International Climate Change Financing:
The Green Climate Fund (GCF)
Richard K. Lattanzio
Analyst in Environmental Policy
June 23, 2011
Congressional Research Service
7-5700
www.crs.gov
R41889
CRS Report for Congress
P
repared for Members and Committees of Congress
International Climate Change Financing: The Green Climate Fund (GCF)
Summary
Over the past several decades, the United States has delivered financial and technical assistance
for climate change activities in the developing world through a variety of bilateral and
multilateral programs. The United States and other industrialized countries committed to such
assistance through the United Nations Framework Convention on Climate Change (UNFCCC,
Treaty Number: 102-38, 1992), the Copenhagen Accord (2009), and the UNFCCC Cancun
Agreements (2010), wherein the higher-income countries pledged jointly up to $30 billion of
“fast start” climate financing for lower-income countries for the period 2010 – 2012, and a goal of
mobilizing jointly $100 billion annually by 2020. The Cancun Agreements also proposed that the
pledged funds are to be new, additional to previous flows, adequate, predictable, and sustained,
and are to come from a wide variety of sources, both public and private, bilateral and multilateral,
including alternative sources of finance.
One potential mechanism for mobilizing a share of the proposed international climate financing is
the UNFCCC Green Climate Fund (GCF), currently under negotiation by Parties to the
Convention. If established, the fund would be capitalized by contributions from donor countries
and other sources and used to support climate change mitigation and adaptation projects,
programs, policies, and other activities. The GCF would complement, or perhaps replace, many
of the existing multilateral climate change funds (e.g., the Global Environment Facility, the
Climate Investment Funds, the Adaptation Fund), and become the official financial mechanism of
the Convention. A UNFCCC-appointed Transitional Committee has been tasked with designing
the CGF, with the intent of bringing a finished proposal for a decision before the UNFCCC 17th
Conference of Parties in Durban, South Africa, November 28 – December 9, 2011. Many issues
remain to be clarified during negotiations, and some involve long-standing and contentious
debate. They include: what role the CGF would play in providing sustained finance at scale, how
it would fit into the existing development assistance and climate financing architecture, how it
would be legally and institutionally governed, how it would be capitalized, and how it would
allocate and deliver assistance efficiently and effectively to developing countries.
The U.S. Congress—through its role in authorizations, appropriations, and oversight—would
have significant input on U.S. participation in the fund. As negotiations proceed, Congress may
raise concerns regarding the cost, purpose, direction, efficiency, and effectiveness of the
UNFCCC and existing international financial institutions. These concerns may be weighed
against the negotiated design characteristics of the new fund in an effort to assess its potential
performance. Congress may then be required to determine and give guidance to the allocation of
funds between bilateral and multilateral climate change assistance as well as among the variety of
multilateral mechanisms. Potential authorizations and appropriations for the GCF would rest with
several committees, including the U.S. House of Representatives Committees on Foreign Affairs
(various subcommittees); Financial Services (Subcommittee on International Monetary Policy
and Trade); and Appropriations (Subcommittee on State, Foreign Operations, and Related
Programs); and the U.S. Senate Committees on Foreign Relations (Subcommittee on International
Development and Foreign Assistance, Economic Affairs, and International Environmental
Protection); and Appropriations (Subcommittee on State, Foreign Operations, and Related
Programs).
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International Climate Change Financing: The Green Climate Fund (GCF)
Contents
Introduction ................................................................................................................................ 1
Background on the United Nations Framework Convention on Climate Change .......................... 3
The Cancun Agreements on Climate Finance............................................................................... 4
Financial Pledges .................................................................................................................. 5
The Green Climate Fund ....................................................................................................... 5
The Transitional Committee .................................................................................................. 6
Design Challenges of the Fund.................................................................................................... 7
Timeline of the Negotiations ................................................................................................. 7
Scope of the Fund ................................................................................................................. 7
Fund Governance.................................................................................................................. 8
Fund Mobilization................................................................................................................. 9
Fund Disbursement ............................................................................................................... 9
Relationship of the Fund to Ongoing Negotiations............................................................... 11
Relationship of the Fund to the Convention ......................................................................... 11
Relationship of the Fund to Other U.S. Climate Finance Commitments ..................................... 11
Issues for Congress ................................................................................................................... 13
Contacts
Author Contact Information ...................................................................................................... 13
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International Climate Change Financing: The Green Climate Fund (GCF)
Introduction1
Many voices, domestic and international, have called upon the United States and other
industrialized countries to increase foreign assistance to lower- and middle-income countries to
address climate change.2 Proponents maintain that such assistance could help promote climate-
friendly and high-growth economic development in these countries, while simultaneously
protecting the more vulnerable nations from the effects of a changing climate. For their part,
most, if not all, lower-income countries have stated that their success at combating climate
change would depend critically on receipt of international financial support. They argue that
mitigating climate change pollutants, adapting to the effects of climate change, and building
climate resilience into their development agendas would incur costs above and beyond their
normal economic growth trajectories. These costs would be particularly challenging to nations
that have scant resources compared to industrialized countries, and consider alleviating poverty as
their first priority.
