her reservation, Loomis said, “Under the GCF’s GI, only developing country Parties to the UNFCCC are eligible to receive resources from this fund.” The US noted that it does not believe that the State of Palestine is qualified to accede to the Convention and said that it took the position that it was also therefore not eligible under the GI to designate a national designated authority or receive resources from the Fund.
Loomis added further that the US would not be able to support the project, but due “to significant potential for the positive impact of the proposal”, the US would not stand in its way. She said that the US objected to the funding proposal and “abstains from participating in the consensus decision to finance this proposal,” and requested her statement to be recorded in the report of the Board meeting.
Responding to the US, Shasly, on behalf of the Asia-Pacific constituency said that Palestine is a member of the constituency; that it was a full member of the UNFCCC and it had signed and ratified the Paris Agreement in April 2016. He also stressed that Palestine is leading all developing countries and is the Chair of G77 and China and it will lead the negotiations in the upcoming UNFCCC talks in Madrid, Spain. He added that Palestine was eligible for funding under the Convention, Paris Agreement and the GI of the GCF.
The Board approved USD 407.8 million to 13 new projects. Besides the China and Palestine projects, the Board also approved the following projects:
• USD 30 million for ‘Carbon Sequestration through Climate Investment in Forests and Rangelands’ in Kyrgyz Republic, with Food and Agriculture Organization (FAO) as the AE;
• USD 16.8 million for ‘Implementation of the Lao PDR Emission Reductions Programme through improved governance and sustainable forest landscape management’ with GIZ as the AE;
• USD 39.3 million for ‘Building a Resilient Churia Region’ in Nepal with FAO as the AE;
• USD 63.6 million for ‘Chile REDD-plus results-based payments for results period 2014- 2016’ with FAO as the AE;
• USD 50 million for ‘REDD+ Results-based payments in Paraguay for the period 2015-2017’ with United Nations Environment Programme (UNEP) as the AE; and
• USD 33.3 million for ‘GCF Ecosystem-Based Adaptation Programme in the Western Indian Ocean (Madagascar, Mozambique, South Africa and the United Republic of Tanzania)’ with Kreditanstalt für Wiederaufba (KfW) as the AE.
The following projects were approved under the simplified approval process (SAP) –
• USD 9.7 million for ‘Extended Community Climate Change Project-Flood’ with Palli Karma-Sahayak Foundation (PKSF) as the AE;
• USD 10 million for ‘Building resilience of urban populations with ecosystem-based solutions in Lao PDR’ with the United Nations Environment Programme (UNEP) as the AE;
• USD 10 million for ‘Multi-Hazard Impact-Based Forecasting and Early Warning System’ for the Philippines with Landbank as the AE;
• USD 9.3 million for ‘Climate-resilient food security for women and men smallholders’ in Mozambique through integrated risk management with the World Food Programme (WFP) as the AE;
• USD 9.4 million for ‘Inclusive Green Financing for Climate Resilient and Low Emission Smallholder Agriculture’ in Niger, with International Fund for Agricultural Development (IFAD) as the AE.
The Board also discussed the outcome of the first formal replenishment of the GCF. The Board took note of the summary of the replenishment process and adopted a decision on the outcomes of the first formal replenishment process, which proved contentious.
In contention was how to reflect in the decision of the Board, the recommendations contained in the replenishment summary report.
According to sources, developing country Board members were uncomfortable endorsing straightaway the recommendations in the summary report since it contained policy options and concepts that had not been proposed, discussed or agreed to by the Board and which appeared to them to be inconsistent with the GI.
“The Fund will be governed and supervised by the Board, not the contributors,” a Board member told TWN.
In the draft decision presented to the Board for approval, the language in the paragraph concerned read:
“Agrees to take up the recommendations in the Replenishment Summary Report…during its development of the updated Strategic Plan and other items on its work plan”.
A discussion ensued on what “take up” meant, and how the Board “takes up” the recommendations when the concepts in the recommendations had not been considered. Some Board members felt “take up” was akin to “accepting” the recommendations, while others did not think so. Following deliberations, the language was changed to:
“Agrees that it will consider the recommendations in the Replenishment Summary Report …during its development of the updated Strategic Plan and other items on its work plan.”
