Letter 12: Provocative Policies, Tantalising Terms, and Racy
Relationships
To: Nani G. Oruga, The Bees Trees
From: Chris N. Eppers, Solar Musketeers
Re: Explanation of incremental costs, financial modalities, monitoring and evaluation,
public involvement information disclosure, voluntary fund, 'country driven',
'enabling activities', 'capacity building; relations with private sector, Implementing
Agencies, conventions
Dear Nani,
With this letter, I think you will have gotten pretty much all that is in the
GEF coffers of my brain. The title of this letter is perhaps more tempting than
the contents, but I thought it would at least get you interested. This is a
kind of miscellaneous letter covering a variety of policies, terms, and relationships
that don't quite fit in other places. I thought you would find it useful to
have some sort of explanation of them. It will come out kind as a cross between
a dictionary, encyclopaedia, and NGO position paper. I'll talk about policies
related to incremental costs, public involvement, information disclosure, management
of the voluntary fund and monitoring and evaluation; terms such as 'country-driven',
'integration of priorities', 'enabling activities' and 'capacity building';
and relationships such as with the private sector, and with the executing agencies.
Policies
Incremental costs
The-GEF has developed a policy on incremental costs, which has been approved
by the Council, see Incremental Cost and Financing Modalities, (GEF/ C.2/6/Rev.2).
(The policy on financing modalities needed further work and wilt be discussed
at the April 1996 Council meeting.) The policy on incremental costs discusses
what they are, how they would be used in relation to project selection and the
elements that would be taken into account in calculating them. Just in case
you forgot, incremental costs are what GEF funds cover. Therefore projects must
have positive incremental costs if they are to receive GEF support. It is possible
for a project to have negative incremental costs, as I'll show below.
Simply put, incremental costs are the difference in costs between doing a project
that does not give global environmental benefits and one that does. The GEF
will pay these costs if they are positive. One example from the climate change
area would be funding a wind power project instead of a conventional power plant
that meets national environmental standards. Wind power does not produce CO2
emissions, but may cost more than fossil fuel based power. The GEP could provide
funding to cover the difference in cost. It is much more difficult to give an
example for international waters and biodiversity activities.
In order to make the incremental cost calculation, it is necessary to determine
the cost of the national activity or objective (sometimes it may be a goal such
as electricity provision, rather than something as specific as building a particular
kind of power plant). The cost of meeting the national objective, which provides
a national benefit, is called the baseline. Then the cost of the activity which
provides an additional global benefit, such as reduced CO2 emissions, must be
calculated.
One of the trickiest aspects of incremental costs, as you might have guessed,
is determining the baseline. Calculating the cost of a globally environmentally
beneficial alternative, while not easy, is more straightforward. The incremental
cost paper outlines some of the parameters for calculating the baselines, and
I expect they will develop a technical manual with more details. Some activities
such as greenhouse gas inventories may have a baseline of zero because the country
would not carry out such an activity if it was not required to do so by the
Climate Convention. Therefore the GEF would pay the full agreed cost. Some baselines
may already be available. For example, in a country's national development plan
there may already be provisions for activities which could be built upon in
order to increase biodiversity protection. '1'he GEF could then use these activities
and costs for the baseline. For activities which do not already have a readily
apparent baseline, the GEP and the recipient country would have to "consult
broadly and draw upon existing studies". The characteristics of a plausible
baseline would be that it:
addresses national development goals;
is technically feasible;
is the economically attractive course of action, while remaining broadly
consistent with political and social constraints;
is consistent with applicable environmental standards and social policies;
and
is financially realistic.
In complex cases, according to the paper, the GEF would use a baseline based
on a country's overall development plan. This is because the effort required
to produce a project-specific baseline would not be worth it in the end. Such
a baseline would assure a consistent set of assumptions about the activity,
and would ensure independence from the calculation of the cost of the proposed
GEF activity. However, obtaining a baseline may involve more work than just
lifting it from a published plan. This is because such a plan may not be detailed
enough, or it might already include proposed activities for which incremental
costs would be incurred. Just because they have been proposed, though, does
not mean they will actually be implemented without GEF funding.
