Should the Green Climate Fund finance “less dirty” energy?

Originally posted on Reuters

Many governments and financial institutions support the deployment of “less dirty” fossil fuels to fight climate change both domestically and internationally, and claim this is a sane, sensible approach. Let’s try applying this logic to smoking.

A heavy smoker walks into her doctor’s office hacking up a lung. The doctor tells her patient that it’s fine to smoke, as long as the cigarettes are filtered. The competence – let alone the medical license – of the doctor would be quickly called into question.

But back in the world of the climate crisis, we find ourselves in the ludicrous situation of having to wage a battle to ensure that the Green Climate Fund (GCF) doesn’t fund climate change.

Differing opinions have been voiced about the danger of the GCF financing fossil fuels. Although there was scant media coverage of March’s GCF board meeting, the question of the Fund financing fossil fuels was featured.

So should we be worried? Here’s why there is good reason for concern:

1. The principle of the thing. A fund to combat climate change should not exacerbate climate change, period. But the GCF board won’t agree to that. It has refused to explicitly ban the financing of fossil fuels. That’s like a torture convention that doesn’t forbid torture.

2. Common Principles for Climate Mitigation Finance Tracking (a.k.a. Common Principles). On March 31 in Paris, multilateral development banks and the International Development Finance Club – among the world’s chief financiers of public and private sector initiatives – gave themselves a pat on the back for agreeing to “climate change mitigation finance tracking principles for development finance”.

These principles are supposed to dictate how the development finance institutions keep tabs on the climate pollution-reducing activities they support. According to the World Bank: “The principles set common definitions and guidelines for tracking climate finance, but they leave the implementation, reporting, and quality control to each institution.”

But the list of activities that can be counted as climate mitigation finance is so greenhouse gas (GHG)-emitting, you could combust coal or gas with them. What can count as climate finance? “Energy-efficiency improvement in existing thermal power plant, industrial energy-efficiency improvements though the installation of more efficient equipment, changes in processes, reduction of heat losses and/or increased waste heat recovery.“

What this means in plain English is, for example, that making coal or crude oil combustion more efficient could count as climate finance. And while I don’t see this at all as the right way forward, Japan does, and it sits on the GCF board. Other signatories to the new Common Principles include the Asian Development Bank, which is the first multilateral development bank accredited as an implementing entity of the GCF, and Germany’s KfW Bankengruppe, also just accredited. Another activity the Common Principles would count as climate finance is “thermal power plant retrofit to fuel switch from a more GHG-intensive fuel to a different, less GHG-intensive fuel type.” Here, for example, we could see funding a switch from coal to natural gas count as climate finance. But isn’t natural gas still a fossil fuel? In the broad spectrum of fossil fuels, there is always going to be a project or fuel type that is relatively more or less dirty than another. Allowing so-called climate financing for projects that are slightly less dirty than a hypothetical alternative is a sure way to game the system.

Nowhere in the Common Principles do we even see an alternatives test to measure whether support for non-greenhouse gas emitting renewable energy could be pursued instead of a slightly less dirty fossil fuel project. And in any case, should scarce public resources meant to reduce climate pollution be used to pay for a climate-polluting activity?

There are even rumours – though unsubstantiated and hopefully false – that the GCF might try to join in these Common Principles.

3. Coal concerns. I’ve generally been more worried about the GCF supporting natural gas than I have been about coal, but now I feel slightly less confident. Several board members have informally voiced their possible support for coal retrofits and carbon capture and storage. I don’t think anyone does a retrofit without the intention of extending the life of a plant, subsequently adding years of high-carbon lock-in to a country’s energy mix. Plus, we cannot forget that the constitution of the GCF (the Governing Instrument) specifically allows for carbon capture and storage. According to a new report by Greenpeace, not only is CCS an extraordinarily expensive, commercially-unproven technology, “CCS proposals maintain our dependence on fossil fuels and exacerbate climate pollution.”

4. Other forms of dirty mitigation finance. Fossil fuels aside, GCF watchers must remain hyper-vigilant about the GCF funding false solutions like so-called “climate smart” agriculture, biofuels, waste incineration, nuclear energy and big dams, many of which are included in the Common Principles. As these activities are much more easily “greenwashed” than fossil fuels, there is arguably a significantly higher risk of the GCF financing them.

All this being said, we must remember that none of this is set in stone, and not a single GCF project – good or bad – has yet been funded.

The four points outlined above do not provide reasons to write off the GCF. Developing countries indisputably need climate finance to flow through the GCF to fight climate change and adapt to its unavoidable impacts.

On the contrary, the above serves as a call to double down on efforts to make sure the board of the GCF, and its supporting secretariat, do the right thing. And the right thing simply cannot include funding dirty energy and false solutions in any of their forms.