What are the UNFCCC Climate Finance Arrangements?
In accordance with the principle of common but differentiated responsibility and respective capabilities set out in the Convention, developed country Parties (Annex II Parties) are to provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC. To facilitate the provision of climate finance, the Convention established a financial mechanism to provide financial resources to developing country Parties. The financial mechanism also serves the Kyoto Protocol and the Paris Agreement. The Convention states that the operation of the financial mechanism can be entrusted to one or more existing international entities. The Global Environment Facility (GEF) has served as an operating entity of the financial mechanism since the Convention’s entry into force in 1994. At COP 16, in 2010, Parties established the Green Climate Fund (GCF) and in 2011 also designated it as an operating entity of the financial mechanism. The financial mechanism is accountable to the COP, which decides on its policies, programme priorities and eligibility criteria for funding.
In addition to providing guidance to the GEF and the GCF, Parties have established four special funds: the Special Climate Change Fund (SCCF), the Least Developed Countries Fund (LDCF), both managed by the GEF, and the GCF under the Convention; and the Adaptation Fund (AF) established under the Kyoto Protocol in 2001. At the COP21 in 2015, the Parties agreed that the operating entities of the financial mechanism – GCF and GEF – as well as the SCCF and the LDCF shall serve the Paris Agreement. Parties are currently working on modalities for the Adaptation Fund (AF) to serve the Paris Agreement. Under the Kyoto Protocol, other Climate Finance mechanisms include the Clean Development Mechanism (CDM), the Joint Credit Mechanism (JCM) and the Emissions Trading schemes (ET).
To access funding, developing countries nominate their National Designated Authorities (NDAs) or focal points (FPs) to the GCF, which enables governments to liaise with the Fund and ensure a country-driven approach. The GCF, through the NDAs then accredits Implementing Entities, who are the key partners through which the resources of the GCF in a variety of financial instruments, including grants, concessional loans and private sector instruments, is channelled to undertake climate change mitigation and adaptation projects and programmes in developing countries. The accredited Implementing Entities can be subnational, national (NIEs), regional (RIEs), private, non-governmental or international organizations. In order to undertake actual adaptation or mitigation actions on the ground, the Implementing Entities engage Executing Entities (EEs) who have the technical capacity to implement (execute) climate action in line with the proposals to the GCF.
Funding for climate change actvities is also available through bilateral, regional and multilateral channels.