The Green Climate Fund (GCF) is a proposal by Parties to the United Nations Framework
Convention on Climate Change (UNFCCC)3 to establish an international financial institution to
assist developing countries in their efforts to combat climate change. The fund would be
capitalized by contributions from donor countries and other sources and used to support climate
change mitigation and adaptation4 projects, programs, policies, and other activities. The GCF
would complement, or perhaps replace, many of the existing multilateral climate change funds
(e.g., the Global Environment Facility, the Climate Investment Funds, the Adaptation Fund), and
become the official financial mechanism of the UNFCCC. Expectations by many countries,
specifically developing countries, are that the fund may be very large (i.e., in the range of several
tens of billion to over a hundred billion dollars annually), and serve as the predominant institution
for climate change assistance in the developing world.5 These countries believe that the
1 This report assumes a general understanding of climate change science, policy, financing, and international
negotiations. For further background on climate change science and policy, see CRS Report RL34266, Climate
Change: Science Highlights, by Jane A. Leggett, and CRS Report RL34513, Climate Change: Current Issues and
Policy Tools, by Jane A. Leggett; for further background on international climate change financing, see CRS Report
R41808, International Climate Change Financing: Needs, Sources, and Delivery Methods, by Richard K. Lattanzio
and Jane A. Leggett; and for further background on the international climate change negotiations, see CRS Report
R40001, A U.S.-Centric Chronology of the International Climate Change Negotiations, by Jane A. Leggett.
2 Most industrialized countries currently deliver some financial and technical assistance through a variety of bilateral
development programs and multilateral financial institutions. “Bilateral” assistance involves direct transfers from one
country to another; “multilateral” assistance is distributed through international organizations and agencies such as the
United Nations and the World Bank Group.
3 The UNFCCC and its processes are discussed in greater detail in the next section, “Background on the United Nations
Framework Convention on Climate Change”.
4 “Mitigation activities” refer to actions taken to reduce or reverse the forces that contribute to global climate change
(examples include transitioning to a low-emissions energy supply; capturing the opportunities in energy efficiency
improvements in buildings, transportation, and industry; reducing deforestation and improving sustainable forest
management to better serve as GHG emissions sinks; and employing more low-emissions and sustainable agriculture
practices). “Adaptation activities” refer to adjustments made in natural or human systems in response to actual or
expected climate change and its effects (examples include employing climate-resistant crop varieties, improving
irrigation systems, integrating sustainable land management into agricultural planning, protecting water resources,
managing coastal zones, designing infrastructure for extreme weather or for sea-level rise, and improving public health
services).
5 Many developing countries have stated their support for a large and centralized fund for climate change assistance to
be housed at the UNFCCC, capitalized primarily by public contributions, and funded at or near the level of the
estimated costs for climate change activities in the developing world. While cost estimates vary greatly depending upon
(continued...)
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agreement to establish the GCF has been a key success in the recent international negotiations.
But others caution that ambitious steps need to be taken to ensure that the fund is designed and
implemented correctly in order to achieve an adequate buy-in by donor countries of its
effectiveness and by recipient countries of its legitimacy.
The GCF is in the planning stage. Its scope, governance structure, sourcing, and disbursement
mechanisms are currently under negotiation by Parties to the UNFCCC. Having been mentioned
first in the UNFCCC-adopted Copenhagen Accord of December 2009, a decision was made to
establish the fund during the UNFCCC 16th Conference of Parties (COP) in Cancun, Mexico, in
December 2010. Negotiations have since turned to the design of the fund, over the period of
March to November 2011, and under the auspices of a COP-appointed Transitional Committee,
with the intent of bringing a finished proposal before the UNFCCC 17th COP in Durban, South
Africa, November 28–December 9, 2011.
Many issues remain to be clarified during negotiations, and some involve long-standing and
contentious debate. They include:
• what role the CGF would play in providing sustained finance at adequate levels,
• how it would fit into the existing development assistance and climate financing
architecture,
• how it would be legally and institutionally governed,
• how it would be capitalized, and
• how it would allocate and deliver assistance efficiently and effectively to
developing countries.
The United States is a Party to the UNFCCC negotiations. It also is represented on the UNFCCC
COP-appointed Transitional Committee to negotiate the design of the CGF. The U.S.
representative is Marisa Lago, Assistant Treasury Secretary for International Development and
Markets, U.S. Department of the Treasury. Ms. Lago is supported by the U.S. Department of the
Treasury’s Office of Energy and Environment. If and when the Transitional Committee reaches
consensus on a design for the fund, and if and when the proposal is brought before the COP for a
decision, the U.S. Congress—through its role in authorizations, appropriations, and oversight—
would have significant input on U.S. participation in the fund. Congressional input on a potential
UNFCCC-established fund may include:
• whether and when to participate in the fund,
• how much to contribute to the fund, and with what source or sources of finance,
(...continued)
the analysis (see “Cost Estimates” section in CRS Report R41808, International Climate Change Financing: Needs,
Sources, and Delivery Methods, op cit.), many countries have acknowledged the annual $100 billion figure as a target.
To put this figure in context, in FY2010 the United States provided $1.3 billion for international climate change
assistance, split almost equally between bilateral and multilateral programs. Further, the FY2010 U.S. budget authority
for all foreign operations programs, both bilateral and multilateral, at the Departments of State, Treasury, and the
Agency for International Development, totaled $32.8 billion, or approximately 3% of all FY2010 U.S. discretionary
spending. Beyond the existing multilateral funds, total global contributions to international climate change assistance
have been difficult to track due to the lack of international standards. Transparency of financial contributions and
standardized accounting procedures are included in the package of agreements currently under negotiation by Parties to
the UNFCCC.
