Global Environment Facility (GEF):
An Overview
Richard K. Lattanzio
Analyst in Environmental Policy
May 17, 2010
Congressional Research Service
7-5700
www.crs.gov
R41165
CRS Report for Congress
P
repared for Members and Committees of Congress
Global Environment Facility (GEF): An Overview
Summary
The Global Environment Facility (GEF) is an independent and international financial mechanism
(i.e., a grant and lending institution) that promotes cooperation and fosters actions to protect the
global environment. Established in 1991, it unites 180 member governments and partners with
international institutions, nongovernmental organizations, and the private sector to assist
developing countries with environmental projects related to six areas: biodiversity, climate
change, international waters, the ozone layer, land degradation, and persistent organic pollutants.
GEF receives funding from multiple donor countries—including the United States—and provides
grants and concessional loans to cover the additional or “incremental” costs associated with
transforming a project with national benefits into one with global environmental benefits. In this
way, GEF funding is structured to “supplement” base project funding and provide for the
environmental components in national development agendas. GEF partners with several
international agencies, including the International Bank for Reconstruction and Development, the
United Nations Development Program (UNDP), and the United Nations Environment Program
(UNEP), among others. GEF is the primary fund administrator for four Rio (Earth Summit)
Conventions, including the Convention on Biological Diversity (CBD), the United Nations
Framework Convention on Climate Change (UNFCCC), the Stockholm Convention on Persistent
Organic Pollutants (POPs), and the United Nations Convention to Combat Desertification
(UNCCD). GEF also establishes operational guidance for international waters and ozone
activities, the latter consistent with the Montreal Protocol on Substances that Deplete the Ozone
Layer and its amendments. Since its inception, GEF has allocated $8.8 billion—supplemented by
more than $38.7 billion in co-financing—for more than 2,400 projects in more than 165
countries.
GEF is one mechanism in a larger network of international programs designed to address
environmental issues. Each year, billions of dollars in environmental aid flow from developed
country governments—including the United States—to developing ones. While the efficiency and
the effectiveness of these programs are of concern to donor country governments, a full analysis
of the purposes, intents, results, and consequences behind these financial flows has yet to be
conducted. International relations, comparative politics, and developmental economics can often
collide with environmental agendas. Critics contend that the existing system has had limited
impact in addressing major environmental concerns—specifically climate change and tropical
deforestation—and has been unsuccessful in delivering global transformational change. A desire
to achieve more immediate impacts has led to a restructuring of the Multilateral Development
Banks’ (MDBs’) role in environmental finance and the introduction of many new bilateral and
multilateral funding initiatives. The effectiveness of GEF depends on how the fund addresses its
programmatic issues, reacts to recent developments in the financial landscape, and responds to
emerging opportunities. The future of GEF remains in the hands of the donor countries that can
choose to broaden the mandate and strengthen its institutional arrangements or to reduce and
replace it by other bilateral or multilateral funding mechanisms.
Congressional Research Service
Global Environment Facility (GEF): An Overview
Contents
Introduction ................................................................................................................................ 1
The Global Environment Facility (GEF)...................................................................................... 2
Organizational Structure........................................................................................................ 3
Funding ................................................................................................................................ 4
Project Areas......................................................................................................................... 7
Current Issues for Congress......................................................................................................... 9
External Challenges for GEF............................................................................................... 10
Internal Challenges for GEF................................................................................................ 11
Looking Forward ................................................................................................................ 12
Figures
Figure A-1. Commitments to GEF Pilot Phase and Replenishments ........................................... 14
Figure A-2. Financial Status of GEF Trust Fund: Summary of Arrears ....................................... 23
Tables
Table 1. Recent U.S. Budget Authority for International Environmental Programs ....................... 2
Table 2. U.S. Commitments and Contributions to GEF by Fiscal Year ......................................... 6
Table A-1. U.S. Treasury International Programs: Summary of Arrears...................................... 23
Appendixes
Appendix. Global Environment Facility Trust Fund................................................................... 14
Contacts
Author Contact Information ...................................................................................................... 24
Congressional Research Service
Global Environment Facility (GEF): An Overview
Introduction
Many governments acknowledge that environmental degradation and climate change pose
international and trans-boundary risks to human populations, economies, and ecosystems. To
address these challenges, countries have implemented global environmental policies through a
range of domestic, bilateral, and multilateral mechanisms. Recent mechanisms have taken the
form of (1) treaties and frameworks that seek to harmonize international commitments; (2)
legislative and regulatory policies that support emission reductions, renewable energy portfolios,
and energy efficiency strategies; (3) developmental programs that assist with sustainable growth
strategies in lower-income countries; and (4) financial pledges that increase public funding for
global environmental initiatives. This report investigates the last policy measure: public funding
for global environmental initiatives.
