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Friday, July 1, 2011

International Climate Change Financing: The Green Climate Fund (GCF)

Richard K. Lattanzio
Analyst in Environmental Policy

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 17
th 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).

Date of Report: June 23, 2011
Number of Pages: 16
Order Number: R41889
Price: $29.95

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