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• whether fund contributions would carry specific guidance in distribution and use,
• how contributions to the fund would relate to other U.S. bilateral, multilateral,
and private sector climate change assistance, and
• whether and when to consent to negotiated treaty obligations, if submitted.
After providing a brief background on the history of the climate negotiations leading up to the
proposal of the GCF, this report (1) reviews the terms of the agreement for the design of the fund,
(2) outlines outstanding design issues, and (3) addresses the relationship of the fund to other U.S.
commitments for international climate change assistance. The report ends with a summary of
congressional issues of relevance to the fund.
Background on the United Nations Framework
Convention on Climate Change
The UNFCCC was the first formal international agreement to acknowledge and address human-
driven climate change. The U.S. Senate provided its advice and consent to the Convention’s
ratification in 1992, the same year it was concluded.6 For the United States, the UNFCCC entered
into force in 1994. As of January 2011, 194 governments are Parties. As a framework convention,
the UNFCCC provides a structure for international consideration of climate change but does not
contain detailed obligations for achieving particular climate-related objectives in each Party’s
territory. It recognizes that climate change is a “common concern to humankind,” and,
accordingly, requires parties to (1) gather and share information on GHG emissions, national
policies, and best practices; (2) launch national strategies for addressing GHG emissions and
adapting to expected impacts; and (3) cooperate in preparing for the impacts of climate change.
The UNFCCC did not set binding targets for GHG emissions; however, it did commit the higher-
income Parties (i.e., those listed in Annex II of the Convention)7 to provide unspecified amounts
of financial assistance to help lower-income countries meet the broad, qualitative obligations
common to all Parties.8
As the treaty entered into force and the UNFCCC Conference of the Parties (COP) met for the
first time in 1995, the Parties agreed that achieving the objective of the UNFCCC would require
new and stronger GHG commitments. As a first step toward meeting this objective, the 1997
Kyoto Protocol was drafted and entered into force with a stated aim to reduce the net GHG
emissions of industrialized country Parties (Annex I Parties) to 5.2% below 1990 levels in the
period of 2008 to 2012. The United States signed the Kyoto Protocol in December 1997.
6 United Nations Framework Convention on Climate Change, Treaty Number: 102-38, October 7, 1992, the resolution
of advice and consent to ratification agreed to in the Senate by Division Vote.
7 UNFCCC Annex I Parties include the industrialized countries that were members of the OECD (Organization for
Economic Cooperation and Development) in 1992, plus countries with economies in transition (the EIT Parties),
including the Russian Federation, the Baltic States, and several Central and Eastern European States. Annex II Parties
consist of the OECD members of Annex I, but not the EIT Parties.
8 For more information on the UNFCCC and U.S. participation in international climate treaties, see CRS Report
R41175, International Agreements on Climate Change: Selected Legal Questions, by Emily C. Barbour.
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However, at the time, opposition in Congress was strong.9 The Kyoto Protocol was not submitted
to the Senate by President Clinton, or by his successor, President George W. Bush.
In 2007, UNFCCC Parties reconvened negotiations for further commitments beyond the Kyoto
Protocol, and agreed to negotiate a suite of agreements that included new GHG mitigation targets
for Annex I Parties, “nationally appropriate mitigation actions” for non-Annex I Parties, and other
commitments for the post-2012 period. The mandates (referred to as the Bali Action Plan)
specified that the products of negotiation should be ready by the end of 2009. Due perhaps to high
expectations, as well as continued divergence between Parties on some key issues, the 2009 COP
in Copenhagen, Denmark, did not produce a legally binding treaty, but a short, non-legally
binding political document called the Copenhagen Accord.10
The Copenhagen Accord was a policy document drafted among leaders of about two dozen
countries in the final hours of the 2009 COP, and subsequently acknowledged by 114 countries.
The Accord sat in sharp contrast to the Kyoto Protocol negotiations, as its bottom-up and
nationally appropriate model differed greatly from the top-down implementation of the Protocol.
Provisions in the Accord included voluntary GHG mitigation efforts by all Parties, adaptation and
forestry actions, technology transfer mechanisms, and transparency and reporting standards, as
well as a joint pledge by developed countries of up to $30 billion in “fast start” climate financing
for developing countries for the period 2010–2012, and a goal of mobilizing $100 billion
annually by 2020. The Accord also established the “Green Climate Fund” (GCF) to serve as the
operating entity of the financial mechanism of the Convention.
Many of the elements of the Copenhagen Accord, the Bali Action Plan, and the UNFCCC were
adopted officially at the 2010 COP in Cancun, which yielded several decisions collectively called
the Cancun Agreements.11 Climate financing was one aspect of the negotiations.
The Cancun Agreements on Climate Finance
The establishment of the Green Climate Fund—as well as some other financial arrangements
mentioned in the Copenhagen Accord—was decided on by Parties at the 2010 COP in Cancun,
Mexico, and entered into the negotiating text of the UNFCCC’s Ad Hoc Working Group on Long-
term Cooperative Action under the Convention (AWG-LCA).12 Selected provisions include:
9 See the Byrd-Hagel Resolution (S.Res. 98) in July 1997, wherein the Senate expressed its opposition (95-0 vote) to
the terms of the Berlin Mandate (the 1995 UNFCCC COP agreement that led to the adoption of the Kyoto Protocol) by
stating that the United States should not sign any treaty that does not include specific, scheduled commitments of non-
Annex I Parties in the same compliance period as Annex I Parties, or that might seriously harm the U.S. economy.
