Operational Strategy

of the Global Environment Facility

FOREWORD

The Global Environment Facility Council, established under the Instrument for the Establishment of the

Restructured GEF, first met in July 1994. Since that time, the Council has worked diligently to approve

policies and procedures to enable the GEF to fulfill its unique mission as a financial mechanism for

activities aimed at protecting the global environment. One of the Council's major actions was the adoption

of the GEF Operational Strategy.

When the GEF was restructured after its pilot phase and established as a permanent mechanism, it was

essential to develop a road map to guide its actions and to ensure that its resources would be utilized

cost effectively to maximize global environmental benefits. This operational strategy is such a road map.

It is intended to provide a framework for programmatic cohesiveness and integration among the many

entities that participate in the GEF, including the three Implementing Agencies (UNDP, UNEP and the

World Bank), the Scientific and Technical Advisory Panel (STAP), the GEF Secretariat, and the

international conventions for which the GEF provides operational support and funds for implementation.

The GEF was created to fulfill a unique niche - that of providing financing for programs and projects to

achieve global environment benefits in four focal areas: biodiversity, climate change, international waters,

and ozone layer depletion -- and in land degradation as it relates to these focal areas.

At the United Nations Conference on Environment and Development (UNCED) in Rio, two important

conventions dealing with biodiversity conservation and climate change were signed, signaling a new era

of environmental treaty making and partnership. These two conventions and the Montreal Protocol on

Substances that Deplete the Ozone Layer recognize that while developing countries are not responsible

for the majority of damage to the global environment, they could become major contributors in the near

future. To secure the participation of developing countries in the implementation of these conventions,

financial resources are to be made available by developed countries.

To this end, the GEF has emerged as both a facilitator and a funding mechanism for integrating global

environment concerns into the development process and for realizing the goals of these global

environmental conventions. Both the Biodiversity Convention and the Climate Change Convention have

designated the GEF to serve as the financial mechanism of the convention on an interim basis. The

relationship between the GEF and these two conventions is another example of the innovativeness of

both the Facility and international treaty making for purposes of the global environment insofar as the

relationship is designed to ensure a bridge between the goals and aspirations of treaty negotiations and

the implementation of the commitments and objectives of such treaties.

In accordance with the provisions of the conventions and the GEF Instrument, the use of GEF resources

for purposes of the conventions is to be in conformity with the policies, program priorities and eligibility

criteria decided by the Conference of the Parties of each of those conventions. The Conference of the

Parties (COP) to the Convention on Biological Diversity at its first meeting (Nassau, Bahamas, November

28-December 9, 1994), approved the policy, strategy, program priorities and eligibility criteria for access

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to, and utilization of, financial resources under the Convention's financial mechanism. Similarly the

Conference of the Parties to the UN Framework Convention on Climate Change at its first meeting

(Berlin, Germany, March 28-April 7, 1995) adopted initial guidance on policies, program priorities and

eligibility criteria to be followed by the operating entity or entities of the financial mechanism. The

guidance of both conventions has been fully reflected in the GEF operational strategy.

Although the GEF is not a financial mechanism for the Montreal Protocol, the operational strategy

provides that the GEF operational policies concerning ozone layer depletion will be consistent with those

of the Montreal Protocol and its amendments. For the international waters focal area, there are numerous

relevant international treaties and conventions. These have also been fully taken into account in this

strategy.

The operational strategy was prepared on the basis of consultations and preparatory work of the GEF

Secretariat and the GEF Implementing Agencies. STAP also contributed to the preparation of the

strategy. The secretariats of the international conventions were consulted so as to ensure that the

strategy fully integrates the guidance approved by their COPs. The GEF Secretariat also sponsored five

regional consultations in Africa, Asia, Europe, Latin American and North America involving thinkers and

practitioners in the environment and development fields which contributed to the development of the

operational strategy. Finally, the operational strategy was reviewed and revised by the GEF Council

during two of its meetings. The Council approved the strategy at its meeting in October 1995.

What's next? Consistent with the strategy, operational programs will be developed to provide strategic

frameworks for the development of country-driven projects and coordination of GEF activities. The

operational programs will be implemented through projects in recipient countries. Flexibility will be an

integral element of implementing this strategy so that the GEF may respond to changing circumstances,

and may learn from and be responsive to evolving scientific and technical knowledge, insights of

countries, and guidance of the conventions. The conventions in particular are expected to provide ongoing

guidance concerning policies and program priorities. Monitoring and evaluation of GEF activities

will make a particularly important contribution. The GEF's unique mission in the global environment

requires it to develop programs and projects whose design, although scientifically based, may be more

innovative and experimental than that of regular development projects, making it particularly important

that activities be continuously tracked and results disseminated.

As the GEF moves forward in implementing this strategy, every effort will be made to strengthen its

capacity as a mechanism promoting international cooperation for the purpose of achieving global

environmental benefits within a framework of national sustainable development.

MOHAMED T. EL-ASHRY

CEO and Chairman

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POLICY FRAMEWORK

This operational strategy has been developed to guide the Global Environmental Facility (GEF) in the

preparation of country-driven initiatives in the GEF's four focal areas: biodiversity, climate change,

international waters, and ozone layer depletion.1 The issues of land degradation, primarily desertification

and deforestation, as they relate to each focal area, are also addressed. This strategy will guide the GEF

Secretariat and the three Implementing Agencies (the United Nations Development Programme, the

United Nations Environment Programme, and the World Bank) in developing work programs, business

plans, and budgets. It shall also guide the GEF Council in approving these activities.

This strategy incorporates guidance from the relevant Conventions for which the GEF serves as the

interim financial mechanism: the Convention on Biological Diversity (CBD) and the Framework

Convention on Climate Change (FCCC).2 It also establishes operational guidance for international waters

and ozone activities, the second being consistent with the Montreal Protocol on Substances that Deplete

the Ozone Layer and its amendments. Preparation of the strategy drew on a broad consultative process.

The first chapter defines the mission of the GEF, along with the operational principles on which all

activities will be based. It presents the strategic considerations of the GEF in fulfilling its mission and

provides the framework that will sequence its actions. The chapter also indicates how the GEF will

maintain the flexibility needed to respond to new developments and incorporate continuing guidance from

the relevant Conventions and the GEF Council. Chapters two through five present the operational

strategy specific to each of GEF's four focal areas: biological diversity, climate change, international

waters and ozone layer depletion. A discussion of the activities concerning land degradation, primarily

desertification and deforestation, as they relate to the focal areas, is integrated into the chapters.

MISSION

The Global Environment Facility (GEF) is a mechanism for international cooperation for the purpose of

providing new, and additional, grant and concessional funding to meet the agreed incremental costs of

measures to achieve agreed global environmental benefits in the areas of biological diversity, climate

change, international waters, and ozone layer depletion. Land degradation issues, primarily

desertification and deforestation, as they relate to the four focal areas will also be addressed. In carrying

out its mission, the GEF will adhere to key operational principles based on the two Conventions, the GEF

Instrument, and Council decisions. These principles are summarized in box 1.1.

BOX 1.1

Ten Operational Principles for Development and Implementation of the GEF's Work

Program

1. For purposes of the financial mechanisms for the implementation of the Convention on

Biological Diversity and the United Nations Framework Convention on Climate Change, the GEF

will function under the guidance of, and be accountable to, the Conference of the Parties

(COPs).3 For purposes of financing activities in the focal area of ozone layer depletion, GEF

operational policies will be consistent with those of the Montreal Protocol on Substances that

Deplete the Ozone Layer and its amendments.

2. The GEF will provide new, and additional, grant and concessional funding to meet the agreed

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incremental costs of measures to achieve agreed global environmental benefits.

3. The GEF will ensure the cost-effectiveness of its activities to maximize global environmental

benefits.

4. The GEF will fund projects that are country-driven and based on national priorities designed to

support sustainable development, as identified within the context of national programs.

5. The GEF will maintain sufficient flexibility to respond to changing circumstances, including

evolving guidance of the Conference of the Parties and experience gained from monitoring and

evaluation activities.

6. GEF projects will provide for full disclosure of all nonconfidential information.

7. GEF projects will provide for consultation with, and participation as appropriate of, the

beneficiaries and affected groups of people.

8. GEF projects will conform to the eligibility requirements set forth in paragraph 9 of the GEF

Instrument.

9. In seeking to maximize global environmental benefits, the GEF will emphasize its catalytic role

and leverage additional financing from other sources.

10. The GEF will ensure that its programs and projects are monitored and evaluated on a regular

basis.

STRATEGIC CONSIDERATIONS

GEF activities will aim at maximizing agreed global environmental benefits in the areas of biological

diversity, climate change, international waters, and ozone layer depletion. Land degradation issues,

primarily desertification and deforestation, as they relate to the four focal areas will also be addressed by

GEF activities, particularly in those countries in Africa experiencing serious drought and/or desertification,

consistent with the GEF Instrument.4 The GEF will not finance activities in the areas of biodiversity and

climate change that do not fully conform to the guidance from the relevant Conference of the Parties.

GEF activities will be designed so as to:

· Be consistent with national and, where appropriate, regional initiatives.

· Strive to ensure sustainability of global environmental benefits.

· Reduce the risk caused by uncertainty.5

· Complement traditional development funding.

· Facilitate effective responses by other entities to address global environmental issues.

· Be environmentally, socially, and financially sustainable.

· Avoid transfer of negative environmental impacts between focal areas.

These strategic considerations are discussed below.

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Be Consistent with National and, Where Appropriate, Regional Priorities

GEF activities will be consistent with, and supportive of, the recipient countries' own actions for

sustainable development. GEF programs and projects will be country-driven (see Document GEF/C.4/7,

GEF Project Cycle), and will be linked with national sustainable development efforts. Public consultation

and effective involvement of local communities and other stakeholders will enhance the quality, impact,

relevance, and national ownership of GEF activities.

Regional programs and projects will be undertaken in all countries which endorse them, and GEF

financing will only be provided to those eligible to receive GEF funding. The GEF will encourage and

strengthen partnerships to address programs at the regional level. Global and interregional projects may

be funded for eligible recipient countries or "for other activities promoting the purposes of the Facility."6

Global programs and projects will be designed to facilitate national-level efforts to achieve global

environmental benefits.

Ensure the Sustainability of Global Environmental Benefits

GEF activities will be designed to support:

1. National policies providing adequate incentives for development paths that are sound, from a

global environmental perspective, and contribute to the effective implementation of GEF

operations.

2. Institutional arrangements that are supportive of global environmental protection.

3. Capacity building, human resource development, and skills that are necessary to achieve

global environmental objectives.

4. Communications and outreach that promote better public understanding of the global

environment, mobilize people and communities to protect the global environment, and build

support for GEF's objectives, strategy, and programs.

5. Public participation and consultation with major groups (see paragraph 5 of the Instrument for

the Establishment of the Restructured Global Environment Facility; see also Agenda 21,

Section III, "Strengthening the Role of Major Groups"), local communities, and other

stakeholders at appropriate stages of project development and implementation.

Reduce the Risk Caused by Uncertainty

Although there is significant and continuously evolving knowledge relating to global environmental issues,

scientific uncertainty is inevitably part of the context in which the operational strategy is set. As

enunciated in Principle 15 of the Rio Declaration on Environment and Development, "lack of full scientific

certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental

degradation."

Developing a diverse portfolio and seeking scientific and technological advice will be pursued to reduce

the risks arising from scientific uncertainty. Other means to be pursued include working to increase and

improve environmental information to support decision-making and action, and paying particular attention

to monitoring and evaluation on a programmatic level, including dissemination of information on the

results of these efforts, so as to improve subsequent activities.

A diverse portfolio will:

1. Involve a range of approaches which address the need for ongoing innovation,

experimentation, demonstration, and replicability.

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2. Finance programs and projects that address the underlying causes of global environmental

deterioration, such as economic policy, legal and social issues, institutional weaknesses, and

information barriers.

3. Finance actions that provide lessons beyond their immediate impact or provide long-term

sustainable global benefits, such as reduction in costs of technologies or demonstration of

alternative, environmentally sound, and viable approaches.

4. Finance actions that are cost-effective and catalyze complementary actions or have a

multiplier effect.

5. Involve a range of project executors from the public, non-government, and private sectors.

6. Finance programs that advance the scientific and technical capacities in recipient countries to

reduce global environmental threats.

In developing and managing the portfolio of activities, the GEF will seek the best available scientific and

technological advice. Actions for which the causes, effects, and ameliorative activities are well

established will be expedited. The scientific community, in particular the GEF's Scientific and Technical

Advisory Panel (STAP), will be consulted routinely. Guidance from the Conference of the Parties to the

Convention is expected to include advice and recommendations of the subsidiary scientific bodies of the

Conventions.7

Increased awareness of global environmental issues and improved environmental information assist in

effective decisionmaking and actions and are necessary first steps in identifying global benefits. Funding

the collection and synthesis of usable information, and ensuring its dissemination among decisionmakers,

scientists, and the general public are important parts of the GEF's operational strategy. The GEF will

provide assistance for:

1. Enabling activities, including: inventories, compilation, and analysis of information; and

appropriate capacity building, policy analysis, and strategies and action plans to help

integrate global environmental objectives and national planning and decisionmaking. Such

information also will help countries in preparing communications to the relevant Conventions

and in developing useful intercountry or interregional information bases.

2. Capacity building for, among others, enabling activities, institutional strengthening, and

targeted research, including analysis and application of relevant information.

3. Information dissemination and networking among, and within, countries to help inform

decisionmaking on policies, institutional arrangements, investment choices, resource

management, and the application of environmentally sound technologies. Systematic

sharing and documentation of activities and experiences to protect the global environment is

important in addressing the link between the global environment and national sustainable

development programs.

