China pledges US$20 million a year to its new South-South Cooperation Fund

The South-South Cooperation Fund will become the cornerstone of China's climate leadership – and not the Green Climate Fund
The Chinese government will not contribute to the Green Climate Fund, preferring instead to establish a South-South Cooperation Fund to continue work with developing nations, chinadialogue has learned.

China's chief negotiator and vice-chair of the National Development and Reform Commission, Xie Zhenhua, told chinadialogue the fund would be set up as an alternative to direct funding in order to provide a longer-lasting and more formal mechanism.

But as the plans for the fund are not finalised, there is still uncertainty over how money will be raised, the assessment criteria, and the timescales involved.  
Xie told chinadialogue on December 10: “We’ll discuss it as soon as we get back and put forward a proposal to submit to the State Council.”

At a special UN climate summit in New York in September, Vice Premier Zhang Gaoli revealed that China is to establish a Climate Change South-South Cooperation Fund, and promised that China would double its current spending on South-South cooperation.

At Lima, China sent positive signals on the South-South Cooperation Fund to more countries, expressing hopes that it would be funded multilaterally. China is starting to show its ambitions to act as a leader on the climate change agenda.

China welcomes other nations to participate 

On December 8, speaking at a high-level forum on South-South cooperation on climate change held by the Chinese delegation, Xie Zhenhua again confirmed China’s intention to set up the fund, and invited ministers from other nations to contribute their own suggestions.
At that meeting Xie indicated that the fund would be based on principles of mutual respect, justice, shared benefit and practicality and efficiency; and that other nations, bilateral and multinational bodies and the private sector are all welcome to participate and promote the investment in the green and low-carbon sectors worldwide.
On the morning of the 9th, Brazil’s foreign minister and head of the Brazilian delegation Raphael Azeredo told chinadialogue that at a ministerial-level meeting of BASIC nations the previous afternoon Xie Zhenhua had repeatedly referred to South-South cooperation, but that the fund had not been mentioned.

“I am a delegate, but I’m not aware of this fund and would like to know more. Before that I can’t say whether Brazil will participate or not,” Azerado said.

Yang Fuqiang, Senior Adviser on Climate, Energy and Environment for the NRDC China Program, said that unlike the Green Climate Fund, the South-South Cooperation Fund is independent of the UN climate convention and is entirely voluntary.

He added that several Gulf states, such as Singapore, and BRIC nations such as Brazil, are potential partners.

Jin Jiaman, executive chair of the Global Environment Institute, told chinadialogue that China may not yet have formally approached Brazil and other nations regarding the fund. A likely timetable would be for formal invitations to be issued to several major developing nations at the 2015 Paris talks.

Yang Fuqiang explained that “I don’t think it’s likely the South-South Cooperation Fund will became a part of the international funds. And when China becomes a developed nation, the fund will become a part of China’s commitment to the developing world.”

Plans not yet fixed
Xie Zhenhua told chinadialogue the fund would be set up as an alternative to direct funding in order to provide a longer-lasting and more formal mechanism. But as the plans for the fund are not finalised there is still uncertainty over how money will be raised, the assessment criteria, and the timescales involved.

At the meeting on December 8, Egyptian environment minister Khaled Fahmy expressed gratitude for China’s funding for South-South cooperation, and pointed out that these funds should be provided to all nations, with no geographical distinctions made.

Xie Zhenhua said that “We think that help and support for developing nations should be in the form of donations. We have no plans to use this fund to go and make money from developing nations. That’s not our aim.”

Wang Yi, director of the Chinese Academy of Sciences’ Institute of Policy and Management, said that in the past China often favoured island nations and the least-developed nations in distribution of these funds, and therefore this was easily regarded as aimed at building political capital.

In the future the fund will, while being guided by government, need to incorporate varied funding, market-based operations, and professional oversight; as well as using loans to increase the size of funds and avoiding regional political issues. 

Wang added that it may be funded both by government and commercially, with government funds used to make donations of funds and materials to developing nations, and commercial funds available through the market and expanded through loans.

“As a responsible power, China wants to provide more global public goods,” said Wang. “Establishing the South-South Cooperation Fund will help developing nations and encourage Chinese firms to expand overseas and as a result bring about structural changes at home.”

China will not contribute to the Green Climate Fund

Climate funding has always been a sticking point in international talks.
Previously the developed nations have promised to provide financial support for their developing counterparts, with a target of transferring $100 billion to help developing nations cut emissions and adapt to climate change by 2020. But this funding has failed to appear.
One focus of the current talks in Lima is how to scale up the US$10 billion pledged to the Green Climate Fund. 
Xie Zhenhua described the Green Climate Fund as a commitment by developed nations to the developing world, and he welcomed contributions already made by developing nations.

“Circumstances are different for each developing nation, and China has its own methods,” he said.

Xie was referring to funds earmarked for South-South cooperation by the Chinese government since 2011. In the last three years annual donations of $10m have been made, administered by the Ministry of Commerce’s South-South cooperation project, to fund climate change projects in developing nations.

"Our support for developing nations was underway before the Green Climate Fund,” said Xie.

He added that China would “absolutely not” compete with developing nations – which he referred to as “our poor brothers” – for funds from the Green Climate Fund.

He revealed that an important aim for the South-South Cooperation Fund is “to increase the ability of developing nations to get money from the Climate Fund.”

According to the latest report from the UNEP, the Adaptation Gap, the costs of adaptation for developing nations will be far above previous estimates of $70-$100 billion, and adaptation costs up to 2050 will actually be two or three times that figure. But judging by the current state of funding, finance for adaptation will be nowhere near adequate to meet the needs of developing nations.