10 See UNFCCC Decision 2/CP.15, Copenhagen Accord, FCCC/CP/2009/11/Add.1, at http://unfccc.int/resource/docs/
2009/cop15/eng/11a01.pdf.
11 See UNFCCC Decision 1/CP.16, The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on
Long-term Cooperative Action under the Convention, FCCC/CP/2010/7/Add.1 at http://unfccc.int/resource/docs/2010/
cop16/eng/07a01.pdf#page=2.
12 The Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA) is the
negotiating track of the COP that serves “to enable the full, effective and sustained implementation of the Convention
through long-term cooperative action, now, up to, and beyond 2012.” This is in contrast to the Ad Hoc Working Group
on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) (for which the United States is not a
Party, but an observer). Both Working Groups are tasked with producing negotiating texts with the aim of moving the
texts to an agreement among Parties to the UNFCCC COP.
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Financial Pledges
• Fast Start Financing. The agreement puts forth a collective commitment by
developed country Parties (not specified in the text) to provide new and
additional resources approaching $30 billion for the period 2010–2012 to address
the needs of developing countries (the allocation, or “burden-sharing,” among
countries was not specified in the text) (§ 95).
• 2020 Pledge. The agreement takes note of the pledge by developed country
Parties (not specified in the text) to achieve a goal of mobilizing jointly $100
billion per year by 2020 to address the needs of developing countries (the
allocation, or “burden-sharing,” among countries was not specified in the text) (§
98).
• Sources. The agreement outlines that the pledged assistance is to be scaled-up,
new and additional, predicable and adequate, and that it may come from a wide
variety of sources, including public and private, bilateral, multilateral, and
alternative (§§ 97, 99).13
• Balanced Package. The agreement recognizes that the financial pledges are
offered in the context of continued negotiations toward a balanced package of
commitments by all Parties that includes, among other items, meaningful actions
on mitigation14 and transparency15 (§ 98).
The Green Climate Fund
• Green Climate Fund. The agreement opens the way for the establishment of the
GCF, to be designated as an operating entity of the financial mechanism of the
UNFCCC, accountable to and under the guidance of the COP, to support projects,
programs, policies, and other activities in developing country Parties (§ 102).
• Thematic Funding Windows. The agreement states that the fund should employ
thematic funding windows (i.e., sub-accounts targeted at specific climate change
activities, such as mitigation, adaptation, forestry, capacity-building, etc.). The
allocation among these categories was not specified in the text, only that it should
be “balanced” between adaptation and mitigation (§ 102).
• Adaptation. The agreement notes that a “significant share” of any new
multilateral funding for adaptation should flow through the GCF (§ 100).
13 The United Nations convened an advisory panel in 2010 to investigate issues regarding the sourcing of climate
finance. The report by the U.N. High Level Advisory Group on Climate Change Financing was released in November
2010 and can be found at http://www.un.org/wcm/content/site/climatechange/pages/financeadvisorygroup. For a
discussion of the various proposed public, private, and alternative sources, as well as the issues revolving around the
mobilization of international climate finance, see also CRS Report R41808, International Climate Change Financing:
Needs, Sources, and Delivery Methods, by Richard K. Lattanzio and Jane A. Leggett.
14 “Mitigation” commitments refer to the formalized pledges taken by developed country Parties, or the nationally
appropriate measures being taken by developing country Parties, to reduce GHG emissions.
15 “Transparency” commitments refer to the negotiated provisions whereby all major economy Parties (including the
large emerging economies) must report on the progress they are making in meeting their mitigation commitments
(targets and actions), and all Parties providing financial assistance must report their contributions through commonly
accepted formats.
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• Governance. The agreement sets up a 24-member Board for the fund,
comprising an equal number of members from developing and developed country
Parties (not specified in the text), wherein representation from developing
country Parties is specifically to include relevant U.N. groupings, including
regions, small island States, and the least developed countries (§ 103).
• Trustee. The agreement designates that the fund has a trustee, separate from the
Board and the UNFCCC, to manage the financial assets of the fund, maintain
appropriate financial records, and prepare financial statements and other reports
required by the Board, in accordance with internationally accepted fiduciary
standards. The agreement invites the World Bank to serve as an interim trustee,
subject to a review after three years of operation (§§ 104–107).
• Secretariat. The agreement calls for the creation of an independent Secretariat to
support the operation of the fund, with guidance from the Board (§ 108).
• Transitional Committee. The agreement then stipulates the formation of a
Transitional Committee to design the fund, comprising 40 members, with 15
members from developed country Parties and 25 members from developing
country Parties, with experience and skills in the areas of finance and climate
change, in accordance with given Terms of Reference (§§ 109–110).
• Technical Support Unit. The agreement then tasks the COP to make
arrangements for supplying a support staff for the Transitional Committee, to be
sourced from relevant U.N. agencies, international financial institutions,
multilateral development banks, and the Global Environment Facility (§ 111).
