Foreign Policy In Focus: Global Environment Facility
12/1/98
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Title: Foreign Policy In Focus: Global Environment Facility
Source: Environmental Defense Fund
Status: Copyrighted, contact source to reprint
Date: 12/1/98
Byline: Korinna Horta
Foreign Policy In Focus: Global Environment Facility
December 1998
Volume 3, Number 39
Written by Korinna Horta, Environmental Defense Fund
Edited by Martha Honey (IPS) and Tom Barry (IRC)
Key points
Northern governments established the GEF to demonstrate environmental
leadership to domestic constituencies and to preempt developing countries
efforts to control the international environmental agenda at the 1992 UN
Conference on Environment and Development (UNCED).
The World Bank was given the central role in the GEF because of its
perceived efficiency in handling large amounts of money.
At UNCED, both the UN Climate Change and the Biodiversity Convention
adopted the GEF as their interim funding mechanism.
One of the major challenges faced by the international community is how to
address environmental problems that, although created locally, have global
consequences. Finding solutions to these problems requires cooperation
between countries that have very different economic power and vastly
different per capita rates of consumption of the earth's natural
resources.
As the world's foremost economic power, the U.S. stands out as the largest
contributor to greenhouse gas emissions, which are responsible for climate
change and considered to be the top global environmental problem. Given
U.S. power and influence, no international agreement on reducing global
environmental threats is likely to succeed without a strong commitment by
Washington.
To address the challenge of international environmental cooperation, the
U.S. and other Northern donor nations established the Global Environment
Facility (GEF) in 1991. Along with its developed-country partners, the
U.S. was adamantly opposed to establishing the GEF as an independent
organization. Instead, they opted to entrust the World Bank, the world's
most influential development agency, with the management of the GEF. A
resolution of the World Bank's Board of Executive Directors approved the
GEF as a $1 billion pilot program. The GEF's mission is to assist
developing countries and countries with economies in transition (former
Soviet Union and Warsaw Pact nations) with implementing projects that lead
to global environmental benefits in four areas: climate change,
biodiversity conservation, protection of international waters, and
protection of the ozone layer.
Once the GEF was formally established, the World Bank invited the United
Nations Development Program (UNDP) and the United Nations Environment
Program (UNEP) to join with the GEF in a tripartite structure. The UNDP is
responsible for technical assistance projects and UNEP provides overall
scientific guidance. The World Bank oversees GEF investment projects and
the administration of the GEF trust fund. The UN agencies are junior
partners in this tripartite structure in deference to the belief of the
U.S. and its Northern allies that the World Bank can manage the large
amount of GEF funding more efficiently than the cooperating UN agencies.
Unlike the voting structure in the UN's General Assembly, where every
country has one vote, voting shares in the World Bank (and initially in
the GEF) are proportional to a nation's financial contribution. As a
result, the U.S. and other wealthy industrial countries have preponderant
influence in the GEF.
The establishment of the GEF prior to the 1992 United Nations Conference
on Environment and Development (UNCED), commonly known as the Rio Earth
Summit, effectively preempted alternative proposals for a "green fund,"
which some Southern governments were expected to present in Rio. Because
they had no role in its creation, many Southern governments now feel
ambivalent about the GEF, although they will accept whatever financial
resources may be made available through the facility. At the Rio summit,
Southern nations were presented with an already established GEF with a $1
billion core fund, which donor governments promised to make available in
addition to their ongoing development assistance programs.
The Rio summit produced a global action plan called Agenda 21. This
ambitious plan to make development environmentally, socially, and
economically sustainable stipulated that Northern nations had to increase
their aid flow to the South. According to the plan, the North would
provide $141 billion annually in grants and low-interest loans in the
1993-2000 period to foster sustainable development. This aid would, among
other things, facilitate the North-South transfer of environmental
technologies. But the promise of Agenda 21, though initially hailed as a
major advance in international environmental cooperation, has fallen
short-mainly because it never received the backing of the United States.
