Rich countries’ proposal to bypass governments on climate aid rejected


US-led group wanted to give $100bn a year directly to MNCs for projects to tackle climate change in developing countries

Efforts by rich countries to give $100bn (£66bn) a year of 'climate aid' direct to companies, bypassing poorer countries' governments, have suffered a setback.

The UN's fledgling Green Climate Fund (GCF) is designed to transfer money in the future from the developed to developing world, to tackle the impacts of climate change, such as floods and droughts.

Papers seen by the Guardian following a tense GCF board meeting in South Korea show that rich countries led by the US, Britain and Australia pushed for the World Bank-run fund to be able to bypass the governments of poor countries by giving money intended to help them directly to rich countries' companies. Under this scenario, large contracts for climate change adaptation works in developing countries might have been awarded by the fund to international companies rather than to host governments.

They also lobbied hard for the fund to be able to act like an autonomous bank, taking risks, guaranteeing loans, having its own governing body and even being able to speculate with climate funds.

But the 24-strong board of the new fund voted down the proposal for the GCF to act like a bank and denied rich countries the independent governing structure for the private sector that they sought.

Instead, the board agreed to set up a powerful private sector advisory group and an investment committee. This suggests that rich countries will continue to try to control the funds.

The coffers of the GCF are still empty, but in scenes that mirrored the fraught on-going global climate talks, developing countries led by India tried to establish that the $100bn that has been pledged will be mainly channelled to them in the form of grants and not loans, and to the public rather than the private sector.

Civil society groups said they were shocked at the attempts by the private sector to hijack the money, which had been first pledged at the Copenhagen climate conference in 2009.

"If the GCF gives funds to developed countries' big firms and funds, then the GCF would be subsidising and taking on risks pertaining to the developed countries' firms, rather than assisting developing countries," said Martin Khor, director of the South centre thinktank based in Geneva.

"We want to make sure the GCF does not become an institution dominated by multinational corporations and Wall Street investors that would leave critical, yet unprofitable, priorities by the wayside," said Karen Orenstein, of Friends of the Earth US.

But the 24 member board said a mix of private and public funding was always seen as the model for the GCF. "The decisions that we have taken will help ensure that both governments and the private sector are playing a role in combating climate change," said Zaheer Fakir of South Africa, GCF board co-chair.

Despite strong calls for more transparency, Australia quashed a proposal to allow webcasting of all GCF board meetings.

The fund, set up after the 2010 UN climate conference in Cancun, Mexico, is still in its start-up phase, with head office in the South Korean port of Incheon. Its first meeting was only held last August, after months of delays.

Hela Cheikhrouhou, a Canadian-educated Tunisian who currently heads the energy and climate change department of the African development bank, was last week appointed GCF executive director.

The fund is seen to be crucial to the world achieving a new climate deal, possibly in 2015, when governments will meet in Paris for UN talks. No agreement is possible without rich countries guaranteeing the $100bn a year by 2020 which they pledged in 2009. How the money is raised and disbursed has been one of the main sticking points in the negotiations.


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