• Standing Committee. Finally, the agreement establishes a permanent Standing
Committee under the UNFCCC to assist the COP in exercising its functions with
respect to the financial mechanism of the Convention. The roles and functions of
the Standing Committee are yet to be defined by Parties, but the provision allows
for further discussion on the legal relationship between the fund and the
UNFCCC (§ 112).
The Transitional Committee
A Transitional Committee is tasked with developing an operational design for the GCF and
recommending it for approval at the UNFCCC 17th COP in Durban, South Africa, from
November 28 to December 9, 2011. The issues to be addressed by the Transitional Committee are
outlined in a Terms of Reference section in the Cancun Agreements, and include:16
• legal and institutional arrangements for the fund,
• rules of procedure for the fund’s Board, and the role of the Secretariat,
• financial instruments, funding windows, and access modalities to be employed by
the fund,
• complementarity with other funds and institutions, and
16 The Terms of Reference for the design of the Green Climate Fund can be found in Appendix III of the Cancun
Agreements, op. cit.
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• provisions for standards, safeguards, independent performance evaluations,
technical advice mechanisms, and stakeholder participation.
Design Challenges of the Fund
Observers17 have noted that the Green Climate Fund confronts many challenges in design, scope,
governance, and implementation that must be negotiated by the Transitional Committee and,
eventually, the UNFCCC Conference of Parties. Several of the most significant challenges
include:
Timeline of the Negotiations
Many developing (i.e., recipient) country Parties and their civil society organizations have high
expectations for the GCF. They are pushing for the Transitional Committee to deliver on several
of the more long-standing and contentious points of negotiation (e.g., sourcing of funds,
assessment of contributions, determination of burden-sharing, targets for disbursement).
However, other Parties—including the United States—are insisting that the Transitional
Committee concentrates solely on the technical design characteristics of the fund (as it was tasked
to do by the Cancun Agreements) in order to deliver a timely and manageable product to the COP.
Notwithstanding, the Terms of Reference for the CGF are extensive. The Transitional Committee
met once on April 28 and 29, 2011, in Mexico City,18 and has agreed to meet on three more
occasions prior to the UNFCCC 17th COP in Durban, South Africa, from November 28 to
December 9, 2011. Even in the best of circumstances, many believe that it would be difficult to
successfully negotiate a design for the fund during this time frame, much less address the more
long-standing and contentious issues. Some observers have suggested that it may be several years
before the Transitional Committee can report a final design to the COP.
Scope of the Fund
While little has been decided regarding the eventual size and scope of the GCF, its formation is
being viewed by many as a means through which to simplify the complex network of multilateral
and bilateral funding mechanisms that currently provide climate change assistance to developing
countries. Many early proponents of a global fund had envisioned that such an institution would
play the role of a “fund of funds,” or an “umbrella,” under which to collect both the resources and
17 Many economic and environmental civil society organizations have watched and reported on the UNFCCC climate
negotiations in general, and the GCF negotiations in particular. For more analyses on the design challenges outlined in
this report, among others, as well as on other proposed fund models, see, for example, Neil Bird, Jessica Brown, and
Liane Schalatek, Design Challenges for the Green Climate Fund, Climate Finance Policy Brief No. 4, Heinrich Böll
Foundation North America and Overseas Development Institute, January 2011; Nigel Purvis and Andrew Stevenson,
“Climate Negotiations and International Finance,” Resources, Winter/Spring 2011, No. 177, pp. 16-18; and Benito
Müller, Time to Roll Up the Sleeves—Even Higher!: Longer-term Climate Finance after Cancun, Oxford Energy and
Environment Brief, Climate Strategies and the Oxford Institute for Energy Studies, January 2011.
18 The April meeting of the Transitional Committee succeeded in electing three co-chairs to the committee (Mexico,
South Africa, and Norway), as well as dividing the Terms of Reference into four tentative clusters of issues, or work-
streams (Scope, guiding principles, and cross-cutting issues; Governance and institutional arrangements; Operational
modalities; and Monitoring and evaluation), that were then delivered to relevant support staff in the Technical Support
Unit, under the guidance of co-chairs, to be researched and reported on by the next Transitional Committee meeting in
Tokyo, Japan, in July.
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the comparative advantages of the other mechanisms. As it currently stands, the negotiating text
from the Cancun Agreements gives little indication that such an ambition is to be pursued by the
GCF. It refers, instead, to “aligning” the GCF with other institutions. Nevertheless, the fate of
existing multilateral financial mechanisms may be called into question by the establishment of the
GCF. At present, the Adaptation Fund is the sanctioned U.N. mechanism in support of climate
change assistance for adaptation actions. The Global Environment Facility is the sanctioned
UNFCCC financial mechanism in support of mitigation actions. The World Bank’s Climate
Investment Funds were initially designed to sunset in 2012 at the presumed commencement of the
new UNFCCC mechanism. It is possible that the eventual scope of the GCF may overshadow
and/or replace these funds.19 Conversely, it is also possible that the CGF, if established, may
prove inadequate to existing arrangements in the eyes of potential donors.
Fund Governance
Many decisions on governance await the deliberations of the Transitional Committee. While the
composition and selection of the Board and the Secretariat are important considerations, two
other bodies have provoked significant debate: the Trustee and the Standing Committee.20
• The Trustee. The role of the World Bank in the GCF has been, and continues to
be, controversial. The Cancun negotiating text invites the World Bank to serve as
the interim trustee, subject to review after three years of fund operation (§ 107).