Other donor countries, pointing to the failure of the U.S. to take the
lead and meet its share of Agenda 21 obligations, have also failed to
increase their assistance to the South.
The creation of the GEF prior to the Rio Earth Summit allowed the U.S. and
its G-7 partners to define global environmental problems as they perceived
them and to establish the limits and scope of their responsibilities in
assisting developing countries. Furthermore, the existence of the GEF has
proved a convenient way for the G-7 nations to sidestep the more ambitious
North-South funding plan outlined in Agenda 21.
Problems With Current U.S. Policy
Key Problems
There is a lack of political will to analyze and address the underlying
causes driving the deterioration of the global environment, such as
consumption, foreign debt, international trade, and ill-conceived concepts
of development.
The World Bank has failed in mainstreaming the goals of the GEF into its
much larger overall lending portfolio, which continues to contribute to
the very problems the GEF seeks to address.
U.S. foreign policy with regard to the GEF elicits charges of hypocrisy
due to U.S. failure to take determined action at home to reduce the use of
fossil fuels and to protect its old-growth forests.
Numerous problems beset Washington's policy with respect to the GEF. These
include the U.S. failure: (1) to pay its assessed contribution, (2) to
insist on the implementation of environmental reforms by the World Bank
and the GEF's Implementing Agencies (primarily the World Bank), and (3) to
ratify the UN conventions on Climate Change and Biodiversity Conservation.
With support from its German counterparts, the French government launched
the GEF proposal as a way of responding to growing domestic pressure to do
something about the global environment. With less of a domestic
constituency for international environmental efforts, the U.S. government
was initially reluctant to accept the Franco-German proposal. The Clinton
administration knew that making a financial commitment to a new
international entity would be fraught with difficulties given
congressional reluctance to authorize funding to cover U.S. arrears with
the UN. In addition, the administration was aware that any attempt to
obtain replenishment funds for international financial institutions like
the World Bank would be subject to extensive congressional questioning and
delays.
Several key congressional members with seats on important oversight
committees together with a few administration officials with years of
experience trying to promote environmental reforms in World Bank
operations believed that entrusting the World Bank with the management of
a fund intended to protect the global environment was tantamount to
putting the proverbial fox in charge of the chicken coop. In their view,
the World Bank's massive lending to promote the energy sector and forestry
without adequate environmental safeguards made the institution part of the
problem in both the climate change and biodiversity areas. Consequently,
these congressional members and administration officials felt that the
World Bank should first demonstrate the ability to implement environmental
reforms in its own operations before undertaking new environmental
responsibilities.
But the initial U.S. reluctance to support the GEF was quickly overcome.
With preparations for the 1992 UNCED event fully under way and more than
one hundred heads of state expected at Rio, endorsement of the GEF was a
convenient way of demonstrating environmental leadership. Because the size
of the contributions of donor governments to the GEF is based on the size
of a country's economy-a principle known as "burden-sharing"-the U.S.
became the GEF's largest donor followed by Japan and Germany.
Congressional conditions on U.S. funding have helped bring about some
reforms in the GEF, such as greater public access to information and
broader participation by NGOs in both GEF policy discussions and project
implementation. But the accumulation of arrears of the U.S. contribution
has hampered determined action on the part of the U.S. to obtain more
fundamental reforms. When other donor governments threaten to withhold
their funding unless the U.S. pays its share, U.S. credibility is hurt.
But to achieve further GEF reforms, Washington will need to fulfill its
financial obligations.
The greatest problem thus far has been the failure of the implementing
agencies (and especially the World Bank) to meet their promises of
mainstreaming global environmental goals into their overall programs. The
World Bank's annual lending portfolio of more than $20 billion finances
development projects that contribute to the very problems that the GEF
seeks to address. What is more, the proposals advocated in the Country
Assistance Strategies reports, which are the World Bank's blueprints for
its development financing programs in individual borrowing countries, do
not reflect any systematic consideration of the environmental implications
of these strategies.
