Is the Green Climate Fund fit for purpose in Africa?
By Al-Hamndou Dorsouma
Is the Green Climate Fund ready to meet the Paris Agreement’s ambitions in Africa?
With the December 2015 adoption of the Paris Agreement on climate change, the UN-based Green Climate Fund (GCF) is expected to play a critical role as a major global climate finance instrument, particularly to help developing countries implement their pledges under the Agreement. But, based on its design and current development, is the Fund ready to facilitate Africa’s green development ambitions?
In principle, the GCF is tailor-made to support Africa
The GCF was created in 2010, before the Paris Agreement, by the United Nations Framework Convention on Climate Change (UNFCCC) as the main operating entity of the financial mechanism of the Convention. The Fund is designed to enable a paradigm shift in developing countries towards low‐emission and climate‐resilient development. As of July 2016, the GCF had mobilized USD 10.3 billion in pledges from 43 national governments.
Recognizing the need for country ownership and capacity, the GCF established a network of about 130 National Designated Authorities (NDAs) to interface between each country and the Fund, to provide broad strategic oversight, and to endorse projects proposed for GCF funding.
The Fund has two modalities to channel finance: i) direct access through subnational, national or regional implementing entities; and ii) international access where the recipient countries can access funds through accredited international and regional institutions. Recipient countries can choose to use either modality or both modalities simultaneously. As of now, the GCF has accredited about 33 entities to channel resources, of which 58% are international organizations, 27% national institutions and 15% regional organizations.
Significantly, as an international best practice, the Fund has committed to disbursing half of its resources to adaptation and half to mitigation. This is a positive sign for the emerging global financial architecture, in which mitigation figures prominently and adaptation remains under-funded.
Under the Paris Agreement, developed countries committed to collectively providing USD 100 billion annually by 2020 for mitigation and adaptation while significantly increasing adaptation finance from current levels. Achieving this goal will require the GCF to serve as an effective financing instrument to massively invest in a wide range of climate change initiatives in developing countries, particularly in Africa.
In its current state, is the GCF prepared to support Africa?
But to date, the GCF’s own internal structure for project approvals, implementation, and funding processes is under-developed, and with a cumbersome accreditation process and lack of effective support to build countries’ readiness, the GCF is not yet well equipped to play a leading global financing role. Many questions remain about its capacity to carry out its mandate.
For Africa, this is critical. Three central issues create at least-short-term obstacles for African countries.
A cumbersome accreditation process
When the GCF operationalized its ‘fit-for-purpose’ accreditation process in November 2014, it was largely expected that its resources would swiftly flow to recipient countries through accredited entities with a proven track record with other similar funds. However, for an institution to be accredited (even, with the fast-track accreditation process), it takes at least one year to pass through the GCF’s 3-step accreditation process, including Institutional Capacity Assessment; Review by the GCF Accreditation Panel; and Accreditation Master Agreement (AMA).
In addition, the GCF is meant to complement existing climate financing instruments such as the Global Environment Facility, Climate Investment Funds, and Adaptation Fund. But with the cumbersome approval process, there is high competition between both African and non-African organizations to get accredited and get GCF funding for projects in Africa. This adds another layer to existing fragmentation of financing by the wide variety of instruments. Many African countries are concerned that the GCF will not significantly scale up climate finance in Africa, or if it does, most of the resources will be managed through institutions and intermediaries outside the continent.
To date, it has proven very difficult for the GCF to translate its USD 10.3 billion contributions into project approvals and disbursements. So far, the GCF has committed only USD 424 million in projects and programmes, far below its USD 2.5 billion project approval target for 2016.
An under-developed readiness support process
At the national level, countries must have a well-established institutional framework to deal with global climate finance, to receive and manage funds at scale, and to design projects that meet GCF requirements. To address this in the GCF design, support for development of countries’ readiness was built in. Preparatory activities to help countries get ready are underway now in partnership with other readiness programmes, including the AfDB’s Africa Climate Change Fund (ACCF). The GCF’s NDA structure is meant to help countries build readiness, and African countries need to take advantage of this opportunity to get ready and submit bankable investments for GCF financing.
But the slowness in delivering GCF readiness activities raises the question of whether the GCF itself is ready to help countries get ready. Despite the existence of the NDAs, including several in Africa, the lack of an adequate institutional infrastructure in every African country is still an issue, and it is unlikely that this challenge will be addressed in the shorter term so that GCF funds can flow in the continent.
GCF can fill Africa’s climate financing gap if Africa responds wisely
To date, most estimates show that Africa receives less than 5% of global climate finance; therefore, African countries’ expectations for the GCF are very high. But as the complex GCF requirements make it most difficult for African countries and institutions to become accredited, one can conclude that Africa’s access to GCF resources is and will be very limited. First, African countries face two challenges with the direct access approach, including the difficulties to meet GCF accreditation procedures, and the small-size of project types they are able to apply for. Second, African countries and institutions can use the services of accredited regional and multilateral implementing entities and avoid facing the accreditation challenges; but this could limit their ownership over design and implementation of their projects.
Despite all these limitations, GCF can still be an important vehicle for climate finance in Africa, if African countries use the opportunity wisely to build their own capacities and play an important role in the design of projects to be supported by GCF.
The African Development Bank has been monitoring the development of the GCF since its inception. The Bank has become a multilateral implementing entity of the GCF in March 2016, and is ready to help African countries get access to the Fund. Based on its experience in managing similar funds, the Bank is ready to assist Africa to enhance access to climate finance, in particular through the GCF.