Most believe that once established, a subsequent shift in institutional
arrangement is doubtful. Many developing countries hold the World Bank in a
negative light, believing it to be non-transparent, overly bureaucratic, and
reflecting solely the interests of higher-income countries, which command
greater decision-making power by virtue of their greater financial contributions.
Additionally, some Parties see the potential for conflicts of interest during the
design phase of the fund, since the Bank (1) already operates a portfolio of
Climate Investment Funds that might compete against the GCF for potential
donor country contributions, and (2) has been asked to serve as support staff for
the Transitional Committee to aid in designing the operational procedures,
project selection criteria, performance standards, and safeguard measures for the
new fund. Despite these concerns, some Parties remain unconvinced that an
adequate substitute exists, claiming that no other extant institution could
undertake the proposed financial administration and fiduciary standards with the
same level of confidence from the donors.
• The Standing Committee. The Cancun negotiating text establishes a committee
(its size, composition, and participation are not specified in the text) to help the
COP in exercising its functions with respect to the financing obligations in the
19 Recent funding levels for the above-mentioned multilateral funds are as follows: Global Environment Facility, $3.5
billion pledged for the period 2011-2014; Climate Investment Funds, $6.1 billion pledged for the period 2009-2012;
Adaptation Fund, based on a formula of 2% of the Certified Emission Reduction units issued for projects of the Clean
Development Mechanism of the UNFCCC Kyoto Protocol.
20 During the April 2011 Meeting of the Transitional Committee, it was reported that Nicaragua caused a stir by
accusing the World Bank of “Arthur Andersen syndrome,” presumably referencing the accounting firm’s responsibility
in the Enron affair. See Lisa Friedman, “Negotiations: Nations begin to plan details of Green Climate Fund,”
ClimateWire, May 2, 2011. Similarly, the language regarding the Standing Committee produced considerable debate
among negotiators during the UNFCCC intersessional meeting in Bonn, Germany, from June 6-17, 2011.
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Convention. The committee is specifically tasked to improve “coherence and
coordination in the delivery of climate change financing, mobilization of
financial resources and measurement, [and] reporting and verification of support
provided …” (§ 112). While currently vague, the roles and functions of the
Standing Committee are to be defined further by Parties during AWG-LCA
negotiations. Some21 see the text on the Standing Committee to be a “place-
holder” for postponing the more controversial issues until later. Others believe it
was included to provide a direct, sustained, and authoritative link between the
UNFCCC and the GCF Board, perhaps to open a channel for future mandates to
flow directly from the COP to the Board.
Fund Mobilization
The Cancun negotiating text is silent on sources, with no proposal for how finance would flow
into the fund. The text simply “takes note” of “relevant reports on the financing needs and options
for mobilization of resources to address the needs of developing country Parties with regard to
climate change adaptation and mitigation, including the report of the High-level Advisory Group
on Climate Change Finance [AGF]” (§ 101). Most see the absence of this item under the
Transitional Committee’s Terms of Reference as unsurprising. The 2010 report by the AGF
concluded that the goal of mobilizing adequate and predictable climate finance to developing
countries on the order of $100 billion annually would be “challenging but feasible.”22 Further,
while it is acknowledged that adequate international finance would likely require a range of
sources (including public finance, development bank instruments, carbon markets, and private
capital), little unity exists among COP Parties as to the balance between public and private
sources, developed and developing country participation in international carbon markets or tax
schemes, and the political feasibility of other large-scale fund mobilizations. Several other
multilateral fora have taken up the issue of climate finance sourcing, including the G-20 and the
Major Economies Meeting.23 However, the prospect of the issue being resolved during the course
of the Transitional Committee’s deliberations appears to be slight.
Fund Disbursement
The Transitional Committee’s Terms of Reference mention three main design aspects with respect
to the disbursement of funds: “financial instruments, funding windows and access modalities”
(Appendix III, § 1c). Each category engenders debate among Parties.
• Instruments. As for the choice of instruments, observers24 stress that climate
finance can take a variety of forms: it can be provided as grants, concessional
loans, market-based loans, equity investments, or guarantees. However, debates
consistently arise between donor and recipient countries as to the appropriateness
21 Bird, op cit., p. 4.
22 See AGF Report, op cit.
23 The “G-20” refers to the Group of Twenty: a forum for finance ministers and central bank governors established in
1999 to bring together systemically important industrialized and developing economies to discuss key issues in the
global economy. The “Major Economies Forum” refers to a forum of 17 major developed and developing economies
established in 2009 to facilitate dialogue on energy and climate issues.
24 Bird, op cit., p. 6.
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International Climate Change Financing: The Green Climate Fund (GCF)
of debt-based instruments (e.g., loans) for humanitarian aid. Whilst the general
presumption is that climate finance in support of adaptation actions in developing
countries should be provided on grant terms, this is less customary with regard to
mitigation actions. Thus, many see it as important for the GCF to secure a good
match between the type of finance and the object of financing, retaining
sufficient funds to provide grants when necessary, as influenced by both the
country and the project profile.