U.S. support for global environmental initiatives has increased substantially over the past few
years Table 1.1 As Congress considers potential legislation and/or appropriations for initiatives
administered through the Department of State, the Department of the Treasury, and other agencies
with international programs, it may have questions concerning the direction, efficiency, and
effectiveness of current bilateral and multilateral programs. This report provides an overview of
one of the largest and most comprehensive mechanisms to date—the Global Environment Facility
(GEF)—and analyzes its structure, funding, and objectives in light of the many challenges within
the contemporary landscape of global environmental finance.
1 Some commentators believe the new and increased funding for environmental issues is the result of several factors,
including (1) an increased political understanding of climate change, (2) the transformed role of Multilateral
Development Banks in global energy and environmental issues, (3) an expressed desire to achieve more immediate
environmental and economic impacts through bilateral and private sector resources, and (4) a perceived lack of
efficiency in current financial mechanisms. See Gareth Porter, Neil Bird, Nanki Kaur, and Leo Peskett, “New Finance
for Climate Change and the Environment,” World Wildlife Foundation and the Heinrich Böll Foundation, 2008.
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Global Environment Facility (GEF): An Overview
Table 1. Recent U.S. Budget Authority for International Environmental Programs
($ in millions US)
2009
2010
2011
Fund (Agency)
Actual
Estimate
Request
Clean Technology Fund (Treasury)
-
$300.0
$400.0
Strategic Climate Fund (Treasury)
-
-
-
Pilot Program for Climate Resilience
-
$55.0
$90.0
Forest Investment Program
-
$20.0
$95.0
Scaling-Up Renewable Energy
-
-
$50.0
Global Environment Facility (Treasury) $80.0 $86.5 $175.0
Tropical Forest Conservation Act (Treasury)
$20.0
$20.0
$20.0
Least Developed Countries Fund (State)
-
$30.0
$30.0
Special Climate Change Fund (State)
-
$20.0
$20.0
World Bank Forest Carbon Partnership (State)
$5.0
$10.0
$15.0
Total
$105.0 $541.5 $895.0
Source: H.R. 3288, the Consolidated Appropriations Act, 2010, signed into law Dec. 16, 2009 (P.L. 111-117),
and The Budget of the United States Government for Fiscal Year 2011, Appendix.
Notes: The above list is a selection of global environmental programs funded in part by the U.S. government.
It is not comprehensive of al U.S. environmental funding.
The Global Environment Facility (GEF)
The Global Environment Facility is an independent and international financial mechanism (i.e., a
grant and lending institution) that promotes cooperation and fosters actions to protect the global
environment. Established in 1991, it unites 180 member governments and partners with
international institutions, nongovernmental organizations, and the private sector to assist
developing countries with environmental projects related to six areas: biodiversity, climate
change, international waters, the ozone layer, land degradation, and persistent organic pollutants
(POPs). GEF receives funding from multiple donor countries2—including the United States—and
provides grants and concessional loans3 to cover the additional or “incremental” costs associated
with transforming a project with national benefits into one with global environmental benefits
(e.g., choosing solar energy technology over coal technology meets the same national
development goal of power generation but is more costly. GEF grants aim to cover the difference
or “increment” between a less costly, more polluting option and a costlier, more environmentally
sound option). In this way, GEF funding is structured to “supplement” base project funding and
provide for the environmental components in national development agendas. Since its inception,
GEF has allocated $8.8 billion—supplemented by more than $38.7 billion in co-financing4—for
more than 2,400 projects in more than 165 countries.5
2 See Figure A-1 of the Appendix for a list of donor countries during each GEF funding, or “replenishment,” period.
3 “Concessional loans” are defined as financing that offers flexible or lenient terms for repayment, usually at lower than
market interest rates.
4 Co-financing may come from a variety of sources including public money in the recipient country, private money in
(continued...)
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Global Environment Facility (GEF): An Overview
The idea for a Global Environment Facility was proposed in a September 1989 meeting of the
joint International Bank for Reconstruction and Development (the World Bank)—International
Monetary Fund Development Committee after recommendation by a World Resources Institute
report commissioned by the United Nations.6 The fund was established in 1991 as a pilot program
within the World Bank, and many observers saw it as the beginning of an important shift in
multilateral policy toward incorporating environmental concerns into development assistance.
GEF, however, quickly ran into some operational challenges. These included (1) problems with
communication among the implementing agencies (i.e., among the World Bank economists, the
United Nations Development Program engineers, and the United Nations Environment Program
environmentalists), (2) problems with differing agendas among the donor countries (i.e., between
environmental idealism in Europe or economic pragmatism in the United States and United
Kingdom), and (3) problems with differing perspectives among developing countries (i.e.,
between an emphasis on economic growth or environmental initiatives).
Initially, GEF had been opposed by developing countries who believed that a program established
and controlled by higher-income donor countries under the framework of the Multilateral
Development Banks was not in their best interest. They remained committed to a governing
structure and a cooperative partnership founded on a U.N.-style majority-based decision. After
three years of debate, GEF was restructured in 1994 to address many of its institutional
challenges. GEF moved out of the World Bank to become a separate and permanent institution
with enhanced involvement from developing countries in decision making and implementation.
