■ At the 15th Conference of the Parties (COP) of the UNFCCC in Copenhagen in 2009, attending governments, in the presence of heads of state and government such as President Barack Obama, Chancellor Merkel, Premier Wen Jiabao of China and Prime Minister Manmohan Singh of India, negotiated the so-called Copenhagen Accord, which aimed at setting a new framework for international cooperation related to climate change.

■ One of the key outcomes in the Copenhagen Accord was the reference to a new fund, whereby "developed countries commit to a goal of mobilising jointly USD 100 billion dollars a year by 2020 to address the [climate change related] needs of developing countries." and agreed that "[A] significant portion of such funding should flow through the Copenhagen Green Climate Fund."

■ In subsequent meetings, it was agreed that the fund will be governed and supervised by a board with 24 members, composed of an equal number of members from developing and developed country Parties that will have full responsibility for funding decisions (Board). The Board will be supported by an independent secretariat and a trustee with administrative competence to manage the financial assets of the Fund.

■ In August 2012 the board met for its inaugural meeting and subsequently, it was decided that the board will reside and have its permanent secretariat in Songdo, Icheon City, Republic of Korea.

■ The Board will be responsible for drawing up operating procedures in order to fulfil its mandate and start the replenishment process. Ideally, the Board will be able to start some of its activities in 2013 and will be fully operational in 2014. If the political process allows the full implementation of the GCF, it may become one of the most important facilities providing development assistance and investment support in areas such as renewables, energy efficiency, infrastructure investments and other mitigation and adaption activities.

■ At the eighteenth session of the COP to the UNFCCC, further efforts will be made to refine the design and the operations of the Green Climate Fund (GFC).

GREEN CLIMATE FUND (GCF)

The Future of Renewables and Infrastructure

Financing - from Political Decision to implementation

02

BACKGROUND

The final decision to establish GCF was taken in 2010, at the

sixteenth session of the COP in Cancun, Mexico (decision 1/

CP.16). In line with Article 4, third paragraph of the

UNFCCC, the Fund will receive financial inputs from

developed country Parties, as well as from a variety of other

sources (public and private). The fund will be used in order

to support developing countries in setting up projects,

programmes and other activities that aim to limit or reduce

greenhouse gas emissions and to adapt to the impacts of

climate change. Up to 100 billion US$ annually of climate

financing to developing countries is expected to be mobilised

from developed country sources by 2020, and a significant

share thereof would channelled through the Fund.

At COP 16, the main features of the institutional structure of

the Fund were defined. It was agreed that the Fund will be

governed by a Board, shall have a Trustee and be supported

by an independent Secretariat. Terms of Reference for the

design of the Fund were adopted and a Transitional

Committee was appointed to put these into practice. In

addition, the Parties expressed their intention to establish a

Standing Committee (SC) that would assist the COP in

exercising its functions with respect to the financial

mechanism of the Convention.

THE RELATIONSHIP BETWEEN THE GCF AND THE

STANDING COMMITTEE

The roles and functions of the SC were further defined during

the seventeenth session of the COP, which took place in

Durban in 2011 (2/CP.17). At this session, the actual

launching of the GCF was materialised through the adoption

of the Fund's Governing Instrument (3/CP.17). There is a

clear divide between countries regarding the distribution of

responsibilities to the Standing Committee.

Many developing countries would like to see the

implementation of strong governance provisions, giving the

Standing Committee a high degree of influence over the

GCF. The background is that the Standing Committee is an

instrument under the COP and thus gives the majority of

Parties the ability to directly influence its work in the annual

COPs. Developed countries, however, advocate a high

degree of independence of the GCF and its Board in order to

allow it to operate effectively in the interest of achieving its

goal.

THE ROLE OF THE WORLD BANK

The assets of the GCF will be administered by a trustee only

for the purpose of, and in accordance with, the relevant

decisions of the GCF Board. The World Bank was invited by

the COP to serve as the interim trustee of the GCF, subject to

a review three years after operationalisation of the Fund. The

Board was also invited to select the trustee of the GCF

through an open, transparent and competitive bidding process

in a timely manner to ensure that there is no discontinuity in

trustee services.

During previous negotiations, a number of developing

countries made it clear that there is a level of distrust towards

the World Bank's approach to facilitating investments in

developing countries and the perceived influence of large

donor countries, especially the US, on its operations.

This led to controversial discussions, in particular since

the US initially favoured setting up the GCF as part of the

World Bank or the World Bank at least having a high

degree of influence. Realistically, given the vast amount

of money that is supposed to be administered by the GCF

there were no alternatives to appointing the World Bank

as trustee; it can therefore be expected that the World

Bank will fulfil this role for the foreseeable future and

beyond its initial 3 year mandate.

