Isra-Mart srl:Cancun Green Fund to dominate global climate finance

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Isra-Mart srl:

Work will begin immediately on the formation of a Green Climate Fund after the Cancun Accords granted the UN climate secretariat powers to appoint a new committee to lay the foundations for the centralised fund.

Under the agreement delivered by the Long-term Cooperative Action working group that runs parallel to the Kyoto negotiations, countries agreed to the formation of a Green Climate Fund that will be governed by a board of 25 people "comprising an equal number of members from developing and developed country Parties".

In what is being hailed as a significant victory for developing countries the new fund will be managed under the auspices of the UN rather than the World Bank, although the bank will still be involved as the interim trustee of the fund subject to a review three years after the launch of the fund.

Many developing countries had opposed proposals for the World Bank to operate the new fund, arguing that in the past it has failed to focus enough on climate change and has imposed controversial reforms on countries in return for access to finance. Instead the fund will be governed by the new board and supported by an independent secretariat.

Significantly, the agreement invites the head of the UN climate change secretariat, Christiana Figueres, to convene a new transitional committee to begin work on the formation of the fund and second staff from the UN and other international institutions to support the work of the committee.

The 40-strong transitional committee will include 15 members from developed countries and 25 from developing countries with seven each from Asia and Latin America, and two each from the groups of island states and least developed countries.

Observers are hopeful the committee can be finalised next year so that work can begin on the fund structure ahead of December's climate change summit in South Africa.

The formation of the new fund should serve to simplify the intricate network of funding mechanisms and bilateral agreements that currently provide low carbon and climate adaptation investment for developing countries with the final agreement stating that a "significant share" of climate adaptation spending will flow through the new fund.

However, the agreement made little progress on how the funding will be raised, confirming only that parties remained committed to providing $100bn a year of climate funding from 2020 that will be generated from a "wide variety of sources, public and private, bilateral and multilateral, including alternative sources".

The Cancun Summit did consider the report from a UN-appointed working group detailing how $100bn a year of finance could be raised through a range of mechanisms, including auctioning of carbon credits and levies on international aviation and shipping. But no conclusions appear to have been reached with the final agreement making no mention of fund-raising proposals.

"The proposed Green Climate Fund is good news, but it is designed to distribute the funds not raise them," observed Richard Gledhill, head of climate change and carbon markets at PwC. "More work is needed on potential new sources of funds and the role of the private sector in meeting the goal of raising $100bn per annum by 2020 to support climate action."