On Proposalism – the New Modus Operandi in Climate Finance
Carbon credits have been the main currency in climate finance for a long time. Now this concept is being replaced by the “Green Climate Fund” – an institution that relies on proposals for assigning budgets to climate problems. Thus Climate Finance adopts the practice of “Proposalism” – where funding is allocated based on the writing and evaluation of proposals.
Now that the dust has settled and the time of “Paris is good, but not ambitious enough” statements is over, I’d like to take a step back and highlight one major shift in global climate finance. Over the last few years, I have frequently written articles about “carbon credits”. I admit, the rules for making and paying for them were a nightmare of complexity, but there was one thing I really liked about them: We used to pay for climate change mitigation in developing countries only after we had seen results. All the risks of project failure were carried by local actors. We did not need to understand the details of how the electricity market in Burkina Faso works to support renewable energy there. This mechanism has, for now, been fully replaced by the “Green Climate Fund” (GCF, [1]).
The magic of proposals
The GCF is a curious institution – half bank, half donor, governed by a board with 50% developing country government representatives and 50% donor country representatives. It also has a great team struggling to implement the actual work, out of an office on an artificial peninsula a little south-west of Seoul, Korea. A significant share of the promised 100 billion USD per year in climate finance will flow through it. It operates in a similar way to a classical development bank, but focuses on climate. It takes some effort for an institution to get “accredited”, but once that is done, any number of proposals for funding can be submitted. The GFC then evaluates the proposals based on its (publically available) “investment framework”.
Writing and evaluating climate-related proposals was a major part of my own work during the last couple of months; I’ve just written a proposal asking for funding to train a developing country government in proposal writing, so I feel qualified to say a few words on the topic. I’ve chosen to do so by coining a new term in the form of a fictitious Wikipedia entry:
Proposalism
Proposalism is an economic system in which the majority of resources is allocated based on the writing and evaluation of proposals.
Definition and Occurrence
A main indicator of the level of proposalism in any system is the staff time dedicated to proposal writing and evaluation. While it is appropriate to call a system ‘proposalistic’ if more than 10% of workload is dedicated to proposals, levels of more than 50% are not exceptional in today’s research and climate/development cooperation communities. There is no common agreement as to whether all the workload should be considered, or whether other bureaucratic processes should be deducted first. Using this definition, some positions have reported up to 100% of proposalistic work, in particular in institutions that both write and receive proposals.
Dangers
Evaluation by formalism – not by quality
People who are good at writing proposals are not necessarily good at implementing activities. Therefore proposalism may not improve outcomes compared to funding allocated randomly to eligible entities.
In addition, those people evaluating proposals covering a wide spectrum of activities and locations often lack the experience required to evaluate the likelihood of success of specific proposals. So evaluators frequently stick to formalistic evaluation criteria, which aggravates the former problem, as a proposal writer’s success is determined by his strength in formalisms.
Looming vicious circle
Furthermore, there is a danger of creating vicious circles, as ”Track Record” is a major criterion for proposal evaluation. As it is difficult to judge the success of project implementation – in particular in research and climate/development cooperation projects – a track record typically consists of a history of proposals won and projects implemented, without reference to success in implementation. Therefore, again, this evaluation criterion is not suitable for judging the likelihood of success.
Unproductive workload
Apart from the obvious risk of allocating resources to incompetent implementing agencies, the main danger of proposalism lies in the over-proportional spending of resources on unproductive proposal writing and evaluation.
Inflexible best practice
Proposalism also has an impact on actual project implementation. In order to fulfil generic formalisms, the project structure has to follow a certain “universal” best practice. While local circumstances may make deviations from such standard procedures necessary and efficient, implementers would lose access to funding if proposing such deviations due to violation of formalisms.
Proposalism and Globalisation
Globalisation has massively increased the degree of proposalism throughout society. Due to the fact that requests for proposals (RFPs) are published online and proposals are accepted from any entity globally, the number of proposals per RFP has skyrocketed over the last 20 years.
