That's the 100 billion dollar question (excuse the pun) posed in a recent article in the Environment by researchers Lorrae van Kerkhoffm, Imram Habib Ahmad, Jamie Pittok and Will Steffen. 100 billion USD per year is the amount of money proposed to be channeled to help developing countries mitigate and adapt with climate change. This funding target was agreed upon in Cancun at the 16th Conference of Parties meeting to the UNFCCC in December 2010.

Why is the fund needed?

The impacts of climate change are hitting, and will continue to hit, both developed and developing regions of the world. These impacts are highly likely to be more emphatic in developing countries than in the industrialized world. For example, recent assessments suggest that agricultural production will be hit hardest by climate change in poor, developing countries.  Impacts of climate change on water quantity and quality are likely to be most severe in the arid and semi-arid tropics, and in the Asian and African mega-deltas. In the past, we at sdupdate, have also highlighted research that shows how developing countries in tropical regions may suffer fisheries declines of up to 40% as a result of climate change. With this in mind it becomes obvious that funding for developing countries needs to be made available quickly through a dependable and transparent set of mechanisms. But what are the major pitfalls this global fund can avoid, and how?

What are some of the major pitfalls and how do we bridge them?

Pitfall #1: From global funds to local adaptation - The issue of scales is one of the major potential pitfalls identified by this article. Basically the reasoning goes like this. Dealing with climate change is usually framed as requiring two interlinked strategies. One is a strategy of mitigation, to make the impacts of climate change less severe, and this is typically discussed in terms of international and centralized mechanisms to reduce greenhouse gases. However, the second strategy is one of adapting to the impacts; in essence, finding ways to live with the consequences of climate change. This has no single measure and will by necessity involve a vast array of activities that are mostly local (subnational) in scale. So a challenge facing a Green Climate Fund is how to distribute these "global" resources in a way that enables local institutions to undertake adaptation.

Bridging pitfall #1: So how can the fund distribute resources in a manner that supports local adaptation initiatives? What usually happens in similar situations is that national governments act as "gatekeepers" of global funding. This however, for different reasons, can hinder the flow of money to the local scale project. On the other hand, having a global funding systems dealing and negotiating with thousands and thousands of local projects can be a logistical nightmare. One solution is to set up a system of implementing entities (NIEs), that is national-scale institutions (but disconnected from national government) approved by the Adaptation Fund's board to be entrusted with the implementation of subnational projects. The authors write:

"Support collaborative approaches that can reach local scales. Ensuring that applicants consult widely and coordinate their proposals across government and nongovernment sectors, including the private sector and local-scale representatives, is important. Allowing applicants to submit proposals outside government ministries can also help to support local-scale action, especially where relationships between government and civil society organizations are not strong."

Pitfall #2: Money entering this fund should not reduce aid elsewhere - This touches on the controversy of additionality. The Copenhagen accord has pledged the provision of new and additional resources to respond to climate change in developing regions. So the revenue earmarked for the Green Climate Fund should represent new commitments, rather than diverted from monies that have earlier been committed for some other form of development and economic assistance.

Bridging pitfall #2: A problem is that there doesn't seem to be an accepted definition of additionality in climate finance. The North and South have divergent and conflicting views on what constitutes additional aid. One way of solving this is establishing a benchmark for what counts as additional — for example, any direct contribution from the donors to the Green Fund could be argued to be additional—but there really is no way of knowing whether any such contribution has resulted in declines in other aid-related commitments. The authors suggest that the clearest way to overcoming this problem is that finance for this fund is sourced independently from donor government budgets. In other words not allowing donors to balance resources going to the Green Climate Fund against aid budgets.

Pitfall #3: Embeddedness - Many adaptation activities that could potentially be financed by the fund will have co-benefits (i.e they might benefit food security or biological conservation). If, for example, a country wanted to support a large program of mangrove replanting to build natural buffers to reduce the effect of potential storm surges (storm surges are a projected consequence of climate change to entail more volatile and unpredictable local weather patterns), this would have the co-benefit of restoring fish-breeding habitat. However, if such co-benefits were not allowed, on the basis that livelihood and biodiversity benefits should be supported by other sources of aid financing, then authorities might reject the mangrove replanting and opt for artificial sea walls instead. There is therefore the looming risk that if the fund requires that projects exclusively relate to climate change that it will only support specific, mostly technical interventions.

Bridging pitfall #3. The authors describe this nicely:

"Allow for multiple benefits. This will mean having rules that favor the projects and interventions that yield the greatest gain for their cost, even if a significant part of that gain is not directly related to climate adaptation. For example, funding the creation of a university or government department that can collect, maintain, and interpret climate data may require investment in broadband Internet infrastructure that will benefit the entire university or government. These benefits should be factored into the assessment of the project, and regarded as relevant additional benefits, rather than factored out. This will require transparent and specific funding criteria that ensure all partners (donors and recipients) share expectations and agree upon how climate adaptation funding may be used to support broad-based development strategies."

They wrap up the article:

"While it may seem that raising $100 billion per year to tackle climate change is a mammoth task, designing institutions that can spend these funds in ways that are effective and efficient and that demonstrate commitments to equity will require a delicate balance between sensitivity to the global ethical challenges, and drive and commitment to see the fund operating quickly. This may prove to be even more demanding, and more important in the longer term. Researchers and policymakers alike need to look beyond the environment sector to seek out innovations from others, illustrated by GAVI here in global health, but by no means limited to that one organization. We will need to consider the specific challenges of climate change adaptation, and develop innovative responses to them. Ensuring that these institutional arrangements meet the challenges we have documented and can learn from unfolding experience is crucial to ensuring that the poor and vulnerable are served by the global community."