Climate finance for the Least Developed Countries: A future for the LDCF?

Abstract

The Least Developed Countries Fund (LDCF) is a climate fund that was set up in 2001 at the seventh session of the Conference of the Parties (COP-7) to the United Nations Framework Convention on Climate Change (UNFCCC). The decision to establish such a dedicated fund for the 48 countries characterised as the poorest and weakest members of the international community stemmed from Article 4.9 of the Convention. This provision mandates all parties to “take full account of the specific needs and special situations of the least developed countries in their actions with regard to funding and transfer of technology” (UN, 1992). In Paris, parties agreed that the LDCF shall support the implementation of the new agreement. Fifteen years after the LDCF’s establishment however, the fund—which relies on voluntary contributions from developed countries—is in a very precarious situation: it has been neglected to the point that there are no more resources available for LDCs to access. As the global finance architecture evolves, within and beyond UNFCCC boundaries, whether or not there is a role for the LDCF in the coming years is being questioned. This working paper argues that despite challenges, the LDCF continues to be an important fund for LDCs and its future should be secured. In reviewing the context of the Fund’s establishment, its governance and operation structure and its active portfolio, it finds that the unique aspects of the Fund highlights its relevance and importance in the evolving climate finance landscape. Certain reforms, such as establishing a replenishment cycle, ear-marking, and direct access can address concerns raised about the LDCF and make it a fit-for-purpose, viable fund that plays a key role in the post-Paris climate regime.