Source: http://unfccc.int/focus/climate_finance/items/7001.php .... Dev negotiators, but also public and private constit
© Albert González Farran,
January | 2017
Briefing Paper Making Climate Adaptation Finance Work for Developing Countries By Leslie Debornes
Summary Developing and Least Developed Countries (LDCs) keep struggling to access sufficient funding for their adaptation to the adverse effects of climate change. Working towards more and better climate adaptation finance would require scaling up and easing their access to existing funds, particulartly those dedicated to adaptation. This paper analyses recent developments in climate adaptation finance mechanisms, particularly at the Paris and Marakkesh conferences of the United Nations Framework Convention on Climate Change (UNFCCC).
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Background Developing countries, and particularly LDCs are the most vulnerable to climate change, due to their
The UNFCCC and the Kyoto Protocol: What are their plans on climate adaptation finance pre2020?
level of poverty, economic vulnerability, as well as lack of relevant knowledge and capacities to
The UNFCCC and the Kyoto Protocol recognized
respond effectively to its adverse impacts. Their
that all countries are not equal when facing
level of emissions and contributions to climate
climate change, which is why they foresee
change remain very low, hence mitigation-related
financial assistance from Parties with more
decisions and actions are not the priority in those
resources to those less endowed and more
countries. What is really critical for them is to
vulnerable. Developed country Parties (Annex II
adapt, but to adapt is very costly (in terms of
Parties) shall provide financial resources to assist
technology, capacity b
developing country Parties in implementing the
development, etc.).
Convention. To facilitate this, the Convention established a Financial Mechanism to provide
Despite this, funding for adaptation programming
funds to developing country Parties.
continues to lag behind mitigation. According to a recent report by the Climate Policy Initiative
By far the largest of climate funding sources is the
mitigation accounted for more than 90% of annual
Clean
global public and private climate finance flows in
Authorized by the Kyoto Protocol and launched in
2013. This leaves around $US25 billion or just 7%
2001, the CDM grew slowly at first but reached an
of
annual volume of $8.4 billion by 2007. It allows
global
climate
finance
for
adaptation
Development
Mechanism
(CDM).
programming. As a result, there is a vast funding
emission-reduction
shortfall between the finance needed by developing
countries to earn certified emission reduction
1
(CER) credits. These CERs can be traded and sold,
countries for adaptation and the amount available.
projects
in
developing
and used by industrialized countries to a meet part
Figure 1: Snapshot of 2011 Balance in Climate Funding Commitments
of their emission reduction targets under the Kyoto Protocol. The CDM is the main source of income for the UNFCCC Adaptation Fund, which was
Mitigation
Multiple Objectives
Japan Fast Start Finance
Kyoto Protocol that are particularly vulnerable to OECD Donor Countries
UK International Climate Fund
programmes in developing country Parties to the Multilateral Development Banks
Germany International Climate Initiative
All Special Climate Funds
established to finance adaptation projects and
Adaptation
Source : UNFCCC
the adverse effects of climate change. This was a very innovative fund with greater representation from the developing countries on its Board and it enabled the developing countries to apply directly to the Fund instead of through intermediaries such as the World Bank or the UN Agencies.
1
https://acfid.asn.au/blog-post/shifting-view-attracting-privatefinance-climate-adaptation
Unfortunately, the CDM (and hence the AF)) faced one major challenge: its relatively small volume of
2
The UNFCCC Standing Committee on Finance: A forum for voicing developing countries’ concerns? The UNFCCC created a Standing Committee on Finance on the occasion of the 16th COP to assist Paris Agreement nations with responsibilities like transparency, efficiency, and effectiveness in the delivery of climate finance. Twenty members comprise the committee: 10 members from developing countries and 10 from developed countries. The Standing Committee, which meets at least twice a year, is currently tackling four specific functions: 1. Assisting the COP in improving coherence and coordination in the delivery of climate change financing 2. Assisting the COP in a rationalization of the Financial Mechanism of the UNFCCC 3. Supporting the COP in mobilizing of financial resources 4. Supporting the COP in measurement, reporting, and verification of support provided to the developing countries Source: http://unfccc.int/focus/climate_finance/items/7001.php
transactions. CDM is not only limited in total size; in practice, it has been narrowly focused on a few countries and activities. China alone has issued almost half (more than 46 per cent) of the certified emission reductions (CERs) under CDM; China, India, the Republic of Korea and Brazil together have issued more than 90 per cent of the total.
