For a colossal economic and energy transition, which aims to reduce climate change, a massive development fund is required. And, the bigger the pool of money, the larger the controversy that might arise.

 

Here comes the Green Climate Fund (GCF), the superfund established to help poor countries to pay for investments in climate change mitigation and adaptation.The Green Climate Fund (GCF) was established at UN talks in Cancún, Mexico, five years ago. From the perspective of developing countries, it is one of their primary hopes for financial assistance against a warming world. From the side of developed nations, it is a political tool to leverage consensus.

 

Experts and economists believe that, starting from 2020, the climate change challenge will need an estimated US$100 billion each year. This will help to promote renewable energy and phase out fossil fuel, while making states resilient to early effects of climate change. Other strategies include damage&loss financial support to states affected by climate-related extreme events, REDD+ funds to support forest preservation, adaptation and urban resilience project to avoid large scale climate migration.

 

The idea of the fund was first promoted by then-Secretary of State Hillary Clinton, in 2009. “The US is prepared to work with other countries to jointly mobilise $100bn a year by 2020” Clinton told the press days ahead the Copenhagen failure.

 

Money will be key to deliver results in Paris. “If we are to succeed in Paris, it will require not only political commitment, but also financing,” as Mr Hollande made clear in front of all French ambassadors. Indeed, even if a Convention is signed on December 13, the challenge will be building a constant stream of cash to keep the GFC running for the years to come.

 

Big fund, little money

 

If you arrive at the GCF offices in the city of Songdo, in the metropolitan area of Incheon, South Korea, you may find a small group of economists struggling to raise cash from rich nations. The team is guided by Héla Cheikhrouhou, Executive Director of the Green Climate Fund,and long term climate change finance expert. The office goal is to manage and oversee the fund, not to push nations to allocate money to it. “The GCF is aimed to offer a full range of funding options, including loans, concessional loans, grants, and structural insurance,” Pierre Forestier, head of the climate division of the French development agency, told during a conference in Paris. “It will involve co-financing from the private,” he added.

 

How it works seems quite clear. How raise money less so. So far only US$14 billion has been allocated in the found. Canada, (US$2,65 billion), Japan ($1.5 billion), the United Kingdom (US$1.2 billion), and Germany ($1 billion) lead the way. The United States has pledged the largest amount (US$3 billion). But many key states are lagging way behind. Italy has stakes in only 250 million euros for the next five years. Politicians are spinning the bad news as a good news. For instance, during a September brief in Rome, the Italian Minister of Foreign Affairs Paolo Gentiloni self-defined Italy as “One of the top major donors”. The US$100 billion pledge a year, outlined by Hillary Clinton, seems very distant.

 

Problems, and more problems

 

Issues may arise from Washington DC too. President Obama, who is trying to substantiate his legacy on climate change, has requested Congress to approve on Dec. 11 the US$ 3 billion climate fund. But Republicans in Congress are threatening to disrupt a key piece of President Barack Obama’s pledge to combat global warming, just days before climate negotiations ends. For the GOP blocking, the GCF might be a strategy to undermine a world climate agreement. And, potentially a catastrophe that can fatally undermine the whole negotiation process.

 

“Without Senate approval there will be no money,” congressman John Barrasso (Rep. WY) told the press. “Congress has never authorized funding the Green Climate Fund, and we cannot support providing taxpayer dollars to the fund.”

 

This political move might scare some relevant climate negotiators, especially from India, Indonesia and Brazil, and might push them not to adopt the final text from the negotiations.

 

Even if Paris negotiations will be successful, the GCF needs more agency from donors states. Pledged funds don’t match with disbursed funds. To date only US$5.83 billion had been formally agreed (out of 14 billion), and just US$852 million had reached the fund’s pocket. It gets worse, if we think that only a US$30 million project in Mali has been actually funded.

 

The risk, an analyst said, is not just to miss the goals, but to divert money from the new SDG development agenda and from the development agencies funds. In the past years, the first tranche of climate funding, the so-called 2010-12 fast-start finance (US$7,2 billion), was partially diverted from funds established for Millennium Development Goals (MDGs), and development budget in general. The GCF states that funds should be additional. Nevertheless, the risk of diverting aid from traditional development aid is concrete, according to several Brussels-based analysts.

 

In the meanwhile, World Bank is gearing up to increment loan in order to help Africa adaptation to climate change together with poverty eradication policies.  The World Bank has devised a US$16bn strategy designed to fast-tracking clean energy, efficient farming and urban protection, the measures promise to greatly increase renewable energy across the continent, bolster food production and lead to the planting of billions of trees.

 

We are almost to know whether new options for making GCF more effective will emerge from the Paris negotiations. The risk is to cheer an agreement that has no solid financial background.