The current governing structure was instituted, the first operating procedures (“the Instrument for
the GEF”)7 were documented, and the funding cycle (“the GEF Replenishment”) commenced.
The World Bank took on the provision of the Trust Fund. The United Nations Development
Program, the United Nations Environment Program, and other international organizations
contributed to project development, management, and delivery.
Organizational Structure
International Agencies: GEF currently partners with 10 international agencies: the World Bank;
the United Nations Development Program (UNDP); the United Nations Environment Program
(UNEP); the United Nations Food and Agriculture Organization; the United Nations Industrial
Development Organization; the African Development Bank; the Asian Development Bank; the
European Bank for Reconstruction and Development; the Inter-American Development Bank;
(...continued)
the recipient country, foreign direct investment, or other official development assistance.
5 Information on GEF activities, organization, policies, and projects is available on its new website, at
http://www.thegef.org/gef/.
6 A full overview and analysis of the history of GEF and environmental financing can be found in a number of source
materials including book length studies by Inge Kaul and Pedro Conceição, The New Public Finance: Responding to
Global Challenges, New York: Oxford University Press, 2006; Robert L. Hicks, Bradley C. Parks, J. Timmons
Roberts, and Michael J. Tierney, Greening Aid?: Understanding the Environmental Impact of Development Assistance,
New York: Oxford University Press, 2008; and several articles including Gareth Porter, Neil Bird, Nanki Kaur, and
Leo Peskett, “New Finance for Climate Change and the Environment,” WWF and the Heinrich Böll Foundation, 2008;
Smita Nakhooda, Jon Sohn, and Kevin Baumert, “Mainstreaming Climate Change Considerations at the Multilateral
Development Banks,” World Resources Institute, 2005; and Smita Nakhooda, “Correcting the World’s Greatest Market
Failure: Climate Change and the Multilateral Development Banks,” World Resources Institute, 2008.
7 The “Instrument for the Establishment of the Restructured Global Environment Facility” is the officially adopted
operating procedures of the GEF. See documents at http://www.thegef.org/gef/node/2552.
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Global Environment Facility (GEF): An Overview
and the International Fund for Agricultural Development. Procedurally, the World Bank
administers funding, UNDP oversees project development, and UNEP serves as the scientific and
technical advisor. The remaining agencies contribute to the management and delivery of projects.
International Conventions: GEF is the primary fund administrator for four Rio (Earth Summit)
Conventions, including the Convention on Biological Diversity (CBD), the United Nations
Framework Convention on Climate Change (UNFCCC), the Stockholm Convention on Persistent
Organic Pollutants (POPs), and the UN Convention to Combat Desertification (UNCCD). GEF
also establishes operational guidance for international waters and ozone activities, the latter
consistent with the Montreal Protocol on Substances that Deplete the Ozone Layer and its
amendments.
Internal Organization: GEF’s main decision-making body is the GEF Council, which is an
independent board of governors responsible for developing, adopting, and evaluating operational
policies and programs. The Council is composed of 32 appointed members—16 from developing
countries, 14 from developed countries and two from among the countries of Central and Eastern
Europe and the former Soviet Union. The balance between donor and recipient countries was
negotiated and agreed to by Member states after the pilot phase of the program. The Council
meets approximately every six months and allows non-governmental organizations and private
individuals to attend most sessions. Formal voting goes before the GEF Assembly, which is
composed of representatives from all Member states and meets every four years. During these
times, the Assembly reviews general policy for operations, membership, funding, and
amendments. The GEF Secretariat, based in Washington, DC, services and reports to the Council
and the Assembly and formulates the work program, oversees implementation, and ensures that
operational policies are followed.
Voting: The Assembly and the Council make decisions and adopt regulations through the process
of consensus. GEF defines consensus as an agreement reached by all participants which includes
the resolution or mitigation of all minority objections. If, in the case of the Council, all
practicable efforts have been made and no consensus appears, Members may request a formal
vote. The GEF formal vote is a double weighted majority; that is, an affirmative vote that includes
both a 60% majority of the total number of Participants and a 60% majority of the total amount of
contributions.8 This format arose through a coordinated agreement between developed and
developing countries in an effort to give facility to both donors and recipients in the decision-
making process.
Funding
Replenishments: GEF is funded by donor countries, which pledge money every four years
through a process known as GEF replenishment. The process of replenishment was designed to
allow for program flexibility, strategic planning, and periodic performance evaluations. The
original GEF pilot program of $1 billion has been replenished four times with $2.01 billion in
1994, $2.67 billion in 1998, $2.93 billion in 2002, and $3.13 billion in 2006. Negotiations on the
fifth replenishment of GEF (GEF-5) have begun for implementation in 2010-2014.9 Financial
8 For the purpose of voting power, total contributions consist of the actual cumulative contributions made to the GEF
Trust Fund.
9 GEF’s fiscal year runs from July 1 to June 30.
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Global Environment Facility (GEF): An Overview
commitments by donor country to the GEF pilot program and the four GEF replenishments can
be found in Figure A-1 of the Appendix.