4. Building public awareness in order to ensure public participation and consultation with

stakeholders at appropriate stages of the project cycle.8

Monitoring and evaluation play an especially important role in the GEF for a number of reasons. First, the

GEF's new and unique mission in the global environment requires it to develop strategies and projects

whose designs, although scientifically based, may be more innovative or experimental than those of

regular development projects. Second, the GEF is pioneering new institutional relationships among the

Bretton Woods and United Nations agencies in partnership with the participant countries, international

conventions, NGOs, and other organizations. Third, the emphasis in the early part of the GEF project

cycle on "casting the net widely" and the dynamic process of developing operational programs place a

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premium on continuous learning and improvement. As a consequence, the GEF will emphasize the

quality of monitoring and evaluation systems and ensure that their findings are disseminated widely. In

preparing operational programs consistent with the operational strategy, a project framework approach

will be adopted that will allow the GEF to monitor and track progress in fulfilling its mission.

Complement Traditional Development Funding

The GEF provides new and additional grant and concessional funding to meet the agreed incremental

costs of measures to achieve agreed global environmental benefits (see paragraph 2 of the Instrument

for the Establishment of the Restructured Global Environment Facility and Document GEF/C.2/6/Rev.2,

“Incremental Costs and Financing Modalities”). This principle, articulated in the Conventions on biological

diversity and on climate change, and in the GEF Instrument, has two important ramifications with regard

to financing:

1. GEF funding should be used only for incremental costs. Actions by individual countries to

achieve sustainable development at the national level can be complemented and

supplemented by other efforts aimed at securing global environmental benefits. Efforts to

secure global environmental benefits may impose additional costs (i.e., incremental costs)

on countries beyond the costs of achieving national development goals. In estimating

incremental costs, the GEF will follow the approach approved by the Council.9 In approving

the approach to estimating incremental costs, the Council recognized the need for its

flexible application, including the notion of "environmental reasonableness" as a guiding

principle so as not to penalize progressive environmental action in recipient countries.

2. The GEF should ascertain that its resources are applied as new and additional funding, not

substitutes for regular sources of development finance. The principle that GEF funds will be

additional to the funds required for national sustainable development helps to ensure that

scarce resources are not diverted from development financing and to maximize global

impact of GEF resources. The GEF will not provide budgetary financing for the staff or

activities of international organizations or other international bodies, to fulfill their own

mandates, even those concerned with the global environment.

Facilitate Effective Responses by Other Entities to Address Global Environmental Issues

The GEF will promote and encourage actions to benefit the global environment beyond those it directly

funds:

1. Through integration of GEF work programs with the regular programs of the three

Implementing Agencies, GEF resources will complement the funds and assistance they

provide to recipient countries. The Implementing Agencies will, in turn, finance and/or help

mobilize financing to meet the non-incremental costs of GEF projects.

2. Through outreach to not only governments, but also to non-governmental organizations

and the private sector, the GEF will encourage broad actions to protect the global

environment.

3. The GEF will selectively promote projects that would normally be considered part of an

"environmentally reasonable baseline". In such cases, the GEF may facilitate information

dissemination, advice and other sources of financing.10 For projects that provide either

lessons beyond their immediate impact or long-term sustainable global benefits, the GEF

will help the countries to reduce initial financial risks, remove barriers and meet transaction

costs, or build markets to an extent that lowers future costs for further application of

measures of the same type.

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4. The GEF will actively encourage bilateral, regional, and other multilateral organizations and

foundations to contribute to or cofinance activities to address global environmental

objectives.

5. The GEF will leverage additional financing through collaboration with the private sector.11

6. The GEF will support innovative financing approaches to ensure that recurrent costs of

funded activities are met without continued GEF support.12

7. The GEF will examine the role it might play in facilitating and promoting international

cooperation, thereby leveraging GEF financing to address global environmental objectives

in a multicountry and multiactor context.

Be Environmentally, Socially, and Financially Sustainable

The focus of GEF activities will concern long-term measures. Such measures, if they are to be part of a

long-term solution, will have to be environmentally and socially sustainable, and not merely benign forms

of current, but unsustainable, activities. Furthermore, the measures will need to be financially sustainable.

Individual projects are financially sustainable if their design includes a means of ensuring a stable longterm

source of funding for recurrent costs. Programs are financially sustainable if the initial GEF support

reduces financial risk, overcomes transaction barriers, or builds markets to an extent that lowers future

costs for measures of the same type.

Avoid Transfer of Negative Environmental Impacts Between Focal Areas

In preparing GEF projects, the Implementing Agencies will consider potential environmental effects in

other focal areas. All efforts will be made to design projects that are consistent with the operational

strategies of the other focal areas and avoid negative impacts in focal areas outside of the focus of the

project.

PROGRAMMING OF GEF OPERATIONS

In view of the GEF's limited resources and the finite capacities of recipient countries and Implementing

Agencies to program activities at any given time, the GEF must structure and sequence activities to best

achieve global environmental objectives. The sequencing of GEF tasks will be a dynamic process,

shaped in part by the evolving nature of guidance from the relevant Conventions and the increased

capacity for program development.

GEF operations will be programmed in three broad, interrelated categories:

· Operational programs

· Enabling activities

· Short-term response measures.

Operational Programs

An operational program is a conceptual and planning framework for the design, implementation, and

coordination of a set of projects to achieve a global environmental objective in a particular focal area. It

organizes the development of country-driven projects and ensures systematic coordination between the

Implementing Agencies and other actors.

In the focal areas of biological diversity and climate change, operational programs will be developed

in accordance with the program priorities approved by the Conference of the Parties to the Conventions.

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International waters programs will be developed in accordance with the evolving program priorities

determined by the Council. There will be no operational programs for the focal area concerning ozone

layer depletion. Activities in this focal area will be focused on short-term response measures and enabling

activities consistent with the Montreal Protocol on Substances that Deplete the Ozone Layer and its

amendments. Country-driven project concepts and advice of the Scientific and Technical Advisory Panel

(STAP) will also contribute to the identification and development of operational programs.

Each operational program will be described in a short reference document prepared by the GEF that

takes into account the advice of STAP and builds on appropriate environmental, economic, and technical

assessments and strategies. The operational program document will:

(a) Clarify the program objectives (for example, specify a market, technology, type of measure, or sitespecific

ecosystem)

(b) Relate the operational program to relevant Convention guidance where appropriate

(c) Relate the operational program to relevant past and ongoing work of other organizations

(d) Set out the likely scope of the activities in terms of geographical distribution, time frame, and financial

requirements

(e) Set out the means by which the Implementing Agencies will coordinate their efforts within the GEF

and with their regular programs.

(f) Describe the expected roles of investment, capacity building, enabling activities, technical assistance,

and targeted research

(g) How the sustainability and replicability of the measures supported will be ensured

(h) Include assessment of cost effectiveness and incremental costs to maximize global environmental

benefits

(i) Describe how the program will be monitored and evaluated

The objectives of operational programs will be met through the development and implementation of

projects in recipient countries. Operational programs will be matched with country-driven project

opportunities and priorities. Many country-driven project opportunities in support of the objectives of an

operational program are likely to be included in national strategies and action plans. As project ideas and

concepts are initially explored, one consideration will be whether the project idea contributes to the

objectives of an operational program.

Country-driven project concepts may emerge for which an immediate matching with a GEF operational

program does not exist. These concepts will be explored further to determine whether they provide a

basis for a new operational program. Flexibility will be an integral element of this strategy so that the GEF

may learn from and be responsive to the strategic insights of recipient countries. The Council, the

Conventions, and STAP will provide important guidance in the ongoing process of developing operational

programs. Promising project concepts outside the framework of an operational program may be

considered for support under short-term response measures. Consideration of individual project concepts

outside the framework of an operational program will be guided principally by the urgency of action and

cost-effectiveness in relation to the GEF's mission.

On the basis of guidance from the Conventions, extensive consultations, and technical and scientific

review, 10 initial operational programs are proposed, see box 1.2. Chapters two through five provide

further elaboration.

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BOX 1.2

INITIAL OPERATIONAL PROGRAMS

1. Biodiversity: Arid and semi-arid ecosystems

2. Biodiversity: Coastal, marine, and freshwater ecosystems (including

wetlands)

3. Biodiversity: Forest ecosystems

4. Biodiversity: Mountain ecosystems

5. Climate change: Removing barriers to energy conservation and energy

efficiency

6. Climate change: Promoting the adoption of renewable energy by removing

barriers and reducing implementation costs

7. Climate change: Reducing the long-term costs of low greenhouse gas-emitting

energy technologies

8. International waters: Waterbody-based program

9. International waters: Integrated land and water Multiple Focal Area

10. International waters: Contaminant-based program

Note: In the focal area of ozone layer depletion, all activities are discussed in the sections on

enabling activities and short-term response measures.

Enabling Activities

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 economywide programs 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.13

Enabling activities will include preparation of a plan, strategy, or program to fulfill commitments under

a relevant Convention and preparation of a national communication to a relevant Convention, where

appropriate.14

Operational guidelines and criteria will be developed for these enabling activities in order to clarify the

basis of possible GEF support, its complementarity to past and ongoing support, and its focus on the task

of preparing a particular strategy, plan, program, or communication. The guidelines will also set out the

scope, sequence, depth, frequency, and cost norms for the envisaged components of such support.

Short-Term Response Measures

Although the large majority of GEF activities will contribute directly to operational programs or enabling

activities, some projects that are unrelated to either of these two categories will be of sufficiently high

priority that they may be considered for financing. Such projects would not be expected to yield significant

strategic or programmatic benefits as in the case of operational programs, but they would yield short-term

benefits at a low cost. For example, climate change projects aimed solely at reducing the net emissions

of greenhouse gases or urgent measures to conserve an extremely endangered species may be

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considered under this category. Criteria for selection of short-term response measures in each focal area

are included in chapters two through five.

CONCLUSION

The Council will review a three-year business plan and an administrative budget on an annual basis. The

business plan will provide information on existing operational programs, programs under development,

and proposals for new programs. Proposals for new programs may emerge as a result of guidance from

the relevant Conventions and the Council, new project concepts, or the advice of STAP. In exercising its

oversight and policy functions, the Council will be fully informed of the activities of the Secretariat and the

Implementing Agencies in developing and implementing the operational programs, enabling activities,

and short-term response measures

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NOTES

1 The Instrument for the Establishment of the Restructured Global Environment Facility states that the GEF will

provide “grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global

environmental benefits in the following focal areas:

 biological diversity;

 climate change;

 international waters; and

 ozone layer depletion.

2 Paragraph 6 of the Instrument for the Establishment of the Restructured Global Environment Facility provides that "the

GEF shall be available to continue to serve for the purposes of the financial mechanism of [the Convention on Biological

Diversity and the United Nations Framework Convention on Climate Change] if it is requested to do so by their

Conferences of the Parties." The first meeting of the Conference of the Parties to the Convention on Biological Diversity

requested that the GEF "continue to serve as the institutional structure to operate the financial mechanism under the

Convention on an interim basis." The first meeting of the Conference of the Parties to the United Nations Framework

Convention on Climate Change requested that the GEF "continue, on an interim basis, to be the international entity

entrusted with the operation of the financial mechanism."

3 "Conferences of the Parties" refers to the Conference of the Parties established in Article 7 of the Convention on

Biological Diversity and the Conference of the Parties established in Article 23 of the U.N. Framework Convention on

Climate Change.

4 Document GEF/C.3/8, endorsed by the Council at its third meeting, outlines GEF activities that are consistent with the

objective of the UN Convention to Combat Desertification, and it provides useful thinking on integrating land degradation

into GEF focal area activities.

5 Risk occurs at four levels in the GEF portfolio:

 First, there is the normal commercial and technical risk associated with any development project. Such

risks are addressed through appropriate project design, insurance, and guarantee schemes in the

normal course of project development.

 Second, the recipient may experience an additional project risk as a result of opting for a measure that

also protects the global environment. For example, there may be increased technical risk when a new

renewable energy technology is used as a substitute for a familiar fossil-fuel technology. Such an

additional risk is specifically attributable to the GEF involvement and should be addressed by

appropriate project design (additional capacity building to manage new systems, recurrent

disbursements made on monitored incremental costs, or reimbursement for the increased costs of

insurance).

 Third, in some projects the expected global environmental benefits may not materialize or may not be

incremental. For example, the GEF may pay the incremental costs of protecting a wetland from

development activities in the expectation that this will provide cost-effective protection for the wetland's

biodiversity, only to discover many years later that the project agreement had been breached and the

wetland drained for an alternative economic use.

 Finally, the GEF runs a portfolio risk in that the measures it has adopted may not prove to be the

best or most effective in meeting its overall objectives. For example, if all of the GEF's resources for

climate change were devoted to one or two very specific technologies that were expected to reduce

greenhouse gases very effectively in the long term, and these technologies failed to become

financially self-sustaining as expected, the entire portfolio in climate change would have failed. This

type of risk is best handled by having a diverse portfolio. There is a trade-off between the diversity

of programs (which reduces portfolio risk) and the strategic concentration of resources within each

program (where synergy and scale can increase the chances of market take-off for alternatives and

their integration with sustainable development).

6 Paragraph 9(b) of the Instrument for the Establishment of the Restructured Global Environment Facility states: "All

other GEF grants shall be made available to eligible recipient countries and, where appropriate, for other activities

promoting the purposes of the Facility in accordance with this paragraph and any additional eligibility criteria determined by

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the Council". The Small Grants Programme is an example of a global program that is an "activity promoting the purposes

of the Facility."

7 The role of the Scientific and Technical Advisory Panel is defined in the STAP terms of reference approved by the

Council, Document GEF/C.6/Inf.7, "STAP Terms of Reference".

8 In light of Council guidance on this matter, the Secretariat will prepare for consideration by the Council at its meeting in

April 1996 a proposal for a GEF policy on public involvement.

9 This approach is described in Document GEF/C.2/6/Rev.2 as amended by the Council at its meeting in May 1995.

10 Paragraph 9(c) of the Instrument provides that "GEF concessional financing in a form other than grants that is made

available within the framework of the financial mechanism of the conventions referred to in paragraph 6 shall be in

conformity with eligibility criteria decided by the Conference of the Parties of each convention, as provided under the

arrangements or agreements referred to in paragraph 27. GEF concessional financing in a form other than grants may also

be made available outside those frameworks on terms to be determined by the Council."

