Article 11 of the Convention defines a mechanism for the provision of financial resources to developing countries on a grant or concessional basis, including for the transfer of technology. The Article also specifies that the financial mechanism shall function under the guidance of, and be accountable to, the COP, which shall decide on its policies, programme priorities, and eligibility criteria related to the Convention. The COP designated the Global Environment Facility (GEF) as an operating entity of the financial mechanism in 1998.

At COP 6 (The Hague, November 2000), Parties failed to reach agreement on the question of additional guidance to the operating entity of the financial mechanism and referred the decision of the guidance to a resumed session of COP 6.

At COP 6 part II (Bonn, July 2001), Parties adopted the Bonn Agreements on the Implementation of the Buenos Aires Plan of Action, registering political agreement on key issues. Together with the Bonn Agreements, Parties concluded work on a detailed decision on additional guidance to the financial mechanism, which was forwarded to COP 7 (Marrakesh, October/November 2001) for adoption. This decision expands the scope of activities eligible for funding under the GEF, including those related to adaptation and capacity-building. In addition, the decision invites the GEF to continue its efforts to improve its functioning as operating entity of the Convention’s financial mechanism, including by further streamlining its project cycle and minimizing the time between the approval of project concepts and the disbursement of funds.

As part of the Bonn Agreements, Parties also established three new funds: a special climate change fund and a least developed countries fund under the Convention, and an adaptation fund under the Kyoto Protocol. All three funds will most certainly be operated by the GEF.

Over the most recent reporting period (July 1999 to June 2000), total project financing disbursed by the GEF for climate change activities exceeded US$ 1,424 million, including US$ 199 million in grant funding and US$ 1,225 leveraged through co-financing. Discussions on the third replenishment of the GEF Trust Fund are ongoing.