Cape Town, 19 Oct (Meena Raman) – In a night of drama at the meeting of the Transitional Committee to design the Green Climate Fund (GCF) under the UN Framework Convention on Climate Change (UNFCCC) held in Cape Town, South Africa on 18 October, the US withheld consensus to the adoption of the report of the Committee, which was transmitted to the 17th meeting of the Conference of Parties (COP17), to be held in Durban, South Africa in late November this year, for its approval.

At the meeting, Saudi Arabia also did not give its consent to the adoption of the report.

Despite several attempts by the co-chairs of the meeting and pleas by several countries in the final hours to persuade the US to not withhold consensus to the adoption of the report, the US remained firm in its position.

Several senior negotiators and observers, in response to the US withholding of consensus, commented after the meeting along the corridors that the US was not prepared to agree to a deal in Cape Town until the overall deal in Durban was done, as the GCF issue was a key "bargaining chip" in the negotiations in South Africa.

Germany expressed frustration and disappointment, and said that anything short of sending a report of the Transitional Committee (TC) by consensus to COP17 "is a failure and will likely result in not having the GCF this year or the next."

Mr. Trevor Manuel of South Africa, who co-chaired the meeting with Mr. Kjetil Lund of Norway, called the outcome "sub-optimal".

A number of TC members both from developed and developing countries also expressed concerns over the governing instrument of the Green Climate Fund, which was appended as an annex to the report of the TC, but they did not block consensus.

It is learnt that had the US chosen to adopt the report with reservations and not block the consensus, some developing countries would have also put in their reservations.

The final decision was for submission to COP17, for its approval, of the report with the governing instrument in the annex without adoption, as it did not enjoy the consensus of all TC members.

The fourth and final meeting of the TC, held from the afternoon of 16 October to 18 October, saw intense negotiations on the governing instrument of the GCF.

The TC, which comprised 40 members (15 members from developed countries and 25 members from developing countries), was mandated by the Cancun decision last year to design the GCF.

On the evening of the final day of the TC meeting at close to 8 pm, TC members were presented with a draft report by the co-chairs. The draft report included recommendations of the TC to COP17 in the main part of the report and the draft governing instrument for the GCF in an annex to the report. Mr. Manuel, in presenting the draft report for adoption, said that the governing instrument document was a compromise document and invited members to give their general comments.

Many TC members expressed their views, including the US and Saudi Arabia.

At this session, the US expressed its concerns in some areas and wanted further work to be done. Among the issues raised included the relationship between the COP and the GCF.

It referred to paragraph 15(h) of the main report, which contained a recommendation by the TC to COP17 to "consider the process for selection of trustee of the GCF", and questioned the role of the COP in relation to the selection of the trustee.

(This refers to the permanent trustee, as in Cancun, it was agreed that the World Bank would be invited to serve as the interim trustee. Throughout the Cape Town meeting, the US wanted the COP to have a very minimal role in relation to the GCF and wanted the Board of the GCF to have a greater role).

The US also referred to paragraph 22 of the governing instrument and said that this paragraph "undoes" the Cancun agreement and was a problem.

(Paragraph 22 states that: "The selection of the host country of the Fund will be an open and transparent process. The selection of the host country will be endorsed by the COP").

It also referred to paragraph 72 of the instrument and said that this paragraph also went beyond what was agreed to in Cancun as regards the involvement of the COP.

(Paragraph 72 states that: "Termination of the Fund will be approved by the COP based on a recommendation of the Board").

As regards the legal status of the GCF (as contained in paragraphs 7 and 8 of the instrument), the US said that the essential technical issues needed to be addressed.

(Paragraph 7 states that: "In order to operate effectively internationally, the Fund will possess juridical personality and will have such legal capacity as is necessary for the exercise of its functions and the protection of its interests").

On the operational modalities, the US said that the provisions were too heavily weighted on direct access (by recipient countries to the Fund) and restricted the ability of private sector engagement in transformational activities.

(The instrument in paragraph 41 provides that: "The Fund will have a private sector facility that enables it to directly and indirectly finance private sector mitigation and adaptation activities at the national, regional and international levels". Paragraph 42 states that: "The operation of the facility will be consistent with a country-driven approach".)

Another key concern that the US had was with paragraph 29 of the instrument, which states that "The Fund will receive financial inputs from developed country Parties to the Convention."

The US said that this was a restriction of financial inputs from only developed countries. (The US wanted developing countries to also contribute to the Fund).

The US wanted further work to be done to complete the document.

Saudi Arabia said that it could not endorse the text on the governing instrument, as the views of developing countries were not reflected and its reservations expressed during the negotiations were not taken into account. It said that its call for language on the impact of response measures was ignored.

It expressed concern as regards paragraph 14 of the instrument on decision-making (which states that "Decisions of the Board will be taken by consensus of the Board members. The Board will develop procedures for adopting decisions in the event all efforts at reaching consensus have been exhausted").

Saudi Arabia said that the language was inconsistent with the UNFCCC's procedures on decisions by consensus.

It was also concerned about paragraphs 29 and 30 of the instrument on financial inputs which did not reflect that contributions from public sources from developed countries is supposed to be the primary source of financing, while contributions from the private sector was supplementary.

It was also concerned about references to "alternative sources" of funding and preferred the use of the term "innovative sources" instead.

When co-chair Mr. Manuel wanted to move the report for adoption, the US said that it took objection to the document moving forward, as it wanted more work done, and Saudi Arabia said the document did not enjoy consensus.

Brazil said that at least two members of the TC had shown reluctance to give consensus and suggested to the co-chairs that the only way to move forward was to send the document to the COP and say that there was no consensus.

Finally, following various attempts in finding a way forward, the TC members agreed to an amendment to paragraph 14 of the report which reads as follows: "The draft report was discussed at the fourth meeting of the TC in Cape Town, South Africa, and the text contained in Chapter III below was considered on 18 October 2011. It is submitted by the TC to COP 17 for its approval...".

This was agreed to by members. (The earlier version of this paragraph had the word "adopted" in place of "considered".)

The report also made the following recommendations in Chapter III to the COP, that it: (a) takes note of the report of the TC as mandated by decision 1/CP16; (b) approve the governing instrument of the GCF contained in the annex of this report; (c) requests the Executive Secretary (of the UNFCCC) to invite regional groups and constituencies to nominate their Board members; (d) request the Executive Secretary of the UNFCCC to invite Parties to submit expressions of interest to host the GCF; (e) invite voluntary contributions for the start-up of the GCF; (f) request the UNFCCC Executive Secretary to set up an interim secretariat immediately after COP17 to provide technical, administrative and logistical support to the Board, in particular in the preparation of materials for and organization of Board meetings until an independent secretariat of the GCF is fully operational. The interim secretariat should be composed of staff with the relevant expertise and be fully accountable to the Board and function under its guidance; (g) set the date for the first meeting of the Board; and (h) consider the process for selection of trustee of the GCF.

Meena Raman