11 See paragraph 28 of the Instrument. An information paper on how the GEF may best promote private sector activities

was presented to the Council for comment in October 1995.

12 A policy paper on financial policy, including financing modalities, will be considered by the Council in April 1996.

13 The term ‘enabling activities’ has been defined in the context of the guidance to the GEF from the Conference of the

Parties to the Framework Convention on Climate Change. The concept can usefully be extended to the biodiversity and

ozone layer depletion focal areas.

14 The scope of work in biodiversity and climate change will be in accordance with the guidance of the respective

Conference of the Parties and will continue to evolve as such guidance is developed by the Parties

2

BIOLOGICAL DIVERSITY

Biodiversity is a source of significant economic, aesthetic, health, and cultural benefits, which

form the foundation for sustainable development. Although estimates vary, 1 there is general

scientific consensus that the world is becoming less biologically diverse in terms of genes,

species, and ecosystems. However, the role of biological diversity in the sustainable functioning

of the biosphere is not well understood. There is little understanding of the social, economic, or

ecosystemic consequences of a less biologically diverse world, and scientific knowledge is

limited. Scientists estimate that less than 15 percent of all species have been described.

Rapid loss of biodiversity poses a global threat to human well-being. The scale of human

impacts on biological diversity is increasing exponentially, primarily because of worldwide

patterns of consumption, production, and trade; agricultural, industrial, and settlements

development; and population growth.

Biodiversity is not equally distributed throughout the world. 2Rates of biodiversity loss vary

across ecosystems, and ecosystems vary in their level of species richness. For example,

tropical ecosystems are estimated to house between 50 and 90 percent of total species.3

Neither the economic nor the ecosystemic value of biodiversity resources is well understood. In

particular, there is insufficient knowledge of the interdependence of species within ecosystems

and the impact of the extinction of one species on others. Reducing the rate of biodiversity loss

and conserving existing biodiversity as a basis of sustainable development remain major global

challenges.

Adoption of the Convention on Biological Diversity (CBD) as an instrument to address

biodiversity conservation and sustainable use recognizes the intrinsic value of biological

diversity and its importance for the evolution and sustenance of life support systems of the

biosphere. The CBD expresses the Parties' concern that biological diversity is being significantly

reduced by certain human activities and notes that it is vital "to anticipate, prevent and attack

the causes of significant reduction or loss of biological diversity at source."4 The CBD also

states that "where there is a threat of significant reduction or loss of biological diversity, lack of

full scientific certainty should not be used as a reason for postponing measures to avoid or

minimize such a threat."5

The GEF operates as a mechanism for international cooperation for the purpose of

providing new and additional grant and concessional funding to meet the agreed incremental

costs of measures to achieve agreed global environmental benefits in biological diversity.

Global environmental benefits obtained under the CBD include reduced risks of global

biodiversity loss, the enhanced protection of ecosystems and the species they contain, and

increased sustainability in the use of biodiversity components.

The GEF's objectives in biological diversity derive from the objectives of the CBD: "the

conservation of biological diversity, the sustainable use of its components and the fair and

equitable sharing of the benefits arising out of the utilization of genetic resources, including by

2

appropriate access to genetic resources and by appropriate transfer of relevant technologies,

taking into account all rights over those resources and to technologies, and by appropriate

funding."6 All GEF funded activities concerning biodiversity will be in full conformity with the

guidance provided by the Conference of the Parties to the Convention on Biological Diversity.

CONVENTION GUIDANCE

The GEF operational strategy in biological diversity incorporates the policy guidance of the COP

to the CBD. All GEF-funded activities in biodiversity will be in full conformity with the guidance

provided by the COP to the CBD.

Convention context The COP designated the GEF to serve as the institutional structure to

operate the financial mechanism of the CBD on an interim basis.7 At its first meeting, the COP

provided the GEF with guidance on policy, strategy, program priorities, and eligibility criteria,

included in the appendix to this chapter.8 9This operational strategy is fully consistent with the

Convention guidance.

Non-convention context Only developing-country parties are eligible to receive funding through

the financial mechanism of the Convention. When the GEF provides assistance outside the

financial mechanism, it will ensure that such assistance is fully consistent with the guidance

provided by the COP to the CBD.

STRATEGIC CONSIDERATIONS

The main strategic considerations guiding GEF-financed activities to secure global biodiversity

benefits are: (a) integration of the conservation and sustainable use of biodiversity within

national and, as appropriate, subregional and regional sustainable development plans and

policies; (b) helping to protect and sustainably manage ecosystems through targeted and costeffective

interventions; (c) integration of efforts to achieve global benefits in other focal areas,

where feasible, and in the cross-sectoral area of land degradation, primarily desertification and

deforestation; (d) development of a portfolio that encompasses representative ecosystems of

global biodiversity significance; and (e) that GEF activities will be targeted and designed to help

recipient countries achieve agreed biodiversity objectives in strategic and cost-effective ways.

Sustainable achievement of global biodiversity benefits will greatly depend on the extent to

which GEF activities are country-driven; respond to programs of national priority and that fulfill

the obligations of the Convention; and are related to appropriate national policy frameworks and

plans of sectoral, economic, and social development.

Where feasible and cost-effective, activities will be designed to contribute to global

environmental benefits in other focal areas and in the cross-sectoral area of land degradation.

For example, actions to sequester carbon and minimize land degradation may offer

opportunities for biodiversity conservation, and international waters activities may offer

opportunities for integrating aquatic biodiversity components.10

Land Degradation

Dryland ecosystems contain a significant endowment of plant and animal species and display

high habitat diversity. These are under severe periodic droughts which affect them and their

resources. Dryland species exhibit notably restrictive geographical ranges and high endemism

and have a wide range of morphological, physical, and chemical adaptations to their harsh

environment. Drylands also are the center of origin of many important food crops (for example,

wild wheat, lentil, barley, olive, and pistachio); are a source of important commercial and

industrial products (for example, gums, resins, waxes, oils, and biocides); and provide critical

habitat for wildlife and ecosystem diversity. Forests harbor biodiversity; and deforestation

through agricultural expansion, urban expansion, unsustainable direct extraction, and fuelwood

collection, for example, causes land degradation and biodiversity loss. The GEF will fund

activities addressing land degradation issues as they relate to biodiversity issues that:

 Protect biodiversity and promote sustainable use in arid, semi-arid and mediterranean-type

ecosystems.

 Prevent deforestation and promote sustainable use and sustainable management of forests

or forested areas in order to conserve their biodiversity.

Portfolio Considerations

A portfolio that provides for a high level of representativeness of global ecosystems will be

developed. 11It is difficult to define a precise sampling technique that would provide for a globally

representative biodiversity portfolio because there is uncertainty about the level of species

richness and its value within ecosystems; and relationships between ecosystems are uncertain.

Therefore, a portfolio will be developed from a broadly representative base of globally important

ecosystems including their habitats, while recognizing the potential importance of particular

species and endemism-rich ecosystems.12

Within representative ecosystems, particular attention will be given to the degree of threat (for

example, for coastal and marine resources), level of vulnerability (for example, for arid and

semi-arid areas, mountain regions, and freshwater systems), and priority status at national and

regional levels. 131415

The GEF's biodiversity operations will be programmed in three categories: (a) operational

programs for long-term protection and sustainable use of biodiversity, where the bulk of GEF

funding will be concentrated; (b) enabling activities, prepared and scheduled in accordance with

operational criteria; and (c) short-term response measures that offer cost-effective opportunities

to conserve and sustainably manage biodiversity. All GEF-financed biodiversity activities will

promote the use of local and regional expertise.

OPERATIONAL PROGRAMS

The GEF will develop operational programs based on ecosystems (including species and

genes). There are compelling scientific reasons for addressing biodiversity management within

the framework of ecosystems. Ecosystem management allows the integration of scientific

knowledge of ecological relationships with that of sociopolitical conditions and values to achieve

biodiversity protection and sustainable management. The ecosystem approach also permits the

management of biodiversity by taking into account the interrelationships among its components,

including species and gene pools. Protection and sustainable management of ecosystems

require a long-term commitment and a range of coordinated policy program and project

interventions at a national level, a regional level, or both, as well as successful integration into

the wider economic, social, and cultural contexts.

4

Operational programs for long-term biodiversity protection and sustainable use will be

initially developed for arid and semi-arid ecosystems; coastal, marine, and freshwater

ecosystems; forest ecosystems; and mountain ecosystems.

These ecosystems were selected in full conformity with the COP guidance, and based on

criteria of species diversity, endemism, and degree of threat. They take into account the

considerations of:

 Making systematic progress in securing global biodiversity objectives on the basis of a set

of representative and complementary ecosystems of global biodiversity significance.

 Providing a practical organizing framework for the design and implementation of cohesive

systems of national actions involving coordination of international, intersectoral, and

interagency activities to achieve agreed global biodiversity benefits.

 Providing a basis for the further development of synergistic activities that will yield strategic

and programmatic impacts.

 Providing a workable basis for programmatic monitoring and evaluation of the effectiveness

of GEF's biodiversity activities.

Additional operational programs could be developed for other ecosystems in conformity with the

guidance of the COP to the CBD.

Arid and Semi-Arid Ecosystems

Activities in this operational program will focus on the conservation and sustainable use of

endemic biodiversity in the dryland ecosystems including grasslands, primarily in Africa, and in

mediterranean-type ecosystems, where biodiversity is threatened by increased pressure from

more intensified land use, drought, and desertification, often leading to land degradation. GEFfinanced

activities will emphasize the prevention and control of land degradation through

development of sustainable use methods for biodiversity conservation, including the

management of freshwater systems, in countries experiencing serious land degradation.

Activities will demonstrate integrated approaches to the conservation of representative natural

habitats and ecosystems through effective systems of conservation areas, including protected

areas, introduction of sustainable land use systems, and strategic interventions to rehabilitate

degraded areas. Special attention will be given to the demonstration and application of

techniques, tools, and methods to conserve traditional crops and animal species in their original

habitats.

Coastal, Marine, and Freshwater Ecosystems

Activities in this operational program will concentrate on the conservation and sustainable use

of biodiversity in the coastal, wetland, mangrove, estuarine, marine, and freshwater

ecosystems. Projects will involve integrated approaches to coastal area development and lakes

and rivers management, and will strengthen the network of conservation areas, including

protected areas, to conserve coastal, marine, and freshwater biodiversity. The needs of tropical

island ecosystems will receive particular attention. Several activities in this program will be

implemented in conjunction with the international waters focal area and will involve international

cooperation at the regional level.16

Forest Ecosystems

Activities in this operational program will involve the establishment and strengthening of

systems of conservation areas, including protected areas, and demonstration and development

of sustainable use methods in forestry as part of integrated land management in agricultural and

forest landscapes, focusing primarily on tropical and temperate forest ecosystems areas at risk.

Particular attention will be given to demonstration and application of techniques to conserve wild

relatives of domesticated plants and animals for the sustainable use of biodiversity,

conservation of areas of importance for migratory species, strengthening of conservation area

networks, and development of sustainable use methods in forestry.

Regional projects involving international cooperation will also be supported. Sizable funds from

sources other than the GEF (e.g., multilateral, bilateral, and NGOs) are currently devoted to

protection and management of forest ecosystems. GEF funds will complement ongoing efforts,

as appropriate, and help to scale up and replicate successful initiatives focusing on global

objectives, promote best practices, and help design and implement cohesive programmatic

approaches.

Mountain Ecosystems

Activities in this operational program will initially address the conservation and sustainable use

of biodiversity areas under increasing human pressure and imminent threat of degradation,

including the Mesoamerican, Andean, East African, and Himalayan regions and the

mountainous regions of the Indochina peninsula, and tropical islands. Through these activities,

the GEF will seek to establish sustainable land use practices on mountain slopes in order to

protect representative habitats and strengthen the network of representative conservation areas

in the alpine, mountain grassland, montane forest zones, and freshwater systems. Activities that

link mountain ecosystems with lowland ecosystems through corridors and those that

demonstrate and apply best practices for integrated landscape management will be included.

Regional activities involving cooperative management of chains of mountains, river basins, and

watersheds will also receive support.

Considerations in Developing Operational Programs

Within the framework of each operational program, country-driven, site-specific activities will be

developed. These will be based both on information from country-level or regionally based

activities currently underway or planned, and on key strategic and policy issues involved in

protecting and sustainably managing the ecosystem at the particular site. Each operational

program will identify key actions to be undertaken on the basis of country-based information and

dialogue. Each operational program will define how the Implementing Agencies will coordinate

their efforts both in managing GEF activities and in seeking sufficient funds and opportunities to

support the objectives of the operational program through their regular programs. Each

operational program will provide a framework for establishing an appropriate balance among

institutional strengthening (including technical assistance), investment, and targeted research.

Specific activities will differ depending on the ecosystems concerned and site-specific

conditions.

Each operational program will encompass, in an integrated manner, two types of measures

that are central to biodiversity: (a) long-term protection and (b) sustainable use. Other

considerations that will guide the development of activities in each operational program, as

appropriate, are: (c) underlying causes and policies, (d) stakeholder involvement, and (e)

targeted research.

6

Biodiversity conservation activities Initial emphasis of operational programs will be placed on

in situ activities within and adjacent to conservation areas, including designated areas of

biological importance. Representativeness and complementarity of ecosystems will be sought.

These efforts will take into account national priority areas identified pursuant to Article 7 of the

Convention, as well as scientific assessments completed under other international conventions

or international programs on the subject.17 However, countries may seek assistance to

demarcate, identify, and conserve other potentially important biodiversity reserves, including

significant cultural heritage elements.

Conservation activities will be comprised of direct management interventions, planning of

resource use as well as promotion of sustainable development alternatives to ensure that

livelihoods can be secured in and around the protected areas. Activities will seek to incorporate

protected areas into larger landscapes or seascapes. In addition, attention will be given to

integrated conservation and development projects to avoid creating "magnets" for immigration in

buffer zones and exacerbating threats to biodiversity in the protected areas.

