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 Fund for Biological Diversity

Mainstream, VOL LI, No 1, December 22, 2012 [Annual 2012]

Mistaken Stress on Doubling the
 Fund for Biological Diversity

Thursday 3 January 2013

by Anwar Sadat

Finance constitutes one of the most crucial aspects of negotiations dealing with the two major global environmental problems—biological diversity and climate change. It not only has the potential to ensure broadest possible participation in dealing with the global environmental problems but any serious disagreement on this can hold other important issues to ransom. In the eleventh Conference of the Parties meeting to the Convention on Biological Diversity (CBD) (hereinafter COP 11) held at Hyderabad between October 8 and 19, 2012, the issue of increasing fund to prevent the loss of biodiversity in developing countries so as to meet the Aichi targets (the global biodiversity conservation goals) by 2020 was the top item on the COP 11 agenda for discussion.

As in the case of climate change, there are two reasons that strongly underline the importance of finance in the context of biodiversity: (1) the principle of common but differentiated responsibilities and respective capabilities; and (2) the necessity of developing nations protecting the biological resources from destruction is more if the world is to maintain preservation of biological diversity, ecological stability and food security. The common thread that combines both the reasons is that the specific needs and special circumstances of the developing country Parties put constraint on them to spend adequate resources to protect the world’s plants, animals and natural habitats

In the COP 11 meeting, G77/China paid attention mostly to the issue of increasing fund or pledging of financial commitments by the developed country Parties to meet the Aichi goals by 2020. Rather, they should have paid attention to the following realistic steps to improve the accessibility of adequate funding: (1) change in the existing rule governing contributions to the Convention-designated financial mechanism, Global Environment Facility (GEF), to ensure predictable and adequate funding; (2) alternative scope of increasing fund; (3) institutional structure of funding.

Challenges in Predictable Funding

One of the celebrity outcomes of the COP 11 is that the developed countries have agreed to double the fund flow to developing countries by 2015, to arrest the depletion of biological resources. The compromise formula that was arrived at the meeting to increase the fund is to count the average of annual biodiversity funding for 2006-2010 as the interim baseline to measure the doubling of total biodiversity related international financial flows to the developing countries, in particular the least developed countries, small island developing states, as well as countries with economies in transition by 2015 and at least maintaining this level by 2020. This proposal was brought out by India whose representative explained that setting a target now, even on an interim basis, would build confidence among parties. But the doubling of fund, as it is interpreted in some of the developing countries, should not be seen as something new or a big gain for the developing countries. Rather, it should be seen in the context of Article 20(4) of the CBD, which says that “the extent to which developing country Parties will effectively implement their commitments under this Convention will depend on the effective implementation by developed country Parties of their commitments under this Convention related to financial resources and transfer of technology and will take fully into account the fact that economic and social development and eradication of poverty are the first and overriding priorities of the developing country Parties”.

Without any mandatory formula for collecting money, it is difficult to predict how the said money will be mobilised. Unlike the criterion governing contributions to the United Nations by the member states, there is no criterion mentioned either in the CBD or in the GEF instrument governing contributions towards itself at the replenishment meeting at every four years.

This formulation does not say anything about which nations should pay or in what proportion. In the context of the COP 11 decision to generate fund for the implementation of Aichi targets from a variety of sources clearly implies both public fund and private fund and in light of the growing concern about scarce public fund and the increasing of fund from private sources to meet the expanded needs of developing countries, it should be clear as to what percentage of it will constitute public fund as against private fund.

In the given context of GEF being the financial mechanism of the CBD, it must be made clear by the donor nations (the OECD countries) whether they have also agreed to incorporate their decision of doubling fund exclusively for biological diversity into their burden-sharing formula governing contributions to GEF. Understanding this aspect is very important owing to the fact that GEF provides grant and concessional loan to developing country parties in the following other areas- climate change, ozone layer depletion, land degradation, international waters and persistent organic pollutant. It is already allocating 60 to 70 per cent of the total amount to the cause of biodiversity. If it increases the allocation further for biodiversity, it will have to ignore other areas which are not very easy since GEF is the designated financial mechanisms for the other areas as well like- convention on persistent organic pollutant, desertification and land degradation.

The fundamental idea of burden sharing is that those who have more to share should do so, which is in accordance with the common but differentiated responsibilities for the solution of global environmental problems. The independent evaluation of GEF says that the donor nations are not even fulfilling their pledges to the GEF. Arrears remain a problem for the GEF, principally because the United States had, major outstanding arrears dating back to 1994, and the total arrears currently stand at 167 million dollars. Several donors have deferred their contributions, with reference to the burden sharing formula. Italy has yet to deposit its instrument of commitment for the years 2009-2013. In total, arrears that have been outstanding for some time, deferred contributions, and unfulfilled pledges as of now amounted to some 18 per cent of the resources originally projected for the years 2009-2013.

