15 November 2016
While little discussed at the COP, the channeling and use of climate finance must now take centre stage as the board of the Green Climate Fund (GCF) prepares to meet next month in Samoa. The GCF has just begun its early operational phase and important policies remain to be developed or substantially revised.
On a promising note, the US recently led successful opposition to official partnerships between the GCF and export credit agencies. In arguing against the GCF partnering with the Export-Import Bank of Korea, US board member Leonardo Martinez-Diaz said: "We do not think it is proper to channel [GCF resources] through entities whose job is export promotion." Touché! But the US should consistently apply that principle; it currently counts some US export credit agency financing toward its contribution to the $100 billion.
Though the de facto exclusion of export credit agencies from the GCF is a positive step, if the GCF board and top administrators hope to maintain the GCF's prime spot of wide global support – from civil society and governments, rich and poor - the GCF has to get its house in order, and fast.
The GCF has already displayed an alarming number of shortcomings on policy and process. Though some of the 27 projects approved so far look quite good, at its last meeting, for example, the GCF board approved 10 funding proposals worth $745 million without debating, or even discussing, the merits of most of them. The board repeatedly overlooked the failure of a number of proposals to comply with GCF policies and procedures – mandatory gender action plans were missing from several projects, and stakeholder consultations in some cases were highly inadequate. As those paying attention to the COP know all too well, public climate finance is a scarce resource, and its deployment must be meticulously considered.
Civil society groups have already expressed deep concern that the GCF has begun approving high risk projects, though it has neither an environmental and social management system nor a stand-alone Indigenous Peoples Policy in place. Likewise, civil society vociferously opposed the GCF board's accreditation of some of the world's top fossil fuel financiers, HSBC and Deutsche Bank, each with troubling records on human rights, environment and financial scandals.
But, at least for the moment, the international community seems prepared to cut the GCF some slack. Ultimately, the GCF will be judged by the impact it has on the lives of people in developing countries as they confront the climate crisis. And it is here that specificity must be invoked – because a high risk, large hydropower project may come before the GCF board next month – the Upper Trishuli-1 hydropower project in Nepal.
As a rule, the GCF has no business financing any large hydropower project. This old-school technology has a track record littered with enormous cost and time overruns and very serious social and environmental harms. Big dams often make water and energy systems more vulnerable to climate change and impair the ability of rivers to act as global carbon sinks. According to a new study, methane produced from rotting vegetation in dam reservoirs accounts for 1.3% of all human-caused climate change.
The Nepal hydropower project is already waving a number of red flags. The dam would be located in a post-earthquake zone, and there is concern that road construction could trigger landslides. The project will require resettlement of Indigenous Peoples, yet there are serious questions about whether or not their right to Free, Prior, and Informed Consent has been attained. Further, as the project is part of a series of existing and planned hydropower installations on the Trishuli River, it triggers a mandatory assessment of cumulative impacts, followed by the development of a management plan to mitigate these impacts. But the GCF appears poised to submit the project for approval without this being done.
In fact, Upper Trishuli-1 would be the fifteenth such project built on the river, with another 19 planned. Meanwhile, no less than eight international financiers are reported to already be considering backing the project, including several established lenders, among them the International Finance Corporation, which actually submitted the proposal to the GCF, the World Bank, and the Asian Development Bank. GCF projects are supposed to demonstrate that they affect a paradigm shift; this one doesn't even pass the laugh test.
All of this begs the question of why-in-the-world scarce GCF resources should be shuttled to such a quagmire? The answer is simple: the GCF board must unambiguously reject this large hydropower project in Nepal, before it becomes the GCF's own debacle.
Karen Orenstein is deputy director of the economic policy team at NGO Friends of the Earth.