Activities within the framework of operational programs to secure long-term biodiversity

protection will include:

1. Demarcating, gazetting, strengthening, and expanding of protected areas

2. Establishing long-term funding mechanisms for long-term biodiversity protection,

including trust funds, to ensure provision for recurrent costs

3. Developing integrated conservation and development projects around protected

areas

4. Creating participatory schemes for natural resource management, including that of

buffer zones, by local communities, indigenous groups, and other sectors of society,

consistent with biodiversity conservation and sustainable use

5. Developing demonstration projects linked to alternative livelihoods for local and

indigenous communities

6. Applying technology (such as geographical information systems) for biological

inventorying, rapid assessment, impact measurement, and gap analysis in integrated

planning and management of designated conservation areas, including protected

areas

7. Support training for staff in government agencies responsible for protected area

management

Sustainable use of biodiversity The success of biodiversity conservation efforts will depend on

how well the overall landscape is managed. It is simply not possible to conserve all species in a

region by using conservation areas alone. Biodiversity conservation and sustainable use must

also be achieved outside the designated conservation areas, including protected areas, and

must be integrated into the management of the natural and modified surrounding areas. A range

of uses is possible -- from full protection on strict reserves through various forms of multiple use,

with conservation easements, to full-scale use such as intensive agriculture, forestry, livestock

production, and urban development. Restoration and rehabilitation of unique habitats under

threat in areas of high diversity or endemism will also contribute to conservation and sustainable

use. Activities that involve biodiversity management within the productive sectors of an

economy are likely to lead to long-term sustainability because they will help address the

underlying causes of biodiversity loss. Several sectors, such as forestry, agriculture, fisheries,

and tourism draw upon biodiversity assets.

Incremental costs of activities for conservation and sustainable use of biological resources

will be developed within national policy and regulatory frameworks and within the context of the

operational programs. They will include:

1. Integration of biodiversity conservation and sustainable use objectives into land use

and resource use management plans

2. Establishment of regulatory frameworks and incentive systems to minimize the

harmful impact of economic activities on natural resource use

3. Facilitation of access to, transfer of, and cooperation for joint development of

technology for sustainable management and use of biodiversity resources

4. Promotion of sustainable production and use of natural products, such as nontimber

forest products, wild relatives of domesticated species, and agrobiodiversity-related

products, including the development and implementation of sustainable harvesting

and marketing regimes

5. Development of environmentally sustainable nature-based tourism

6. Participatory schemes for sustainable natural resource management, including that of

buffer zones, by local communities, indigenous groups, and other sectors of society

7. Integrated pilot projects to provide alternative livelihoods to communities, consistent

with biodiversity conservation and sustainable use

Sustainable use of biological resources is a prerequisite for their long-term conservation.

However, in most cases, it is not possible to accurately predict the impacts on ecosystems,

habitats, species, or gene pools of innovative approaches to conservation and sustainable use

of biodiversity. In addition, the risks of introducing perverse incentives that lead to

overharvesting and destruction of natural resources are significant. Activities that involve

harvesting of wild resources (for example, wildlife, nontimber forest products) pose special risks.

It is, therefore, a priority to develop sustainable use methods that do not degrade biodiversity in

agriculture, forestry, and fisheries. Therefore, sustainable use activities will require close

monitoring of: species selection; information on current occurrence, density, and other

demographic parameters of biological resources, including yield studies and regeneration

surveys; and actual impacts of harvesting, so that harvesting levels and methods can be

adjusted as needed.

Underlying causes and policies Biodiversity loss occurs through direct and indirect causes.

These causes are typically multiple and synergistic. They involve complex interactions of

demographic, social, ecological, economic, and cultural factors.18 The levels of causality may

include proximate causes (where human action, such as land clearing, directly induces

biodiversity loss), intermediate causes (such as inappropriate economic policies and legal

ownership and tenure circumstances), and ultimate causes (such as population growth, poverty,

8

low standards of living, lack of social development which increases pressure on natural

resources, and overconsumption of resources).19

Addressing all underlying causes of biodiversity loss is beyond the GEF's mandate and

ability.20 Yet recipient countries must ascertain the range and importance of causal factors and

their role in biodiversity loss and its amelioration. For example, appropriate adjustments in

economic and social development policies may offer cost-effective, long-term solutions to

biodiversity protection problems.21 Although the GEF will concentrate its efforts on addressing

the proximate and intermediate causes of biodiversity loss, it will, through the Implementing

Agencies' regular country assistance and awareness-building programs, facilitate efforts to

address the ultimate causes of biodiversity loss.

Within the context of operational programs, GEF-financed activities will include:

1. Identification and analysis of major causes (proximate, intermediate, and ultimate) of

biodiversity loss, activities to build awareness of these causes, and assessment of

feasible actions to address them.

2. Application of analytical tools for decisionmaking (for example, valuation, indicators,

impact assessment); promotion of partnerships to address the underlying causes;

dissemination and systematic sharing of information, including on best practices; and

incorporation of biodiversity concerns in the mainstream activities of Implementing

Agencies.

3. Incremental investments and technical assistance to help implement remedial

measures, such as capacity building, including human resource development, shifts

in economic and social policy, and introduction and strengthening of legal,

institutional, and regulatory systems; and to promote the integration of biodiversity

conservation in agriculture, forestry, fisheries, wildlife and water management,

tourism, and other relevant sectors.

4. Introduction of innovative measures, including economic incentives, for the

conservation and sustainable use of biodiversity.22

Stakeholder involvement and social issues Issues of poverty, social development, sustainable

livelihoods, and access to common property resources are closely linked to biodiversity

conservation and sustainable use. Participation of affected stakeholders, including indigenous

peoples, is of central importance, especially in the case of communities that reside inside

protected areas and their immediate surroundings.23 Effective involvement of local people in

GEF's biodiversity activities must be based on knowledge of their social, cultural, and economic

context and their impacts on biological resources. Important factors in designing strategies for

effective participation of stakeholders in global biodiversity objectives include access to land

and other resources; governance systems relating to conflict management; distribution of

benefits and accountability for conserving key resources; and demographic composition, gender

roles, and social organization processes that influence human and environmental interactions.

GEF activities will incorporate the lessons from implementing participatory approaches into

community-based management of biodiversity projects. These include integrated conservation

and development projects in which social needs are integrated into project design;

comanagement of resources, through contracts or negotiations with governments that define

each stakeholder's responsibilities in managing the resource; and devolution of management to

local groups and nongovernmental organizations (NGOs). Local, national, and international

NGOs have played important roles by providing needed expertise in facilitating stakeholder

participation and conducting scientific and technical studies, inventories, social assessments,

and community-based outreach.

Targeted research The GEF will fund targeted research, including information collection,

analysis, and dissemination, only in the context of the operational programs. Targeted research

will be guided by the following considerations:

1. Because biodiversity is highly site-specific, baseline research, inventorying, and

monitoring will be supported in recipient countries to help develop site-specific

activities within the framework of operational programs.

2. The GEF could play a facilitating or complementary role in cofunding strategically

significant efforts in applied biodiversity research to help develop activities in recipient

countries to achieve Convention objectives with special emphasis on conservation

and sustainable use methods.

3. Support is needed in many recipient countries in the application of analytical tools

and methodologies, including the use of modern information technologies, to monitor

biodiversity and to plan for its conservation and sustainable use.24

Potential areas for targeted research in biodiversity could include, for example, implementation

of rapid (ecological/biological) assessment methods; technology applications for sustainable

resource use in agriculture, forestry, and fisheries; incorporation of social dimensions in the

management of conservation areas, including protected areas; and assistance to existing

biodiversity research and monitoring institutions.25 GEF funds will not be used to finance basic

research or to create new research institutions. The GEF also will not fund the recurrent costs of

research.

ENABLING ACTIVITIES

The concept of "enabling activities" has not been formally adopted by the COP of the CBD,

although many enabling activities, as described generically in the first chapter, are of direct

relevance to biodiversity and are recognized as priority activities by the CBD.26

Enabling activities in biodiversity prepare the foundation for design and implementation of

effective response measures required to achieve Convention objectives.27 They will assist

recipient countries to develop national strategies, plans, or programs referred to in Article 6 of

the CBD, and to identify components of biodiversity together with processes and activities likely

to have significant adverse impacts on conservation and sustainable use of biodiversity

pursuant to Article 7 of the CBD. They will normally involve the review and assessment of

information and will assist a recipient country to gain a better understanding of the nature and

scope of its biodiversity assets and issues as well as a clearer sense of the options for the

sustainable management and conservation of biodiversity.28 Enabling activities include

supporting country-driven activities that take stock of, or inventory existing biodiversity by relying

on national programs and studies, without new primary research. The activities also include

identifying options and establishing priorities to conserve and sustainably use biodiversity;

preparing and developing biodiversity planning exercises, such as national strategies, action

10

plans, and sectoral plans; and disseminating of information through national communications to

the CBD.29

Many countries already have a significant quantity of useful information and a number of

assessments of biodiversity which can be utilized in planning. In addition, there exists a variety

of approaches and practices for planning biodiversity conservation and sustainable use. It is

essential to promote synergy and coordination among such initiatives within the recipient

countries and among donors. When enabling activities are aimed at providing countries with the

basic information on which to act, they will normally be regarded as incremental and will be

funded on the basis of full cost reimbursement. Support to further develop in-country and

sectoral plans, programs, and activities in light of global objectives will be based on incremental

cost financing.

As a follow-up to enabling activities, some Parties may require further capacity building to

implement agreed activities, to establish or strengthen institutional and legal frameworks, or to

undertake action-oriented research to conserve biodiversity. Capacity building for such followup

will be undertaken within the context of operational programs.

Operational criteria will be developed:

 To set out the scope, sequence, depth, and typical cost norms for various components of

enabling activities in biodiversity.

 To outline recommended processes to prepare, discuss, and implement enabling activities

within a recipient country.30

 To delineate the requirements for provision of GEF support, its complementarity to existing

and ongoing support, and its focus on

the task of preparing particular plans or communications in relation to the Convention.

SHORT-TERM RESPONSE MEASURES

Proposed activities that are not an integral part of an operational program but are still costeffective,

or that enable the GEF to respond to an urgent need, or seize a promising countrydriven

opportunity in a timely manner are also eligible for support. It would be unwise to reject

such activities merely because they are not part of an agreed operational program if their costs

are relatively low, the outcomes relatively certain, and their urgency or priority unchallenged.

The operational criteria to guide consideration of proposed activities under short-term response

measures include:

 Likelihood of success. Projects should demonstrate that they are well-designed and

feasible. Supporting assessments of technical quality and relevance, as well as conducive

country policy and program frameworks will be required, and STAP advice will be sought.

Impact indicators will be developed for the monitoring and evaluation of short-term

measures.

 Cost effectiveness. Few useful quantifiable norms of cost-effectiveness exist for biodiversity

activities; in their absence, information will be provided to assess the nature and

significance of the costs involved in relation to the expected biodiversity benefits.

 Degree of threat, vulnerability or urgency. Some interventions may be considered extremely

urgent on the basis of known imminent threats to a species or ecosystem (for example,

tropical forests, coastal and marine biodiversity) or degree of vulnerability (for example arid,

semi-arid, and mountainous regions).3132

 Opportunism. A GEF intervention may be considered opportune in the face of a fortuitous

combination of factors -- for example, emergence of a conducive national policy

environment for international collaboration to address an urgent or emergent problem at the

national or regional level.

 Demonstration value. Innovative approaches (for example, innovative use of economic

incentives) to implementing biodiversity activities may need to be tested.33

Short-term response measures, like activities developed within the framework of operational

programs, will be country-driven and consistent with national plans and strategies, may involve

establishment of systems to provide for recurrent costs, and will be supported by measures to

ensure the sustainability of biodiversity benefits.

Eligible activities under short-term response measures could include, for example, those

with a focus on threatened or endangered species or ecosystems, actions to reduce immediate

threats to migratory species, and programs to facilitate implementation of unforeseen

opportunities for national action and international cooperation to reduce specific risks of

biodiversity loss. Over time, some short-term response measures may also help the

development of new operational programs.

CONCLUSION

The operational strategy for biodiversity sets forth an approach for implementing the GEF's

mandate in biodiversity, in full conformity with the guidance provided by the COP of the CBD. It

provides a framework for the development and implementation of GEF-financed activities to

allow recipient countries to address the complex global challenge of biodiversity conservation

and sustainable use. It also provides a framework for systematic monitoring and evaluation of

the effectiveness of GEF-financed activities.

12

APPENDIX

POLICY, STRATEGY, PROGRAMME PRIORITIES and Eligibility Criteria for access to and utilization of financial

resources of the Convention on Biological Diversity

I. Policy and Strategy

Financial resources should be allocated to projects that fulfill the eligibility criteria and are

endorsed and promoted by the Parties concerned. Projects should contribute to the extent possible to

build cooperation at the sub-regional, regional and international levels in the implementation of the

Convention. Projects should promote utilization of local and regional expertise. The institutional structure

should over time assist all eligible countries to fulfil their obligations under the Convention. Policy and

strategy may be revised, as necessary, by the Conference of the Parties.

II. Eligibility Criteria

Only developing countries that are Parties to the Convention are eligible to receive funding upon

entry into force of the Convention for them. In accordance with the provisions of the Convention, projects

that seek to meet the objectives of conservation of biological diversity and sustainable use of its

components are eligible for financial support from the institutional structure.

III. Programme Priorities

1. The conservation of biological diversity and sustainable use of its components is one of

the key elements in achieving sustainable development and therefore contribute to combating poverty.

2. All the actions contemplated in the Convention will have to be carried out at the national

and international level, as appropriate. However, for the purposes of giving direction to the interim

structure operating the financial mechanism, a list of programme priorities is given in paragraph 4 below.

