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What’s the Future of the Climate Investment Funds?

The committees governing the $7 billion Climate Investment Funds (CIFs) – the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF) – will meet in Istanbul this week. Alongside these meetings, a range of stakeholders from civil society, indigenous groups, and the private sector will participate in a series of events organized as part of the annual Partnership Forum, which takes place from November 4-7, 2012.

Decisions made at these meetings are critically important for the funding of climate mitigation and adaptation activities in developing nations. They’ll have important implications for meeting the immediate investment needs of developing countries, as well as for long-term global climate finance. The meetings will mark the start of discussions on how to sunset the CIFs and transition to a new global climate finance mechanism—the Green Climate Fund.

Sunsetting the CIFs

The CIFs were set up in 2008 to support low-carbon, climate-resilient development in developing countries. They were designed to be a transitory mechanism, with the intention of eventually replacing them with a new multilateral body. That new body is now presumed to be the Green Climate Fund (GCF), which is poised to become the main channel for climate finance. As the Joint CTF-SCF Committee meets in Istanbul, the contributor and recipient countries represented will consider the future role of the CIFs in the emerging global financial architecture for combating climate change. This discussion is also expected to come up as part of the Partnership Forum.

As discussions on how to gracefully sunset the CIFs and transition to the GCF get under way, the joint CTF-SCF committee and other stakeholders will need to keep three critically important issues in mind:

  1. Ensure that the operationalization of the GCF is not undermined: Some fear that the CIFs will be unduly perpetuated at the expense of the GCF. Committee members will need to reiterate their political commitment to sunset the CIFs and support the development of the GCF.

  2. Ensure that funds allocated to countries are delivered as promised: CIF commitments made to some developing countries have resulted in projects and programs being designed and developed. The CTF-SCF committee needs to follow through on providing funding for projects and programs that have been designed well so as not to erode the trust of stakeholders in these countries.

  3. Ensure that there is no gap in funding during the transition period: Even as the CIFs phase out and the GCF phases in, developing countries’ climate finance needs will not cease. Thus, it’s essential for contributor countries to ensure that these funding needs continue to be met through existing channels until the GCF is fully operational.

While it’s unlikely that the committee will make concrete decisions on these issues during the Istanbul meeting, it will be the start of an important dialogue to be picked up at subsequent meetings. The decisions of the committee will also depend on the progress made in operationalizing the GCF.

Important Decisions for the CTF Committee

The CTF committee has another important matter to consider – how to allocate unspent funds. Earlier this year, Thailand revised its CTF investment priorities, reallocating $170 million of its original $300 million allocation and releasing the remaining $130 million for the committee to put to alternate uses. At the May 2012 meetings, the committee discussed options for using such funds, should they become available from other countries. Should it provide the money to countries that have underfunded CTF investment plans? Should the committee give funds to countries that were fully funded but indicated that they could develop additional projects if more money was available? Should the funding cover shortfalls resulting from delays in some countries’ contributions? Other variations of these options were also considered. The committee could not arrive at a consensus at the May 2012 meeting and will reconsider the issue in Istanbul. It will be important for the committee to ensure that the funds released, particularly the $130 million, are put to good use expeditiously and effectively. It would be disappointing if well-designed projects and programs were left unfunded due to the committee’s inability to arrive at a consensus.

The CTF committee will also need to consider how to best monitor and evaluate its programs. These are important decisions—they will assure stakeholders that money is being spent well and set a precedent for subsequent funds. The committee will need to consider metrics for quantifying climate and development impacts of investments and ways to improve data collection. CTF pilot countries will also want to resolve the increasing backlog of projects building up behind approved investment plans. They can either justify the need for more time to more fully develop promising projects and programs, revise their investment plans with other well-designed projects, or like Thailand, return funds.

The Future of the CIFs

The Istanbul CIFs meetings have big implications for the current and future state of global climate finance. Getting the CIFs’ operations to be efficient, effective, and inclusive is important not only to ensure that the $7 billion is spent on the right projects, but because it will provide important lessons for how the Green Climate Fund should be designed.

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