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This is a joint post with Lawrence MacDonald.

In a break with the post-World War II practice of international organizations being headquartered in either Europe or the US, South Korea beat  five nations to become the host of the Green Climate Fund (GCF), a new entity that may become a key player in international efforts to avert runaway climate change. The GCF interim secretariat announced late last month that Songdo International Business District, a gleaming new satellite city adjacent to South Korea’s main airport, won the competition to host the fund. The decision is expected to be confirmed at the 18th Conference of the Parties (COP) of the United Nations Framework Convention on Climate Change (UNFCCC) that will get underway in Doha, Qatar, later this month.

Now comes the hard part: the 24-member GCF board, which has an equal number of members from developed and developing countries, must figure out how to raise and disburse hundreds of billions of dollars to help developing countries reduce greenhouse gas emissions and cope with the impacts of accelerating climate change.  Rich countries pledged at the Copenhagen COP in 2009 to mobilize $100 billion a year in climate funding by 2020. Whether or not the promised funds actually materialize will depend in part on the success of the GCF.

The I-Tower, which will house the
headquarters of the Green Climate Fund.
Songdo, South Korea.

While there has been slow but steady progress on fund’s location and governance, there is still no clear plan for how it will operate and raise money.  It could become little more than another Global Environment Fund (GEF), channeling donated funds as grants to developing countries with little multiplier effect.  Or—and this is clearly what officials in Korea are hoping and what would be best for the world—it could evolve into a major international financial institution that, like the World Bank, leverages its balance sheet to provide resources many times its paid-in capital.

A key question being hotly debated is how the GCF will engage with the private sector.  What will a private sector "window" look like?  One possible path spelled out in detail in a 2011 CGD working paper by Darius Nassiry and David Wheeler involves a “fund-of-funds” approach in which public money would be used as cornerstone equity for two “funds of funds,” one for technology innovation and one for deployment (for more on how this would work, see here).

Korea’s leaders are heavily invested in the fund’s success, seeing it as a reflection of the country’s growing   international stature and a means to grow their national economy. Finance Minister Bahk Jae-wan told reporters that hosting the GCF  would boost business such as hotels and finance, and would help Korean companies “acquire information about new international projects concerning climate change and to take part in such projects." Korean press reports said that President Lee Myong-bak, who is approaching the end of a single six-year term, aggressively lobbied other national leaders to support Korea’s bid.

Korea has been positioning itself as a leader on development and climate issues, hosting a series of high-level international conferences in recent years. It is also home to the Global Green Growth Institute (GGGI), which aims to promote strategies for environment-friendly economic growth. The GGGI began in 2010 as a government-backed Korean foundation and last month officially became an international organization.

China and the US backed Korea’s bid, an encouraging sign that a Korea-hosted GCF might offer a forum for dialogue and consensus on climate financing and other issues between the world’s two largest emitters of greenhouse gases. Korea beat out Germany, Switzerland, Mexico, Namibia and Poland to host the fund in five rounds of elimination voting (the country with the fewest votes in each round was dropped).

Another plus: the GCF location decision focuses attention on Asia, a region critical to meeting the challenge of capping global emissions of greenhouse gases.  Korea’s pledge of $40 million to help jumpstart the fund may encourage other emerging market economies to contribute as well.

Finding itself in the climate spotlight, Korea has promised to step up efforts to reduce its own greenhouse gas emissions. In early October, the country doubled targets for 2013 reductions, to 3% of expected emissions. The tighter targets—enforced with modest fines against major emitters—are designed to help firms improve competitiveness ahead of a national emissions trading scheme to start in January 2015. Korean lawmakers approved the program in May, overcoming strong industry opposition.

There is plenty of room for improvement. The country ranks near the bottom on the environment component of CGD’s Commitment to Development Index, in part due to high annual per capita emissions of CO2, about 14.5 tons of carbon dioxide equivalent per person. Though this is still well below the US (18.6 tons) it is higher than Germany (11.7) and the UK (9.5).  Moreover, Korea’s massive coal-burning power plants account for three of the five largest power plant emitters of greenhouse gases in the world, according to CGD’s Carbon Monitoring for Action (CARMA) database.

If the world is going to avoid runaway climate change, we will need a whole lot more of the commitment and political will that Korea has shown. I’m hopeful that Korea will succeed in its aspirations to global leadership on the issue and in its ambitious efforts to slash its own emissions of heat-trapping gasses.