A concern of both NGOs and some Council members has been that some countries
might have more environmentally progressive baseline activities than others,
both planned and already implemented. The worry is that these countries would
in effect be 'penalised' for doing the right thing; they would not receive as
much funding from the GEF as the incremental costs of their projects would be
lower. By the same token, countries which used environmentally unsustainable
projects would in effect benefit from pursuing those policies. This problem
was acknowledged during the May 1995 Council meeting. It seemed that the GEF
would work to ensure that its guidelines would not penalise those more progressive
countries.
In choosing an alternative activity, considerations such as whether it delivers
domestic benefits equivalent to those planned, and whether it delivers global
benefits beyond those in the baseline, must be taken into account. It must be
country-driven and meet the first four characteristics of the baseline activity
as listed above. Finally, because the costs and benefits of the baseline and
alternative activities might be distributed differently, the alternative activity
would have to address these effects in its design.
The incremental cost paper stresses that incremental costs are "principally
a reference point" for discussions on GEP grant financing and that the
calculation provides a framework to structure the technical negotiations for
reaching an agreement for each project. The expectation is that a dearly defined
framework would help avoid arbitrariness and provide transparency to make pragmatic
decisions on a case by case basis. The actual incremental cost is not expected
to be the deciding factor in project selection, with other considerations being
programme priorities as outlined in the operational strategy, national goals,
likelihood of success, and the environmental and social acceptability of the
project.
Financing modalities
These are the ways that the GEF can disburse its funds for projects. Currently
it can only provide grant funding, but it is developing ideas for giving other
types of funding such as concessional or contingent loans. These types of funding
would help to get projects with negative incremental costs, but which need financing,
off the ground. Concessional financing is a repayable loan with below market
interest rates, while contingent financing is a normally repayable loan, but
under specified contingencies, all or part may be forgiven. The former could
be used for energy efficiency projects, while the latter would be useful when
there are certain types of risks. A policy on financial modalities was first
discussed by the Council when they took up the Incremental Costs and Financing
Modalities paper (GEF/C.2/6/Rev.2) at the May 1995 meeting, but it concluded
that the proposals needed further development and requested a paper for the
April 1996 meeting. NGOs, particularly ones focusing on climate change, would
like to see these other financial modalities included in the GEF menu.
Information disclosure
The GEF is now in the process of developing a policy on information disclosure.
It will be covered, together with aspects of wider participation, in a policy
on public involvement (see below) which will be prepared for the April 1996
Council meeting. The Instrument gives some guidance, but it is considered inadequate
by NGOs. It states GEF policies shall "provide for full disclosure of all
non-confidential information". The question is what will be confidential
and what won't be. In the absence of its own policy, each implementing agency
is following its own policies. You can find these in Implementing Agencies Policies
on Information Disclosure and Consultations, (GEF/C.3/Inf.7). UNDP and UNEP
information disclosure policies provide for a high degree of transparency. The
World Bank policy is considerably less so, however, in practice the World Bank,
at least in its GEP unit, is quite open and well organised regarding access
to project information. NGOs will probably want this to be formalised, particularly
with regard to World Bank loans associated with GEF projects.
The area that needs most improvement is access to information at the country
and project implementation level. In order for there to be effective participation
in projects, the GEF will have to work, through the Implementing and Executing
agencies, to develop a culture of openness among agency staff and government
officials. It will be particularly important that project information is translated
into local languages and in a comprehensible style so that there can effective
local and grassroots participation. NGOs can and should test access to information.
Monitoring and evaluation
Much criticism was levelled at the GEF Pilot Phase for its lack of a coordinated
monitoring and evaluation mechanism. As I'm sure is obvious to you, effective
monitoring and evaluation helps to avoid problems, both by catching them before
it is too late and by allowing lessons to be learned for the future. Evaluation
of environmental aspects helps to determine whether the GEF is having an impact
and why or why not. Ultimately, monitoring and evaluation help to save GEF resources
and make existing ones more effective.
