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Wednesday, June 12, 2013

International Environmental Financing: The Global Environment Facility (GEF)

Richard K. Lattanzio
Analyst in Environmental Policy
The United States contributes funding to various international financial institutions to assist developing countries to address global climate change and other environmental concerns. Congress is responsible for several activities in this regard, including (1) authorizing periodic appropriations for U.S. financial contributions to the institutions, and (2) overseeing U.S. involvement in the programs. Issues of congressional interest include the overall development assistance strategy of the United States, U.S. leadership in global environmental and economic affairs, and U.S. commercial interests in trade and investment. This report provides an overview of one of the oldest international financial institutions for the environment—the Global Environment Facility (GEF)—and analyzes its structure, funding, and objectives in light of the many challenges within the contemporary landscape of global environmental finance.

GEF is an independent and international financial organization that provides grants, promotes cooperation, and fosters actions in developing countries to protect the global environment. Established in 1991, it unites 182 member governments and partners with international institutions, nongovernmental organizations, and the private sector to assist developing countries with environmental projects related to six areas: biodiversity, climate change, international waters, the ozone layer, land degradation, and persistent organic pollutants. GEF receives funding from multiple donor countries—including the United States—and provides grants to cover the additional or “incremental” costs associated with transforming a project with national benefits into one with global environmental benefits. In this way, GEF funding is structured to “supplement” base project funding and provide for the environmental components in national development agendas. GEF partners with several international agencies, including the International Bank for Reconstruction and Development, the United Nations Development Program (UNDP), and the United Nations Environment Program (UNEP), among others, and is the primary fund administrator for four Rio (Earth Summit) Conventions, including the Convention on Biological Diversity (CBD), the United Nations Framework Convention on Climate Change (UNFCCC), the Stockholm Convention on Persistent Organic Pollutants (POPs), and the United Nations Convention to Combat Desertification (UNCCD). GEF also establishes operational guidance for international waters and ozone activities, the latter consistent with the Montreal Protocol on Substances that Deplete the Ozone Layer and its amendments. Since its inception, GEF has allocated $11.5 billion—supplemented by more than $57 billion in cofinancing— for more than 3,200 projects in over 165 countries.

GEF is one mechanism in a larger network of international programs designed to address the global environment. Accordingly, its effectiveness depends on how the fund addresses programmatic issues, builds upon national investment plans, reacts to recent developments in the financial landscape, and responds to emerging opportunities. Critics contend that the existing system has had limited impact in addressing major environmental concerns—specifically climate change and tropical deforestation—and has been unsuccessful in delivering global transformational change. A desire to achieve more immediate impacts has led to a restructuring of the Multilateral Development Banks’ (MDBs’) role in environmental finance and the introduction of many new bilateral and multilateral funding initiatives. The future of GEF remains in the hands of the donor countries, including the United States, which can choose to broaden the mandate and/or strengthen its institutional arrangements or reduce and replace it by other bilateral or multilateral funding mechanisms.

Date of Report: June 3, 2013
Number of Pages: 27
Order Number: R41165
Price: $29.95

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