International Climate Change Financing:
The Green Climate Fund (GCF)
Richard K. Lattanzio
Analyst in Environmental Policy
May 5, 2014
Congressional Research Service
7-5700
www.crs.gov
R41889
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 in “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), proposed during the 2009 Conference of Parties (COP)
in Copenhagen, Denmark, accepted by Parties during the 2011 COP in Durban, South Africa, and
currently under implementation. When operational, the fund would aim to assist developing
countries in their efforts to combat climate change through the provision of grants and other
concessional financing for mitigation and adaptation projects, programs, policies, and activities.
The GCF is to be capitalized by contributions from donor countries and other sources, potentially
including innovative mechanisms and the private sector. The GCF would complement many of
the existing multilateral climate change funds (e.g., the Global Environment Facility, the Climate
Investment Funds, and the Adaptation Fund); however, as the official financial mechanism of the
UNFCCC, some Parties believe that it may eventually replace or subsume the other funds. While
many Parties expect capitalization of the GCF to begin in the fall of 2014, many issues remain to
be clarified, and some involve long-standing and contentious debate. They include what role the
GCF 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 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 GCF. Congress regularly determines and gives
guidance to the allocation of foreign aid between bilateral and multilateral assistance as well as
among the variety of multilateral mechanisms. In the past, Congress has raised concerns
regarding the cost, purpose, direction, efficiency, and effectiveness of the UNFCCC and existing
international institutions of climate financing. Potential authorizations and appropriations for the
GCF may 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). As of FY2015, the U.S. Administration—through its State, Foreign
Operations, and Related Programs 150 account—has made no specific budget request for
appropriated funds to be contributed to the GCF.
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International Climate Change Financing: The Green Climate Fund (GCF)
Contents
Introduction ...................................................................................................................................... 1
Financial Assistance and the United Nations Framework Convention on Climate Change ............ 3
Cancun Agreements and the Green Climate Fund ..................................................................... 4
The Durban Platform and the Green Climate Fund ................................................................... 5
The Doha Gateway and the Green Climate Fund ...................................................................... 6
The Warsaw Outcomes and the Green Climate Fund ................................................................ 7
Recent Developments ................................................................................................................ 7
Outstanding Challenges for the Fund .............................................................................................. 8
Relationship of the Fund to the Convention .............................................................................. 8
The World Bank as Trustee ........................................................................................................ 9
Mobilization of Funds ............................................................................................................... 9
Operational Modalities ............................................................................................................ 10
Relationship of the Fund to Other U.S. Climate Finance Commitments ....................................... 12
Issues for Congress ........................................................................................................................ 13
Contacts
Author Contact Information........................................................................................................... 14
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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 depends 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 incur costs above and beyond their normal economic
growth trajectories. These costs are particularly challenging to nations that have scant resources
compared to industrialized countries, do not recognize themselves as the historical sources of
climate pollution, and consider alleviating poverty as their first priority.
The Green Climate Fund (GCF) is an international financial institution connected to the United
Nations Framework Convention on Climate Change (UNFCCC).3 The GCF was proposed by
Parties to the UNFCCC during the 2009 Conference of Parties (COP) in Copenhagen, Denmark,
and its design was agreed to during the 2011 COP in Durban, South Africa. The fund aims to
assist developing countries in their efforts to combat climate change through the provision of
grants and other concessional financing for mitigation and adaptation4 projects, programs,
policies, and activities. The GCF is to be capitalized by contributions from donor countries and
other sources, potentially including innovative mechanisms and the private sector. The GCF
would complement many of the existing multilateral climate change funds (e.g., the Global
Environment Facility, the Climate Investment Funds, and the Adaptation Fund); however, as the
official financial mechanism of the UNFCCC, some Parties believe that it may eventually replace
or subsume the other funds. Expectations by many countries, specifically developing countries,
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 United Nations Framework Convention on Climate Change, 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, “Financial Assistance and 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).
