Direct and easy access to funding

Legal assistance paper

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Date produced: 08/12/2009

1. What other international facilities, other than the UNFCCC Adaptation Fund (AF), provide “direct access” funding for developing countries?

2. If a new UNFCCC fund is set up, and is stated as allowing “easy access”, what does this mean? How does this differ from “direct access”? Is there any precedent from other international facilities on what “easy access” means?

3. Which previous UNFCCC document provided for “direct access” for adaptation funds. Would it conflict with this previous document to now agree at Copenhagen to give only “easy access”?

Executive Summary: The Multilateral Fund for the Implementation of the Montreal Protocol has similar “direct access” characteristics and structure to the UNFCCC Adaptation Fund. The funding, structure and disbursements of the Multilateral Fund is set out in more detail below. The use of the term “easy access” has not been used in a similar fund structure before and further information is requested for the context in which the term may be used. The term “direct access” has previously been used UNFCCC document Paragraph 11 of Decision 1 of CMP.4 and is also referred to in at least 3 COP documents. It is recommended that if the “easy access” mechanism is to be used when forming a new fund, it is used in a “direct access” framework to avoid inconsistencies.

1.1 The Multilateral Fund for the Implementation of the Montreal Protocol (the “Fund”) provides “direct access” funding for developing countries. It was Established under Article 10 of the Montreal Protocol on Substances that Deplete the Ozone Layer (the “Montreal Protocol”). The Fund was established in 1987 (began operation in 1991) to help developing countries comply with their obligations under the Montreal Protocol to phase out the use of ozone-depleting substances (“ODS”). Those countries with an annual per capita consumption of ODS of less than 0.3 kg a year, as defined in Article 5 of the Protocol, are eligible to benefit from the Fund. As of 23 September 2009 there are 143 parties that qualify as Article 5 parties.
1.2 Funding – The Fund is replenished on a three-year basis by industrialised states. Pledges amount to US$ 2.55 billion over the period 1991 to 2009. States are determined as ‘industrialised’ or ‘developing’ on the basis of UN Scale of Assessment. Up to 20 per cent of the industrialised States’ contributions may be delivered through their bilateral agencies in the form of eligible projects and activities. Article 10 of the Protocol encourages contributions to the Fund from other Parties and is without prejudice to future arrangements that could be developed with respect to other environmental issues
1.3 Structure – Article 10 of the Protocol requires a Fund to be established with an Executive Committee. The Fund is managed by an Executive Committee with an equal representation of seven industrialized and seven Article 5 countries which are elected annually by a Meeting of the Parties. The Committee reports annually to the Meeting of the Parties on its operations. The Executive Committee is elected from the annual Meeting of the Parties. Article 10 also requires implementing agencies to be used to run projects: United Nation Environment Programme (UNEP); United Nations Development Programme (UNDP); United Nations Industrial Development Organization (UNIDO) and the World Bank. There is a Fund Secretariat which is independent from the implementing agencies. The Secretariat considers all funding requests and also makes guidelines and policies for the Fund.
1.4 Disbursements – the funds only used to pay for additional or ‘incremental’ costs incurred by developing countries in converting to non-ODS technology. The Fund provides finance for activities including the closure of ODS production plants and industrial conversion, technical assistance, information dissemination, training and capacity building aimed at phasing out the ODS used in a broad range of sectors. Article 5 states submit to the Secretariat proposals for ‘Country Programs’ on how to convert to non-ODS technology using the implementing agencies. These Programs are subject to approval by the Secretariat and then the Executive Committee. If approved, these Programs are supported by the Fund financially and by creating a reporting mechanisms. Article 5 parties have to report on the progress of their country programs annually.

2.1 We have not been able to find any reference to “easy access” – and need more context to advise on how it is to be construed. For example, does it involve streamlined procedures to access funding that is otherwise part of direct access or would there be an intermediary involved as per the other UNFCCC funds?

3.1 The main UNFCCC document providing for “direct access” is Paragraph 11 of Decision 1 of CMP.4. Paragraph 19 of the AF’s Operational Guidelines institute procedures to facilitate direct access (see http://www.adaptation-fund.org/images/AFB.Operational_Policies_and_Guidelines.pdf).

3.2 Other references:
COP 12 (Nairobi) – Paragraph 39 – Decision 1 – CMP.2 about the Adaptation Fund: FCCC/KP/CMP/2006/10/Add.1 (available at: http://www.adaptation-fund.org/images/5-CMP_2_-_Adaptation_Fund.pdf).
COP 13 (Bali) – Paragraph 29 – Decision 1 – CMP.3 about the Adaptation Fund (available at: http://unfccc.int/files/meetings/cop_13/application/pdf/cmp_af.pdf).
COP 14 (Poznan) – Paragraph 11 – Decision 1 CMP.4 about the Adaptation Fund – 2008FCCC/KP/CMP/2008/11/Add.2 ( available at http://unfccc.int/resource/docs/2008/cmp4/eng/11a02.pdf#page=1).

3.3 In our view a decision to give only “easy access” may be seen as inconsistent with “direct access”. Assuming easy access is meant to streamline the procedure that would otherwise be available through direct access (e.g. categories of actions that may meet automatic criteria for the allocation of certain amounts of funds) then this could detract from the very hard effort developing countries made to obtain direct access to funds. It may be better to press for text that supports an “easy access” mechanism within the framework of direct access – perhaps using different language that reflects that certain activities may be “pre-approved”.