Counter-Movements
Behind-Closed-Doors RFP development
This method of avoiding proposalism is widespread among institutions of all kinds. Individuals from implementers and funders jointly develop a RFP and a fitting proposal, prior to publishing the RFP. Generally, the RFP includes some highly restrictive conditions to reduce the number of competing proposals.
While this works fairly well for those involved in the meeting behind closed doors, it adds significantly to the frustration of all other actors. Due to the often mandatory openness of RFPs, it is impossible to tell from the outside whether an RFP resulted from a closed-door development or is actually seeking proposals. Furthermore, this approach is highly vulnerable to corruption.
Results-Based Payments (RBP)
RBP are gaining popularity in public health and development funding institutions after they virtually disappeared from climate finance. Under this mode, funding is not allocated based on a proposal, but on the delivery of a certain metric. While this approach can, in principle, fully avoid proposalism, it is only suitable for a subset of activities. In particular, the development of metrics and monitoring indicators for RBP is highly controversial.
Costly Signalling / “Skin in the Game”
This new method has not yet been adopted by any major institution. To reduce the number of proposals, a fee per proposal is charged. Some models advocate a fee covering the cost of proposal evaluations, while others request a higher fee only as an indication of seriousness – it is then usually donated to a charity.
This entry reflects only the personal view of the author. It is not to be understood as an institutional statement, but rather as a personal and deliberately provocative opening of a discussion.
While writing I noted that this lamentable practice not only wreaks havoc in climate finance, but all over the place! Looking forward to a lively discussion on alternative ways to allocate public budgets to complex problems.
Further Information
[1] The external page Green Climate Fund
Comments
The description of the workings of the GCF sounds like research funding. A procedure with a track record that is not so bad. In the US, as far as I know, 50% time spent on proposal writing is customary. Here, with the financing of climate mitigation and adaptation, the result in the end is not information on paper, but things like new climate resistant infrastructure etc. So, proposal writing may take-up 50% of investment planning and, of course, not 50% of the investment. I have been in charge of distributing much R&D money in a neighboring country. I wished that there was a mechanism in place like the matching fund scheme we have in Switzerland with the KTI. This helps the evaluators of R&D proposals a lot, particularly when the proposal concerns the D (technology development). I think proposals are a good thing particularly if they are proposals for matching funds. That I consider carbon credits fudgeable, I blogged here before.
In Defense of Proposals Critics of climate science claim that the world shouldn't accept a certain and large upfront cost now in exchange for *maybe* mitigating a future cost of uncertain size/scope. It is clever and efficient to allocate limited funds on the objective merits of their cost/benefit structures, i.e. to get the most bang for our collective buck. Without detailed proposals and an associated analysis, these costs/benefits cannot be objectively determined, and the climate change mitigation projects could not be properly ranked by impact. Climate change mitigation must also compete for resources with other crises facing the world (third world malnutrition, sanitation, communicable diseases, etc). Using proposals, the impact of each project can be compared with that of projects across other areas. To the extent the projects will truly benefit the world, they will be funded. The alternative would be to allocate funding based on connectedness or political pull. Proposalism has it's problems, but these represent the cost of being transparent and fair. Can you propose a better way of allocating scarce funds?
Dear Commenter, Thanks for opening up the discussion! Funny enough, I fully agree with all your arguments, just not with the conclusion. I'm afraid proposal-evaluation is horribly bad at finding out the "objective merits of their cost/benefit structures," or "ranking by impact". As I pointed out in the section on "behind closed doors", I'm not a big fan of the approach that you portrait as the only alternative either. The other two approaches mentioned (results-based and Skin in the Game) seem more attractive to me, at least for now. I do agree that the decision on where and for which technology such mechanisms should be put in place first should be based on proposals/science. But at the moment, the decision which mechanism gets how much happens exactly like that - behind closed doors and based on political connectedness and pull. I am myself in the middle of a thought process on improving the allocation mechanisms, so sorry that I can't give you a great answer solving the issue.