An undeniable lack of available funding The total amount of finance available for adaptation is also woefully short of what is needed. The United Nations Environment Programme estimates that adaptation costs in 2030 are likely to range between USD140 billion to USD300 billion per annum. In other words, in order to meet
At Copenhagen in 2009, developed country Parties
financing needs and avoid an adaptation gap, the
to the UNFCCC committed to a goal of mobilizing
total financing for adaptation in 2030 would have
jointly $100 billion a year by 2020 from public and
to be approximately 6 to 13 times greater than
private
sources
to
support
mitigation
and
adaptation climate action in developing countries.
is that communities, farmers, priv
However, the sources, instruments, and channels
developing countries and LDCs need funding to
that should count toward that goal remain
adapt to climate change. For instance, agro-
ambiguous, even after the new universal climate
industrialists in the East African Community
agreement for post-2020 period, signed in Paris in
(EAC) have expressed their need to receive more
December 2015.
funds to purchase adequate equipment, access
Finance obstacles impeding climate adaptation In the context exposed above, developing countries and LDCs are facing two main barriers in terms of climate finance, which refrain them to get sufficient funding to adapt to climate change.
required technologies, and build relevant capacities to cope with climate adverse effects. Challenging access to available funds Developing countries and LDCs have faced many barriers in the recent years to access climate finance, especially climate adaptation finance. The
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architecture of climate finance itself is one of the
interest investors because they do not allow to
causes that impede them to get the funds. As the Africa Progress Panel pointed out in its recent report entitled Power, People, Planet: Seizing , there
Paris and Marrakech: Turning Points on Climate Adaptation Finance?
needs are poorly served by such a labyrinthine system. Modest funding has been transferred
Adaptation finance in Paris
through overly bureaucratic delivery structures that combine high transaction costs with low
During the 21th Conference Of Parties in Paris
impact. Most finance has been earmarked for
(COP21), climate finance was one of the critical
small-scale
points to be agreed upon to ensure that the
projects
rather
than
national
ambitious goals set by the Parties would be
programmes.
reached, and that, in doing so, developing Moreover, a lack of knowledge about available
countries and LDCs would be supported when
funds impede them to access the available funds.
undertaking adaptation and mitigation actions.
At local and national levels in developing countries
The negotiations resulted in Article 9 of the Paris
and LDCs, potential beneficiaries of climate
Agreement, and were even materialized by some
adaptation finance are not aware of international
commitments by some country members already.
or regional support mechanisms/programmes that
The Overseas Development Institute estimates that
are available to help LDCs and developing
the public finance offered by developed countries in Paris will result in at least $18.8 billion per year
change. When interviewing agro-industrialists in
by 2020. In addition, Japan aims to mobilize $10bn
the EAC region a few months ago, they were more
per year in public and private finance by 2020.
aware of climate change support programs
Moreover, new pledges to climate funds, including
implemented
the AF, LDC Fund, and the Green Climate Fund
by
international
donors
and
developed countries. Supports at national level,
(GCF), added up to more than $1.5bn.2
extension services and technical support provided by national and local governments were also
The Agreement encourages other countries, i.e.
acknowledged in some countries.
developing countries, to provide support on a voluntary basis. A number of them have already
Nature of funding
elected to contribute climate finance. Already, Ex-President Dilma Rousseff said the
recorded funds include loans that must be reimbursed by developing countries, protests Jürg Staudenmann, member of the Committee of the
country was considering contributing climate finance, joining other emerging economies like China, which pledged to provide $3.1 billion over
Climate Alliance and the Climate Action Network. The main part of those funds is also coming from private sources. However, we know that measures for the protection of the populations do not
2
https://www.odi.org/comment/10201-climate-finance-agreedparis-cop21
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three years. 3
and the Marrakesh talks seem to be just kicking it 7
On adaptation specifically, countries agreed that the AF created under the Kyoto Protocol could
Two main challenges have arisen in Marrakech
play a role in implementing the Paris Agreement.
