The Green Climate Fund (GCF), the United Nations’ key funding body for confronting climate change in developing countries, opened its headquarters on Wednesday in South Korea. As an indicator of the significance of the event, World Bank President Jim Kim, UN climate chief Christiana Figueres and International Monetary Fund Managing Director Christine Lagarde were in attendance.
Last year Korea beat out five rivals — Germany, Switzerland, Poland, Mexico, and Namibia — in its bid to be home to the GCF. Referred to as the environmental sector’s World Bank, the nearly 200-member Green Climate Fund team will work to funnel money from richer nations to those most in need in the battle against climate change. In 2009, developed countries committed to annually mobilize $100 billion from public and private sources for climate mitigation and adaptation by 2020. The GCF was created to provide a significant portion of this commitment.
At the opening ceremony, Ms. Héla Cheikhrouhou, Executive Director of the GCF, said, “the office opening is both a symbolic and practical demonstration that the Fund is ready for business. The fund will be a dynamic and innovative driver to combat climate change, so it is highly appropriate that our headquarters will be in a new green building, located in the heart of technology innovative Songdo.”
After Korea won the bid to be home to the GCF, Song Young-gil, mayor of Incheon, said that he expected the GCF to trigger a ripple effect in the local economy, pointing to a report estimating the economic effect of being home to the GFC headquarters will be roughly $344 million annually to the country.
The Fund itself will not be fully operational for about a year, and for now South Korea is not reaping any economic benefits, but is rather the sole financier of the Fund, providing $40 million for administrative expenses.
With GCF funding levels currently hovering around $10 billion a year — an amount promised in 2010 — there were serious concerns of a finance drought coming out of November’s major UNFCCC climate meeting in Warsaw.
According to Britain’s Overseas Development Institute, cash inflows have fallen far short of expected levels, with new finance dropping by more than two-thirds in 2013 from 2012. A BODI report found that, “funding in response to German flood damage in 2013 was four times higher than funding to help developing countries adapt to climate change since 2003.”
As of October 2013, the U.S. had pledged $356 million to the fund this year, 71 percent lower than the $1.21 billion pledged in 2012, according to the independent website Climate Funds Update.
According to the Center for American Progress, finance negotiations for the CGF went through the night several times during last month’s climate meeting in Warsaw. Eventually a compromise was reached, “calling on developed countries to submit strategies for scaling up climate finance through 2020, including information on pathways for mobilizing funds.”
No concrete interim targets were included in the final decision, however, only a call on developed countries to provide “ambitious and timely contributions” to the GCF before the next round of high-level climate talks in Lima, Peru next December.
Rebecca Lefton, Senior Policy Analyst at the Center for American Progress, points out the significance of the GFC’s mechanism for private finance, co-authoring a recent article that states, “the United States and other donor countries will continue to focus on using public resources to leverage larger private flows:”
“New initiatives on mobilizing finance are underway that work through development finance institutions, export credit agencies, and multilateral development banks to generate private investment and scale up climate finance. Private sources and public-private partnerships will play a significant role in the future mobilization of finance commitments as governments face budget shortfalls, and they could provide a significant portion of climate finance in a ramp-up period to 2020.”
According to Climate Funds Update, public funding has not yet attracted as much private investment as expected: for every $1 spent between 2010 and 2012, only $0.25 of private finance had been drawn in as of the beginning of 2012. Many of these programs are still in the early stages, making it hard to tell how effective the efforts have been, as well as what the best ways to leverage public financing to attract private investment are. Slow global economic growth has also contributed to the lack of public and private investment.
One way to encourage private investment might be for governments to commit to climate-friendly growth strategies, and stop “vacillating” according to Nicholas Stern, a leading climate change economist.
“That is a killer … governments have to recognize that the only serious long-term or short-term future lies in the transition to the low carbon economy,” Stern told RTCC. “That is the growth story of the future: if they set clear policies in place … that’s where the finance will flow.”
With this in mind, a new initiative called the Global Commission on the Economy and Climate recently launched a year-long study to analyze the economic costs and benefits of action against climate change with hopes of presenting a more persuasive argument for action. The report will be released in September 2014.
“All this time, we have talked about emissions,” the commission’s chair, former Mexican President Felipe Calderon, said at the project’s launch. ”But this time, we will try to talk about profits. That could change the equation.”
Recently New York Mayor Michael Bloomberg and former U.S. Secretary of the Treasury Hank Paulson helped launch a similar project with a domestic focus. Called the Risky Business initiative, the coalition seeks to illustrate the impact of climate change on the US economy.
According to Bloomberg News, the initiative will attempt to persuade investors and legislators that the consequences of uninhibited greenhouse gas emissions far outweigh the short-term costs of mitigating pollution.