In the decision adopted, the Board welcomed “the successful conclusion of the first formal replenishment process of the GCF”; welcomed “the pledges made by 28 contributors totalling USD 9.66 billion (Special Drawing Rights (SDRs) 6.97 billion) equivalent (as of 14 November 2019), and the credit earned due to early payment encashment, which brings the outcome of the pledging session to USD 9.78 billion (SDR 7.05 billion) equivalent”.
(SDRs are supplementary foreign exchange reserve assets maintained by the International Monetary Fund. During the initial resource mobilization period, the GCF lost nearly USD 1 billion in foreign exchange losses).
In the decision adopted, the Board encouraged “further pledges and/or contributions during the replenishment period” and “contributing countries to confirm their pledges to the GCF in the form of fully executed contribution agreements/arrangements as soon as possible”.
Prior to the adoption of the decision, a report on the replenishment process and its outcome was presented by Johannes Linn, the facilitator for the replenishment process.
In relation to the outcome, Linn said that even though a few countries that had pledged in the initial resource mobilization (IRM) period of the GCF did not pledge for the first formal replenishment, the total pledge was USD 9.78 billion, which was about USD 500 million more than what was pledged in the pledging conference for the IRM in November 2014. “This result was achieved by three-quarters of the contributors increasing their pledges in national currency terms and nearly half of them doubling or more than doubling their pledges. Had all countries that pledged at Paris merely pledged the same amounts they contributed in domestic currency terms during the IRM, the replenishment total would have amounted to only about USD 5.9 billion. The actual outcome at Paris was thus 66 per cent higher than this important benchmark,” said Linn. (Paris was where the pledging conference took place in late October this year).
Linn also added that the GCF first replenishment period was for four years, compared to the IRM, where contributions were for 5 years in effect, and therefore, “the GCF would be able to programme annually 70 per cent more during the GCF-1 period than it did during the IRM period”. Linn further added that additional pledges could be expected in the coming months and years.
Responding to the report, Shasly (Saudi Arabia) congratulated Linn for ensuring a smooth process. Shasly also acknowledged the contributions from developed countries and added that in comparing with the IRM, “what we have in our books is USD 10.3 billion, not USD 7.3 billion. If you take the foreign exchange rates since the IRM, the figures will be different”. He also said that the replenishment figures are short of the USD 100 billion targets (referring to the promise by developed countries in Cancun under the UNFCCC in 2010 to mobilise USD 100 per year by 2020) and hoped in future replenishments there would be more ambitious contributions. “Developing countries have a lot of potentials to act on climate change but they need support. If we have to increase our ambition…we need to increase ambition for finance support because there is a mismatch between what is being asked from developing countries and what is being put on the table for that action,” said Shasly.
Jorge Ferrer Rodriguez (Cuba), while thanking contributors, said despite an increase from the IRM pledging process, “we are far from meeting the needs of developing countries; far from the potential of contributors; far from the Paris Agreement ambition in all areas – mitigation, adaptation and finance.”
Speaking on the issue, alternate active observer Helen Biangalen-Magata (from the Philippines), representing the civil society voice, added that developed countries were far from the USD 100 billion a year target and the commitments were “staggeringly low” compared to the actual requirements of “equity, fair shares and keeping temperature rise below 1.5°C (since the pre-industrial period”. “We challenge the developed countries who have not given any contributions to the Fund or very little contributions as compared to their fair share in climate change obligations to do so,” said Magata.
Accreditation of entities
The Board also accredited 7 entities to the Fund, after an intense discussion around some of the entities, following issues raised by civil society as to their past conduct, and also as to whether adequate due diligence processes were undertaken by the GCF’s Accreditation Panel.
The entities who were accredited and who will be able to access GCF resources were:
National Committee for Sub-National Democratic Development Secretariat (NCDDS) based in Cambodia;
• CRDB Bank based in Tanzania;
• Finanzas y Negocios Servicios Financieros Limitada (FYNSA) based in Chile;
• IL&FS Environmental Infrastructure and Services Limited (IEISL) based in India;
• Yes Bank Limited (Yes Bank) based in India;
• Cassa Depositi e Prestiti S.p.A. (CDP) based in Italy and
• Save the Children Australia (SCA) based in Australia.
(Edited by Meena Raman)