The list may be revised by the Conference of the Parties, as necessary.

3. Programme priorities should promote utilization of regional and local expertise and be

flexible to accommodate national priorities and regional needs within the aims of the Convention.

4. The programme priorities are as follows:

a) Projects and programmes that have national priority status and that fulfil the

obligations of the Convention;

b) Development of integrated national strategies, plans or programmes for the

conservation of biological diversity and sustainable use of its components in

accordance with Article 6 of the Convention;

c) Strengthening conservation, management and sustainable use of ecosystems

and habitats identified by national governments in accordance with Article 7 of

the Convention;

d) Identification and monitoring of wild and domesticated biodiversity components,

in particular those under threat, and implementation of measures of their

conservation and sustainable use;

e) Capacity-building, including human resource development and institutional

development and/or strengthening, to facilitate the preparation and/or

implementation of national strategies, plans for priority programmes and activities

for conservation of biological diversity and sustainable use of its components;

f) In accordance with Article 16 of the Convention, and to meet the objectives of

conservation of biological diversity and sustainable use of its components,

projects which promote access to, transfer of and cooperation for joint

development of technology;

g) Projects that promote the sustainability of project benefits; that offer a potential

contribution to experience in the conservation of biological diversity and

sustainable use of its components which may have application elsewhere; and

that encourage scientific excellence;

h) Activities that provide access to other international, national and/or private sector

funds and scientific and technical cooperation;

i) Innovative measures, including in the field of economic incentives, aiming at

conservation of biological diversity and/or sustainable use of its components,

including those which assist developing countries to address situations where

opportunity costs are incurred by local communities and to identify ways and

means by which these can be compensated, in accordance with Article 11 of the

Convention;

j) Projects that strengthen the involvement of local and indigenous people in the

conservation of biological diversity and sustainable use of its components;

k) Projects that promote the conservation and sustainable use of biological diversity

of coastal and marine resources under threat. Also, projects which promote the

conservation of biological diversity and sustainable use of its components in

other environmentally vulnerable areas such as arid and semi-arid and

mountainous areas;

l) Projects that promote the conservation and/or sustainable use of endemic

species;

m) Projects aimed at the conservation of biological diversity and sustainable use of

its components which integrate social dimensions including those related to

poverty.

Note: This annex reproduces verbatim Document UNDP/CBD/COP/1/17, annex I, pages 33 - 34.

NOTES

1 See World Resources Institute, World Conservation Union, and UnitedNations Environment Programme,

especially chapter 2, A 1992 report by theUnited Nations Environment Programme, “Global Biodiversity Strategy:

Guidelines for Action to Save, Study, and use Earth’s Biotic Wealth Sustainably and Equitably.”

2 World Conservation Monitoring Centre (WCMC), Global Biodiversity 1992; Chapman and Hall, UK.

14

3 Global Biodiversity Strategy chapter 2.

4 Preamble to the Convention on Biological Diversity, 1994.

5 Preamble to the Convention on Biological Diversity, 1994.

6 Convention on Biological Diversity, Article 1.

7 Decision I/2, "Financial Resource and Mechanism," Report of the First Meeting of the Conference of the Parties

to the Convention on Biological Diversity, UNEP/CBD/COP/1/17, February 28, 1995.

8 The first meeting of the Conference of the Parties was held in Nassau, Bahamas, November 28-December 9,

1994.

9 "Policy, Strategy, Programme Priorities and Eligibility Criteria for Access to and Utilization of Financial Resources

of the Convention on Biological Diversity" (UNEP/CBD/COP/1/17; Annex 1, pp. 33-34), referred to hereafter as

"Criteria." The full text is included as an appendix to this chapter.

10 Biodiversity concerns cut across the GEF focal areas and cross-sectoral issues:

(a) Climate change examples include programs that increase reforestation with indigenous plant

species for carbon sequestration in ecologically important areas.

(b) International waters examples include actions seeking prevention of ecological degradation of

critical water habitats (wetlands, estuaries, lakes); programs to prevent the introduction of exotic

species; and projects that address over exploitation of key marine environments such as coral reefs

or of specific species through unsustainable harvesting practices.

(c) Ozone depletion examples include the impacts of methyl bromide-based fungicides (ozonedepleting

substances) and their impact on biodiversity.

(d) Land degradation examples include prevention of land degradation and the link with deforestation

and unsustainable agricultural practices.

11 At its first meeting, the Conference of the Parties identified as a program priority "strengthening conservation,

management and sustainable use of ecosystems and habitats identified by national Governments, in accordance with

article 7 of the Convention." Article 7 of the Convention provides that a contracting party is to identify components of

biological diversity important for its conservation and sustainable use having regard to the indicative list of categories

set down in Annex I.

The criteria set down in Annex I of the Convention are:

1. Ecosystems and habitats: containing high diversity, large numbers of endemic or threatened

species, or wilderness; required by migratory species; of social, economic, cultural or scientific

importance; or, which are representative, unique or associated with key evolutionary or other

biological processes;

2. Species and communities which are: threatened; wild relatives of domesticated or cultivated

species; of medicinal, agricultural or other economic value; or social, scientific or cultural

importance; or importance for research into the conservation and sustainable use of biological

diversity, such as indicator species; and

3. Described genomes and genes of social, scientific or economic importance.

12 There has been considerable academic debate on methodologies to determine relative priorities in global

biodiversity, and no consensus has yet been reached. Further efforts will be required in this field, and STAP could

be requested to play a role on advising the GEF Secretariat on the scope of priority-setting methods and

approaches.

13 Criteria, 4 (k).

14 Criteria, 4 (k).

15 Criteria, paragraphs 3 and 4(a).

16 The recent (1995) Great Barrier Reef Marine Park Authority/World Bank/IUCN volumes of A Global

Representative System of Marine Protected Areas will provide significant input to this operational program.

17 Although there is no universally agreed classification for establishing the global importance of protected areas,

a number of reference materials identify such sites. Efforts could be focused on sites listed in one or more of the

following: Directory of Wetlands of International Importance (RAMSAR); World Heritage Sites (as included in the

World Heritage Convention); Biosphere Reserves (UNESCO) of international importance and as also recorded by the

World Conservation Monitoring Centre (WCMC), Global Biodiversity, 1992; Bird Areas of International Importance

(Bird-Life International); Centers of plant diversity, IUCN, 1987, IUCN Threatened Plants Unit, Kew, U.K.; and Global

Biodiversity, pp. 66-67; and Regions of Diversity of Crop Plants (WCMC, pp. 338-42). These efforts, while useful in

their own right, point out the need to strengthen an overall system for classifying and assessing the global significance

of biodiversity sites.

18 See, for example, Economics and the Conservation of Global Biological Diversity: Katrina Brown, David Pearce,

Charles Perrings, and Timothy Swanson. Working Paper Number 2 Global Environment Facility. Chapter 3, The

Economic Causes of Biodiversity Erosion provides a succinct summary of the key variables affecting biodiversity loss.

See also figure 5.1, which provides a schematic summary of factors affecting global biological diversity.

19 R. Cervigni, Incremental Cost of Biodiversity Conservation, CSERGE, 1994. The UN Commission on

Sustainable Development is investigating the issue of consumption and production patterns.

20 For example, it is unlikely that the GEF will fund population programs, direct antipoverty interventions, or potable

water schemes, even if these were identified as causal factors affecting the deterioration of biodiversity. Such

programs would normally be of high national priority and be an integral part of national economic and social

development plans and policies.

21 The removal or reduction of economic distortions that are generally beneficial to the economy of a country in

question may simultaneously benefit the environment and biodiversity. Case study work at the country level would be

able to assess the likely impact of removing economic distortions. Numerous publications testify to this, but see

especially D.W. Pearce and J. Warford, World Without End: Environment, Economics and Sustainable Development,

(New York: Oxford University Press, 1993).

22 "Criteria", paragraph 4(i).

23 Article 8(j): "Subject to its national legislation, respect, preserve and maintain knowledge, innovations and

practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and

sustainable use of biological diversity and promote their wider application with the approval and involvement of the

holders of such knowledge, innovations and practices and encourage the equitable sharing of the benefits arising

from the utilization of such knowledge, innovations and practices;"

16

24 This is suggested as an enabling activity by the Inter-Agency Task Force on Biodiversity.

25 The UNEP, in consultation with STAP, is preparing a draft paper on targeted research relating to GEF activities.

26 See the Convention on Biological Diversity: Preamble; Articles 6, 7(b), 12, and 18(2); and CBD guidance

(footnote 7): 4(c), (h), and (j).

27 Final Report of the Meeting of the Task Force on GEF Enabling Activities under the CBD, April 5-6, 1995,

Nairobi. The task force identified a fourth category of activity: "enabling activities for general use rather than countryspecific

(for example, development of guidelines for biodiversity planning.") However, such activities also relate to

targeted research and, as such, will be reviewed in that context.

28 The GEF Secretariat has established an Inter-Agency Task Force on Biodiversity. It reviews all biodiversity

project and activity proposals and undertakes ad hoc review work. The task force was convened in April 1995, to

specifically review enabling activities in biodiversity. The CBD Secretariat was invited to chair the meeting, which was

hosted by the UNEP on April 5-6, 1995. It reviewed (a) the definition and scope of enabling activities in biodiversity;

(b) systems needed to ensure programmatic cohesion and cost effectiveness; and (c) preliminary assessments of

norms and standards to be applied in programming resources.

29 Convention on Biological Diversity, Article 26.

30 The GEF will encourage countries to disseminate findings widely within the country and to encourage discussion

and debate among all major stakeholders. GEF consultation and participation guidelines (once approved by the

Council) will provide a framework for such activities.

31 "Criteria", paragraph 4(k).

32 "Criteria", paragraph 4(k).

33 "Criteria", paragraph 4(i).

3

CLIMATE CHANGE

Human activities have been substantially increasing the atmospheric concentrations of greenhouse

gases. These increases enhance the natural greenhouse effect and will result, on average, in additional

warming of the Earth’s surface and lower atmosphere, which may adversely affect natural ecosystems

and humankind.

The United Nations Framework Convention on Climate Change (FCCC), which became effective in

March 1994, was an international acknowledgment that change in the Earth’s climate and its adverse

effects are a common concern of humankind and calls for the widest possible cooperation by all

countries. While recognizing that various actions to address climate change can be justified economically

in their own right and help in solving other environmental problems, the Convention agreed on the need

for all countries, especially developing countries, to have access to resources to achieve sustainable

social and economic development. As developing countries progress toward sustainable development,

and their energy consumption grows they will have to consider ways to achieve greater energy efficiency

and control greenhouse gas emissions, including how to apply new technologies in ways that are

economically and socially beneficial.1

The objective of the FCCC is the stabilization of greenhouse gas concentrations in the atmosphere at

a level that will prevent dangerous anthropogenic interference with the climate system. Such a level

should be achieved within a time sufficient to allow ecosystems to adapt naturally to climate change, to

ensure that food production is not threatened, and to enable economic development to proceed in a

sustainable manner.2 Global environmental benefits will be obtained to the extent that the objective of the

FCCC is met.

The GEF operates as a mechanism for international cooperation to provide new and additional grant

and concessional funding to meet the agreed incremental costs of projects to achieve agreed global

environmental benefits in climate change (among other focal areas).3 The GEF operational strategy for

climate change sets out how the GEF, consistent with the guidance of the FCCC, can assist eligible

countries to contribute to meeting the FCCC’s objective.

CONVENTION GUIDANCE

The GEF operational strategy in climate change incorporates the policy guidance of the FCCC. All GEFfunded

activities in climate change will be in full conformity with the guidance provided by the Conference

of the Parties (COP) to the FCCC.

Convention context. The most recent guidance of the FCCC was provided by the first COP, which met

in Berlin March 28-April 7, 1995. The COP provided initial guidance on eligibility criteria, program

priorities, and policies for the financial mechanism, whose operation, on an interim basis, is entrusted to

the GEF.4 The GEF requested additional guidance from the COP on the development of an operational

strategy.5 In response to a specific request, the COP approved:

“a mixed strategy wherein projects will be selected with a double set of programme

priorities as described in paragraph 9(c) of the [GEF] report, that is, if they met either one

of the long-term programme priorities or one of the short-term programme priorities.”67

This operational strategy for climate change sets out both the long-term and short-term operational

programs and is fully consistent with the Convention guidance.

Non-convention context. Only developing-country Parties are eligible to receive funding through the

financial mechanism of the FCCC. When the GEF provides assistance outside the Convention’s financial

mechanism, it will ensure that such assistance is fully consistent with the guidance provided by the COP

to the FCCC.8

GEF-FINANCED ACTIVITIES

The overall strategic thrust of GEF-financed climate change activities is to support sustainable measures

that minimize climate change damage by reducing the risk, or the adverse effects, of climate change.9

The GEF will finance agreed and eligible enabling, mitigation, and adaptation activities in eligible recipient

countries.

Enabling activities facilitate implementation of effective response measures. The determined the program

priorities of these GEF activities: “In the initial period, emphasis should be placed on enabling activities.”10

Some of these will be “agreed full cost” activities in support of country obligations under Article 12.1 of the

United Nations Framework Convention on Climate Change (national communications); others will be

“agreed full incremental cost” activities for other relevant commitments. 11 12

Mitigation measures reduce or lead to the reduction of greenhouse gas emissions from anthropogenic

sources or protect or enhance removal of such gases by sinks (thus reducing the risk of climate change).

The GEF will assist in implementation of national programs by supporting agreed mitigation activities that

meet either long-term or short-term criteria.1314

Adaptation activities minimize the adverse effects of climate change. Initially, the GEF will meet the

“agreed full costs of relevant adaptation activities undertaken in the context of the formulation of national

communications.”15 These are the “Stage I adaptation activities” outlined by the COP.16 Funding for

adaptation activities beyond Stage I will be dependent on COP guidance. In the medium and long term,

subject to COP guidance, the GEF could finance agreed and eligible activities, including further capacity

building, undertaken to prepare for adaptation, as envisaged by Article 4.1(e), as well as measures to

facilitate adequate adaptation, including insurance, and other adaptation measures as envisaged by

Articles 4.1 (b) and 4.4.

