1. 1 System for Transparent Allocation of Resources STAR

2. STAR – RAF Mid-term Review  Following RAF MTR, GEF Council made specific recommendations during November 2008 meeting: (a) Scenarios (options) for expansion of RAF to all focal areas by GEF5 (b) Steps towards improving RAF for biodiversity and climate change in GEF5 (c) Rules and procedures for reallocation of unused RAF resources in GEF4

3. STAR – GEF Council Decision  GEF Council decision in June 2009 meeting: (a)Prepare additional documentation on eligibility (b)Continue developing Option A, including possible incorporation of elements in Option B (c)Prepare another option with composite allocation per country that: does not include International Waters would include BD, CC, LD, and POPs provides flexibility in programming among different GEF focal areas below a certain threshold, particularly for LDCs and SIDS (d) Prepare new revision of the Global Benefits Index ( GBI) for biodiversity and suggest improving the GBI in other focal areas; (e) Further develop and revise the Global Performance Index (GPI) (f) Convene another meeting of ad hoc committee before next Council Meeting

4. STAR – GEF Council guidance  In addition to Council decision, Council gave guidance on several key issues: (a)Level of replenishment would be key factor in designing resource allocation system (b)Need for mechanism to ensure overall programming targets for different focal areas (c)Clear guidelines for other categories (besides IW) to be included under set- asides and how these resources would be used (d)Eliminate 50% rule established during GEF-4 for RAF (e) Group allocations be abandoned in GEF-5, giving all countries individual allocations (f) Apply floors, or minima, to country allocations (g) Ad hoc working committee to convene intersessionally to provide guidance on improving STAR. Second ad-hoc committee meeting 14 October 2009, prior to November 2009 Council meeting

5. STAR – General Issues  Implementation issues have been left out of this presentation. These will be discussed once structure and indices of STAR for GEF-5 have been agreed upon by Council.  Overall objective of allocation system for GEF has not changed: “…a system for allocating resources to countries in a transparent and consistent manner based on global environmental priorities and country capacity, policies and practices relevant to successful implementation of GEF projects”

6. STAR – Eligibility  GEF Instrument states countries are eligible if (a) they meet eligibility criteria established by relevant convention COP or (b) besides (a), they are eligible to borrow from WB (IBRD and/or IDA) and are recipients of UNDP technical assistance.  Specific set of rules proposed to determine whether eligible GEF country will receive a STAR allocation in GEF-5 i.Be a Party to relevant Convention and meet COP eligibility criteria ii.Not be a member of European Union as of 1 July 1st 2010; and iii.Have had at least one national project in past 5 years (in any focal area)  For countries that are not eligible at start of GEF-5 (i.e. have not yet acceded to/ratified Convention) but become Parties, it is proposed to include possibility of funding for such countries through global and regional set-asides.

7. STAR – Options for Allocation  Under option 1, each country that meets criteria for allocation in BD or CC under STAR will receive an allocation for these focal areas. All other focal areas will fall outside of STAR.  Under option 2, each country that meets criteria for BD, CC, LD, or POPs under STAR will receive allocation for that particular focal area. Both ozone depletion and international waters will continue outside of STAR.

8. STAR – Flexibility under Option 2  Based on current simulations under option 2 for $5 B replenishment scenario, a threshold of $6.5 M would allow GEF to program at least 90% of resources in BD, CC, LD and POPs.  In other words, any country that receives a total allocation less than 6.5 M across these four focal areas would be allowed to use its allocation in any of the focal areas where it is eligible.  Under the $5 B replenishment scenario, approximately 35 countries would benefit.

9. STAR – Global and Regional Set-asides (1)  Based on RAF MTR conclusions and Council guidance, 20% global and regional set-aside (GRS) is proposed per focal area under $5B and $6.5B scenarios and 15% for $9B scenario.  For enabling activities to fulfill CBD, UNFCCC, and Stockholm Convention obligations, GEF support up to $500,000 outside the national STAR allocations is proposed, to be funded out of the focal area GRS.  As previously, enabling activities that exceptionally would require above $500,000 would be funded from the respective country’s STAR envelope and would follow the regular non-expedited project cycle.

10. STAR – Global and Regional Set-asides (2)  Rules for using regional set-asides Any proposal to access GRS resources must be consistent with GEF Strategic Goals and should deliver additional global environmental benefits (GEBs) that would not be achieved via national commitments only. Regional projects must be endorsed by each participating country.  As a complement to these generic criteria, each focal area has developed specific guidance for the use of their respective set- asides, outlined in the draft GEF-5 focal area strategies.

11. STAR – Global and Regional Set-asides (3)  Separate from global and regional set-asides (GRS), a number of other programs and activities will be funded outside of the STAR allocation process. These include: a.Agency fee b.Corporate budget of the GEFSEC, the Trustee, EO, and STAP c.Small Grants Programme d.Country Support Programme, National Dialogue Initiative, and Expanded Constituency Meetings e.International Waters f.Ozone Layer Depletion g.Sound Chemicals Management h.Voluntary National Business Plans i.GEF Earth Fund j.Support through Non-grant Instruments

12. STAR – Floors and ceilings  With elimination of group allocation for GEF-5, a 2M floor for CC, 1.5M floor for BD, and a 0.5M floor for LD and POPs are proposed.  Would give countries enough resources to develop a project and would increase allocations for countries that were in the group under GEF-4.  In addition to floors, proposed STAR model will include ceilings on country allocations to ensure a more equal distribution of funds.  Same ceiling levels as GEF-4 are proposed, with 15% for CC and 10% for all other focal areas.