Each Implementing Agency does have its own monitoring and evaluation procedures.
These are supposed to apply to their GEF projects. Unfortunately, within the
Implementing Agencies, this has not been as thorough as it should. Furthermore,
because of the nature of GEF objectives and the need to measure its global impact,
new monitoring and evaluation approaches need to be developed and used consistently
across all the Implementing Agencies.
The Instrument requires that the GEF Secretariat develop guidelines with the
Implementing Agencies to monitor project implementation and evaluate project
results. The Council, at its May 1995 meeting, discussed the General Requirements
for a Coordinated GEF-Wide Monitoring and Evaluation System paper (GEF/C.4/6).
This presented a set of concepts and goals for a GEF monitoring and evaluation
system, scope, evaluative approaches, organisation, procedure, and resources
involved. The Council found the paper useful but some members seemed taken aback
by the estimated cost of such a system.
The paper outlined four main themes that should be evaluated. These are: the
global environmental impact of GEF activities; the extent of learning and dissemination
of information that takes place regarding issues related to the GEF focal areas;
indications of attitudinal change, such as through policy shifts regarding GEF
objectives; and capacity building. It highlighted the urgent need to collect
baseline data, without which it would be impossible to get an accurate reflection
of the GEF's impact, particularly with regard to the environmental aspects.
Once GEF operations are well under way, this data will be lost. To obtain this
information, however, a monitoring and evaluation system has to be established.
The paper pointed out that monitoring and evaluation needs to cover all levels
of GEF activities from projects to policies. Plans need to be integrated into
projects from the very beginning, and planning should begin now for another
overall assessment of the GEE An effective monitoring and evaluation system,
through increasing evaluative capacities, particularly at the project level,
can also have a positive impact beyond the information gathered for official
use.
The Senior Monitoring and Evaluation Officer will report directly to the Council
on evaluation studies and other tasks requested by it. Monitoring activities
will be reported through the Chief Executive Officer.
NGOs feel it is very important for the GEF to have a unified monitoring and
evaluation system highlighting the need to cover all levels of the GEP, from
projects to policy-making, and the need for a participatory approach. They generally
support the ideas presented in the paper on monitoring and evaluation and want
to see a system implemented quickly. NGOs painted out the failure to address
the role of STAP and the GEP Operations Committee. This will probably be rectified
in the more detailed plans for the monitoring and evaluation system. The conclusion
of the Council's discussion was that a monitoring and evaluation officer be
hired and that a systematic framework for monitoring and evaluation be developed
with a proposed work programme and budget, and a proposal for further work on
methodology be given.
Public involvement
A policy on public involvement in GEF-financed projects will he presented
at the April 1996 Council meeting. This policy document will outline the basic
principles in three types of public involvement: information dissemination,
consultation, and stakeholder participation. This policy paper combines the
provisions on information disclosure and participation contained in the GEF's
Instrument as well as the policies and procedures of the GEF's Implementing
Agencies. During the GEF's Pilot Phase it was heavily criticised for lack of
participation in its projects, as well as tack of documentation on participation.
At the same time, the criticisms were targeted at the absences of operational
guidelines on how public involvement will be carried out through the project
cycle.
The information documents on public involvement which were provided to Council
members and others during the October meeting contained the basic principles
for developing more specific operational guidelines. These principles are:
That the responsibility for public involvement resides within country,
but the GEF Implementing Agencies should ensure that appropriate public involvement
activities are included in all GEP-financed projects;
That public involvement activities should be of high quality and impact,
broad-based and sustainable; and
That public involvement procedures should be flexible and responsive to
national and local conditions.
The operational guidelines will cover the financing of public involvement
activities, technical assistance and advice, development of good practices,
and participatory monitoring and evaluation.
Voluntary Fund
The primary role of this fund is to cover the costs associated with holding
the NGO-GEF Consultations and bringing recipient country NGO representatives
to the meetings. Provided there is sufficient funding it may also cover other
activities. NGOs are quite insistent on this point. The Secretariat suggested
it could also be used for regional consultation on implementation of the Operational
Strategy, co-sponsored technical meetings related to GEF focal areas, travel
costs of least developed country participants in selected GEF-related meetings,
and contributions to publications such as the Earth Negotiations Bulletin. The
GEF for the time being is managing the fund and contributes US$ 50,000 per year.