THE INTERIM SECRETARIAT

Currently, an Interim Secretariat has been set up by

UNFCCC Secretariat and the Global Environmental Fund

(GEF) Secretariat to support the operations of the Fund.

It is expected that the Interim Secretariat will be replaced

by a permanent one in 2013 which may grow to several

hundred members of staff and operate out of South

Korea.

ELEMENTS ON THE TABLE IN DOHA

According to the provisional agenda of the eighteenth

session of the COP, items 11 (b), (c) and (d) in particular,

both the report of the SC to the COP and the report of the

GCF to the COP, will provide a starting point for

discussions on matters relating to the financial

mechanism under the Convention. On this basis,

negotiations will be undertaken regarding the

arrangements that are to be concluded between the

Conference of the Parties and the Green Climate Fund.

Report of the Standing Committee to COP18

The Report of the Standing Committee to COP18

(FCCC/CP/2012/4) contains recommendations of the

SC to be considered by COP18, as well as a

description of the outcome of its first and second

meetings in September and October 2012, and in

particular of its work programme for the period 2013-

2015.

Pursuant to decision 2/CP.17, paragraph 121, the SC

shall provide the COP with expert input, including

through independent reviews and assessments, into

the preparation and conduct of the reviews of the

financial mechanism by the COP. They aim at

ensuring the mechanism's conformity with the

Convention and with the guidance of the COP, as

well as its overall effectiveness in implementing the

Convention.

In addition, the SC indicates that it would be available

to play a role, at the request of the COP, in the

development of the arrangements between the COP

and the Green Climate Fund. The report also

recommends that the COP adopts a decision to

change the name of the SC to the "Standing

Committee on Finance".

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Report of the Green Climate Fund to the Conference of

the Parties

At COP 17, the Board of the GCF was requested to

operationalise the Fund in an expedited manner. The

report of the Green Climate Fund to the Conference of

the Parties (FCCC/CP/2012/5) describes the activities

that were undertaken by the Board in this regard between

December 2011 and November 2012.

Furthermore, the report gives an account of the decisions

taken by the Board on its internal organisation and

working modalities. At its first and second meetings, in

October and August 2012, the Board decided to work out

additional rules of procedure (ie on observer participation

in Board meetings), to continue the arrangements

between the UNFCCC and the Global Environment

Facility (GEF) with respect to the Interim Secretariat and

its staff, to initiate the selection process for the Executive

Director of the independent Secretariat that is yet to be

established and to approve the Fund's administrative

budget (for a total of US$ 9.6 million, for the periods up

until 31 December 2013).

The work plan of the GCF until 31 December 2013

builds on the Fund's Governing Instrument and

comprises a list of seven topics to be addressed as

indicative priority matters: institutional and strategic

matters; access modalities; programming modalities;

private sector facility (PSF); accountability mechanisms,

standards, results and evaluation; resource mobilisation

and the establishment of the independent Secretariat.

Arrangements between the Conference of the Parties

and the Green Climate Fund

As a financial mechanism within the meaning of Article

11 of the Convention, the GCF shall function under the

guidance of and be accountable to the Conference of the

Parties. At its first and second meetings, the Fund's

Board was not able to reach consensus on the

arrangements that are to be concluded between the COP

and the GCF in this respect.

Since the GCF Board is tasked with operationalising the

Fund, agreeing on appropriate governance arrangements

between the COP and the GCF will be one of the major

tasks of the negotiators in the Doha Conference as far as

the financing mechanisms are concerned. As indicated

above, there are diverging views as to how much influence

the COP and/or the Standing Committee shall have over

the GCF. Developed countries favour a large amount of

independence in order to effectively avoid some groups of

Parties vetoing crucial funding decisions, while developed

countries fear that an independent fund will be controlled

largely by donors, not taking into account the needs of

developing countries.

Alexander Sarac, Legal Director at DLA Piper (London),

has been appointed as advisor to one of the Green Climate

Fund's Board members (accredited with the Interim

Secretariat). DLA Piper will continuously monitor the

developments in this area. If you have any questions

related to this or other issues addressed at the Climate

Change Conferences please check our website or contact

us directly.

Alexander Sarac

Legal Director

T +44 (0)20 7153 7729

alex.sarac@dlapiper.com Issues that are highlighted in the work plan are,

amongst others: the GFC's reporting obligation to

the COP; the type of instruments through which the

Fund will provide financing (grants, concessional

lending or others); the funding approval processes;

the accreditation process for implementing entities

that will have access to Fund resources; the model

for delivery of the PSF's resources (direct, indirect

or a combination); monitoring, policies and

procedures for contributions and resource

mobilisation; liaison with the host country regarding

juridical personality and legal capacity (as well as

the associated privileges and immunities) to be

conferred to the Fund.