13. STAR – Indicators - Global Performance Index (GPI) (1)  GPI has been adjusted to reflect outcomes of RAF MTR, STAP input, and Council guidance.  GEF-5 GPI is a measure of country performance based on two main sources, both used in GEF-4: 1) The World Bank’s Country Policy and Institutional Assessment (CPIA), derived from judgments of World Bank staff on country performance based on a set of macroeconomic, structural, social, and governance criteria; 2) A revised GEF Portfolio Performance Index (PPI).  RAF MTR recommended relative weight of PPI in a country should be increased in GEF-5 to ensure that performance is rewarded.

14. STAR – Indicators - Global Performance Index (GPI) (2)  To respond to these recommendations, PPI has been given a greater weight within GPI of 20% (versus the 10% given under GEF-4).  New proposed PPI calculated using project implementation report (PIR) implementation progress ratings and terminal evaluation (TER) ratings on outcomes. PPI = 0.4 x PIR + 0.6 x TER

15. STAR – Indicators - Global Performance Index (GPI) (3)  Two subcomponents of World Bank CPIA are used in the GEF-5 STAR simulations: 1.Country Environmental Policy and Institutional Assessment Index (CEPIA) provides systematic assessment of environment related policies and institutional frameworks within a country. 2.Broad Framework Indicator (BFI) examines quality of management in selected areas of public sector.  Increasing relative weight of PPI means reducing weights for CEPIA and BFI to 65% and 15% respectively. Revised GEF-5 GPI formula is thus: GPI = 0.20 x PPI + 0.65 x CEPIA + 0.15 x BFI

16. STAR – Indicators – Premium for country capacity and vulnerability – GDP base index  To address concerns related to impact and potential negative consequences on smaller, vulnerable countries, SIDS, and countries with poor capacity, in addition to floors, a premium to take into account country capacity and vulnerability based on GDP Purchasing Power Parity (PPP) is proposed.  PPP often used to compare the standards of living between countries (in place of a per-capita GDP comparison at market exchange rates).  PPP selected for inclusion in STAR model as third component - in addition to GBI and GPI - since it equalizes purchasing power for different currencies for a given basket of goods within a country and is a good proxy for socio- economic status among countries.

17. STAR – Indicators – GEF Benefit Indices – Climate Change (1)  GEF Benefits Index for Climate Change (GBIcc) composed of two indicators: 1) emissions of greenhouse gases except from land use, land use change, and forestry (LULUCF) sector, and 2) forest cover as partial proxy for GHG emissions from LULUCF sector.  First indicator with 95% weight same as in GEF-4 for CC GBI. Based on country’s emissions of six greenhouse gases (CO2, CH4, N20, HFCs, PFCs, SF6) in tons of CO2 equivalent (in the latest year available), multiplied by adjustment factor which rewards countries that show a decrease in the amount of emissions of CO2 relative to GDP or “Carbon Intensity”.

18. STAR – Indicators – GEF Benefit Indices – Climate Change (2)  Second indicator with 5% weight is proxy for potential of emissions reduction and/or carbon sequestration related to LULUCF. Based on country’s forest cover in 2005 multiplied by adjustment factor which rewards countries with decreasing loss of forests over time.  Evident that chosen proxy is imperfect indicator of overall carbon stocks, which at best only cover part of LULUCF issues, and that there are limitations of data accuracy.  Indicator will be kept under review and expected will be revised for application in GEF-6 based on UNFCCC discussions.  Therefore given relatively small weight at this stage.

19. STAR – Indicators – GEF Benefit Indices – Biodiversity  Because RAF MTR expressed overall satisfaction with indicators that compose GEF Benefits Index for Biodiversity (GBI BD ), propose using 2008 GBI BD index (based on GEF-4 indicators and updated with new data available in 2008).  GBI BD reflects complex, highly uneven distribution of species and threats to them across world ecosystems, both within and across countries.  To respond to RAF MTR recommendations, propose increasing weight of marine ecosystems from 20% in GEF-4 to 25% in GEF-5.

20. STAR – Indicators – GEF Benefit Indices – Land Degradation (1)  Proposed GEF Benefits Index for Land Degradation (GBI LD ) based on three key factors: Need for controlling and preventing land degradation in production systems Challenge of combating desertification in drylands, including need to adapt to drought risks Need to address livelihood needs of vulnerable populations

21. STAR – Indicators – GEF Benefit Indices – Land Degradation (2)  Three proxy indicators derived based on data availability: Land area affected by LD is proxy indicator for “loss of ecosystem function and productivity“ Total dryland area or proportion of each country’s land area within arid, semi-arid and sub-humid zones as defined by UNCCD. Drylands important indicator because predisposed to desertification and major factor influencing livelihoods of third of world’s population. Vulnerable populations since LD is human development challenge due to impacts on poverty, especially in rural areas where people overwhelmingly depend on the land.

22. STAR – Indicators – GEF Benefit Indices – POPs  Two proxy indicators proposed to calculate GEF Benefits Index for POPs (GBI POPs ): i) arable and permanent cropland (data from FAO) and ii) industry value added (data from World Bank).  Overall, these indicators should be reasonable proxies to track most investment needs re: industrial POPs chemicals and industrial sources of unintentionally produced POPs, and investment and capacity building needs re: pest management since many POPs are pesticides.