U.S. Commitments and Contributions: The United States supported the establishment of GEF in
1991. While the United States did not provide direct funding during the pilot phase of the
program,10 it has made commitments and contributions to all four GEF replenishments. U.S.
commitments have been $430 million in 1994, $430 million in 1998, $430 million in 2002, and
$320 million in 2006, for a total of $1.61 billion. U.S. commitments correspond to 13.9% of total
contributions for GEF during the history of the program, or, more specifically, 21.3% of total
contributions for GEF-1, 16.1% for GEF-2, 14.7% for GEF-3, and 10.2% for GEF-4.11 Payments
made by the U.S. Treasury to the International Bank for Reconstruction and Development (the
World Bank) as trustee for the GEF have varied widely over the years due mainly to budget
trends. As of December 31, 2009, payments have totaled $1.36 billion. Thus the United States is
currently $249.5 million in arrears of its pledged commitments, joining Argentina, Egypt, India,
Nigeria, and Portugal in that category. P.L. 111-117 was enacted in December 2009 with a
stipulated contribution of $86.5 million to GEF, of which $80 million is for the final GEF-4
contribution and $6.5 million is for a portion of arrears.12 A summary of U.S. commitments and
contributions is shown in Table 2. The financial status of the GEF Trust Fund and the summary
of arrears by country can be found in Figure A-2 of the Appendix. A summary of the United
States status in arrears by U.S. fiscal year can be found in Table A-1 of the Appendix.
10 During the GEF Pilot Phase, the United States had a separate co-financing arrangement administered by USAID.
11 The percentage of total contributions and the percentage of new donor funding are computed from different totals.
U.S. percentage of new donor funding is 20.86%, 20.84%, 17.94%, and 20.86%, respectively. See Appendix, Figure
A-1, for a full breakdown of U.S. contributions in relation to other sources.
12 Please note that the FY2010 enacted $86.5 million contribution is not calculated into GEF’s December 31, 2009,
figures.
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Global Environment Facility (GEF): An Overview
Table 2. U.S. Commitments and Contributions to GEF by Fiscal Year
$ Committed to GEF
($ in millions)
$ Contributed to GEF
Fiscal Year
for four years
($ in millions)
1994 $430.0 $30.0
1995 $90.0
1996 $35.0
1997 $35.0
1998 $430.0 $47.5
1999
$167.5
2000 $35.8
2001
$107.8
2002 $430.0
$100.5
2003
$146.8
2004
$138.4
2005
$106.6
2006 $320.0 $79.2
2007 $79.2
2008 $81.1
2009 $80.0
2010
$680.0 / $575.0a $86.5b
2011
$175.0c
Total
$2,290.0 / $2,185.0
$1,622.0
Totals through 12/31/2009
$1,610.0
$1,360.5
Arrears through 12/31/2009
$249.5
Sources: FY2011: The Budget of the United States Government for Fiscal Year 2011, Appendix, Department of
State and Other International Programs, at http://www.gpoaccess.gov/usbudget/fy11/pdf/appendix/sta.pdf.
FY2004-FY2010: U.S. Department of Treasury, Office of Performance Budgeting and Strategic Planning, at
http://www.ustreas.gov/offices/management/budget/budgetinbrief/index.shtml. Prior to FY2004: CRS
correspondence with U.S. Department of Treasury.
a. $680 million as requested in The Budget of the United States Government for Fiscal Year 2011, Appendix /
$575 million as pledged at the Fifth GEF Replenishment negotiations on May 12, 2010.
b. Enacted, P.L. 111-117 ($6.5 million of the $86.5 million is for funds in arrears).
c. Requested, The U.S. Budget for Fiscal Year 2011, Appendix, Department of State and Other Int’l Programs
($5.0 million of the $175.0 million is for funds in arrears).
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Global Environment Facility (GEF): An Overview
GEF-5: GEF finalized its Fifth Replenishment negotiations on May 12, 2010, in Paris, with over
30 countries pledging $4.25 billion to fund projects for the period 2010-2014. The financial
pledges include $1.3 billion programmed for climate change and some of the Fast Start Financing
discussed at the Copenhagen Climate Change Conference. The funding represents a 52% increase
in new resources provided by donors over the last GEF replenishment. The U.S. Administration
reportedly pledged $575 million over four years to GEF-5, with 29% of the U.S. funding to be
directed toward clean energy, 15% toward forestry, and 9% toward building resilience to climate
change impacts.13 The U.S. pledge represents an 80% increase over the last GEF replenishment.
During negotiations, the United States reportedly achieved important policy reforms to improve
GEF’s overall effectiveness, particularly with regard to country-owned business plans for funding
and resource allocation. The U.S. Budget for Fiscal Year 2011 had set forth a U.S. commitment of
$680 million for the Fifth Replenishment of GEF, to be paid in four equal installments of $170
million from FY2011 through FY2014. The FY2011 Budget had included $170 million for the
first installment of GEF-5 and $5 million for a portion of U.S. arrears, for a total request of $175
million.14 All funding is subject to annual congressional approval.