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are that the GCF becomes very large (i.e., in the range of several tens of billions to over $100
billion annually) and serves as the predominant institution for climate change assistance in the
developing world.5 These countries believe that the 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 implemented and operated 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 currently under implementation. While the governing board, a host city, and the basic
design of the fund have been agreed to by Parties, many structural aspects have yet to be
determined. These include most of the procedures, principals, and standards by which the fund
would operate. Prospective dates to complete these various arrangements have been laid out over
the course of 2014, and some Parties target the U.N. World Leaders’ Climate Summit in
September 2014 to announce the agreement and begin the capitalizing of the fund. Others remain
skeptical of this timeline, as there are many issues that need to be clarified, some involving long-
standing and contentious debate. They include
• what role the GCF would play in providing sustained finance at adequate levels;
• how it would fit into the existing development assistance and climate financing
architecture;
• what sources of financing would capitalize it; 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. Congressional input on the GCF may
include
• whether and when to participate in the fund;
• whether and how much to contribute to the fund, and with what source or sources
of finance;
• 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
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
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 and when to consent to negotiated treaty obligations, if submitted.
Financial Assistance and 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 2014, 195 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.
However, at the time, opposition in Congress was strong.9 The Kyoto Protocol was not submitted
to the Senate by President Bill Clinton or by his successor, President George W. Bush. Thus, the
United States is not a Party to the Protocol.
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) specify
that the products of negotiation should be ready by the end of 2009. Due perhaps to high
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.
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.
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expectations, as well as continued divergence among 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 by 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, 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 financial
provisions by developed country Parties. The Accord also established the “Green Climate Fund”
(GCF) to serve as the operating entity of the financial mechanism of the Convention.
Cancun Agreements and the Green Climate Fund
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 The establishment of the GCF—as well as some other financial
arrangements mentioned in the Copenhagen Accord—was a central aspect of the negotiations,
and was entered into the negotiating text of the UNFCCC’s Ad Hoc Working Group on Long-
term Cooperative Action under the Convention (AWG-LCA).12 Climate finance provisions in the
Cancun negotiating text (1/CP.16) included the following:
• Fast Start Financing. The agreement put 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) (1/CP.16§95).
• 2020 Pledge. The agreement took 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)
(1/CP.16§98).
• Sources. The agreement outlined that the pledged assistance was to be scaled-up,
new and additional, predicable and adequate, and that it may come from a wide
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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variety of sources, including public and private, bilateral, multilateral, and
alternative (1/CP.16§§97, 99).13
• Balanced Package. The agreement recognized that the financial pledges were
offered in the context of continued negotiations toward a balanced package of
commitments by all Parties that would include, among other items, meaningful
actions on mitigation14 and transparency15 (1/CP.16§98).
• Green Climate Fund. The agreement opened 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
(1/CP.16§102).
• Transitional Committee. The agreement stipulated 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 (1/CP.16§§109–110).
The Durban Platform and the Green Climate Fund
The basic design of the GCF, recommended by the Transitional Committee, was adopted
officially at the 2011 COP in Durban, South Africa, which yielded several decisions collectively
called the “Durban Platform.”16 The design of the GCF was a central aspect of the negotiations,
and the approved guidelines, referred to as the “Governing Instrument of the Green Climate
Fund,” was entered into the negotiating text of the UNFCCC’s Ad Hoc Working Group on Long-
term Cooperative Action under the Convention (AWG-LCA). Decisions on the GCF in the
Durban negotiating text (CP.17)17 included the following:
• Status. The agreement designated the GCF as “the operating entity of the
Financial Mechanism of the Convention” to be “accountable to and function
under the guidance of the Conference of Parties to support projects, programmes,
policies and other activities in developing country Parties” (3/CP.17§3).
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.
16 See UNFCCC Decisions accepted by COP 17 at http://unfccc.int/meetings/durban_nov_2011/meeting/6245/php/
view/decisions.php.
17 See UNFCCC Decision 3/CP.17, Launching the Green Climate Fund, at http://unfccc.int/resource/docs/2011/cop17/
eng/09a01.pdf. Text appearing in the “Annex” is referenced in the textual notes with a letter “A” before the paragraph
number.
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• Governance. The agreement set forth the composition of a board, to have 24
members, composed of an equal number from developing and developed country
Parties, with representation from relevant United Nations groupings including
Small Island States (SIDS) and Least Developed Countries (LDC) (3/CP.17§A9).
The decision invited Parties to submit their nominations for board membership
(3/CP.17§10). Functions of the board were to include designing operations,
establishing funding windows, approving funding, selecting implementing
agencies, defining an accreditation process for implementing agencies,
developing fiduciary standards and environmental and social safeguards, and
building a framework for the monitoring and evaluation of performance.
• Host Country. The agreement began the process of selecting a host country for
the GCF, asked Parties to submit expressions of interest, and required a final
decision for endorsement by the 18th session of the COP (3/CP.17§§12-13).