discussions on climate adaptation finance, which
The Fund has been particularly valued by
will have to be handled this year in Bonn,
developing countries since it allows national
Germany.
institutions to access finance directly, without going through an international entity.4 Moreover,
First, there was some debate about the AF,
the GCF, which has recently been operational,
and whether it should be moved over to the
needs to play a significant role in financing
Paris Agreement, or not. Some parties,
adaptation, as it seeks to reach an equal split argued that it would be more relevant to
between adaptation and mitigation.5
focus only on GCF. Other parties, mainly
Adaptation Finance at COP22
developing countries and LDCs, want the AF to be maintained, hence ensuring adaptation
Finance remained a very sensitive topic in
remains a political priority in the future.
Marrakech during the last climate conference in
These discussions fell flat, with countries
November 2016, with little progress happening on
merely agreeing to discuss the issue and
that front. Countries were urged to continue
hand in their views by 31 March 2017.8
scaling up their financial contributions towards the Second, developed and developing countries
preachieve a greater balance between adaptation and
disagreed over the distribution of funding
mitigation. Some countries had hoped for stronger
between mitigation and adaptation efforts. A
wording on this, since adaptation has long trailed
roadmap9 drawn up by developed countries
mitigation, to the detriment of the most vulnerable
and presented in Marrakesh allocated just
Unfortunately, it seems like Parties
20% of climate finance to efforts to limit the
only agreed to continue discussing it in the months
damage caused by climate change. This
to come basically.
proposal would see $20bn per year spent on
countries.
According
6
to
Zambian
president
Edgar
own estimates put the need at $140-300bn
Lungu
per year. Developing countries themselves Jan Kowalzig, Oxfam
called for at least 40% of the $100bn fund to
Germany,
be spent on adaptation.
finance gap was unfinished business back in Paris,
countries wanted this roadmap to be
3
http://www.wri.org/blog/2015/12/what-does-paris-agreementdo-finance 4 Ibid 5 http://www.huffingtonpost.com/linah-mohohlo/at-cop22-it-isimportant_b_13147502.htm 6 https://www.carbonbrief.org/cop22-key-outcomes-agreed-atun-climate-talks-in-marrakech
7
http://climateobserver.org/special-cop22-adaptation-financestill-unfinished-business-marrakech-talks/ 8 https://www.carbonbrief.org/cop22-key-outcomes-agreed-atun-climate-talks-in-marrakech 9
http://dfat.gov.au/international-relations/themes/climatechange/Documents/climate-finance-roadmap-to-us100billion.pdf
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adopted as part of the Marrakesh Action
finance, in the finance workshops or in the main
Proclamation, but the developing countries
Negotiators should keep
Oxfam representative said.10
advocating for more equity in the dissemination of funds between adaptation and mitigation.
Way forward
UNFCCC finance mechanisms should encounter Dev
less administrative burden and becoming more
negotiators,
but
also
public
and
private
actionable funding mechanisms, allowing States
constituencies, have two main requests: (i)
and/or other stakeholders to access the available
enhancing and easing the access to the funds and
funds to implement adaptation actions.
(ii) scaling up the funds readily available for adaptation actions. Below are three ways to address
Negotiators will have to define the climate finance
these requests are presented.
architecture, defining the role of each operating fund, as at the moment there is a paradoxical
Working to improve current UNFCCC finance mechanisms
situation of the LDC Fund and AF both having a pipeline of ready-to-go approved adaptation projects in the poorest and most vulnerable
Developing countries and LDCs negotiators should
developing countries and the GCF sitting on
aim at making their voice more heard on the
several billion unspent US Dollars.11
subject of adaptation finance in the UNFCCC discussions, being in the standing committee on
Conclusions drawn from the in-session workshop on long-term finance, Bonn, in May 2016 The nationally determined contributions (NDCs) constitute a good opportunity for supporting the scaling up of climate finance, including adaptation finance whose access remains a challenge, particularly for small island developing States and least developed countries; Country-driven processes in developing countries are fundamental for scaling up climate finance; strengthening national public financing management system and the overall policy environment is vital to effectively manage, leverage and monitor the effectiveness of climate finance flows; The role of the private sector in adaptation finance needs to be further enhanced; Better information needs to be generated for more efficient planning, including through enhanced tracking of climate finance flows, particularly for adaptation finance.
