U.N. Green Climate Fund ready by 2014: observer

by Susanna Twidale | Reuters Point Carbon
Tuesday, 2 July 2013 18:00 GMT

A handful of Australian one dollar coins is shown in Sydney, February, 2004. REUTERS/Tim Wimborne

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LONDON, July 2 (Reuters Point Carbon) - A U.N. climate fund charged with raising up to $100 billion a year to help some of the world’s poorest countries battle the causes and effects of climate change could be ready to give out cash by the end of 2014, an observer to the fund’s board said Tuesday.

The development of the Green Climate Fund (GCF) is seen as a crucial key to help unlock U.N. climate negotiations which have for years been marred by a lack of trust, with rich and poor countries trading accusations over broken promises while global greenhouse gas emissions rise.

“The target is still to make sure the fund is up and running by 2014 and ideally ready for the first deployments of cash by the end of that year,” Abyd Karmali, global head of carbon markets at Bank of America Merrill Lynch, and active private sector observer on the board of the fund said in an interview.

At U.N. climate negotiations in 2010, rich nations agreed to set up the GCF, but weak economic growth has dampened governments’ willingness and ability to contribute, meaning the fund is currently an empty shell and will rely on the private sector for the bulk of the funds.

Karmali said the board meeting of the fund made good progress towards setting up institutions that would help tap banks and funds, but said: “It is too early to talk about the size of finance the private sector is likely to contribute.”

“We believe with the right instruments we could achieve leveraging rates of 1-5 and upwards,” he said, explaining that for each dollar of public money invested the private sector could multiply that by a factor of five.

Private firms want to be able to use cash donated by countries to help safeguard larger investments they will make in greenhouse gas cutting schemes in developing countries, although Karmali said there were risks.

“The biggest concern for the private sector is that we are guarded against retroactive policy reversals such as those that happened in OECD countries with renewable feed in tariffs,” said Karmali.

Over the past few years cash-strapped governments such as Spain and Britain have halted or said they would phase out subsidy programmes for renewable power producers such as wind farms and solar generation, denting confidence in government-backed schemes.

At its fourth meeting, held in South Korea last week, the GCF fund agreed to set up a series of committees, including a Risk Management and an Investment Committee which it hopes will help find solutions to the risks facing investors in emission reduction schemes.

Private sector firms have suggested the fund could provide feed-in tariffs and loan guarantees for renewable power generation, price guarantees for projects to reduce deforestation and offer a minimum price for CO2 offsets to help secure their investments.

“The (GCF) board has a good understanding of the policy risks and costs that could provide barriers to private sector investment, and it is a positive step that the board is seeking to address these issues,” Karmali said.

Rich nations are expected to make pledges to the fund at this year’s high level climate talks to be held in Warsaw in November.

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