This is enough to cover 12 NGO travel grants and the cost of one Consultation
per year. ( An additional four travel grants are funded through the GEF administrative
budget.) Contributions from other sources must be sought from governments, foundations,
the private sector, and NGOs themselves. The ideas for the voluntary fund were
first set out in document GEF/C.S/ 11, Guidelines for Management of the GEF
Voluntary Fund.
Terms
Country-driven
This term has its roots in the GEF Instrument and is tossed about quite freely.
I think the basic idea is that projects must be supported by actors within the
country and should not be imposed. While not a particularly controversial term,
some Council members have wanted a better definition. Some questions regarding
it are: Does country-driven mean government support only? Should it mean government
support only? Does it mean that project must originate in the country? In the
end the answer to all of the questions is probably no, not necessarily. Successful
projects need the support of all those in involved and particularly those most
affected by it. While projects which originate within a country are more likely
to reflect local and national priorities, it is possible that ideas for good
projects come from outside the country. Provided these are developed in a participatory
manner, such projects can be quite successful.
Integration of priorities
This is a phrase that crops up frequently in both official and NGO literature
on the GEF. It refers to the need for GEF projects to address a variety of levels
and types of concerns. For example, in a biodiversity project, there may be
people living in the area whose primary concern is producing enough food and
gathering enough fuel wood. A successful project will have to address these
concerns as well as maintain and protect biodiversity. The more closely these
concerns can be intertwined, the higher the likelihood of long term benefits
to the global environment. An example from the climate change area is the need
to reduce air pollution in cities. A government would be more willing to implement
a project that addresses a national priority such as local air pollution at
the same time as the global priority to reduce C02 emissions. Integration of
priorities does not mean that the GEF will necessarily pay for these 'national'
or 'local' benefits, but it should at least ensure that these aspects are integrated
in its projects and seek funding from other sources if they cannot be covered
through the GEF.
Capacity building
This term, as you probably know, is part of the development jargon, and refers
to increasing the ability of countries and communities to carry out activities.
Capacity building activities might include training, providing funding for books
and periodicals, creating or supporting particular institutes, etc. You could
almost say that it is the software for making sure that hardware (concrete activities)
are able to happen. Capacity building creates the potential for a country to
initiate its own activities in a particular field, or, once given the infrastructure,
to continue and expand upon them. The Pilot Phase was criticised for not including
enough capacity building activities in its projects. At the May 1995 GEF meeting,
the Chief Administrator assured the Council that capacity building would be
a key element of GEF programmes.
Enabling activities
The Operational Strategy now has a decent definition of enabling activities,
which I quote here:
"Enabling activities - which include inventories, compilation of information
policy analysis, and strategies and action plans - represent a basic building
block of GEF assistance to countries. They either are a means of fulfilling
essential communication requirements to a convention, provide a basic and essential
level of information to enable policy and strategic decisions to be made, or
assist planning that identifies priority activities within a country. Countries
thus enabled will have the ability to formulate and direct sectoral and economy
wide programmes to address global environmental problems through a cost effective
approach within the context of national sustainable development efforts. Enabling
activities will normally qualify for full cost funding when they are directly
related to agreed global environmental benefits and consistent with the convention's
guidance." (GEF/C.6/3, Paragraph 1.26)
From this description you can see there are high expectations for the results
of enabling activities. We'll have to stay tuned to see whether they really
come about. Guidelines and criteria for these activities still have to be developed.
Relationships
Private sector
At the July 1995 Council meeting, the issue of private sector participation
in the GEF reared its head, particularly with regard to business participation
in Council meetings. While NGOs recognise that achieving substantial advancement
in the GEF focal areas will require private sector involvement, they don't think
that business organisations should be part of the NGO delegation. NGOs have
been assured that business organisations will not be part of the NGO delegation.