Project Areas
GEF funding is provided to recipient countries for projects and programs in six areas:
biodiversity, climate change, international waters, ozone layer depletion, land degradation, and
persistent organic pollutants. For examples of the types of projects funded by GEF, see the text
box below.
Biodiversity: GEF is the financial mechanism of the 1993 United Nations Convention on
Biological Diversity. The goal of GEF’s program is the conservation and sustainable use of
biodiversity, the maintenance of the ecosystem goods and services that biodiversity provides to
society, and the fair and equitable sharing of the benefits arising out of the use of genetic
resources. To achieve this goal, the program has several objectives including sustainability
initiatives in protected areas, conservation measures in production sectors, capacity building to
implement the Cartagena Protocol on Biosafety (CPB), and capacity building to support the
implementation of the Bonn Guidelines on Access to Genetic Resources. Biodiversity projects
constitute the largest percentage of GEF’s portfolio, making up 36% of total grants.
Climate Change: As the financial mechanism of the United Nations Framework Convention on
Climate Change, GEF allocates and disburses funding for projects in climate change mitigation
(i.e., reducing or avoiding greenhouse gas emissions in the areas of renewable energy, energy
efficiency, and sustainable transport), and climate change adaptation (i.e., increasing resilience to
the adverse impacts of climate change of vulnerable countries, sectors, and communities). GEF
projects in climate change help developing countries contribute to the overall objective of the
UNFCCC to achieve a “stabilization of greenhouse gas concentrations in the atmosphere at a
level that would prevent dangerous anthropogenic interference with the climate system.”
Moreover, GEF manages two special funds under the UNFCCC—the Least Developed Countries
Fund, to assist in adaptation strategies for the most vulnerable countries; and the Special Climate
13 Statement made by Natalie Wyeth, spokeswoman for the U.S. Treasury Department, as reported by
http://www.eenews.net/climatewire/2010/05/17/4.
14 The U.S. Budget for Fiscal Year 2011, op. cit.
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Change Fund, to assist in mitigation and adaptation programs for countries that are heavily reliant
of fossil-fuel technologies.
International Waters: GEF’s international waters focal area does not serve as a financial
mechanism for a specific convention. Through an association with regional agreements, it targets
trans-boundary water systems, such as river basins with water flowing from one country to
another, groundwater resources shared by several countries, and marine ecosystems bounded by
more than one nation. GEF grants help countries collaborate with their neighbors to modify
human activities that place stress on trans-boundary water systems and interfere with downstream
uses of those resources. Some of the issues addressed include trans-boundary water pollution,
over-extraction of groundwater resources, unsustainable exploitation of fisheries, control of
invasive species, and balancing the competing uses of water resources.
Ozone Layer Depletion: GEF, in partnership with the 1985 Vienna Convention for the Protection
of the Ozone Layer and the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer,
has aimed to safeguard the earth’s protective ozone layer after the discovery that certain
compounds were found to deplete it, posing substantial risks to human health and the
environment. GEF has allocated funds to assist in phasing out ozone-depleting substances (ODS)
and curbing the rising production and use of hydrochlorofluorocarbons (HCFCs). GEF’s aim is to
protect human health and the environment by assisting countries in phasing out consumption and
production of ODS while enabling alternative technologies and practices, according to countries’
commitments under the Montreal Protocol. The long-term goal of GEF interventions is to
contribute to the return of the ozone layer to pre-1980 levels.
Land Degradation: In 2002, the GEF Assembly expanded GEF’s mandate by adding land
degradation to the portfolio and designating it the financial mechanism of the United Nations
Convention to Combat Desertification. GEF focuses on sustainable agricultural practices (e.g.,
crop diversification, crop rotation, water harvesting, and small-scale irrigation schemes),
sustainable rangeland management, and the preservation of viable indigenous forests and
woodlands. GEF projects aim to integrate sustainable land management into national
development priorities, and to strengthen human, technical, and institutional capacities.
Persistent Organic Pollutants: GEF is the interim financial mechanism of the 2001 Stockholm
Convention on Persistent Organic Pollutants, a global and legally binding agreement to reduce
and eliminate pollutants including pesticides (e.g., DDT and mirex) and industrial chemicals (e.g.,
PCBs) as well as unintentionally produced POPs (e.g., dioxins and furans). GEF’s involvement in
tackling the threats posed by POPs dates back to 1995, with the introduction of the International
Waters Operational Strategy and its contaminant-based component. In this framework, GEF
began to develop a portfolio of strategically designed projects including regional assessments and
pilot demonstrations that addressed a number of pressing POPs-related issues.