• Windows. While the Copenhagen Accord specified that the GCF would support
activities related to “mitigation including REDD-plus,25 adaptation, capacity
building, technology development and transfer” (§ 10), the Cancun negotiating
text has dropped such references, opting instead to state that the GCF would use
“thematic funding windows” (§ 102). Whether or not the question of “balance”
among these windows is addressed by the Transitional Committee remains to be
seen. With present funding by existing financial institutions decidedly tilted
toward supporting mitigation actions, there is likely to be a strong expectation—
by developing countries as well as certain civil society organizations—that
adaptation actions would receive a significant portion of support from the CGF.
Some allocation formula is likely to be expected from the Transitional
Committee, if for no other reason than to allow subsequent funding decisions to
be adequately rule-based.
• Access. Finally, consideration of how countries would access funds from the
GCF, and which agencies and organizations would be allowed to acquire funds to
implement projects, remains an ongoing issue of debate. Currently, almost all
multilateral financial assistance for climate change activities in developing
countries is channeled through third-party implementing agencies (e.g., U.N.
agencies, multilateral development banks, major nongovernmental
organizations).26 Whether and which of these agencies would be accredited to
manage GCF funds is not specified; however, language in the Cancun negotiating
text does mention one specific modality: “direct access” (Appendix III, § 1c).
Direct access has become a prominent, new arrangement in climate finance
delivery, allowing the recipient country to access financial resources directly
from the fund, and/or allowing it to assign an implementing agency of its own
choosing. This operational freedom has been a rallying point for many
developing country Parties. The modality is also supported by many developed
country Parties as a means to secure broader competition and greater country
ownership. Nevertheless, implementation of direct access arrangements may
prove to be slow and difficult, because they would likely require the same
stringent level of fiduciary standards, competitive procurement practices, and
environmental and social safeguards demanded of existing third-party
implementing agencies.
25 “REDD-plus,” or “Reducing Emissions from Deforestation and Forest Degradation,” activities refer to mitigation-
relevant activities in support of forestry and sustainable land management.
26 The only current exception to this practice is the U.N. Adaptation Fund, which has begun to accredit national
agencies in recipient countries as official implementing agencies for fund disbursement. Council Members for the
Global Environment Facility have begun discussions on a similar practice. This practice is referred to as “direct
access.”
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International Climate Change Financing: The Green Climate Fund (GCF)
Relationship of the Fund to Ongoing Negotiations
Many Parties have stressed the importance of the design choices to be made by the Transitional
Committee, and the influence that these choices may have on the ability of the fund to attract both
the longer-term financial pledges of donor countries and the leveraged investment of the private
sector. A few, including the United States, contend that the engagement of finance ministries—as
opposed to climate negotiators—is critical to ensuring the best technical design and the best use
of funds. Some observers27 have cautioned that a poorly designed fund could cause the
multilateral effort to deteriorate into endless political squabbles as opposed to effective technical
conversations about how best to capitalize and leverage resources. Nevertheless, while some
critics see climate negotiators as ill-equipped to adequately debate issues of finance, their
expertise remains relevant to other aspects of the negotiations. Many Parties remain focused on
the need for a “balanced package” of commitments to arise from the UNFCCC climate
negotiations. They, including the United States, stress that the design of a financial mechanism
should not outpace elaborations on other issues, such as GHG mitigation and transparency
commitments, to be made by developed and developing countries alike.
Relationship of the Fund to the Convention
As currently conceived, the GCF is intended to operate at arm’s length from the UNFCCC, with
an independent Board, Trustee, and Secretariat. The Cancun negotiating text states that the GCF
is to be “accountable to and function under the guidance of the Conference of Parties” (§ 102)
(i.e., similar in legal structure to the Global Environment Facility), as opposed to “accountable to
and function under the guidance and authority of the Conference of Parties” (i.e., similar in legal
structure to the Adaptation Fund). While subtle, the distinction carries import, and negotiators
from China and the Group of 7728 have—for the moment at least—kept the latter structure in
conversation in an effort to ensure adequate representation by all Parties of the UNFCCC. The
majority of developed country Parties, however, oppose the Adaptation Fund model as inefficient
and overly politicized for two key reasons: (1) the COP would have direct authority over the
selection and release of all Board and Secretariat members, and (2) the COP would have final
approval over all rules and guidelines proposed by the Board. Given the current language of the
negotiating text, and the proposed design of the Board to carry equal representation between
developed and developing country Parties, this issue may already be resolved.
Relationship of the Fund to Other U.S. Climate
Finance Commitments
At present, there have been no funds pledged specifically to the Green Climate Fund. Further,
there have been no pronouncements regarding redirection of current or future bilateral or
multilateral financial assistance into the fund. Nor has the size, the scope, or the sources of
financial contributions been decided in the negotiating text or voiced officially by the UNFCCC,
27 For example, see comments made by Athena Ballesteros of World Resources Institute in an article by Lisa Friedman,
“Cancun: Countries Get to Work Designing Green Climate Fund,” ClimateWire, January 3, 2011.
28 The Group of 77 is an official U.N. negotiating group composed of developing countries. Founded in 1964 in the
context of the U.N. Conference on Trade and Development (UNCTAD), it now has over 130 members.
