Financing Arrangements in the International Climate Change and Biodiversity Regimes Jolene Lin Assistant Professor Faculty of Law The University of Hong Kong

Outline Global Environmental Facility: Financial mechanism designated by the UNFCCC and CBD treaty regimes to fund climate change and biodiversity projects Institutional linkage between the UNFCCC and CBD frameworks that can, in theory, be utilized to promote the implementation of projects that can achieve the co- benefits of climate change mitigation and/or adaptation and biodiversity protection Sidelining of the GEF The climate funds

Brief Background on the GEF Launched in 1991 as a 3-year experiment “complementary” to the UNFCCC and CBD and the Rio Summit processes Administered by the UNDP, UNEP and the World Bank UNDP: capacity building and technical assistance UNEP: technical and scientific analysis World Bank: managing investment projects

Brief Background on the GEF Incremental costs approach Turbulent pilot phase Rio Summit (1992): it was agreed that the GEF would be restructured and used as the “interim” financial transfer mechanism for the UNFCCC and CBD

Brief Background on the GEF Purpose of restructuring $8.8 billion for more than 2,400 projects in more than 165 developing countries and countries with economies in transition

GEF as the institutional linkage What are some obstacles to the GEF playing the role of institutional linkage to promote climate and biodiversity objectives? Co-financing requirement: total cash and in-kind resources committed by governments, multilateral or bilateral sources, the private sector, NGOs, the project beneficiaries and the concerned GEF agency to a particular project Justification

GEF as the institutional linkage “Cofinance for GEF projects is important because it: (a) expands the resources available to finance environmental objectives; (b) is a key indicator of the strength of the commitment of the counterparts, beneficiaries, and Implementing and Executing Agencies to those projects; and (c) helps ensure the success and local acceptance of those projects by linking them to sustainable development, and thereby maximizes and sustains their impacts.”

GEF as the institutional linkage Difficulties of attracting co-financing for biodiversity projects vis-à-vis climate change mitigation projects Not surprising that majority of GEF projects in China (largest recipient of GEF funding) are in the climate category Co-financing requirement, reinforced by the idea that the implementing agencies should focus on areas in which they have a comparative advantage, exacerbates tendency to consider climate change and biodiversity as two separate issues

Incremental Cost Approach Refers to the costs exceeding the measures adopted pursuant to national envt protection policies and conducted in the absence of global envt concerns Why this formula was adopted Create financial incentives for developing countries to undertake envt protection activities that were costly to them but which generated global benefits Capped costs for donor states

Incremental Cost Approach Problems Discrepency between the GEF’s global envt benefits mandate and the objectives of the CBD and the UNFCCC is an inherent limitation to the ability of the GEF to effectively finance activities to promote biodiversity conservation and climate change

Turning our attention towards Convention-specific funds… Developing countries motivated to pursue establishment of financial mechanisms that are managed by the convention bodies rather than the GEF Adaptation Fund Green Climate Fund CBD regime: discussions of a Green Development Mechanism (clearly modeled on the Clean Development Mechanism)

Turning our attention towards Convention-specific funds… Explore the possibility of utilizing the climate funds to finance projects that (1) achieve climate objectives without negative impacts on biodiversity (biodiversity-benign climate projects) and a step up, (2) projects that achieve both climate and biodiversity objectives develop a CBD financial mechanism that will be administered by the COP instead of the GEF.

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