Sooksiri Chamsuk is a programme officer at the United Nations Industrial Development Organization’s Regional Office in Bangkok, Thailand, and has worked on a number of GEF-funded projects since 2005. She is studying on the IPR's Professional Doctorate in Policy Research and Practice (DPRP). This blog is based on her paper The Global Environment Facility (GEF)’s climate change mitigation: a reflection through the lens of institutions and institutional change.
The Global Environment Facility (GEF), conceptualised in 1991 and subsequently set up in 1992, is the largest grant-based climate finance mechanism in full operation – and it has a huge influence when it comes to helping recipient countries reduce their greenhouse gas emissions and combat climate change. Thus far, the GEF has approved US$3.6 billion in grant funding for 1,037 projects on climate change mitigation, with an additional $33.4 billion mobilised in co-financing (GEF, 2017). Its climate change mitigation portfolio – the main objective of which is to reduce greenhouse gas (GHG) emissions – has financed projects ranging from clean energy, renewable energy, energy efficiency, and land use, to reforestation. These mitigation strategies aim to help developing countries make the transition to low-carbon and sustainable development. GEF-funded projects have, for example, contributed to significant GHG emissions reduction in Russia and China.
With the closure of the Facility’s current funding cycle, dubbed GEF6, approaching in June 2018 – and the commencement of the new cycle, GEF7, immediately taking place in July 2018 – this blog takes a closer look at how the GEF’s climate change mitigation portfolio has evolved over the past two and a half decades. I then make recommendations for possible future strategy in this area.
Evolution of climate change mitigation strategies
This section examines whether climate change mitigation strategies lead to projects that bring institutional change and encourage countries to break out of all types of “carbon lock-in.” The factors inducing institutional change discussed in Brousseaua, Garrousteb, & Raynaud (2011) and the conditions to encourage breaking out of carbon lock-in, as proposed by Seto et al (2016) (below), are at the centre of this discussion.
Conditions for breaking out of carbon lock-in: GEF climate change mitigation strategies 1991–2006
- The ability to break out of infrastructural or technological lock-in will depend on the anticipated technological and economic viability and lifetimes of the systems already in place, the costs of moving away from those systems, and options for alternatives.
- Escaping institutional carbon lock-in depends on increasing institutional adaptability, inducing institutional change, and encouraging institutional lock-in of an alternative, de-carbonising trajectory.
- Transforming behaviour will require overcoming entrenched individual habits and preferences and cultural practices and social norms.
- The types of carbon lock-in are mutually reinforcing, characterised not merely by individual inertia but also by a collective inertia in which any movement out of lock-in in one of the spheres induces a response in the other spheres that results in further hardening the collective inertia.
Source: Seto et al (2016)
GEF climate change mitigation strategies 1991–2006 (inception phase, GEF1, GEF2, and GEF3)
Over the years the focus of the GEF’s climate change mitigation strategies has evolved from demonstrations of technology to the removal of barriers to technology penetration, and to (technology) market transformation. The first climate change mitigation strategy focused on three pillars:
- renewable energy technologies;
- energy efficiency technologies; and
- measures to reduce the long-term costs of low-carbon technologies.
A fourth pillar was added later: environmentally sound transport systems.
The GEF’s evaluation of the climate change programme in 2004 revealed that “a number of GEF projects have contributed directly to the development of renewable energy policies through the drafting or revision of national renewable energy strategies and action plans, and GEF projects have been successful in the development of energy efficiency and renewable energy standards, testing, certification, and labelling, all of which are vitally important to improve quality, reliability, and consumer acceptance”.
However, in their study of climate change mitigation strategies and projects during the same period, Hennicke, Borbonus & Woerlen (2007) criticise the GEF for providing more support for renewable energy, with its higher investment needs and operating costs, than to energy efficiency, to avoid the same amount of GHG emissions. They argue that mainstreaming energy efficiency into national policies and planning approaches did not stand out as the GEF’s underlying concern.
Although the three climate change mitigation strategies emphasise market transformation, they focus on change in the technology market. According to Seto et al (2016) and Woerdman (2004), to escape from institutional lock-in, the presence of a better alternative is a prerequisite. The three climate change mitigation strategies were objected to lay the foundations for the economic viability of renewable energy, energy efficiency, and environmentally-friendly transport. These strategies also aim to reduce the long-term costs of low-carbon technologies as a separate pillar. This pillar, however, has not yet translated well enough into projects, perhaps because the GEF guidelines failed to elaborate on associated policy measures. For instance, these measures could include a tax on carbon-intensive technologies or the removal of subsidies on fossil fuels.
Nonetheless, in the first 12 years of the GEF’s full operation, the three climate change mitigation strategies have successfully laid the foundations for technology change, and the possibility of superior alternatives.
Climate change mitigation strategies 2007–present
The GEF announced its intention to place more emphasis on economic instruments from 2007 (Hennicke, Borbonus & Woerlen, 2007), with change eventually materialising in the GEF6 strategy that began in 2014. GEF6 was a complete overhaul, with four pillars:
- demonstrations and financing options for low-carbon technologies;
- innovative policy packages and market initiatives;
- integrated low-carbon urban systems; and
- carbon stocks in forests, and smart agriculture.