• Management. The agreement tasked the board with establishing an independent
secretariat to execute the day-to-day operations of the fund, to be in place no later
than by the 19th session of the COP (3/CP.17§§15, 19).
• Trustee. The agreement asked the board to open a transparent and competitive
bidding process for the selection of a trustee, either to replace or continue the
services of the World Bank, as interim trustee (3/CP.17§16).
• Board Meetings. The agreement authorized the board to set up an interim
secretariat immediately with the goal of convening the first board meeting. The
first two board meetings were hosted by Switzerland and South Korea
(3/CP.17§24).
• The Governing Instrument. The agreement adopted the guidelines for the
general operation of the fund. This included rules and procedures for the board,
secretariat, and trustee, as well as initial discussions on fund structure, eligibility,
access, allocation, standards, and evaluation (3/CP.17§Annex).18
The Doha Gateway and the Green Climate Fund
The GCF Board formed in 201219 and began a series of meetings to decide on recommendations
to bring before the UNFCCC at the 2012 COP in Doha, Qatar. Decisions on the GCF in the Doha
negotiating text (CP.18)20 included the following:
• Host Country. The agreement endorsed the consensus decision of the GCF
Board to select Songdo, Incheon, Republic of Korea as the host of the GCF. The
GCF Board and the Republic of Korea were asked to conclude the legal and
administrative arrangements for hosting the fund, and to ensure that juridical
personality and legal capacity are conferred to the GCF (6/CP.18§§3, 4).
18 For the full “Governing Instrument for the Green Climate Fund,” as annexed to Decision 3/CP.17, see
http://unfccc.int/resource/docs/2011/cop17/eng/09a01.pdf.
19 For a list of GCF Board members, see the fund’s website, http://www.gcfund.org/board/members-of-the-board.html.
As of April 2014, Mr. Leonardo Martinez, Deputy Assistant Secretary, Office of Environment and Energy, Department
of the Treasury, serves on the board for the United States.
20 See UNFCCC Decisions accepted by COP 18 at http://unfccc.int/meetings/doha_nov_2012/meeting/6815/php/view/
decisions.php.
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• Governing Instrument. The agreement recognized the Governing Instrument for
the GCF, and asked the board to develop the final arrangements for the
Instrument’s provisions (7/CP.18).
The Warsaw Outcomes and the Green Climate Fund
At the November 2013 conference in Warsaw, Poland, the GCF Board reported on the progress of
the implementation of the Governing Instrument, including the work accomplished on the
development of procedures, allocation of resources, securing of funding, establishment of a
secretariat, selection of a trustee, and initiation of inter-fund linkages with other relevant thematic
entities. Decisions on the GCF in the Warsaw negotiating text (CP.19)21 included the following:
• Secretariat. The agreement established the independent secretariat and named
Ms. Héla Cheikhrouhou as the executive director (4/CP.19§2).
• Guidance. The agreement adopted official guidance from the COP on policies,
program priorities, and eligibility criteria for the fund to include (1) balancing
resources for mitigation and adaptation, (2) pursuing country-driven approaches,
and (3) confirming that all developing country Parties are eligible to receive
resources (4/CP.19§9).
• Arrangements. The agreement laid out the governing arrangements between the
COP and the GCF, including provisions for guidance, reporting, cooperation,
review, and evaluation (5/CP.19).
• Funding. The agreement called for “ambitious and timely contributions” by
developed country Parties by COP 20 (4/CP.19§13).
Recent Developments
During board meetings in 2013 and 2014,22 the board stated that securing financing for the fund
was incumbent upon making progress across the full range of criteria for implementation in the
Governing Instrument as outlined in Decision 3/CP.17. The board targeted the U.N. World
Leaders’ Climate Summit in September 2014 as an opportunity officially to report on its progress
and request financial pledges. The board laid out a set of criteria to fulfill prior to this date,
including a determination on the following:
• Initial structure for the Fund and its secretariat, its administrative policies, best-
practice fiduciary principles and standards, and environmental and social
safeguards.
• Financial risk management and investment framework.
21 See UNFCCC Decisions accepted by COP 19 at http://unfccc.int/meetings/warsaw_nov_2013/meeting/7649/php/
view/decisions.php, including UNFCCC Decision 4/CP.19, Report of the Green Climate Fund to the Conference of the
Parties and guidance to the Green Climate Fund, and UNFCCC Decision 5/CP.19, Arrangements between the
Conference of the Parties and the Green Climate Fund, at http://unfccc.int/resource/docs/2013/cop19/eng/
10a01.pdf#page=13. Text appearing in the “Annex” is referenced in the textual notes with a letter “A” before the
paragraph number.
