Energy Fact & Opinion: The United States Contributes to the Green Climate Fund
March 10, 2016
- In early March, the Obama administration announced that it had paid $500 million into the Green Climate Fund (GCF), a financial mechanism created in 2010 under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC) to support mitigation and adaptation in developing countries. The GCF is currently considering 22 projects worth over $5 billion; 8 initiatives have already received approval.
- The money is the first tranche of a larger, multiyear $3 billion pledge that President Obama made in late 2014 as part of the international goal to raise $10 billion from developed countries in the run-up to the 2015 Paris UNFCCC negotiations. Forty-two governments pledged over $10 billion to the GCF, although not all the money pledged has been delivered ( according to the GCF, $6.8 billion has been delivered). The U.S. pledge was the largest single pledge, representing almost 30 percent of total pledged funding (a complete list of countries and their contributions can be found here).
- The GCF itself is part of a broader effort to raise $100 billion per year in climate finance by 2020 from a combination of public and private sources. Estimates of the total current amount of climate finance vary, from around $60 billion per year to $360 billion per year.
- The U.S. contribution to the GCF is not the only climate financing that the U.S. government provides to multilateral institutions. In the most recent budget passed in December 2015, the United States also gave $171 million to the Clean Technology Fund, $50 million to the Strategic Climate Fund, and $168 million to the Global Environment Facility. That budget also appropriated $10 million for the UNFCCC and the Intergovernmental Panel on Climate Change.
- The money in this year’s budget is not out of step with previous international climate contributions; in FY2014, for example, the president asked for nearly $900 million in bilateral and multilateral international climate assistance ( which was only 8 percent of the overall climate change-related budget authority request for that year ).
The $500 million is a significant symbol of the administration’s commitment and ability to follow on the promises made in Paris, especially in light of recent speculation about the future of U.S. climate policy due to the Supreme Court’s recent stay of the Clean Power Plan and the U.S. presidential election. Ensuring adequate climate finance was an important factor for getting developing countries to support the objectives of architecture of the Paris Agreement, which lays out a path for climate action post-2020. The Paris Agreement softened the divisions between developed and developing economies that have long been seen as a barrier to a durable global approach to dealing with climate change. In the long term, this financial assistance is one of the most crucial components of making sure there is equitable participation in reducing greenhouse gas emissions, as well as ensuring that the countries most affected by climate change and least able to address it are able to build capacity.
The allocation has not been without criticism. In this context, the $500 million represents a victory for the administration, which recently beat back Republican attempts to prohibit taxpayer money from being spent on the GCF. Republicans had been threatening to withhold consent for funding unless the administration submitted the Paris Agreement for Senate ratification. The most recent budget, passed in December, does not allocate any funding for the GCF, but it also does not prohibit the administration from reallocating funds from other accounts. Some Senate Republicans expressed displeasure with the administration’s decision, but they are unlikely to be able to stop the funds transfer.
While opponents often characterize U.S. contributions to the Green Climate Fund as an overly generous handout, many in the environmental and development communities—as well as some developing countries—are also critical, as they see the level of funding (from the United States and the international community more broadly) as inadequate in size relative to the magnitude of financing required to deal with climate change.
The broader challenges of climate finance go beyond the politics of this particular pledge or even the GCF itself. More challenging than just allocating the funding is ensuring that it is well spent, additional, and allocated in a way to stimulate the transition to a low carbon economy. These challenges are compounded by two factors: first, that climate finance is mostly taking place in developing economies that have institutional challenges in effectively utilizing finance to begin with. Second, the mushrooming of institutions, initiatives, and groups is beneficial in that it draws attention to the issue but may result in overlap, duplication, donor fatigue, and inefficiency. Over the last 24 years since the UNFCCC treaty, many different funds and initiatives have been created to bolster climate finance and enable the transition to a low carbon economy in developing countries. The proliferation of institutions addressing climate finance, on top of the accounting challenges, means that it is difficult to track where commitments are being met and whether the money has been effectively spent. As the sums allocated by private, bilateral, and multilateral institutions grow larger over time, this problem is likely to persist, which over the longer term could undermine political support, despite the necessity of adequate and low-cost finance to the international climate effort.