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Global Environment Facility (GEF): An Overview
Examples of GEF Projects
Rural Electrification and Renewable Energy Development in Bangladesh
GEF Grant: $8,540,000
Description: The project promoted solar energy in rural areas by (1) increasing awareness of Solar Heating Systems
(SHS) among consumers and providers; (2) building technical and management capacity; (3) implementing and
evaluating SHS programs; (4) providing technical and business development support to institutions; (5) introducing
standards and programs for testing and certification; (6) financing grants to buy-down capital costs to increase
affordability of SHS; (7) promoting electricity as a means for income generation and social wellness; and (8) identifying
mechanisms to promote sustainability. Multiple approaches to SHS delivery were enacted, including a “fee-for-service”
program through rural electricity cooperatives, purchase supported by micro-credit through NGOs and microfinance
lenders, and hire-purchase/direct sale programs by private dealers and NGOs. Over 40,000 systems were instal ed
supplying energy to rural dispersed communities.
Biodiversity Conservation in Cacao Agro-forestry in Costa Rica
GEF Grant: $750,000
Description: The project improved management of cacao-based indigenous smal -farms according to both ecological
and organic productive principles so as to ensure conservation and sustainable use of plant and animal diversity and
provide a sustainable source of family income. The project promoted and maintained on-farm biodiversity while
improving livelihoods of organic cacao producers (including indigenous, Latin-mestizos, and Afro-Caribbean groups) in
the Talamanca-Caribbean corridor in Costa Rica.
Prevention and Management of Marine Pollution in the East Asian Seas in and around Indonesia
GEF Grant: $8,025,000
Description: The project developed policies and plans to control marine pollution from land and sea- based sources,
upgraded national and regional infrastructures and technical skills, and established financing instruments to project
sustainability. Project included selection of demonstration sites, establishment of regional monitoring and information
networks, and involvement of regional association of marine legal experts to improve capacity to implement relevant
conventions.
Source: GEF Project database at http://www.thegef.org/gef/gef_projects_funding.
Notes: As of April 1, 2010, there were 2,610 projects listed in the GEF database, of which 665 were “closed” or
“completed”; 1,200 were “under implementation” or had been “approved by the implementing agency”; and the
remaining 745 were in a pre-approval or endorsement stage.
Current Issues for Congress
GEF is one mechanism in a larger network of international programs designed to address
environmental issues. Each year, billions of dollars in environmental aid flow from developed
country governments—including the United States—to developing ones. While the efficiency and
the effectiveness of these programs are of concern to donor country governments, a full analysis
of the purposes, intents, results, and consequences behind these financial flows has yet to be
conducted.15 International relations, comparative politics, and developmental economics can often
collide with environmental agendas. Critics contend that the existing system has had limited
impact in addressing major environmental concerns—specifically climate change and tropical
deforestation—and has been unsuccessful in delivering global transformational change. A desire
to achieve more immediate impacts has led to a restructuring of the Multilateral Development
Banks’ role in environmental finance and the introduction of many new bilateral and multilateral
funding initiatives.
15 See Hicks, et al., op. cit., for an initial foray into a quantified analytic and a discussion on the metrics involved.
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Global Environment Facility (GEF): An Overview
The effectiveness of GEF depends on how the fund addresses its programmatic issues, reacts to
recent developments in the financial landscape, and responds to emerging opportunities. The
future of GEF remains in the hands of the donor countries that can choose to broaden the mandate
and strengthen its institutional arrangements or to reduce and replace it by other bilateral or
multilateral funding mechanisms. The following section investigates some of the current
challenges facing GEF and summarizes some of the responses initiated by the program.
External Challenges for GEF
• Rise of Climate Change Issues and Funding: The past decade has seen a rise in
the significance of global environmental issues—particularly climate change—on
the political agendas of many northern and some southern hemisphere countries.
Proposed policies have not only attempted to address the environmental
implications of greenhouse gas mitigation and climate change adaptation, but
have become linked to energy and infrastructure issues through international
economic, trade, and geo-political concerns. To address these issues,
governments have begun to incorporate many global environmental objectives
into their sustainable growth and development strategies. Funding for these
activities has increased, and various institutional responses for this extensive
portfolio are under consideration. Some critics contend that existing
environmental funds (e.g., GEF) are unsatisfactory because they do not have
experience managing investments of this scope.
• The Changing Role of Multilateral Development Banks in Environmental
Funding: Multilateral Development Banks (MDBs) are key actors in the global
system of environmental financing. As commercial lending institutions, they
dispense funds more efficiently than many institutional programs such as GEF;
but as primary mechanisms for economic development, their past environmental
lending practices have produced conflicts of interest.16 Objectives began to shift
in 2005 when MDBs were encouraged by the G-8 leaders to play a more leading
role in sustainable development and environmentally friendly technologies.17
Since this time, MDBs have launched many new initiatives to address the
environment, including efforts to (1) account for GHG emissions and improve
energy efficiency; (2) support renewable energy; (3) manage forests sustainably;
(4) promote carbon finance; and (5) adapt to climate change.18 GEF programs
now find themselves in competition with many of the new initiatives in MDB
portfolios.