22 See meeting documents at http://www.gcfund.org/meetings.html.
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• Initial results areas, core performance indicators, and results management
framework.
• Procedures for accrediting national, regional, and international entities that will
implement activities for the fund or intermediate finance to such entities.
• Policies and procedures for the initial allocation of fund resources, including
results-based approaches.
• Initial proposal approval process, including criteria for program and project
funding.
• Initial modalities for the operation of the fund’s mitigation and adaptation
windows, and the Private Sector Facility.
• Terms of reference of the fund’s independent units on evaluation, integrity, and
grievance redress.
Outstanding Challenges for the Fund
Observers23 have noted that the GCF confronts many challenges in design, scope, governance,
and implementation that must be decided either by the board or by the Parties to the UNFCCC
prior to its operation. Several of the most significant challenges left unanswered or unaddressed
by the negotiating text include the following:
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 Governing Instrument states that the GCF is to
be “accountable to and function under the guidance of the Conference of Parties” (3/CP.17§A4)
(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 7724 have—for the moment at least—kept the latter structure in
conversation in an effort to ensure representation by all Parties of the UNFCCC. The majority of
developed country Parties, however, opposes 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. Keeping the fund independent from the COP has
been a key negotiating point for the United States. Given the current language of the negotiating
23 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.
24 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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text (7/CP.18§1), and the design of the board to carry equal representation between developed and
developing country Parties, this issue may already be resolved.
The World Bank as Trustee
The role of the World Bank in the GCF has been, and continues to be, controversial. The
Governing Instrument confirms the World Bank as the interim trustee, subject to review after
three years of fund operation (3/CP.17§A26). 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 implementation 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 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.
Mobilization of Funds
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]” (1/CP.16§101). The Governing Instrument elaborates little
on the sources of funding beyond two short statements: (1) the fund “would receive financial
inputs from developed country Parties to the Convention,” and (2) the fund “may also receive
financial inputs from a variety of other sources, public and private, including alternative sources”
(3/CP.17§§A29-A30). The Doha and Warsaw negotiating texts simply reiterate this language,
calling for “ambitious and timely contributions by developed countries,” and inviting “financial
inputs from a variety of other sources, public and private, including alternative sources”
(4/CP.19§§13, 15). Most see the faint mention of sources 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.”25
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 Forum.26 However, the means by which the issue may be resolved during the
fund’s implementation is unclear.
25 See AGF Report, op cit.
26 The “G-20” refers to the Group of Twenty: a forum for finance ministers and central bank governors established in
(continued...)
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Operational Modalities
The Governing Instrument outlines several design aspects regarding the operation of the fund,
including “complementarity, eligibility, structure, access modalities, and financial instruments”
(3/CP.17§§A31-A56). Each category engenders debate among Parties, and the negotiating text
leaves a number of issues open for consideration during implementation.
• Complementarity. 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 the comparative advantages of the other
mechanisms. As it currently stands, the Governing Instrument gives little
indication that such an ambition is to be pursued by the GCF. It states, instead,
that the fund would “operate in the context of appropriate arrangements between
itself and other existing funds under the Convention, and between itself and other
funds, entities, and channels of climate change financing outside the Fund”
(3/CP.17§A33). Nevertheless, the fate of the other funds would 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 designed originally 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.27 Conversely, it is
also possible that the GCF may be deemed inadequate to existing arrangements
in the eyes of potential donors.
• Eligibility. The Governing Instrument text states that “all developing country
Parties to the Convention are eligible to receive resources from the Fund”
(3/CP.17§A35). Presumably this characterization would include middle-income
countries like Brazil, India, South Africa, and China. The United States is on
record as objecting to this arrangement.28
(...continued)
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.
27 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.
28 U.S. Congress, House Committee on Foreign Affairs, Subcommittee on Oversight and Investigations, U.N. Climate
Talks and Power Politics, 112th Cong., 1st sess., May 25, 2011, S.Hrg. 112-22, p. 20, wherein Todd Stern, U.S. Special
Envoy for Climate Change, in responding to questions, stated that “after I arrived in Copenhagen in 2009, I did my first
press conference. And I was asked about funding for China. And I said I didn’t really anticipate that U.S. funds, which
are limited in any event, would be most wisely spent going to China.”