The operational criteria for these GEF activities will be developed in accordance with this operational

strategy and with GEF policies. The initial portfolio of GEF-financed activities will include:

 Long-term measures, including long-term mitigation projects and enabling activities to facilitate

implementation of effective response measures. These measures will be country driven and

prepared in the context of GEF operational programs

 Enabling activities that specifically support national communications, including Stage I adaptation

activities. These will be country-driven and prepared and scheduled in accordance with GEF

operational criteria

 Short-term mitigation projects will be country-driven and approved individually on the basis of GEF

operational criteria

Because enabling activities are the foundation for much of the GEF portfolio, they will be emphasized

initially. As the GEF builds on this foundation, the emphasis will gradually shift to the other types of

activities. Long-term measures will constitute the largest share of the GEF climate change portfolio, with

enabling activities in support of national communications a relatively small and declining share. Shortterm

mitigation projects will constitute only a small share of the portfolio, in order to maintain the

operational emphasis on long-term measures.

Insofar as it is feasible, projects will be designed and located so as to meet global environmental

objectives in other focal areas and to prevent or control land degradation.

Land Degradation

Degrading dryland soils and burning biomass are globally significant sources of greenhouse gas

emissions. Prolonged or frequent drought and soil degradation undermine the soil’s capacity to store

carbon. Frequent and large-scale biomass burning reduces the carbon stored in vegetation and trees,

increasing carbon emissions, and can contribute to land degradation. GEF activities in climate change will

therefore take land degradation issues into account.17 The following are illustrative of activities that

accomplish this objective:

 Rural renewable energy projects (such as solar, wind, and biomass energy for lighting, water

heating, cooking, and water pumping) and energy efficiency projects (such as those for increasing

the efficiency of wood or charcoal burning stoves) that would help reduce unsustainable use of

firewood

 GEF biofuel activities that restore degraded land and biomass cover in order to produce, harvest,

and utilize biomass in sustainable ways

 Stage I adaptation activities that are eligible for GEF financing and that examine and plan for any

additional soil protective measures that become necessary under climate change

 Carbon sink protection, enhancement, and restoration projects that improve carbon storage in

biomass and soils and help to prevent or control land degradation, especially desertification and

deforestation.

LONG -TERM MEASURES

Working Group I of the Intergovernmental Panel on Climate Change has emphasized that it is the

cumulation of emissions over time, rather than when emissions take place, that determines the impact of

greenhouse gases on climate. Long-term mitigation measures respond to this concern.

GEF-financed long-term measures will be prepared in the context of operational programs. The

operational programs in climate change designed to achieve long-term impacts build in part on the

proposed approach outlined in the Analytical Framework of the Scientific and Technical Advisory Panel

(STAP).18 STAP recommended promoting the “backstop” technologies--technologies such as renewable

energy technology that will in the long run be necessary to prevent greenhouse gas emissions--as a

strategy to induce cost reductions. STAP noted that “What is relevant for the GEF ... is not only (a)

[backstop technologies’] current cost, but (b) the prospects for reduction in costs of the technologies in

question, and (c) the contribution that GEF can make to cost reductions.”

In line with STAP's recommendations, operational programs will be developed to expand, facilitate,

and aggregate the markets for the needed technologies and improve their management and utilization,

resulting in accelerated adoption and diffusion. The emphasis of operational programs will be twopronged:

(a) removing barriers to implementation of climate-friendly, commercially viable technologies,

and (b) reducing the cost of prospective technologies that are not yet commercially viable, to enhance

their commercial viability.

Removing implementation barriers for technologies. The GEF, in association with the development

banks and other development institutions, will contribute to the cultural, institutional, administrative,

technical, policy-related, and financial learning processes necessary to remove barriers and promote

broad dissemination of commercially available, climate-friendly technologies and measures throughout a

country or region. Operationally, “removing a barrier” must promote sustainability; it does not mean

merely subsidizing a few projects so that they can surmount a barrier while leaving it in place. GEF

activities will therefore mainly involve building endogenous capacity, improving public awareness, and

demonstrating and disseminating technologies and measures. The costs of removing barriers, such as

learning costs, are incremental costs.

Barriers may include price distortions, regulatory barriers and biases, lack of information, insufficient

management capacity, inability to analyze non-traditional projects, higher perceived technology risk of the

alternative technology, high transactions costs, high initial costs (inability to amortize, poor access to

credit), and appropriation effects (investment benefits cannot be recovered by the agent that bears the

costs).

Reducing the costs of promising technologies. Inducing reductions in the manufacturing and

implementation (transactions) cost of highly promising, climate-friendly technologies will help to make

them economically viable. GEF activities will help move the market for the technologies to the point where

market size, prospective market development, and depth of distribution channels will reduce costs,

hastening the day when projects using the technologies will become economically viable. In cases in

which substantial cost reduction can be achieved through greater use of local manufacturing capacity, the

GEF will pursue technology transfer, local procurement, and the development of appropriate industrial

infrastructure. The GEF will finance part of the investment, associated preinvestment work, and technical

assistance. The incremental cost is the difference in cost between the climate-friendly means of satisfying

the country’s sustainable development needs and the baseline means.

Operational Programs

In both cases set out above, operational programs will identify measures and technologies that will be

funded so as to achieve objectives of the program. The operational programs will provide the context for

the investments, capacity building, technical assistance, targeted research, public participation, and

enabling activities to be developed, all with the aim of facilitating implementation of effective response

measures.

The GEF will make grants for agreed incremental costs.19 In the long run, the GEF could play an

even larger catalytic role through other forms of financial assistance, particularly in relation to operational

programs that accelerate implementation of commercial technologies and measures. The success of

renewable rural electrification, for example, will be highly dependent on innovative financing. In the future,

the GEF might usefully embrace such other forms of financing as concessional and contingent lending,

trusts and revolving funds, loan guarantees against specified mitigation-related risks, and temporary

equity participation. It would, of course, be necessary for the GEF to show in some detail that such

assistance is complementary to that from other channels, such as multilateral banks, and that it is indeed

catalytic. However, until the Council approves revisions, modifications, or additional financing modalities,

project support will be restricted to grants for incremental costs.20

Article 4.1 of the FCCC provides a list of commitments by all Parties, including those that need GEF

support. The Article 4.1 commitments concern both anthropogenic emissions by sources and removals by

sinks, both mitigation and adaptation, all relevant economic sectors, all greenhouse gases not controlled

by the Montreal Protocol, and various types of measures. Over time, additional operational programs

regarding issues not addressed by initial operational programs will be proposed to the GEF Council.

These programs will be consistent with the guidance of the COP of the FCCC; the most promising

technically, in accordance with the latest scientific and technical assessments of the Intergovernmental

Panel on Climate Change (IPCC) and STAP; cost-effective solutions to meet program objectives; and

consistent with the GEF’s other operational principles and strategic objectives.

Developing operational programs will be a dynamic process that emphasizes learning by doing. The

lessons concerning effective response measures in recipient countries and by GEF Implementing

Agencies will be absorbed, the programs modified, the insights generalized, and accepted good practice

applied in new contexts. Future operational programs also will cover the measures that countries identify

in their national communications, consistent with Article 4.1 of the FCCC. In the immediate short term, the

constraints on programming will be the financial resources available for a given replenishment period and

the capacities of the GEF, its Implementing Agencies, and the recipient countries to develop and

implement projects.

Three initial operational programs are proposed on the basis of a review of technical assessments,

including recent work for the GEF on the cost reductions expected in new energy technologies.21 These

programs are consistent with the guidance provided by the COP and with the most recent findings of the

IPCC. The three operational programs that will be developed initially are:22

 Removal of barriers to energy conservation and energy efficiency

 Promotion of the adoption of renewable energy by removing barriers and reducing implementation

costs

 Reduction of the long-term costs of low greenhouse gas-emitting energy technologies.

Removal of barriers to energy conservation and energy efficiency. The purposes of this operational

program are:

(a) To remove barriers to the large-scale application, implementation, and dissemination of leasteconomic-

cost, commercially established, or newly developed, energy-efficient technologies; and

to promote more efficient energy use where a reduction in greenhouse gas emissions would

result. Such measures could include enhancing demand-side management, particularly in the

basic materials industries, transport, and housing; establishing and strengthening integrated

resource planning and administration capabilities; and encouraging supportive legal, regulatory,

and policy changes.

(b) To help ensure the sustainability of the resulting “win-win” projects by demonstrating cost

recovery and facilitating mainstream financial support, including from the multilateral

development banks.23

(c) To facilitate the learning process required for widespread application of energy conservation and

energy efficiency projects in developing countries.

Within this operational program, the barriers in specific markets will be identified and the measures for

their removal will be proposed. The programmatic benefits will be the implementation of “win-win” projects

following the removal of the barriers. (For example, the GEF could facilitate the establishment and

strengthening of energy service institutions able to undertake both demand-side and supply-side

measures.) The incremental costs are the costs of removing the barriers to energy-efficient technologies.

Measures aimed at removing the barriers to implementation will include assessment and analysis,

information dissemination and awareness building, institutional reform and strengthening, policy

adjustments, planning, and legislative and regulatory measures. In particular, it will be necessary to:

 Assess the economic scope for energy conservation and energy-efficient technologies and programs

whose implementation is blocked by barriers.

 Estimate the contribution that such projects would make to reducing greenhouse gases.

 Identify all barriers, particularly energy pricing distortions.

 Propose specific measures to remove barriers.

 Estimate the costs of barrier removal.

 Demonstrate the sustainability of the “win-win” projects after GEF support has ended, including

demonstrations of appropriate cost recovery.

 Estimate the financial requirements and time horizon.

 Determine how programmatic benefits will be monitored and evaluated.

Promoting the adoption of renewable energy by removing barriers and reducing implementation cost.s.

The purposes of this operational program are to remove barriers to the use of commercial or nearcommercial

renewable energy technologies; and to reduce high implementation costs of renewable

energy technologies due to low-volume or dispersed application.

Examples of such renewable energy technologies are photovoltaics (in both on-grid and off-grid

applications); combustion of agricultural residues to generate heat and power, including steam boilers

using biomass residues; other technologies for using biofuels; methane-control technologies for waste

disposal; and wind power. Supporting measures include organizational reform and innovative financing.

Within this operational program, it will be necessary to:

 Assess the economic scope in specified regions for “win-win” renewable energy projects on the basis

of renewable energy resource data (for example, for wind, solar, biomass, and micro-hydro) and

cost data for the renewable energy technologies and the alternatives.

 Estimate the extent to which barriers or high implementation costs hamper cost-effective

implementation.

 Estimate the contribution that fulfilling the full scope of such projects would make to mitigating

greenhouse gases.

 Demonstrate appropriate cost recovery, and, hence, the sustainability of similar renewable energy

projects after GEF support for removing barriers and reducing implementation costs has ended.

 Estimate the financial requirements and time horizon.

 Determine how the programmatic benefits will be monitored and evaluated.

It will be necessary to identify all barriers to the use of renewable energy -- including any energy pricing

distortions; to propose specific measures to remove the barriers; and to estimate the costs of barrier

removal. In addition to removing barriers, it may also be necessary to reduce implementation costs

through selected demonstration of the technologies and of cost recovery principles. GEF grants also may

be needed to meet the incremental cost of purchased units in order to stimulate demand and thereby

achieve economies of scale. Demand must be high enough for local dealer support and marketing

infrastructure to expand to the point where unit implementation costs are reduced.

Reducing the long-term costs of low greenhouse gas-emitting energy technologies. This operational

program is designed to reduce the cost of prospective technologies that have not yet become widespread

least-cost alternatives. Its purpose is to promote the application of specified technologies so that, through

learning and economies of scale, the costs of manufacture will tend to be commercially competitive. It will

therefore be necessary to specify technologies whose costs will drop greatly with economies of scale in

application. Proven but less mature technologies, such as solar-thermal power generation for high

insolation regions, grid-connected and household-related solar applications, advanced biomass power

and fuel technologies, fuel cells, and advanced fossil fuel technologies may be particularly well suited to

this approach. A first step will be to review the proposed technologies, taking into account STAP’s advice,

to ensure that the essential research and development to make the technologies technically sound has

been completed.

The benefits of the program will be the reductions in the costs of applying promising technologies.

The GEF will finance the incremental costs of projects that advance application of specified technologies.

For each technology, it will be necessary to:

 Justify the choice of the technology as a potential mitigation measure based on scientific and

technical considerations, the resource base in recipient countries, and prospects for sustainability

and replicability.

 Set out the cost reduction objective.

 Estimate the level of funding required to achieve the programmatic objectives and identify the

necessary capacity building, targeted research, and investment needs.

 Assess the programmatic impact of the GEF.

 Estimate the financial requirements and time horizon of the activities.

 Show how the programmatic benefits will be monitored and evaluated.

Although applications for this operational program will be sought primarily in countries where the

technology will directly replace fossil fuels, no country will be excluded from the program’s scope because

the technology is the focus of attention, rather than the market or region. The lowest-cost applications,

wherever they are, then will help build a market for the technology. The long-term objective is to identify

an economically viable technology that will become a “win-win” option for many other countries as well.

ENABLING ACTIVITIES IN SUPPORT OF NATIONAL COMMUNICATIONS

Enabling activities provide the foundations to address climate change through country-driven activities.

They have been defined by the FCCC as “planning and endogenous capacity-building, including

institutional strengthening, training, research and education, that will facilitate implementation, in

accordance with the Convention, of effective response measures.”