One of the obvious reasons that is traced to the mounting arrears is that the GEF money is raised through national budget contributions. Governments are politically less willing to export funds which have been raised in a domestic context because that money is perceived by their constituents as national money. Sustaining the commitment to raise public funds is contingent on domestic policy setting. If there is a change in domestic policy setting or change of government, sustaining the commitment can waiver.

Missed Opportunity of Increasing Fund

What appears to be a missed opportunity as regards roping in of middle-income countries to generate adequate fund to meet the expanded biodiversity needs of developing countries is concerned. Middle income countries notably absent from the current list of donors to the GEF which include existing International Development Association donors—Barbados, Brazil, Cyprus, Egypt, Estonia, Hungary, Iceland, Israel, Kuwait, Latvia, Poland, the Russian Federation, Saudi Arabia, Singapore, and the Slovakia Republic, Thailand, which contributes to the Global Fund to fight AIDS, Tuberculosis and Malaria, is not yet a donor to the GEF; nor are several other middle-income countries with relatively large economies, such as Argentina, Chile, Malaysia, and Venezuela. This would have been in accordance with Article 20(2) of the CBD which envisages that the COP is entitled to periodically review and if necessary amend the list of contributors. In the subsequent Para of Article 20, it is clearly written that contributions from other countries and sources on a voluntary basis are also to be encouraged. The idea does not weaken the common but differentiated responsibilities principle since the resource mobilization from them will be on voluntary basis and, that unlike the developed countries, the middle-income countries are not required to provide new and additional financial resources.

In addition to predictable and adequate funding, the CBD says that the developed country Parties have to provide new and addition funding for the purposes of biodiversity. Though the goal of providing new and additional resources is embodied in the Convention, but that is nowhere defined which leaves room for interpretation. But the most developing countries and non-governmental organisations (NGOs) understand it as “additional to existing developed country promises to provide 0.7 per cent of their gross national income (GNI) as official development assistance (ODA)”. The developed countries view “new and additional funding” as funding efforts that go beyond the level of ODA. The deliberations that underwent at the meeting point out that several developed countries opposed setting of quantitative targets specific to ODA. Using the annual average biodiversity related flows between 2006-2009 as baseline is aimed at measuring just doubling of biodiversity related flows. Measuring of additionality requires defining a base year against which development assistance and the GEF resource flows could be compared.

Institutional Structure of Funding

What has been a troublesome experience for the developing countries is that the GEF fund is not directly accessible to them. GEF is operated by the following multilateral implementing agencies (MEAs) International Bank for Reconstruction and Development (IBRD), United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP) and Multilateral Regional Development Banks. They hold these MEAs responsible for causing delays in delivery of funding and the implementation of projects. Excepting decisions regarding funding of enabling activities in developing countries in pursuance of Article 6 in the CBD, the decisions regarding projects protecting biodiversity cannot be proposed and implemented without involvement of these entities. The rationale behind assigning devolution of funding decisions to nationally designated entities is that money involved for funding a project is in millions of dollars. The final evaluation and approval of projects involves hundreds of people. It would be immensely inefficient to strengthen the infrastructure for taking decisions at the international level, regardless of the fact whether the decisions are taken by one international entity or an agency of UN or multilateral financial institutions.

The Convention requires that the mechanism shall function under the guidance of, and be accountable to, the Conference of Parties. Developing countries have always demanded that the GEF should be placed under the direct control of the COP as a first step towards reaching the goal of direct accessibility of the fund. The independent evaluation of GEF performance points out that successful implementation of biodiversity projects require that the projects need to be country-driven and the resources to be used for the implementation should be nationally owned.

The example of accessing fund directly from an international agency has already been set with the operationalisation of adaptation fund (AF)—this is a fund in the area of climate change which provides money for the adaptation purposes in developing countries. Designated national entities from developing countries can access fund directly from the AF without involving an MEA.

Conclusions

If the developing countries are to meet the Aichi targets by 2020, merely doubling of fund is not enough. Rather, it should accompany the following to ensure predictable and adequate funding: (a) mandatory formula for mobilization of financial resources; (b) roping in of middle-income countries as contributors to GEF; (c) direct accessibility to GEF fund; (d) codifi-
cation of operational definition of new and additional.

Dr Anwar Sadat is an Assistant Professor (Senior) at the Indian Society of International Law, New Delhi. He can be contacted at sadatshazia@gmail.com

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