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A Key Week for the Future of the Global Environment Facility as Countries Re-up Its Funding

Governments will meet in Stockholm tomorrow to decide how to replenish the Global Environment Facility (GEF), a trust fund designed to help developing countries meet their commitments under several international environmental agreements. GEF grants finance everything from toxic chemical clean-up to biodiversity protection to anti-wildlife trafficking efforts. This not only benefits the local communities where the projects are implemented; because the consequences of environmental degradation spill over borders, investing in the GEF has regional and global benefits.

Every four years, member countries refill the GEF trust fund and negotiate a package of policy measures they hope will strengthen the institution. This time around, a bold new set of reforms has been put on the table. Key contributors to the GEF, including the United States, Japan, Germany, France, the United Kingdom and Sweden, should give these reforms a vote of confidence by pledging at least as much finance as they did at the last replenishment in 2014. 

Perhaps the biggest question is what the United States will do. While the Trump administration has not been a champion of environmental finance and is unlikely to pledge big in Stockholm, Congress will have the last word through future budget appropriations. The good news is that the GEF enjoys the longstanding support of many legislators, thanks to its contributions to U.S. interests at home and abroad.

The GEF Has Bipartisan Roots in the United States

The GEF was established shortly after the end of the Cold War, at a time when the benefits of international cooperation were on full display. The reunification of Germany, with strong international support, was giving rise to a new era of economic prosperity and stability in Europe. And countries had recently ratified the Montreal Protocol, which phased out ozone-destroying gases.

President George H.W. Bush, who became a champion of the GEF in its foundational years, told Congress in March 1992 that preventing environmental degradation should be seen as a way to promote national security and economic growth. “The year ahead,” he said, “will test our ability to redefine the relationship between humanity and the environment — and in so doing, to secure a greater peace and prosperity for generations to come.” In President Bush’s vision, the GEF would become “the principal vehicle for assisting developing nations with the incremental costs of gaining global environmental benefits under new international agreements.”

Since then, the GEF has secured strong bipartisan support in the United States. Congress has appropriated funding to the GEF every year since its creation, and the United States has historically been the largest contributor, pledging an average of $460 million in each of the six previous replenishments. The GEF also supports U.S. businesses that provide clean energy and environmental services; 127 U.S. companies, universities and NGOs in 29 states have won contracts to implement GEF projects.

Bold Reforms to Improve the GEF’s Effectiveness

In the 25 years since its creation, the GEF has invested $14.5 billion and mobilized an additional $75 billion from outside sources for 4,000 projects in 167 countries. These projects have supported the creation of protected areas covering an area larger than Brazil, sustainable management of transboundary river basins in 73 countries, and the reduction of 2.7 billion tons of greenhouse gas emissions.

However, over time, questions have emerged about whether the GEF is being all it can be. Can it further scale its impact? Has it worked out a sensible division of labor with its peer institutions? Is it doing enough for the poorest and most vulnerable countries? And can it mobilize more capital and expertise from the private sector? The package of reforms for the current replenishment addresses these challenges:

  • Increasing scale: The GEF provides each developing country with a certain funding allocation, which is further sub-divided into sectoral priorities. This system has provided predictability, but it also means that resources can sometimes be spread too thinly across multiple priorities. A new integrated approach, which builds on pilots in cities, food security and deforestation in commodity supply chains, will retain country funding allocations, but provide more opportunities for countries to concentrate resources in larger financing packages so that they can have impact at scale.
  • Playing well with others: There has been some confusion about the GEF’s role in the climate finance architecture, especially now that the Green Climate Fund is up and running and in some cases funding similar projects. The GEF’s new integrated approach will allow it to focus better on how different drivers of environmental degradation — not just climate change — interact with each other and how they can be tackled together so they promote global environmental benefits. 
  • A greater share for those who need it most: Concessional funding is critical if the poorest and most vulnerable countries are to do their part in meeting global environmental challenges. Proposed adjustments in the GEF’s allocation system put more weight on a country’s GDP, which will lead to a greater share of funding going to lower income countries, including least developed countries and small island developing states.
  • Working with the private sector: Mobilizing private investment is key to meeting environmental challenges. New efforts to accelerate the GEF’s use of “non-grant instruments,” such as loans or guarantees, will help mobilize increased private investment to help GEF members meet their environmental objectives. 

Safeguarding the GEF’s Finances

The U.S. position on the replenishment remains challenging. President Trump proposed a 30 percent reduction in GEF funding in fiscal year 2018, but Congress rejected those cuts, providing $139.5 million. In the fiscal 2019 funding request, the administration doubled down, proposing a 50 percent cut in GEF funding. While the Trump administration will likely pledge less than we would hope in Stockholm, it’s ultimately Congress that will make the decision—and Congress supports a strong U.S. pledge to the GEF. Other countries should not cut their pledges because of temporary lapses of U.S. leadership. Instead, they should see this week’s GEF replenishment as an opportunity to make a down payment on the world’s environmental future.

DISCLOSURE: The GEF is a WRI donor. The views expressed in this post are solely those of the authors.

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