Support For the Preparation of National Communications

Among the enabling activities, those that are specifically related to countries’ obligations concerning

national communications under Article 12.1 of the FCCC are eligible for GEF financing on the basis of

“agreed full costs.”24 Such enabling activities will result in plans on which the national communications will

be based; these plans will serve as the basis for sustainable and effective response measures. The

assistance provided under these enabling activities will conform fully to the guidance of the COP with

respect to national communications. Because the format for national communications is still under

consideration, the content will, for the interim, be based on the provisions of Article 12.1. The GEF has

prepared operational criteria to guide the preparation and scheduling of support for these activities and to

ensure:

 Coverage without duplication of the efforts of others (including bilaterally financed studies)

 Appropriate sequencing of the activities

 The use of best practices

 Cost-effectiveness (including use of norms)

SHORT-TERM PROJECTS

The GEF may finance climate change projects that reduce greenhouse gases in the short term, even if

they are not part of an operational program. Such projects will be funded if they are country priorities,

cost-effective in the short term, and likely to succeed. The rationale for project support is primarily the

expected reduction in greenhouse gases rather than its programmatic impact. Careful monitoring will be

required to verify that the actual reduction in greenhouse gas emissions meets or exceeds the original

expectation.

Short-term projects may be of various types, including initiatives to seize unforeseen opportunities and to

meet contingencies. Short-term projects may include, but are not limited to, mitigation measures in areas

for which operational programs have not yet been developed -- such as transport, carbon sequestration,

and agricultural waste. Experience gained from these projects will be valuable to the future development

of such operational programs. Projects that require conducive policies in order to be economic and

sustainable will be eligible for GEF financing when such policies are in place.25

Criteria for Short-term Projects

In line with the criteria for short-term response measures (see chapter 1), and in accordance with the

portfolio emphasis on long-term measures (see page xx), the following considerations will guide project

appraisals:

Cost-effectiveness. Cost-effective projects are those that mitigate a specified amount of

greenhouse gas emissions for a given cost. These can be identified as projects with low unit

abatement cost (UAC), the cost per unit of greenhouse gas emissions abated or sequestered

[expressed as US dollars per ton of carbon equivalent ($/tC)]. The criterion is therefore a specified

UAC, which will act as a reference value.

One basis for estimating a reasonable UAC reference value for GEF-financed short-term projects

is the climate change damage avoided through the project. The IPCC is currently assessing damage

cost estimates, and their recommended estimate will be used when available. At present,

conservative estimates in the available literature under consideration by the IPCC vary between

$5.30 and $10.00 per tc.26 A conservative approach is to set a UAC ceiling of $10 per tC, ensuring

that GEF-financed short-term climate mitigation activities are limited to projects that are cost-effective

even under conservative, technically reasonable assumptions about the damage due to future

climate change or additional benefits.27 Pure abatement projects (such as those involving low-cost

fuel switching, for example, the use of Liquefied Petroleum Gas (LPG) as a transport fuel) will be

expected to be very cost-effective, that is, to have UACs closer to zero than the ceiling. Projects with

more than just abatement benefits -- such as “proof-of-concept” projects, or others that also produce

valuable lessons in implementation or monitoring, such as a carbon sequestration project -- could be

justified even with higher UACs.

Likelihood of success. When a project’s funding is seen to be justified primarily in terms of the expected

carbon abatement resulting from the project itself, it must have a high probability of success. This is a

qualitative criterion, but supporting assessments of technical and institutional risk will be needed.

Country-driven. Proposed short-term projects must be country driven and have the country’s highest

priority for funding. This may be demonstrated by inclusion of the project in the country’s climate action

plan; and by support of country-driven policy measures to mitigate greenhouse gases.

Stage I Adaptation Activities

GEF will provide full-cost funding for Stage I adaptation activities undertaken within the context of the

formulation of national communications.28 Such activities may include studies of the possible impacts of

climate change; identification of options for implementing the adaptation provisions, especially the

obligations set forth in Articles 4.1(b) and 4.1(e); and relevant capacity building. Stage I adaptation

activities supported by the GEF will assist the COP to identify countries and regions that are particularly

vulnerable to climate change. Funding for subsequent activities will depend on future COP guidance.

Such Stage I adaptation activities will identify options to facilitate adequate adaptation to climate

change. These activities could encompass the following:

Assessment of national, regional and/or subregional vulnerability to climate change; where

appropriate, rely on related data-gathering systems to measure climate change effects in particularly

vulnerable countries or regions and strengthen such systems as necessary; and identify a near-term

research and development agenda to understand sensitivity to climate change.

Evaluation of policy options for adequate monitoring systems and response strategies for climate

change impacts on terrestrial and marine ecosystems.

Assessment of policy frameworks for implementing adaptation measures and response strategies in

the context of coastal zone management, disaster preparedness, agriculture, fisheries, and forestry,

with a view of integrating climate change impact information, as appropriate, into national strategic

planning processes.

In the context of undertaking national communications, building of national, regional and/or

subregional capacity, as appropriate, to integrate climate change concerns into medium and longterm

planning.

Other Enabling Activities

The GEF will provide financing for other enabling activities on an “agreed full incremental cost” basis. As

with other country-driven initiatives, these activities will be prepared in the context of an operational

program to ensure sustainability, continuity, and integration of the enabling activity with follow-up

investments, capacity building, technical assistance, targeted research, and public participation.

APPENDIX A

Initial guidance on policies, programme priorities and eligibility criteria to the operating entity or

entities of the financial mechanism29

The Conference of the Parties

Recalling Article 11.1 of THE UNITED Nations Framework Convention on Climate Change,

Having considered recommendation 11 of the Intergovernmental Negotiating Committee for a

Framework Convention on Climate Change,

1. Decides to adopt the following initial guidance on polices, programme priorities and eligibility

criteria to the operating entity or entities of the financial mechanism:

(a) Regarding activities undertaken under Article 11 of the Convention,

Within the framework of the financial mechanism:

(i) The operating entity or entities should, in all funding decisions related to the financial

mechanism, take into account Articles 4.1, 4.6, 4.8, 4.9 and 4.10 of the Convention. In

particular, in order to take full account of the specific needs and special situations of the

least developed countries, funds allocated to their project/programmes should be on a

grant basis;

(ii) Projects funded through the financial mechanism should be country-driven and in

conformity with, and supportive of, the national development priorities of each

country;

(iii) The operating entity or entities should ensure that, with reference to activities involving

transfer of technology, such technology is environmentally sound and adapted to suit

local conditions;

(iv) As far as possible, due consideration should be given to the following aspects concerning

activities undertaken under the financial mechanism. Activities should be:

- supportive of the national development priorities which contribute to a comprehensive

national response to climate change;

- consistent with and supportive of the relevant provisions of internationally agreed

programmes of action for sustainable development in line with the Rio

Declaration and Agenda 21 and UNCED-related agreements;

- sustainable and lead to wider application;

- cost effective;

(v) The operating entity or entities of the financial mechanism should strive to leverage other

funds in support of the activities of developing country Parties to address climate change;

(vi) In mobilizing funds, the operating entity or entities should provide all relevant information to

developed country Parties and other Parties included in Annex II to the Convention, to

assist them to take into full account the need for adequacy and predictability in the flow of

funds. The entity or entities entrusted with the operation of the financial mechanism

should take full account of the arrangements agreed with the Conference of the Parties,

which, inter alia, shall include determination in a predictable manner of the amount of

funding necessary and available for the implementation of the Convention, as provided

for in Article 11.3(d) of the Convention.

(b) Regarding programme priorities,

(i) Priority should be given to the funding of agreed full costs (or agreed full incremental costs,

as appropriate) incurred by developing country Parties in complying with their obligations

under Article 12.1 and other relevant commitments under the Convention. In the initial

period, emphasis should be placed on enabling activities undertaken by developing

country Parties, such as planning and endogenous capacity-building, including

institutional strengthening, training, research and education, that will facilitate

implementation, in accordance with the Convention, of effective response measures;

(ii) In this context, activities aimed at strengthening research and technological capabilities for

the implementation of the Convention in developing country Parties should be supported

through international and intergovernmental efforts. Such support would include

networking and the training of experts and, as appropriate, institutional development;

(iii) Emphasis should also be placed on improving national public awareness and education on

climate change and response measures;

(iv) The operating entity or entities should finance the formulation by developing country Parties

of nationally determined programmes to address climate change issues which are in

accordance with national development priorities. To facilitate the formulation of these

programmes, it should finance capacity-building and all other activities related to the

formulation, management and regular updating of these programmes, which should, as

far as possible, be comprehensive;

(v) The operating entity or entities should, in accordance with the policies, programme priorities

and eligibility criteria as established by the Conference of the Parties, be available to

assist, if so requested, in the implementation of the national programmes adopted by

developing country Parties;

(vi) In the implementation of these national programmes, the operating entity or entities should

support agreed activities to mitigate climate change, as referred to in the Convention, in

particular in Article 4.1, consistent with Article 4.3.

(c) Regarding eligibility criteria,

Eligibility criteria shall apply to countries and to activities and shall be applied in accordance with

Article 11.1, 11.2 and 11.3;

(i) Regarding eligibility of countries, only countries that are Parties to the Convention would be

eligible to receive funding upon entry into force of the Convention. In this context, only

developing country Parties would be eligible to receive funding through the financial

mechanism, in accordance with Article 4.3;

(ii) Regarding eligibility of activities,

- Those activities related to obligations under Article 12.1 to communicate information for

which the “agreed full costs” are to be met are eligible for funding;

- Measures covered by Article 4.1 are eligible for funding through the financial mechanism

in accordance with Article 4.3. Such measures should be agreed between the

developing country Party and the international entity or entities referred to in

Article 11.1, in accordance with Article 4.3;

- In addition to the above, such measures would be eligible for financial support under

Article 11.5.

(d) Regarding adaptation, the following policies, programme priorities and eligibility criteria should

apply:

(i) Adaptation to the adverse effects of climate change, as defined by the Convention, will

require short, medium and long term strategies which should be cost effective, take into

account important socio-economic implications, and should be implemented on a stageby-

stage basis in developing countries that are Parties to the Convention. In the short

term, the following stage is envisaged:

- Stage I: Planning, which includes studies of possible impacts of climate change,

to identify particularly vulnerable countries or regions and policy options for

adaptation and appropriate capacity-building;

(ii) In the medium and long term, the following stages are envisaged for the particularly

vulnerable countries or regions identified in Stage I:

- Stage II: Measures, including further capacity-building, which may be taken to

prepare for adaptation, as envisaged by Article 4.1(e);

- Stage III: Measures to facilitate adequate adaptation, including insurance, and

other adaptation measures as envisaged by Article 4.1(b) and 4.4;

(iii) Based on the outputs of the Stage I studies, as well as other relevant scientific and

technical studies, such as those of the Intergovernmental Panel on Climate Change

(IPCC), and any emerging evidence of the adverse effects of climate change, the

Conference of the Parties may decide that it has become necessary to implement the

measures and activities envisaged in Stages II and III, consistent with the relevant

conclusions of the Committee and with the provisions of the Convention;

(iv) Funding for the implementation of such adaptation measures and activities would be

provided as follows:

- For Stage I, the Conference of the Parties at its first session, shall entrust to the Global

Environment Facility (GEF) the interim operating entity of the financial

mechanism, the task of meeting the agreed full costs of the activities required by

Article 12.1 of the Convention. This would include meeting the agreed full costs

of relevant adaptation activities undertaken in the context of the formulation of

national communications; such activities may include studies of the possible

impacts of climate change, identification of options for implementing the

adaptation provisions (especially the obligations contained in Article 4.1(b) and

4.1(e) of the Convention), and relevant capacity building;

- If it is decided in accordance with paragraph (iii) above, that it has become necessary to

implement the measures envisaged in Stages II and III, the Parties included in

Annex II to the Convention will provide funding to implement the adaptation

measures envisaged in these stages in accordance with their commitments

contained in Article 4.3 and 4.4 of the Convention;

- In its review of the financial mechanism of the Convention under Article 11.4, the

Conference of Parties, taking into account studies conducted and options for

adaptation identified during Stage I, any emerging evidence of the adverse

effects of climate change, as well as the relevant conclusions reached by the

Committee and its own decisions on this issue, must decide on the channel or

channels, under Article 11 of the Convention, to be used for the funding referred

to in the preceding subparagraph, to implement the adaptation measures

envisaged in Stages II and III.

(e) Regarding agreed full incremental costs,

The various issues of incremental costs are complex and difficult and further discussion on the

subject is therefore needed. The application of the concept of agreed full incremental costs

should be flexible, pragmatic and on a case-by-case basis. Guidelines in this regard will be

developed by the Conference of the Parties at a later stage on the basis of experience.

2. Also decides to take a note of the following conclusions of the Intergovernmental Negotiating

Committee for a Framework Convention on Climate Change:

(a) Outside the framework of the financial mechanism,

Consistency should be sought and maintained between activities (including those related to

funding) relevant to climate change undertaken outside the framework of the financial mechanism

and the policies, programme priorities and eligibility criteria for activities as relevant, established

by the Conference of the Parties. Towards this end and in the context of Article 11.5 of the

Convention, the secretariat should collect information from multilateral and regional financial

institutions on activities undertaken in implementation of Article 4.1 and Article 12 of the

Convention; this should not introduce new forms of conditionalities.

(b) On transfer of technology, the Committee took note of document A/AC.237/88 prepared by

the interim secretariat. The Committee recognized the importance of this subject under the

relevant articles of the Convention and concluded that discussions should continue at the

Conference of the Parties and its subsidiary bodies with a view to identifying ways and means of

operationalizing the transfer of technology under Article 4.5 of the Convention.

(c) The Committee took note of document A/AC.237.Misc.40, an approach paper by the Group of

77 and China on the format of communication of information by Parties not included in Annex I to

the Convention.

