Pacific seeks partnerships in climate finance

By Nic Maclellan in Funafuti, Tuvalu.

Most Forum island countries have already accessed funding from the Green Climate Fund (GCF), the global climate finance mechanism created under the UN Framework Convention for Climate Change. It’s a crucial source of funding for developing countries, operating under the Paris Agreement on Climate Change.

Around the world, Small Islands Developing States (SIDS) already have 24 approved GCF projects, with 11 already under implementation. So far, US$5.2 billion has been programmed from the fund, with $830 million (16 per cent) going to SIDS – and half of this amount has gone to Pacific island states.

Now there’s a need to replenish the US$10.3 billion fund, for future grants after 2020. Starting from October, the GCF is seeking to replenish the fund with significant pledges from OECD countries and voluntary contributions from large developing nations.

Jerry Velasquez is Director of the GCF’s Mitigation and Adaptation Division. He attended this week’s Sautalaga Climate Dialogue in Tuvalu, and met with a range of Pacific delegations at the Pacific Islands Forum to discuss future co-operation with the GCF.

Velasquez told the Sautalaga that Pacific governments need to address three core issues for future GCF funding. The first is easing access to the GCF, through the Readiness Fund (a GCF mechanism that provides preliminary finance for preparation of the technical and scientific studies required to make a full bid to the fund). There’s also a need to increase country capacity to manage and implement programs.

Velasquez called for a strategic plan to increase financing for Pacific SIDS. With more funding available in coming years, there will be growing competition for the proportion of GCF funding specifically allocated to Least Developed Countries (LDCs) and Small Island Developing States (SIDS).

“It would be useful for governments to raise their ambitions and articulate their priorities,” he said. “Some are already clear, some are not, but we need to understand the common issues. There are ideas for low-emissions shipping, most countries have problems accessing water, they have a lot of countries with coastal protection issues and some would like to increase the percentage of renewable energy     

Accessing the fund

In recent years, there have been significant debates on the GCF Board between developed and developing countries on how to improve access to the fund. The GCF Readiness Fund provides resources to hire or deploy technical staff to prepare for a major bid to the GCF. It’s a crucial mechanism for Smaller Island Developing States that often lack the staff to deal with the complex international bureaucracy.

Exsley Taloiburi is Climate Change Financing Adviser at the Pacific Islands Forum Secretariat in Suva. Taloiburi told Islands Business: “We have ten of our Forum island countries that have already had access to the GCF Readiness Fund. Although countries are eligible to access US$1 million per year, a number of our countries have not fully utilised that cap. Countries that have accessed funds from the GCF envelope have accessed well below $1 million a year.

“But it’s not a prerequisite – they can just go and apply for project funding instead of accessing GCF readiness funds. Some of these countries feel that they have the enabling environment to absorb the funds that the GCF is offering, not only the scale of funding, but the reporting requirements and other requirements for Forum Island countries.”

Despite these successes, the GCF Secretariat has recently approved changes to further cut back the bureaucracy.

Jerry Velasquez noted: “The debate is not just the size of the Readiness Funding but how we deploy this funding more easily. One innovation that’s already been approved is three-year readiness grants. Instead of applying each and every year, you apply for it once for three years, up to a maximum of US$3 million. This cuts the bureaucracy by one third and allows for some stability in hiring staff and capacity building.

“The other thing that’s an innovation here that could be applied elsewhere is the regional readiness, because you cannot do everything by yourself. You cannot hire a technical expert on water and fisheries and everything in each and every country. So, you could draw down resources regionally.”

Forum host Enele Sopoaga, Prime Minister of Tuvalu, welcomed the notion of regional readiness systems.

“I’m welcoming the GCF’s presentation saying there’s the capacity for readiness resources to be packaged and bundled for a regional facility,” Sopoaga said. “I can see there could be a way forward for this to be approved, dispersed and housed in the Pacific from which island countries can draw from as readiness resources. That could be an innovative way of moving forward. But it’s not only access, but also implementation and disbursement – for funds to be disbursed as soon as possible in order to help the island countries survive.”