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• Structure. While the Copenhagen Accord specifies that the GCF would support
activities related to “mitigation including REDD-plus,29 adaptation, capacity
building, technology development and transfer” (2/CP.15§10), the Cancun
negotiating text dropped such references, opting instead to state that the GCF
would use “thematic funding windows” (1/CP.16§102). The Governing
Instrument further unsettles the structure of the fund by stating that the GCF
would “initially have windows for adaptation and mitigation”; but would
likewise “ensure adequate resources for capacity-building and technology
development and trade” as well as “consider the need for additional windows”
(3/CP.17§§A37-A39). Further, the board is tasked with “balancing” the allocation
of resources between adaptation and mitigation (3/CP.17§A50). With present
funding by existing financial institutions decidedly tilted toward mitigation
actions,30 there is likely to be a strong expectation—by developing countries as
well as certain civil society organizations—that adaptation actions receive a
significant portion of support from the GCF. Currently, no allocation formula has
been provided, nor has a definition of “balance.”
• Access. 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, most
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).31 The Governing Instrument invites international entities to
provide services for the GCF; however, it emphasizes “direct access” modalities
as a way to enhance recipient country ownership in the process (3/CP.17§§A45-
48). 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. The Governing Instrument places the burden of
29 “REDD-plus,” or “Reducing Emissions from Deforestation and Forest Degradation,” activities refer to mitigation-
relevant activities in support of forestry and sustainable land management.
30 Some of the reasons donor countries more readily provide financial assistance for mitigation projects as opposed to
adaptation projects may include (1) mitigation actions serve to benefit the global environment, whereas adaptation
actions often only provide benefits at the local level; (2) mitigation actions in the form of large-scale infrastructure
projects associated with low-carbon technological development often are prioritized by donor countries because they
support—and are incentivized by—global investment and the private sector, whereas local adaptation projects often
find private sector mobilization more difficult to facilitate; and (3) mitigation actions in the form of large-scale
infrastructure projects often are easier to monitor, verify, assess, and evaluate compared to smaller-scale, local
adaptation projects.
31 Several multilateral funds currently use some model of direct access, including the U.N. Adaptation Fund and the
Global Environment Facility, which have begun to accredit national agencies in recipient countries as official
implementing agencies for fund disbursement.
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developing “an accreditation process for all implementing entities” on the board
(3/CP.17§A49).
• Instruments. As for the choice of instruments, the Governing Instrument states
that financing would be provided “in the form of grants and concessional
lending, and through other modalities, instruments or facilities as may be
approved by the Board” (3/CP.17§A54). Observers stress that climate finance can
take a variety of forms; however, debate consistently arises between donor and
recipient countries as to the appropriateness of debt-based instruments (i.e.,
loans) for humanitarian aid. While 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.
Relationship of the Fund to Other
U.S. Climate Finance Commitments
At present, there have been no official contributions to the GCF beyond small amounts for the
fund’s administrative budget.32 Further, there have been few pronouncements regarding
redirection of current or future bilateral or multilateral financial assistance into the fund.33 Nor
have the eventual size, scope, or sources of financial contributions been decided in the negotiating
text or voiced officially by the UNFCCC, Parties to the COP, or members of the board. 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” (1/CP.16§100, italics added).34 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. The Governing Instrument elaborates little on the sources of funding beyond two short
statements: (1) the fund “would receive financial inputs from developed country Parties to the
Convention,” and (2) the fund “may also receive financial inputs from a variety of other sources,
public and private, including alternative sources” (3/CP.17§§A29-30).
As of FY2015, the U.S. Administration has made no specific budget request for appropriated
funds to be contributed to the GCF.
32 Contributions for the fund’s administrative budget of approximately $10 million have been made or pledged by the
governments of Australia, Finland, Netherlands, Republic of Korea, Sweden, Denmark, France, Germany, Japan,
Norway, and the United Kingdom of Great Britain and Northern Ireland.
33 A few countries have offered unofficial pledges, including, for example, approximately $45 million by Sweden; see
http://www.government.se/sb/d/17126/a/228841.
34 It has been suggested by some Parties that the inclusion of this statement 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.
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The relationship of the GCF to other climate finance commitments by the United States can be
outlined as follows:
• 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 was not tied to the GCF. Fast start funds were provided
as 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” (1/CP.16§99).
When operational, 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 officially. 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 Board has 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 the final implementation of the GCF. 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.
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
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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 GCF, 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 design
characteristics of the GCF 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 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).
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 (or lack
thereof); 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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