FINANCE:

A 'turf war' complicates efforts to get climate aid to developing nations

PUNTA DEL ESTE, Uruguay -- Enthusiasm ran high in the Bahamas when the government agreed to phase out incandescent light bulbs using $1 million in Global Environment Facility grants.

That was two years ago. Beset by what officials described as bureaucratic dysfunction among the international funding agencies, the Bahamas' leaders are still waiting for their project to be approved. By now, interest is starting to wane.

"They wanted to roll it out very rapidly, but after two years, we simply do not have this project up and running," Philip Weech, director of the Bahamas Environment Science and Technology Commission, said of his country's leaders.

"You jump through one hoop after another hoop, and then sometimes you have to start all over again," Weech said of trying to get dollars for climate protection and biodiversity. "We can give you some very long horror stories."

Bahamas is hardly the only country with complaints. If there is one point that countries meeting this week in this South American resort town agreed upon, it's that securing money from the GEF is no easy task.

As the GEF enters its 19th year, the world's largest funder of environmental projects is still trying to resolve one of the problems that have plagued it since its inception: a cumbersome bureaucracy linking several different agencies that, countries complain, often have competing rules and regulations.

Environment ministry officials who deal with the GEF say the institution has made enormous strides over the past few years, cutting in half the length of time it takes to win approval for projects and other improvements. But at the 4th Assembly of the Global Environment Facility this week, CEO Monique Barbut acknowledged there is more to be done and promised major changes on the horizon.

GEF wants a leading role

"It's time to get down to business," Barbut told delegates from 180 member countries as she laid out a series of promised reforms.

The challenges are taking on increased importance as the GEF vies for a leading role in doling out climate change funding. The stakes are potentially huge. Nations in Copenhagen last year pledged $30 billion over the next three years and about $100 billion annually by 2020. Agencies are battling fiercely for the right to manage those dollars.

"There's a huge competition as to which channel those funds will flow through," said Saleem Huq, a senior fellow at the International Institute for Environment and Development in the United Kingdom.

"It's a big turf war," added Karen Orenstein, spokeswoman for Friends of the Earth. "The GEF wants a role, and the World Bank wants a role."

Established in 1991, the GEF is aimed at forging international cooperation and funding solutions to critical environmental threats. In an unusual structure, countries apply for GEF funding through a third-party agency that also oversees the project.

Initially countries could only work through the World Bank, U.N. Environment Programme or the U.N. Development Programme, but in recent years, the GEF has added more agencies to the list. Now it is considering ways to allow nations to apply directly. The proposal has met with mixed results, with some larger developing countries eager to bypass what they see as a useless middleman and with wealthy nations cautious about giving recipients more direct control.

"We have been trying to simplify the procedure, but when a country gives money away, it wants to be sure it will be used the way it is intended to be used," said William Ehlers, team leader for external relations at the GEF.

Despite the differences, countries on both sides of the money divide said they were all committed to making the system work more smoothly. And after years of chronic underfunding, the GEF last month announced a record four-year replenishment of $4.25 billion.

It's far short of the tens of billions environmental groups insisted the GEF needs to really be effective. But the pledge represents a 52 percent increase over the last funding cycle, with $575 million coming from the United States.

Developed nations favor the World Bank

"In the financial economic context of today, this also shows the trust donors have in the GEF," Barbut said. She called it a "first step" in dedicating the $30 billion of early money wealthy nations pledged to help the world's most vulnerable countries cope with climate change impacts and transition to a low-carbon economy.

By laying claim to a slice of the Copenhagen funding, analysts said, Barbut also set down a marker for the future. The message: GEF can and will steer climate money.

Not everyone is so sure about that, though. The United States has put its weight behind the World Bank to act as the trustee for the Copenhagen Green Climate Fund.

"There is substantial precedent for the World Bank to play this role, considering it currently serves as the trustee for nearly every existing channel of climate finance," U.S. Treasury Department officials said in a statement, adding that it has the internal safeguards to oversee large amounts of financing.

"We want to make sure that every dollar we contribute to this effort is accounted for and spent properly. The World Bank is an attractive trustee for this effort precisely because of its strong fiduciary standards and its extensive capacity to uphold them," Treasury wrote.

A number of other industrialized countries that will be the prime donors of climate funding have echoed the United States' reasoning. Said Huq, "It's a very powerful argument that plays very well with the treasuries of developed countries -- and treasuries aren't really concerned about the environment. They're concerned about getting money out the door and having it be handled well."

"The GEF is trying very hard to compete, but it's having a hard time winning that battle because it is not the preferred option for developed countries," he said.

Many environmental groups and developing countries, meanwhile, are pressing for the money to go through the U.N. Framework Convention on Climate Change. They distrust the World Bank and feel the UNFCCC is most responsive to and inclusive of poorer nations. But that argument, Huq acknowledged, "is being made, but not being won."

Barbut, for her part, denied that a power play is at hand. Under the U.N. climate change convention, the GEF simply is the world's financial mechanism -- end of story. But when pressed, Barbut acknowledged she hopes her agency will emerge as a "compromise."

"It's not that [countries] want either one or the other. If it were that simple, we would not have gotten that money," Barbut said of the GEF's replenishment. Indeed, a delegate from Switzerland this week declared the funding a "testament of the confidence of the entire donor community" in the GEF.

"The problem is also coming from the developing countries. Will they ever accept to have the World Bank? And I don't think many developed countries want to see the U.N. [in charge of the money]," Barbut said. "Then, the GEF is a compromise."

Still waiting for those light bulbs

Countries say there are a number of problems that first need to be resolved. They complain bitterly about conflicting orders from multiple agencies as they work on a single project. Others say the length of time getting a simple urban transportation or biodiversity protection plan off the ground -- now an average 16 months -- is not worth the less than $5 million in grant funding countries normally receive.

One Nigerian official recalled filling out 16 different forms for a single project. A deputy minister from South Africa said the total GEF budget for four years is less than what Americans spend on toilet paper annually. And a senior environment officer from Tanzania echoed the complaint of dozens when he said international consultants have more say in choosing projects than national leaders themselves.

"Most projects are being developed by consultants outside the country, so they don't meet the national priorities," said Daniel Nkondola, who serves in the Tanzanian government's environment division.

Not everyone shares the complaints. Nepal's undersecretary of finance, Bhuban Karki, said the GEF system has been simplified significantly and countries have been given more flexibility in recent years. "It's definitely an improvement for countries like Nepal," Karki said, and endorsed the GEF as the prime climate funder.

"No other agencies are managing climate as their sole objective," he said.

Mohamed Shareef, deputy minister of environment in the Republic of Maldives, agreed and credited Barbut with imposing previous reforms that have improved the GEF. "Since Monique came on the scene, I think things have moved," Shareef said. "She's very strict, and she tells it how it is."

For now, Barbut said, her agency's biggest challenge is to make sure that recipient countries have what she describes as "full control" of the projects GEF is financing.

Some, though, are skeptical that problems can be resolved easily. Weech, still waiting for his light bulb funding, called for a new "mindset" that sees rich and poor countries as partners, not donors versus recipients. He doesn't see any of the proposed reforms making a great difference until all countries, including industrialized ones, are allowed to access GEF funds.

Said Weech, "Make every country a recipient, and you'll see the way the ballgame changes."

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