Under this agenda item, discussions focused on the LDC Fund, the report of the Global Environment Facility (GEF), the review of the financial mechanism and additional guidance to an operating entity of the financial mechanism.

On the report of the GEF, the SBI considered the information on how the GEF has applied the guidance and decisions of the COP. It noted the successful and substantial third replenishment of the GEF Trust Fund and called upon countries and other entities that are in a position to do so to make additional contributions to the GEF. Among the key issues raised in the deliberations, were concerns by developing countries that the GEF had not made progress in funding activities relating to capacity building, adaptation and the preparation of second national communications. The SBI, in its conclusions, recommended that the COP invite the GEF to report to COP-9 on how it has applied the guidance on funding these activities.

Concerning the review of the financial mechanism, the COP decided to request the GEF to report to COP-9, the progress in the implementation of its plan of action developed in response to the recommendations of the Second Overall Performance Study of the Global Environment Facility, and also on how it has taken into consideration the recommendations of the second review of the effectiveness of the financial mechanism. It further requested the Secretariat to prepare for consideration at SBI-20, a report on the implementation of Decisions 12/CP.2 (Memorandum of Understanding between the COP and the GEF Council) and 12/CP.3 (annex to the MOU on the determination of funding necessary and available for the implementation of the UNFCCC). In addition, it requested the GEF to review its project cycle with a view to making it simpler and more efficient and agreed to initiate the third review of the financial mechanism at SBI 21.

Regarding guidance to an entity entrusted with the operation of the UNFCCC financial mechanism for the Least Developed Countries (LDC) Fund, the COP decided to request the financial mechanism to ensure the speedy release and disbursements of funds and timely assistance for the preparation of National Adaptation Programs of Action (NAPAs) and the organization of four regional workshops on the advancement of the preparation of NAPAs. Two workshops will be held in Africa (one for Francophone and one for Anglophone countries), one in Asia and one in a small island developing state during 2003. The COP also encouraged developed country parties to assist in addressing the needs relating to training in negotiation skills through bilateral channels. It also invited all parties to submit views on strategies for implementing national adaptation programs of action and means of addressing the various elements of the least developed countries work program. These views will be compiled and considered at SBI 18. Consideration of additional guidance to the financial mechanisms for the operation of the LDC Fund will continue at COP-9.

The Special Climate Change Fund was established to provide new funding that is additional to contributions, which are allocated to the climate change focal area of the Global Environment Facility and to multilateral and bilateral funding, for the implementation of the Convention. The COP decided that the GEF should promote complementarity while ensuring financial separation of funding between this special fund and the other funds that are entrusted to it, as well as adopt streamlined procedures that would ensure transparency in the special fund’s operation. In order to further define prioritized activities, programmes and measures to be funded by the special fund, the COP also decided to initiate a process whereby Parties would submit their views for compilation in a report for consideration at SBI 18. This report would be considered at COP-9 where a decision on guidance to the special fund will be taken.