An additional problem for U.S. foreign policy-and a major irony-is that
the GEF has been adopted, at least on an interim basis, as the financial
mechanism for both the UN Climate Change and Biodiversity Conservation
conventions. As such, one of its principal tasks is to assist countries in
implementing their obligations under the conventions, neither of which the
U.S. has ratified.
Finally, U.S. foreign policy with regard to the GEF elicits charges of
hypocrisy due to U.S. failure to take determined action at home to reduce
the use of fossil fuels and to protect its old-growth forests. Meanwhile,
the U.S. uses the GEF to call on other countries to prevent climate change
and conserve biodiversity.
Toward a New Foreign Policy
Key Recommendations
The U.S. must demonstrate commitment to addressing global environmental
problems by reducing its contribution to creating these problems.
The overall programs of the GEF implementing agencies, especially the
World Bank, should be made consistent with protecting the global
environment.
A new U.S. foreign policy should work toward ensuring that GEF projects
originate in and represent the priorities of the countries in which they
are to be implemented.
In addition to focusing on reforms at both the macro level of policy
decisions and the micro level of project implementation, a new U.S.
foreign policy toward the GEF and global environmental issues should move
to enhance Washington's credibility as an environmental leader by building
bridges between the GEF and domestic environmental protection efforts.
At the macro level, an important first step for the U.S. would be to
follow up the results of a 1998 evaluation study commissioned by the GEF.
This study found that the GEF failed to mainstream global environmental
goals into the overall activities of its implementing agencies. From its
inception, the GEF promised to function as a Trojan Horse within the
implementing agencies to ensure that their overall operations were
consistent with GEF goals. In the case of the World Bank, this would mean,
for example, a shift away from its substantial lending for fossil fuel
development and toward funding for renewable energy. Concerning
agricultural lending, Washington should use its influence to make the
World Bank recognize the central importance of supporting indigenous land
rights and genuine land reform as issues closely related to biodiversity
protection. To date, the World Bank has tended to fund agribusiness
plantations, which invariably threaten biodiversity.
The blame for this failure to mainstream environmental goals lies with the
governments that are represented in both the GEF and its implementing
agencies. The U.S. and other major donor countries have not given adequate
attention to incentive structures and other regulatory mechanisms that
ensure that environmental awareness is incorporated in development
planning. The U.S. should recognize, however, that many Southern countries
vigorously oppose environmental mainstreaming, because it is regarded as
another Northern-driven aid conditionality. They continue to view the GEF
as a donor-dominated initiative that does little to address the
development needs of their impoverished nations. Although it is the
developing world of the South that is least prepared to endure the
consequences of global environmental deterioration, environmental
mainstreaming is often perceived as both an imposition and a threat to
their development.
U.S. officials should work closely with their counterparts in both donor
and developing countries to build a broad coalition that is powerful
enough to ensure that the GEF implementing agencies will take
environmental mainstreaming seriously. To persuade developing country
governments to support these efforts, the rationale for the GEF and its
program areas must explicitly link socioeconomic development to protection
of the environment.
A strong commitment to promoting environmental mainstreaming would help
reduce uncertainties about timely U.S. financial contributions to the GEF.
More environmentalists, their congressional representatives, and the media
would come to understand that U.S. involvement in the GEF is essential to
global environmental protection and that the GEF should be fully funded.
Given the World Bank's growing role in either cofinancing or providing
risk insurance for privately financed projects, a U.S. commitment to
environmental mainstreaming at the bank could help set international
environmental standards that private sector investments must meet before
becoming eligible for public funding.
At the micro level, GEF projects often suffer from the same problems as
regular development projects financed by the World Bank-they are often
considered to be donor-driven with minimal input from institutions and
groups in the country where they are being implemented. A new U.S. foreign
policy should work toward ensuring that GEF projects originate in and
represent the priorities of the countries in which they are to be
implemented. Furthermore, the GEF's "incremental cost" criterion, which
holds that the GEF can only finance "the incremental costs of measures
needed to achieve global environmental benefits," should be downplayed and
possibly abandoned. The incremental cost principle creates an unhealthy
and methodologically questionable separation of global and local
environmental benefits. Since the GEF pays only for the costs of a
project's "global environmental benefit" and not for any other development
benefits, it undermines a sense of ownership in the project country-a
prerequisite for the long-term sustainability of environmental protection
efforts once outside funding is no longer available.