Battle over replenishment

At the global climate negotiations in 2010, OECD countries agreed to an annual global target of US$100 billion in public and private funds by 2020, to support developing country efforts to adapt to climate change and cut greenhouse gas emissions. As they signed the Paris Agreement in 2015, industrialised countries reaffirmed this objective, and made a series of recommendations about the effective use of these resources.

In Paris, countries pledged to review the global US$100 billion climate funding target by 2025, but this commitment comes in a separate “decision text” rather than the binding agreement.

The GCF began operations in 2015, but is about to launch a replenishment round, to increase OECD pledges beyond the current level of US$10.3 billion.

However, the Morrison government in Australia has now joined the Trump administration in refusing to commit further funding to the GCF replenishment. In 2014, former US President Barack Obama pledged US$3 billion to the fund. Trump administration however has refused to commit the remaining US$2 billion, a significant hole in the GCF’s budget. The chaos surrounding Brexit has also complicated the delivery of funding pledges from the UK government, given possible fluctuations in the value of the British pound.

Throughout this week’s Pacific Islands Forum in Funafuti, there’s been growing concern over Australia’s position. Despite an Australian announcement that A$500 million of re-badged aid will be directed at climate infrastructure and resilience projects across the Pacific, some island leaders are concerned that the refusal to commit more funds to the GCF will undercut international efforts to reach and increase global financing targets.

Jerry Velasquez welcomes the news that some European countries are increasing their support.

“What’s happening now is that some of our donors are doubling their pledges,” he said. “Germany and Norway have just announced doubling their funds – Germany to 1.5 billion euros. The question is, what will happen with the rest? It’s up to the countries of the Pacific to call for a strong replenishment. The more money that gets into the replenishment, the more money they will get.”

That call was taken up in this week’s Tuvalu Declaration on the Climate Change Crisis, which welcomes “the significant role that the GCF plays in supporting developing countries in their efforts to address climate change. We call for a prompt, ambitious and successful replenishment of the GCF.”

Partners in implementation

Velasquez noted: “We also need to get the partners in place, because more often than not, the limiting factor is the partners. We need more different kinds of partners. Some entities like the Ministry of Finance of the Cook Islands is limited to project management for up to US$10 million. Obviously, that limits the type of things they could do.

He encouraged greater private sector involvement in leveraging resources: “Ideally, we should have a commercial bank that have a larger ability to program money so they could access concessional loans. Fiji has the Fiji Development Bank that is larger, but you have very few entities here in the Pacific that can channel non-grant instruments, such as concessional loans, equity and guarantees. That’s where you can leverage private sector finance.”

International climate finance is managed through National Implementing Entities (NIE) – often government departments, development banks, technical agencies or other organisations that can manage public finance or implement projects.

Exsley Taloiburi explained that national and regional bodies around the region had already achieved GCF accreditation: “In the Pacific, the NIEs we have with the GCF are the Cook Islands Ministry of Finance and the Fiji Development Bank, while the Regional Implementing Entities (RIEs) we have at the moment are the Pacific Regional Environment Program (SPREP), the Pacific Community (SPC) and the Micronesian Conservation Trust.

“The Cook Islands Ministry of Finance obtained accreditation to the Kyoto Protocol Adaptation Fund initially, and they applied through the fast-tracking process and they were able to get GCF accreditation as well. Tuvalu’s Ministry of Finance has just been granted NIE status to the Adaptation Fund, and I think that puts them in a very good position to be able to apply for fast-tracking for NIE status to the GCF.”

In recent years, regional organisations like PIFS and SPREP have expended a lot of effort to share success stories between Forum member countries, to see what works best in accessing funding or implementing successful projects.

“There can be good South-South learnings, where Forum Island Countries can learn from each other,” said Taloiburi. “One way to do this that we’ve been working on is South-South attachments between different countries that allows countries to explore and understand other options.

“I think information sharing is really critical for Forum Island Countries. We’ve undertaken National Climate Finance Assessments in 11 of the 14 FICs and there are a lot of very good lessons that can be shared. A number of countries have established national sustainable funding mechanisms, such as the Tuvalu Climate and Disaster Survival Fund, or Fiji’s Green Bonds.”