One Council member made the point that should business organisations eventually
have access to GEF meetings, then there would also need to be geographical representation.
The role of the private sector in GEF projects is explored in the information
paper, Engaging the Private Sector (GEF/C.6/Inf.4), given at the October 1995
Council meeting. It presents experiences to date on private sector involvement,
and thoughts on how the GEF might encourage private sector investments that
would benefit the global environment. The paper discusses how the incremental
cost policy would apply, financing modalities tailored to the private sector,
the need for a streamlined project approval process, and other GEF-specific
considerations. The latter include consistency with recipient country policies,
transparency and consultation, and distorted incentives. The document may be
revised and approved at the April 1996 Council meeting.
The private sector is already involved in GEF projects, particularly climate
change ones. I would say that there is a mixed feeling on the part of NGOs regarding
private sector involvement in GEF projects. While the private sector can play
an important role, it is equally important to monitor business involvement.
A particular concern might be that companies which are most able to carry out
activities with global environmental benefits without GEF assistance, might
also be better equipped to obtain GEF financing than smaller organisations.
Implementing Agencies and Accountability
The IAs are accountable to the GEF Council for their GEF-financed activities,
as well as for the activities of other agencies that actually carry out or execute
each of the IAs' projects. For example UNDP/GEF projects might be carried out
through another UN agency, or a government ministry.
At the February 1995 Council meeting, in the document Accountability of Implementing
Agencies for Activities of Executing agencies (GEF/C.3/9), both UNDP and UNEP
asserted that they were accountable for the GEF work of their executing agencies.
The World Bank, however, could not give such a clear-cut response: it would
likely be dealing with other multilateral development banks as executing agencies.
According to the World Bank, these would have trouble accepting a World Bank
performance audit, which would be necessary for it to ensure Accountability
in its full legal meaning. It seems though that this has been cleared up. At
the July 1995 meeting the Bank prepared a paper, World Bank Accountability for
Executing Agency Activities (GEF/C.5/13), which stated that the Bank would be
accountable to the GEF Council for GEF project preparation and execution of
activities and would satisfy itself that its executing agencies can "carry
out activities in a manner consistent with the objectives, policies, and procedures
of the GEF".
Conventions
The Convention on Biological Diversity and the Framework Convention on Climate
Change have both adopted the GEF as their interim financial mechanism, and provide
guidelines on policy, strategy, programme priorities, and eligibility. Both
conventions require the GEF to ensure that it follows their guidance; the Climate
Convention explicitly states that its financial mechanism must be accountable
to its Conference of Parties. Because of the relationship between the GEF and
these two Conventions, the GEF Instrument requires that the Council develop
"cooperative arrangements or agreements" with the COPs of the Conventions.
In addition to addressing the provisions in each Convention regarding the financial
mechanism, they must also include procedures for determining aggregate funding
amounts for each one.
There has been a fair amount of debate on the legal aspects of the relationship
between the Conventions and the GEE The way it is shaping up now, there would
be a Memorandum of Understanding (MoU) between each Convention and the GEF.
This is an agreement which is characterised by a firm, but not legally binding
agreement between two or more organisations. The drafts of these MoUs are set
out in the document, Arrangements with the Conventions on Biological Diversity
and the Framework Convention on Climate Change (GEF/C.5/8). The draft MoUs cover
arrangements such as: determination and communication of guidance from the COPs;
conformity with the guidance; reports from the GEF to the COPs on its activities
as the financial mechanism for each Convention; cooperation between the secretariats;
representation; and review and evaluation. Each also says that aggregate funding
requirements will be jointly determined, however none gives any hint of the
procedures. The MoU with the Climate Convention at least says that the procedure
will be developed by both the Council-and the GOP Both of the MoUs will have
to be reviewed by the relevant bodies in each convention before they are finalised.
I think that covers the GEF essentials. Many thanks for your suggestion for
compiling these letters and adding annexes of addresses and documents. We're
already looking for funding to cover printing costs. Would you be interested
in translating it into Spanish?