Another major element of a new foreign policy should be the building of
bridges to domestic environmental protection efforts by demonstrating a
political commitment to reduce the U.S. contribution to global
environmental deterioration. The delicate issue of the U.S. contribution
to greenhouse gas emissions must be confronted head-on. Otherwise, the
U.S. will be unable to convince the world that it is serious about
addressing climate change, even if it meets its financial obligations to
the GEF.
U.S. international environmental policy is not isolated from other aspects
of Washington's role in international affairs. In the case of biodiversity
loss, for example, the underlying forces driving deforestation-the cause
of irreversible losses of many species-are in many cases the result of
U.S. policies that prioritize debt repayment, promote export production,
support undemocratic regimes, and back unsustainable development schemes.
A new foreign environmental policy should recognize that the GEF can do
little to address international environmental deterioration unless the
political will can be mustered to address the underlying structural
factors that contribute to unsustainable development.
Korinna Horta is a senior environmental economist with the Environmental
Defense Fund.
Sources for More Information
Organizations
Bank Information Center
733 15th St. NW, Ste. 1126
Washington, DC 20005
Voice: (202) 737-7752
Fax: (202) 737-1155
Email: bicusa@igc.org
Environmental Defense Fund
1875 Connecticut Ave., NW
Washington, DC 20009
Voice: (202) 387-3500
Fax: (202) 234-6049
Email: Korinna_Horta@edf.org
Website: http://www.edf.org
Contact: Korinna Horta
Friends of the Earth
The Global Bldg.
1025 Vermont Ave., NW, Ste. 300
Washington, DC 20005
Voice: (202) 783-7400
Fax: (202) 783-0444
Email: adurbin@essential.org
Website: http://www.foe.org
Contact: Andrea Durbin
World Rainforest Movement
International Secretariat
Casilla de Correo 1539
Montevideo, Uruguay
Voice: (598) 249-6192
Fax: (598) 241-9222
Email: rcarrere@chasque.apc.org
Contact: Ricardo Carrere
Publications
Raymond L. Bryant and Sinead Bailey, Third World Political Ecology (London
and New York: Routledge, 1997).
David Fairman, "Report of the Independent Evaluation of the Global
Environment Facility Pilot Phase," Environment, vol. 36, no. 6,
July/August
1994.
Global Environment Facility, Instrument for the Establishment of the
Restructured GEF (Washington, DC: 1994).
Global Environment Facility, Independent Evaluation of the GEF Pilot Phase
(Washington, DC: 1994).
Global Environment Facility, Valuing the Global Environment: Actions &
Investments for a 21st Century (Washington, DC: 1998).
Global Environment Facility, Study of the GEF's Overall Performance
(Washington, DC: 1998).
Joyeeta Gupta, "The Global Environment Facility in its North-South
Context," Environmental Politics, vol.4, no.1, Spring 1995.
Robert O. Keohane and Marc A. Levy, Institutions for Environmental Aid
(Cambridge, MA: MIT Press, 1996).
Richard B. Norgaard, Development Betrayed (London and New York: Routledge,
1994).
Wolfgang Sachs, ed., Global Ecology: A New Arena of Political Conflict
(London and New Jersey: Zed Books, 1995).
World Bank, Operations Evaluation Department, Effectiveness of
Environmental Assessments and National Environmental Action Plans: A
Process Study (Washington, DC: 1996).
World Wide Web
UN Bodies, The Banks, and Overseas Development Assistance Agencies
(compiled by the International Institute for Sustainable Development, c
1996)
http://iisd1.iisd.ca/ic/sb/direct/sdun.htm
World Bank
(web page concerning the GEF)
http://www.worldbank.org/html/gef/gef.html