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International Climate Change Financing: The Green Climate Fund (GCF)
Parties to the COP, or members of the Transitional Committee. The only specific financial
allocation tied directly to the GCF in the Cancun negotiating text is “that a significant share of
new multilateral funding for adaptation should flow through the Green Climate Fund” (§ 100,
italics mine). This statement does not define “new” or “significant,” does not identify specific
contributors or recipients, and does not assign specific amounts, allocations, or changes to
bilateral aid, mitigation assistance, or current levels of funding. However, its inclusion may be the
result of Parties’ experiences with the U.N. Adaptation Fund, which serves as a reminder of the
challenge to raise funds directly from countries’ national budgetary contributions and the
reluctance of such countries to commit a significant share of these funds to UNFCCC-sponsored
adaptation projects.
In regard to the GCF’s relationship to other climate finance commitments by the United States:
• UNFCCC Fast Start Financing Pledges. The collective pledge by developed
country Parties to provide new and additional resources approaching $30 billion
for the period 2010–2012 is not tied to the GCF. In fact, the GCF is unlikely to be
operational before the end of 2012. Fast start funds most likely would continue as
current bilateral and multilateral contributions made through authorized
appropriations by donor country governments.
• UNFCCC 2020 Pledges. The collective pledge by developed country Parties to
the goal of mobilizing jointly $100 billion per year by 2020 is not tied directly to
the GCF. The Cancun negotiating text makes clear that “funds provided to
developing country Parties may come from a wide variety of sources, public and
private, bilateral and multilateral, including alternative sources” (§ 99). If
established, the GCF would be one of many possible public and multilateral
sources. While any financial assistance that is channeled through the GCF would
likely be considered a part of the $100 billion goal, the entirety of the $100
billion goal is not expected to be provided solely by the GCF, and no estimation
of the GCF’s presumed share has been suggested. Many Parties, as well as the
AGF report, have suggested that development bank instruments, carbon markets,
and—especially—private capital would be critical to mobilizing assistance at the
level pledged.
• Bilateral Aid. The GCF would not necessarily interfere with current or proposed
bilateral climate change assistance to developing countries. The GCF would be
another multilateral mechanism for climate change assistance that would exist
alongside bilateral activities, much the way that the Global Environment Facility
and the Climate Investment Funds currently do. U.S. allocations between and
among bilateral and multilateral assistance channels would continue through
authorized congressional appropriations.
• Other Multilateral Aid. The GCF Transitional Committee and the GCF
Standing Committee have been tasked with determining the complementarity of
the GCF with respect to other U.N. multilateral mechanisms. Thus, the
negotiations may produce some alteration in the landscape of the multilateral
choices provided by the UNFCCC. Development bank mechanisms such as the
Climate Investment Funds may or may not be reevaluated by their governing
Boards in light of any proposal that comes out of the UNFCCC. Presumably,
choices would remain available to donor countries. U.S. allocations among
multilateral assistance channels would remain based on congressional guidance
and would continue through authorized congressional appropriations.
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International Climate Change Financing: The Green Climate Fund (GCF)
Issues for Congress
Members of Congress hold mixed views about the value of international financial assistance to
address climate change. While some Members are convinced that human-induced climate change
is a high-priority risk that must be addressed through federal actions and international
cooperation, others are not as convinced. Some are wary, as well, of international processes that
could impose costs on the United States, redirect funds from domestic budget priorities,
undermine national sovereignty, or lead to competitive advantages for other countries. Regardless
of current views, the United States is a Party to the UNFCCC and has certain obligations under
the treaty. The executive branch continues negotiations and implementation of the UNFCCC
obligations, while committees of Congress engage in oversight (from home and at the
international meetings), providing input to the executive branch formally and informally, and
deciding program authorities and appropriations for these activities.
As Congress considers potential authorization and/or appropriations for the Green Climate Fund,
if established, it may raise concerns regarding the cost, purpose, direction, efficiency, and
effectiveness of the UNFCCC and existing international financial institutions. These concerns
may be weighed against the proposed design characteristics of the new fund in an effort to assess
its potential performance. Congress may then be required to determine the allocation of funds
between bilateral and multilateral climate change assistance as well as among the variety of
multilateral mechanisms. Congress may also wish to gauge and give guidance to the new fund’s
relationship with domestic industries and private sector investment, as well as the spillover effects
of U.S. participation on technological innovation, humanitarian efforts, national security, and
international leadership. Potential authorizations and appropriations for the GCF rest with several
committees, including the U.S. House of Representatives Committees on Foreign Affairs (various
subcommittees); Financial Services (Subcommittee on International Monetary Policy and Trade);
and Appropriations (Subcommittee on State, Foreign Operations, and Related Programs); and the
U.S. Senate Committees on Foreign Relations (Subcommittee on International Development and
Foreign Assistance, Economic Affairs, and International Environmental Protection); and
Appropriations (Subcommittee on State, Foreign Operations, and Related Programs).
Additional issues for Congress concerning the climate negotiations in general, and the GCF in
particular, may include the means to establish a more desirable form of agreement; the
compatibility of any international agreement with U.S. domestic policies and laws; the adequacy
of appropriations and fiscal incentives to achieve any commitments under the agreement; and any
requirements for potential ratification and implementing legislation, should a formal treaty
emerge from the negotiations.
Author Contact Information
Richard K. Lattanzio
Analyst in Environmental Policy
rlattanzio@crs.loc.gov, 7-1754
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