16 The development portfolios of most MDBs strongly emphasize a bias toward conventional fossil fuel power
generation and infrastructure loans that often worked counter to environmental aims (e.g., the World Bank loaned more
than $2.5 billion for conventional power projects in 2005 compared to $109 million for renewable energy or energy
efficiency). See Gareth Porter, et al., op. cit., for further comments.
17 See the Gleneagles Plan of Action at the 2005 G-8 Meeting in Gleneagles, Scotland. It should be noted that the
portfolios of many MDBs still retain significant provisions for conventional power and infrastructure projects as
compared to most bilateral environmental aid, albeit with a greater ratio of renewable and efficiency resources than in
the past. See Hicks, et al., op. cit.
18 For a full analysis of the rise of MDBs in environmental finance, see Smita Nakhooda, Correcting the World’s
Greatest Market Failure: Climate Change and the Multilateral Development Banks, World Resources Institute, 2008.
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• Increase in New Bilateral, Multilateral, and Private Funding Mechanisms: Many
donor governments perceive that the existing environmental finance system has
not produced satisfactory results.19 In searching for new and effective approaches
to environmental funding, donors have sought options that can be organized
quickly, administered directly, and be demonstrated to produce a more dramatic
impact on the environment. Many have turned to highly specified multilateral
programs, bilateral or even private sector measures to accomplish these aims, and
no fewer than 15 environmental finance mechanisms have been announced
between 2007 and 2009. GEF is in competition with many of these new
initiatives for a share of environmental funding.20
Internal Challenges for GEF
• Lack of Strategic Approach: Historically, GEF has adhered to a project-by-
project approach to allocating funds, wherein over 95% of pledges have been
allocated to individual countries and less than 5% have been set aside for
regional or global programs. The dynamic assumes that on-going negotiations
and incremental adjustments could foster transformational change in economies
over time. While a project-by-project approach has allowed GEF to fulfill the
mandates of many of its conventions, large-scale environmental issues such as
climate change and biodiversity may demand more strategic and programmatic
funding modalities.
• Slowness of GEF Project Initiation and Implementation: Since its inception,
GEF’s project approval process has been long and complex. A 2006 internal
report found a 66 month lapse between entry of a concept into the project
pipeline and its initiation. Bureaucratic structures, work program frequencies,
Council deliberations, and consensus politics have all factored into delays.
• Difficulties in Defining “Incremental” and “Additional”: As stipulated in the
“GEF Instrument,” grants cover the “incremental” or “additional” cost of
“transforming a project with national benefits into one with global environmental
benefits.” Incremental cost calculations have also been used as preference in
project selection. Historically, GEF’s implementing agencies have had difficulty
producing a coherent methodology for calculating incremental cost, slowing the
rate of project development. Furthermore, countries continue to argue over the
19 Statistics confirm these perceptions: as a point of comparison, the success rate for multilaterally funded
environmental projects often pales in comparison to education, health, or infrastructure projects. Only 25% of World
Bank-financed environmental projects during the years 2001-2003 received a “satisfactory” project outcome rating,
compared to 100% for education, 86% for health, and 87% for infrastructure. See Hicks, et al., op. cit., p.6.
20 Recent initiatives include The Global Climate Change Alliance (GCCA) of the European Commission; The
International Window of the Environmental Transformation Fund (ETF-IW) of the United Kingdom; The Spanish
Millennium Development Goals (MDG) Fund; The Japanese Cool Earth Partnership; The German International
Climate Initiative; The Norwegian Agency for Development Cooperation (NORAD) Rainforest Initiative; The
Australian Global Initiative on Forests and Climate (GIFC); The German Life Web Initiative; The World Bank Forest
Carbon Partnership Fund (FCPF); The GEF Tropical Forest Account (TFA); The World Bank Clean Technology Fund
(CTF); The GEF-IFC Earth Fund; The World Bank Strategic Climate Fund (SCF) and Pilot Program for Climate
Resilience (PPCR); The Kyoto Protocol Adaptation Fund; and The Copenhagen Accord Green Fund. For an analysis
and overview of these new programs, see Porter, et al., 2008, op. cit.
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requirements of additionality (i.e., whether or not the global environmental
elements of a project would have taken place in the absence of GEF funding).
• Unsuccessful History of Leveraging the Private Sector: While GEF has long
recognized a need to mobilize investment resources in the private sector,
successful collaboration may require a degree of experience and commitment that
GEF cannot achieve under its existing structure. The length and uncertainty
inherent in the GEF project cycle may make participation less attractive to the
private sector, and the organization’s emphasis on government entities at the
expense of forming relationships with investors and manufacturers may serve as
a further impediment.
• Low Level of Funding by Donor Countries: Donor countries never intended GEF
to cover all the financing needed to achieve developmental objectives. Rather, it
was designed to be a catalyst for additional measures to address global
environmental problems. As such, historical funding provided by donor countries
was never at the level required to produce significant progress in reversing global
threats. This experience has demonstrated that the initial assumptions underlying
GEF—that relatively small amounts of incremental grant financing could
leverage multilateral investment for transformational change—may be flawed.