GEF6 offered a different approach to sharing resources. It clustered all conventional technologies such as energy efficiency and renewable energy in one pillar, and emphasised market aggregation and the removal of economic barriers in a new pillar.
A preliminary study of the GEF’s overall climate change mitigation programme launched in March 2017, and found that 75 percent of projects have delivered satisfactory results in reducing GHG emissions, with 70 percent of projects having outputs incorporated into laws, policies, and regulations. In China, India, Mexico, and Russia, supportive policy frameworks through GEF projects have helped reduce some market barriers.
Preliminary evaluation reports show that GEF6 projects have made superior alternative technologies more widely available, have addressed structural and technological carbon lock-in according to Seto et al (2016), and have induced technological changes and changes in the prices of technologies. GEF projects have resulted in revisions of rules and regulations on power generation from renewable energy, and introduced incentive schemes for the technological penetration of both renewable energy and energy efficiency. GEF projects engage both governments and private companies in investing more heavily in renewable energy and energy efficiency technologies.
The GEF could have pushed harder for market price changes for fossil fuels (via tax schemes, or the removal of fossil fuels subsidies), and for lifestyle changes (which can take a long time to yield results), but these are achievable with the right policy tools and instruments to control and manipulate preferences and behaviour.
Most GEF projects contain elements on raising awareness, mainly through seminars and workshops. These activities might suffice to boost public awareness, but to change public preferences and behaviour to break away from carbon lock-in, specific policy instruments are required.
Looking ahead, the GEF should design its next climate change mitigation strategy to move closer to escaping carbon lock-in – but with limited funds. Projects that focus on the effective use of economic instruments to change behaviour generally require less funding compared with technology-related projects, so the GEF could achieve certain goals despite a decrease in funds.
Recommendations for the GEF7 climate change mitigation strategy
My three key recommendations for the GEF7 strategy are:
- Measures to emphasise changes in prices, including fossil fuel taxes; removal of fossil fuel subsidies; and changes in preference.
- The GEF should implement a project evaluation methodology that measures the adverse effects of its projects. For instance, analysis reveals that an incentive scheme to encourage consumers to use energy-efficient appliances can result in higher collective energy consumption due to consumers carelessly leaving the appliances on all the time, under the assumption that they consume less energy (a “rebound effect”). The GEF has implemented a significant number of energy efficiency projects worldwide, so it may be worthwhile studying whether any of them have resulted in a rebound effect leading to the inability to break out of carbon lock-in.
- Perhaps most importantly, there must be efforts to break down the networks of carbon-intensive fossil fuel use. This is crucial, as these networks comprise policy-makers, interest groups, industries, and consumers that have built up and reinforced each other over centuries. It will be challenging to break them apart, but a pioneer is needed to lead the effort, and the GEF is well placed to take up this role.
One stumbling block is that the draft strategy must be endorsed by the GEF Council. Recommendations are put forward regardless of the power balance in the council, but powerful states might oppose any element in the strategy that would risk putting them at a disadvantage. States with fossil fuel-led economies might object to a strategy containing measures to limit use of fossil fuels.
To formulate strategies for the next cycle the GEF should also consider different schemes and elements, perhaps outside of low-carbon technological realms, while taking into account possible adverse effects.
The GEF’s climate change mitigation strategies have evolved from the expansion of GEF project implementation networks to successfully driving developing countries to break out of technological carbon lock-in. The expanding networks facilitate climate change mitigation policies at country level, and GEF funds provide affordable low-carbon technologies as better alternatives, but, at the same time, too many coalitions can create competition and result in climate change mitigation policies that might serve only a small group of interests. I would suggest, based on the above, that the GEF should consider going beyond technological-based projects to a focus on behaviour and preference changes at the national level. This could be achieved through the formulation and implementation of the GEF7 climate change mitigation strategy, and encouraging change in institutional policy mechanisms.
For the GEF to remain a strong agent for change toward a low-carbon society, it should take into account institutional change when designing the GEF7 strategy (and at the upcoming GEF7 replenishment donor meeting later this month) to effectively help developing countries break out from institutional carbon lock-in, and not just technological carbon lock-in. The climate finance landscape has changed significantly, with new climate financing organisations such as the Climate Investment Fund (founded 2008) and the Green Climate Fund (founded 2011) receiving pledged amounts far exceeding those for the GEF. However, the GEF maintains its unique role in this arena, despite its success remaining debatable.
Brousseaua, E., Garrousteb, P. and Raynaud, E. 2011. Institutional changes: Alternative theories and consequences for institutional design. Journal of Economic Behaviour & Organization, 79, pp. 3–19.
Hennicke, P., Borbonus, S. and Woerlen, C., 2007. The GEF’s interventions in the climate change focal area: the contribution to strategies for climate change mitigation and sustainable development, Energy for Sustainable Development, XI(1), pp.13- 25.
Woerdman, E., 2004. The Institutional Economics of Market-based Climate Policy, Amsterdam: Elsevier.