Source : http://unfccc.int/cooperation_and_support/financial_mechanism/items/9984.php
10
https://www.euractiv.com/section/climateenvironment/news/cop22-climate-finance-pushed-back-to-2018/
11
http://www.climatechangenews.com/2016/11/15/adaptationfinance-climate-changes-forgotten-child/
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Finally, the question of accounting of finance has
For instance in Africa, the African Development
been pushed back to 2018 in Marrakesh.
Bank has made a good start in promising to
Negotiators will have to work on clear modalities,
-
now needs to keep a
to make sure the commitments are respected. In
close eye on how well the funds are contributing to
fact, enhancing consistency in finance reporting
help communities and households adapt to the
would benefit all countries in their efforts to
effects of climate change.14
accurately track progress on commitments and ensure that the quantity and quality of climate finance flows improve over time.12
Leveraging climate adaptation funds at national and regional levels
Enhancing private sector participation in adaptation finance Private actors are the largest source of global climate finance billion
in
Stockholm
2013.
investing more than $US190 However, research
Environment
by
Institute shows
the that
As it has been proved in the past, LDCs and
private finance has to date almost exclusively
developing countries should not rely only on
targeted mitigation projects. In the
developed countries finance commitments. The
project pipeline there are currently no private
Nationally Determined Contributions, national
projects that focus on adaptation.15 Given the huge
policies
good
financial flows internationally that are generated
climate
and governed by the private sector, the potential of
adaptation in those countries. The example of
private finance to serve the unmet demand of
Bangladesh can be cited where some cities have
climate adaptation finance should be considered.
developed some years ago a climate change strategy
The challenge here would be to leverage possible
and action plan, then set up a Climate Change
voluntary actions of the private sector, that is,
Trust Fund using its own money. Each year since
supporting adaptation for commercial reasons
then the Finance Minister of Bangladesh has been
rather than where the private sector is tapped to
allocating approximately 100 Million US Dollars
create public finance flows.16
and
opportunities
budgets to
can
allocate
represent
funds
to
implement hundreds of adaptation activities around the country by government as well as civil society.13
own
In fact, the focus should now be made on the returns of adaptation projects, which lie in the counter-factual. Adaptation increases the resilience of communities, cities and countries to the effects
At regional level as well, some actions can be taken
of climate change. Adaptation projects, at their
by regional organizations and development banks.
simplest, work to lower investment risk. Consider a
They need to dedicate funds to climate adaptation
privately-financed toll road in a developing
action and ensure that climate considerations are woven through every policy and project funded. 14
12
https://www.greenbiz.com/article/5-climate-finance-topicswatch-cop22-marrakech 13 http://www.climatechangenews.com/2016/11/15/adaptationfinance-climate-changes-forgotten-child/
http://www.huffingtonpost.com/linah-mohohlo/at-cop22-it-isimportant_b_13147502.html 15 https://acfid.asn.au/blog-post/shifting-view-attracting-privatefinance-climate-adaptation 16 https://www.seiinternational.org/mediamanager/documents/Publications/Climat e-mitigation-adaptation/policybrief-privatesectorfinanceadaptation.pdf
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community. While climate-related events may pose
Climate negotiators, policy-makers and other
a significant threat to the physical asset itself, the
relevant stakeholders may now work on raising
resilience of the local community to climate change
awareness of private sector on these opportunities,
is equally important. The financial sustainability of
as well as creating the right framework at all levels
the toll road is dependent on the economic well-
to allow the private sector to invest in climate
being of those that use and pay for the toll road.
adaptation efforts.
Private investors therefore have an interest in ensuring local people, businesses and markets are resilient
to
climate
shocks.
Alternatively,
adaptation benefits could be thought of, and valued a concept commonly used to assess financial damages. 17
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This paper is authored by Leslie Debornes. CUTS briefing
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https://acfid.asn.au/blog-post/shifting-view-attracting-privatefinance-climate-adaptation
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