• Criticism of Donor and Agency Management of GEF: Donor control over the aim
and the direction of environmental funds has always been a challenge to
multilateral mechanisms. Critics claim that MDBs and donor countries alike use
GEF money as a tool to get recipient governments to commit to larger loans with
political conditionality. Some recipient governments note an unwieldy
bureaucracy to GEF and other multilateral funds and report that U.N. agencies
routinely assess unreasonable administrative fees.21 These and other accusations
of institutional torpor, inflexibility, and opaqueness have hindered GEF’s
objectives as an international site of coordination.22
Looking Forward
During the 2006 Replenishment meetings, GEF worked to address many of its program
deficiencies. The Council aimed to streamline costs and management fees, ensure project quality
upon proposal, and reduce the length of the project pipeline. A Sustainability Compact was
enacted that would oversee several issues, including (1) the shift away from a project-oriented
approach to a strategic and programmatic one; (2) a concentration on financing pre-market
innovation in an attempt to leverage private capital; (3) a heightened dedication to transparency,
accessibility, and equitability; and (4) a renewed focus on country-driven ownership through the
implementation of a Resource Allocation Framework (RAF) wherein funding is determined by a
country’s potential to generate global environmental benefits and its capacity to successfully
implement GEF projects. Further, in 2007, GEF initiated a pilot public-private partnership (PPP)
initiative called the “Earth Fund” to enhance engagement with the private sector. Internal
21 A January 26, 2009, audit of GEF by Deloitte Touche Tohmatsu showed that more than $17 million went to pay for
fees during the 2008 accounting period; and more than $15 million was spent on fees in 2007.
22 For examples, see Porter, et al., 2008, op. cit., and Environment and Energy Daily, “Copenhagen: Red Tape, High
Fees Hamstring International Green Funds,” December 22, 2009, at http://www.eenews.net/Greenwire/print/2009/12/
22/1.
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assessment of these reforms has shown promise, but independent reviews still find “many
limitations with the current system.”23
Meetings leading up to the fifth replenishment of the GEF Fund in 2010 have seen the
development of policy recommendations along two lines:
• Enhancing Country Ownership: A key finding in GEF’s recent performance
evaluation was the relationship between country-driven strategic development
and project success rate. Recommendations to strengthen country ownership
include (1) reforming in-country corporate programs to include greater project
portfolio identification and enhanced stakeholder coordination, and (2)
developing a more flexible and transparent resource allocation framework.24
• Improving the Effectiveness and Efficiency of GEF Partnerships:
Recommendations to strengthen GEF partnerships include (1) enhancing
accountability to the conventions and protocols; (2) streamlining the project cycle
and refining the programmatic approach; (3) enhancing engagement with the
private sector; (4) implementing the results-based management framework; (5)
clarifying the roles and responsibilities of GEF entities, agencies, and
conventions; and (6) enhancing engagement with civil society organizations.
The GEF Council characterizes these policy recommendations as part of a continuing process to
“further develop ... the GEF partnership to meet emerging challenges.”25 Critics, however,
comment that many of the policy recommendations for the GEF-5 replenishment are little
different than those for the GEF-4 replenishment, highlighting the slowness of reform and the
institutional impediments that continue to confront the organization.
23 See GEF’s “Fourth Overall Performance Study” and “Policy Recommendations for the Fifth Replenishment of the
GEF Trust Fund,” February 12, 2010, p. 4, at http://www.thegef.org/gef/node/2483.
24 These policy recommendations correspond to those highlighted favorably in the U.S. Budget for Fiscal Year 2011,
p. 862.
25 “Policy Recommendations,” op. cit., p. 3.
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Appendix. Global Environment Facility Trust Fund
Figure A-1. Commitments to GEF Pilot Phase and Replenishments
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Source: Instrument for the Establishment of the Restructured Global Environment Facility - March 2008, at
http://www.thegef.org/gef/node/2552.
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Figure A-2. Financial Status of GEF Trust Fund: Summary of Arrears
Source: GEF/R.5/Inf.24. Financial Status of the GEF Trust Fund—as of December 31, 2009, at
http://www.thegef.org/gef/node/2490.
Table A-1. U.S. Treasury International Programs: Summary of Arrears
Status as of May 15, 2009 ($ in millions)
Multilateral
Arrears Arrears Arrears Arrears Arrears Arrears Arrears Arrears Arrears
Development
end-
end-
end-
end-
end-
end-
end-
end-
end-
Banks
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009
Global
$203.9 $210.9 $171.6 $140.7 $141.5 $169.8 $170.6 $169.5 $169.5
Environment
Facility
Source: U.S. Department of Treasury, FY2010 Budget Request, available at http://www.ustreas.gov/offices/
international-affairs/intl/fy2010/budget-FY2010.pdf.
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Author Contact Information
Richard K. Lattanzio
Analyst in Environmental Policy
rlattanzio@crs.loc.gov, 7-1754
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