APPENDIX B

Report of the Global Environment Facility to the Conference of the Parties on the

development of an operational strategy and on

initial activities in the field of climate change30

The Conference of the Parties,

Recalling Article 11.1 of the United Nations Framework Convention on Climate Change,

Having considered the report by the Global Environment Facility (GEF) containing information on

the development of an operational strategy in the climate change area and on the initial activities in this

field (FCCC/CP/1995/4),

1. Welcomes the decision of the GEF Council to follow a “two-track” programming approach in

1995: while work is undertaken by the GEF secretariat to develop a long-term comprehensive operational

strategy, supported by analytical work and consultations, and allowing for the guidance from the

Conference of the Parties (track one), some project activities are to be undertaken to allow a smooth

transition between the operations of the pilot phase and the restructured GEF (track two);

2. Decides to adopt a mixed strategy wherein projects will be selected with a double set of

programme priorities as described in paragraph 9(c) of the report, that is, if they met either one of the

long-term programme priorities or one of the short-term programme priorities;

3. Takes note of the report on initial activities;

4. Invites the GEF in future reports to take fully into account relevant aspects of the modalities

for the functioning of operational linkages between the Conference on the Parties and the operating entity

or entities of the financial mechanism.

NOTES

1 See the United Nations Framework Convention on Climate Change (FCCC), especially the Preamble.

2 FCCC, Article 2.

3 Global Environment Facility, Instrument for the Establishment of the Restructured Global Environmental Facility,

1994, Washington, D.C., papa 2(a).

4 United Nations Framework Convention on Climate Change. FCCC/CP/1995/7/Add.1, decision 11/CP.1, June 6,

1995. Hereafter referred to as “Guidance”. This decision appears in appendix 3.A.

5 Global Environment Facility, “Report by the GEF to the First Conference of the Parties of the Framework

Convention on Climate Change”, GEF/C.3/10, Washington, D.C., February 1995.

6 “Report by the GEF to the First Conference of the Parties.”

7 United Nations Framework Convention on Climate Change. FCCC/CP/1995/7/Add.1; decision 12/CP.1, June

6, 1995. This decision appears in Appendix 3.B.

8 Guidance, 2 (a).

9 Terminology used in this paragraph has the same meaning as the COP Guidance and the FCCC (in particular,

Articles 1, 4, and 12).

10 Guidance, 1(b) (i).

11 Guidance, 1(b) (i), and FCCC, Article 4.3.

12 Guidance, 1(b) (i), and FCCC, Articles 4.1 and 4.3.

13 Guidance, 1(b) (vi). See also FCCC, Articles 4.1 and 4.3.

14 United Nations Framework Convention on Climate Change. FCCC/CP/1995/7/Add.1, decision 12/CP.1, June

6, 1995.

15 Guidance, 1(d).

16 Guidance, 1(d).

17 Global Environment Facility, “Scope and Preliminary Operational Strategy for Land Degradation”, GEF/C.3/8.

18 Scientific and Technical Advisory Panel, “Analytical Frameworks,” 1993, p.31.

19 Global Environment Facility, “Incremental Costs and Financing Modalities,” section I, GEF/C.2/6 Rev.2.

20 A revised paper on financing modalities is scheduled for Council consideration in April 1996.

21 Kulsum Ahmed “Renewable Energy Technologies: A Review of their Status and Costs of Selected Technologies.”

World Bank Technical Paper 240: Energy Series. World Bank, Washington, D.C.,

22 In the initial phase, these operational programs will not include activities or projects for carbon sinks, transport

energy, or geothermal energy. Carbon sequestration will be a factor, however, in short-term response measures and

in certain programs in the biodiversity and international waters focal areas that also address issues in land

degradation or the preservation of forest habitats, and in such cases special attention will be given to effective

baseline definitions and monitoring. An operational program on carbon sequestration will be developed as the basis

for Council consideration after GEF experience in these short-term measures has been evaluated. Transport will be

fundamental to addressing climate change, and a proposal to develop an operational program in this area will be

prepared for Council consideration at a later time when the role and effectiveness of the GEF in this area are more

clearly defined. Geothermal heat, as a commercially available technology, may be one among the broad range of

technologies that will be stimulated in the program on renewable energy which addresses barriers to these

technologies, but will not be identified as a technology for support under the program on greenhouse gas-emitting

energy technologies.

23 “Win-win” projects are those that are least economic cost and would normally be chosen solely on the basis of

national interest. In addition, these projects also result in global environmental benefits. The choice of energy efficient

lighting is an example of a “win-win” activity.

24 Global Environment Facility, Instrument for the Establishment of the Restructured Global Environment Facility,

Washington, D.C., 1994, para 6; FCCC, Article 4.3; and Guidance, 1(b)(i).

25 Carbon sequestration includes carbon sink protection and enhancement and restoration measures that improve

carbon storage in biomass and soils. Many of these measures will also contribute to preventing and controlling land

degradation.

26 W.D. Nordhaus, Managing the Global Commons: The Economics of Climate Change (Cambridge, Mass.: MIT

Press, 1994); W.R. Cline “Optimal Carbon Emissions over Time: Experiments with the Nordhaus DICE Model”,

Institute for International Economics, Washington, D.C. 1992; W. R. Cline, “modelling Economically Efficient

Abatement of Greenhouse Gases”, Paper presented at the United nations Conference on Global environment,

Energy and Economic Development, Tokyo, September 1993; S.C. Peck, and T.J. Teisbereg, “CETA: A Model for

Carbon Emissions Trajectory Assessment”, Energy Journal 13, 1992: 55-77; D. Maddison, “The shadow Price of

Greenhouse Gases and Aerosols”, Centre for Social and Economic Research on the Global Environment, University

College London aned University of East Anglia, Norwich, 1993. For a recent literature review, see S. Frankhauser,

Valuing Climate Change, (London: Earthscan, 1995).

27 Note that short-term measures can only postpone carbon accumulation because countries will still be emitting

greenhouse gases. At the suggested ceiling, every US$200 million spent on short-term projects would delay

atmospheric carbon accumulation by about one day.

28 Guidance, 1(d).

29 FCCC/CP/1995/7/Add.1, decision 11/CP.1

30 FCCC/CP/1995/7/Add.1, decision 12/CP.1

4

INTERNATIONAL WATERS

The world's water resources are under enormous stress, and the ecosystems, people, and economic

development that depend on these resources are facing a precarious future. Global environmental

concerns relating to international waters include:

 Degradation of the quality of transboundary water resources, caused mainly by pollution from landbased

activities (toxic chemicals, nutrients, pathogens, oxygen-demanding wastes, sediment, and

debris).

 Physical habitat degradation of coastal and near-shore marine areas, lakes, and watercourses (for

example, wetlands, mangroves , estuaries, coral reefs), as a result of inappropriate management (for

example, land conversion, dredging, coastal construction, and irrigation).

 Introduction of nonindigenous species that disrupt aquatic ecosystems and cause toxic and human

health effects (untreated ballast water discharges from ships, for example).

 Excessive exploitation of living and nonliving resources due to inadequate management and control

measures (for example, overfishing, and excessive water withdrawal).

Degradation of freshwater and marine systems, and of surface waters as well as groundwater resources,

is causing irreversible environmental effects, hardship for the poor, real losses to the economy, human

health concerns, and the need for costly investments to mitigate the damage. Marine and freshwater

systems constitute important sources of income and food for a large part of the world's population whose

food and water supplies are now at risk. For example, globalization of technological advances in the

fishing industry, pollution, and habitat destruction have depleted fish stocks to dangerously low levels and

placed food security in jeopardy in many areas. Downstream or transboundary international issues of

global significance have yet to be effectively addressed.

The degradation occurring in international waters represents a warning that the carrying capacity of

transboundary freshwater basins, coastal areas, and marine ecosystems has been approached in some

places and exceeded in others by inappropriate sectoral development policies and projects as well as

unwise use of the water resources. A consensus has emerged that a more comprehensive approach to

water resources management is needed -- one that is cross-sectoral, integrates ecological and

development needs, and is based on holistic analyses of the carrying capacity of the water environment.1

In this approach, the river basin, groundwater system, coastal area, or large marine ecosystem typically

serves as a management unit on which to base changes in the way that sectoral development activities

are conducted and how priority environmental interventions are made. In many instances, action

programs are needed to restore proper functioning of ecosystems or remedy major human health risks.

Such a comprehensive approach that integrates actions across sectors is new to most countries, difficult

to implement, and even harder to achieve when actions must be coordinated among countries.

The GEF's objective in the international waters focal area is to contribute primarily as a catalyst to the

implementation of a more comprehensive, ecosystem-based approach in managing international waters

and their drainage basins as a means to achieve global environmental benefits. The GEF will act as a

catalyst to ensure that countries better understand the functioning of their international waters systems,

gain an appreciation of how their sectoral activities influence the water environment, and find means for

collaborating with neighboring countries to collectively pursue effective solutions. As such, the GEF will

primarily fund the transactions costs of these learning processes so that countries may make changes in

the ways that human activities are conducted in different sectors and make priority environmental

interventions. The aim is to overcome barriers to action so that the capacity of any particular waterbody to

sustainably support human activities is not exceeded.

The term "international waters", as used for the purposes of the GEF Operational Strategy, includes

the oceans, large marine ecosystems, enclosed or semi-enclosed seas and estuaries as well as rivers,

lakes, groundwater systems, and wetlands with transboundary drainage basins or common borders. The

water-related ecosystems associated with these waters are considered integral parts of the systems. The

common global hydrologic cycle dynamically links many watersheds, airsheds, estuaries, and coastal and

marine waters through transboundary movement of water, pollutants, and living resources.

The international waters area includes numerous international conventions, treaties, and agreements.

The architecture of marine agreements is especially complex, and a large number of bilateral and

multilateral agreements exist for transboundary freshwater basins.23 Related conventions and

agreements in other areas increase the complexity.4 These initiatives provide a new opportunity for

cooperating nations to link many different programs and instruments into regional comprehensive

approaches to address international waters. Chapters 17 and 18 of Agenda 215broadly capture the spirit

of these international agreements and offer particularly valuable guidance to countries. GEF activities

undertaken in this focal area will be consistent with Agenda 21.

SCOPE AND THE GEF ROLE

The overall strategic thrust of GEF-funded international waters activities is to meet the agreed

incremental costs of: (a) assisting groups of countries to better understand the environmental concerns

of their international waters and work collaboratively to address them; (b) building the capacity of existing

institutions (or, if appropriate, developing the capacity through new institutional arrangements) to utilize a

more comprehensive approach for addressing transboundary water-related environmental concerns; and

(c) implementing measures that address the priority transboundary environmental concerns. The goal is

to assist countries to utilize the full range of technical, economic, financial, regulatory, and institutional

measures needed to operationalize sustainable development strategies for international waters.

The GEF will play a catalytic role in assisting countries seeking to leverage cofinancing in association

with national funding, development financing, agency funding, and private sector action for different

elements of a comprehensive approach for sustainably managing international waters. The

"precautionary principle," the "polluter pays principle," and policy reforms are most always included as

integral elements of international waters projects and programs to foster incentives to use resourceefficient

and clean production methods that will help reduce discharges of toxic substances and sustain

global environmental benefits. Both business communities and governments have important roles in

developing and implementing pollution prevention programs aimed at reducing or eliminating waste

generation. The GEF can assist countries in finding ways to harmonize and overcome technical and

financial barriers to waste reduction and build the necessary capacity, including human resources

development, to facilitate implementation.

The use of sound science and proven technological innovations can help recipient countries address

the imminent threats to international waters. In particular, simulation models and information technology

can provide a basis for improving management decisions on complex environmental problems and often

provide an opportunity for involving countries' scientific communities in projects. Stakeholder involvement

and participation of different sectors in each recipient country also constitute important elements of GEF

activities concerning international waters.6 Through such stakeholder involvement, needed changes in

sectoral activities can be made to reduce the stress on international waters. In addition, use of computerbased

information systems and computer networking among stakeholders and government organizations

can foster broad involvement in planning and implementing GEF international waters projects and should

help to improve the quality, public awareness, and scientific basis of international waters projects. These

technological innovations promote transparency among cooperating nations regarding key information,

encourage broader participation by stakeholder groups within country and across countries, and provide

a basis for evaluation.

Given the broad scope of activities in this focal area and the widespread nature of threats to

international waters, the GEF's activities will focus mainly on seriously threatened waterbodies and the

most imminent transboundary threats to their ecosystems. Consequently, the GEF will place priority on

addressing the following imminent threats to international waters:

 Control of land-based sources of surface and groundwater pollution that degrade the quality of

international waters. Of special emphasis is the prevention of releases of persistent toxic substances

and heavy metals that cannot be neutralized by marine and freshwater ecosystems or that

accumulate in living organisms. High priority is also placed on abatement of common contaminants

such as nutrients, biological contaminants, or sediments that endanger species or threaten

ecosystems.

 Prevention and control of land degradation where transboundary environmental concerns result from

desertification or deforestation.

 Prevention of physical or ecological degradation, and hydrologic modification, of critical habitats

(such as wetlands, shallow waters, and reefs) that sustain biodiversity, provide shelter and nursery

areas for the production of fish protein sources, and otherwise are important for restoring and

maintaining ecosystems associated with international waters.

 Control of unsustainable use of marine living resources as well as nonliving resources resulting from

inadequate inadequate management measures such as overfishing, excessive withdrawal of

freshwater, and resource extraction.

 Control of ship-based sources of chemical washings and nonindigenous species that can disrupt

ecosystems or cause toxic and human health effects.7

Taking into account the lessons from pilot phase projects in this focal area, priority will be given to

comprehensive approaches to management that emphasize imminent environmental threats and different

geographic settings. These broad approaches are regarded as a more effective response than narrow,

sector-specific interventions such as traditional ship-waste proposals.

BIOLOGICAL DIVERSITY AND CLIMATE CHANGE

Wherever appropriate, activities in the international waters focal area will be coordinated with those in

other GEF focal areas. GEF projects integrating several focal areas have the potential to multiply global

benefits from GEF interventions. For example, wetland restoration and protection initiatives can provide

benefits for both biodiversity protection and water quality improvement. Biodiversity protection and carbon

sequestration have potential linkages and important roles in restoring damaged transboundary basins.

Other, more subtle linkages exist; for example, support for energy conservation and efficiency may help

reduce the burning of fossil fuels that emit mercury as a by-product. Long-range transport of the mercury