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- The GCF was established in 2010 and is the largest such fund set up to provide financial assistance to poorer countries to help fight the climate crisis within their borders.
- Against their legal obligations under the UN Framework Convention on Climate Change and the Paris Agreement, rich countries pour money into the GCF.
- According to the UK’s Contribution Agreement, it committed to providing GBP 1.44 billion to the GCF Trust Fund in instalments over four years.
- By September 30, 2022, it had to pay GBP 362 million, or $409 million. The GCF secretariat informed the board that, of this, the UK had failed to pay $288 million.
- The GCF board has thus deferred three projects, while the default also calls into question developed countries’ demands for ambitious climate action from others.
After making lofty speeches since it assumed the presidency last year of the UN climate negotiations, the UK has now defaulted on its promised funds for the year to the Green Climate Fund (GCF).
As a result, the fund – set up to provide climate finance to poorer countries – has had to defer support to three proposals from these countries even though they had already been approved for support.
In June 2022, Alok Sharma, leading the UK government at climate talks in Glasgow, had said, “It is the year for world leaders to deliver on the commitments made at COP26 to keep 1.5º alive.”
(Parties to the Paris Agreement are required to make their best efforts to keep the world’s average surface temperature from warming by less than 1.5º C above the pre-industrial level. So keeping 1.5º alive is a way of saying keeping the Paris Agreement alive in letter and spirit.)
“We’re going to be working on increasing finance for adaptation, including ensuring the private sector is mobilising finance as well,” Sharma had added.
But in the recently concluded meeting of the GCF board in Incheon, South Korea, UK board member Sarah Metcalf admitted that the board was facing a crunch because the kingdom hadn’t fulfilled its commitments due in September 2022.
Specifically, an internal presentation of the GCF, reviewed by the author, showed that the UK government had defaulted on its promised payment of $288 million to the fund, which it had committed to do by September this year.
The UK’s failure to keep its promise is bound to be an embarrassment at the next edition of the UN climate talks – the COP27 in Sharm el Sheikh in Egypt, from November 6. The UK had been heading global climate talks since the COP26 in Glasgow last year and will hand over the baton to Egypt in November.
“The UK is serving its last ten days as COP president and they haven’t been able to pay the money, and they are also one of the four largest donors,” a diplomat from a developing country attending the GCF meeting said on condition of anonymity, due to political sensitivities. “The amount is huge…”.
The author emailed queries to the concerned officials in the UK government and the GCF secretariat, including the UK’s GCF advisor and the GCF’s executive director. The head of communications at GCF responded: “As I understand you have already been in touch with the UK government. I refer you to them regarding your query below.” The UK government was yet to respond at the time of publication. The article will be updated if they do so later.
“Ambitious climate action in developing countries is dependent on ambitious support by developed countries,” a diplomat from another developing country who was present at the board meeting said. “This is mandated in the convention1 and the Paris Agreement, but developed countries have consistently failed to meet their climate finance pledges and commitments, and this does not augur well for the forthcoming talks at COP27.”
A fund without money
The GCF was established in 2010 and is the largest such fund set up to provide financial assistance to poorer countries to help fight the climate crisis within their borders.
Against their legal obligations under the UN Framework Convention on Climate Change (FCCC) and the Paris Agreement – to support poor countries stave off the effects of the climate crisis and adapt to it – rich countries pour money into the GCF. The fund’s board then allocates it to beneficiary countries for specific climate-related projects.
On October 16, the board released a report listing the funding proposals it had considered at its 34th board meeting. The report listed nine projects, with three being deferred to ensure the total cost didn’t overshoot the funds available at that time.
When the GCF receives proposals, its secretariat first takes a look, shortlists a few, and submits the list to an independent expert body called the Technical Advisory Panel (TAP). The TAP then chooses projects from this list to present to the board for approval.
In its October 16 report, the GCF board said that following guidance from the two co-chairs, it would skip considering three projects even though they had the secretariat’s and the TAP’s endorsement – because the GCF received lower contributions than anticipated from its donors.
The diplomat quoted above said, “The policy for contribution says we cannot approve anything without money. So because the payments from the UK didn’t come through, the proposals had to be dropped.”
But they weren’t dropped without contest. Pakistan’s board member to the GCF, Nauman Bashir Bhatti, pointed out that “a project being deferred has certain consequences.” At the board, Pakistan currently speaks on behalf of developing countries from the Asia-Pacific region.
The GCF board member from Gabon, Tanguy Guillaume Gahouma Bekale, speaking on behalf of developing-country parties from the African states, also expressed concern about the three deferred proposals. Erika Lennon, an active observer for Civil Society Organisations for Developed Countries, called the decision a matter of grave concern.
To this, Metcalf, the UK’s representative at the board, replied that “the UK was unable to make a payment in September in advance of the board. This is due to pressures on the UK ODA budget as a result of ongoing crisis, as a result of which the UK has temporarily paused some payments.” ODA stands for ‘official development assistance’.
According to the UK’s Contribution Agreement signed with the GCF in 2019, it committed to providing GBP 1.44 billion to the GCF Trust Fund in instalments over four years. By September 30, 2022, it had to pay GBP 362 million, or $409 million. The GCF secretariat informed the board that, of this, the UK had failed to pay $288 million.
The UK attributed its failure to the ongoing economic crisis in its country and that some payments to the ODA had been paused. ODA is money from rich countries paid to developing countries as economic aid. Since the crisis began, the UK government cut aid money down from 0.7% of the gross national income to around 0.5%.
On the one hand, international treaties such as the UN FCCC and the pacts thereunder, such as the Paris Agreement, don’t explicitly allow countries to renege on their commitments due to changes in domestic economic and political situations. On the other, agreements don’t penalise countries for failing to come through on their commitments either. Countries also don’t face any reputational loss in the market – like they do when they default on sovereign debt repayment commitments.
At the Incheon meeting, representatives of developing countries expressed concerns that a situation similar to the UK’s default could recur. Those from Pakistan added that some kind of contingency is required to avoid delays in future.
The focus now shifts to the upcoming COP27 climate talks between representatives of more than 190 countries in Egypt, where climate finance is expected to be the principal bone of contention. The UK’s failure to deliver on its financial commitments both accentuates the importance of the talks and promises to heat them up.
Mrinali is a researcher with Land Conflict Watch, an independent network of researchers studying land conflicts, climate change and natural resource governance in India.
The UN Framework Convention on Climate Change↩