Financing Mechanisms and Issues
This is the government’s preerred choice, with the possible exception o MoNRE. However, donors have concerns about the possible diversiono climate change unds to other activities. This could be addressedby institutionalising a process or mainstreaming climate change intoministry-level and local development plans. A urther concern is thatbudget support mechanisms are limited in their ability to attract privatesector fnancing, which is seen to be crucial to meet the fnancing targetsin particular or mitigation.ODA support is expected or the NTP-RCC where 50 per cent o undsare expected to come rom ‘oreign capital’. The Japanese and Frenchgovernments have committed $134 million in ODA loans under a SupportProgram to Respond to Climate Change (SP-RCC). The interest on theJapanese loans, which orm the majority o unds, will be 0.25 per centover a 40-year repayment period with a 10-year grace period. The undswork in a similar way to the Poverty Reduction Support Credit whereprogress is measured through a policy matrix. The World Bank andthe Canadian International Development Agency (CIDA) are now alsoplanning additional unds or this mechanism.
Although compiled and updated into a matrix o climate change projectsby the World Bank, this modality suggests a high level o ragmentation.In addition, the level o investment, especially or adaptation projects, isrelatively low. However, project support will be essential, especially in theshort term, to encourage innovation in dierent sectors. This mode o support is also likely to be one o the ew available to civil society groups.Project support is bound to decline, however, once multi-donor undssuch as the Adaptation Fund are up and running.
Multilateral channels and multi-donor trust unds
The Trust Fund for Forests (TFF)
The national-level Trust Fund or Forests (TFF) has been consideredas a potential channel or reducing emissions rom deorestation anddegradation. It was established in 2004 with pooled unding romFinland, the Netherlands, Sweden, and Switzerland. It addresses sector priorities within agreed policy rameworks, such as the National ForestDevelopment Strategy. TFF unding appears to be on the decline as onlyFinland and Switzerland have committed to support it ater 2012.
The Global Environmental Facility (GEF)
The Global Environmental Facility (GEF) is a hosting fnancingmechanism or the dierent UN conventions, including the UNFCCC.GEF provides grants or projects tackling climate change, biologicaldiversity, international waters and ozone layer depletion. The UnitedNations Development Programme (UNDP), United Nations EnvironmentProgramme (UNEP) and World Bank are traditionally the threeimplementing agencies that channel most o the GEF resources tonational partners in a wide range o projects. Increasingly, regionaldevelopment banks and other UN organisations also channel GEFfnance, as ‘executing agencies’. In Viet Nam, most GEF unding is or large technical assistance projects ocusing on mitigation, e.g. efcientenergy.
Useul lessons andlimitations o the Trust Fundor Forests (TFF)
capacity building in the sector.
donors eel equal in the decision-makingprocess.
harmonised and thereore efcient.
management because o the governmentmanagement board’s low capacity.
exposing the work to fnancial risks.
large entities (e.g. the Asian DevelopmentBank or World Bank) where the bulko unding is absorbed by internationalconsultants or by agencies lacking incapacity, leading to project ailure.
und is weak.
Limitations o the GlobalEnvironmental Facility (GEF)
stakeholders in project design.
counterpart unding, which is an oten-criticised GEF requirement.
because o the need to apply throughintermediate agencies.