The Marrakech accord (COP 7) in 2001, stressed the need for predictable and adequate levels of funding for parties not included in Annex 1 and the need to develop appropriate modalities for burden sharing among parties included in Annex II. Three new funds were established; 18 areas of assistance on adaptation were identified, including for GEF funding and the development of National Adaptation Porgrammes for Action (NAPAs) for LDCs was decided upon. The adaptation fund was finally operationalised in Bali, where an adaptation fund board was set up, serviced by a secretariat (GEF) and a trustee (World Bank), on an interim basis.
The Bali Action Plan: paragraph 1 (c) on “Enhanced action on adaptation” which spells out the need for urgent implementation of adaptation actions is now being discussed under the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA).
While all agree on the need for adaptation measures, differences appear among countries on two counts: a) the question of responsibility and b) where the money is to come from. The Alliance of Small Island States suggests a Convention Adaptation Fund, linked to GHG emissions and based on the polluter pays principle (thus, responsibility falls upon developed countries); also, there should be an international insurance mechanism. G-77 and China want the financing to be ‘predictable and stable, new and additional, adequate and timely’; India adds the element of ‘automaticity’ should also guide how money is generated for adaptation.
The EU has suggested a framework of action for adaptation and says while effective action on adaptation is the responsibility of every country, it can be complemented by global action; it proposes a broad funding architecture that can leverage private and public financial flows. The US does not think an intergovernmental insurance mechanism is a good idea.
The Swiss government has proposed a fund for adaptation, based on a global burden sharing system. The funds would be raised, using the polluter pays principle, through a global levy of US $2 per tonne of CO2 on all fossil fuel emissions—roughly a burden of US $0.5 cents/litre of liquid fuel. The uniform and global tax reflects the need to address the problem on a global scale, says the proposal. But to take into account the principle of common but differentiated responsibiities, a basic tax exemption of 1.5 tonnes of CO2 per inhabitant would be given. The estimated revenues, amounting to US $18.4 billion, would be allocated to a multilateral adaptation fund.
Alliance of Small Island States (Misc.2/add1)
The framework to support, facilitate and implement adaptation actions should address the timely flow of new and additional resources to support immediate and urgent national adaptation activities in particularly vulnerable developing countries.
With respect to national planning for adaptation, the framework should include, rapid risk assessment – an institutionalized NAPA like process for small island states and LDCs, to enable prioritization of and urgent response to, needs at the national level with timely support for implementation guaranteed under the convention.
The framework should include a Convention Adaptation Fund, linked to GHG emissions, based on the polluter pays principle, with criteria established for contributions and for prioritization of resources. A share of the proceeds from the auction of AAUs could be used for this purpose.
An international insurance mechanism, to help fund financial resilience to the impacts of extreme weather events should be set up.
For enhanced knowledge sharing, regional centres of excellence should be strengthened.
The proposal for the institutional framework for adaptation, which assists the most vulnerable, will be submitted at a later date.
India (October 17, 2008)
Enhanced implementation of adaptation is a priority for India, given our high vulnerability to climate change and the fact that climate change impacts can pose a significant risk to economic and social development and poverty alleviation efforts.
The generation of resources for adaptation should be guided by:
- Adequacy – in terms of being able to finance the different categories of adaptation interventions in developing countries;
- Predictable – so as to enable responses to be planned and implemented more effectively;
- Automaticity – an example of automaticity exists for the adaptation fund, which is financed through a 2 per cent levy on CDM transactions, this can be extended to other kinds of carbon market transactions. In addition, a scheme of defined contributions can be adopted.
- New and additional – this means there should be no redirection of investment in developing countries from development programmes.
What should be financed?
As climate change poses a specific additional burden in different sectors and regions and in different contexts, the ‘additional cost’ should be supported. This financing should be in the form of grant, or at concessional finance.
How will it be financed?
Recognising that the level of funding will not be available for financing full cost of adaptation will not be adequate for financing full cost of adaptation even in the most optimistic scenarios of fund availability, financing the additional cost should be based on a negotiated set of co-financing or cost-sharing levels.
The new mechanism for adaptation should have an executive board, constituted by and accountable to the COP. The composition should have balanced representation from Annex 1 and non-Annex 1 parties; an advisory board to assist the executive board; a secretariat to support the operations and a trustee for managing and disbursing the funds.
What will be the nature of interventions for adaptation?
G-77 and China (October 12, 2008)
- Concrete adaptation projects – first, where projects have to respond to climate change or where climate change is leading to persistent changes, like drought, and require an adaptation intervention specific to this additional risk. The second category is where climate change poses new and unique risk that may arise in future, that may be non-marginal and go beyond the baseline of climate variability;
- Adaptation technologies – which are need for enabling adaptation may be treated in a manner similar to mitigation technologies with regard to issues of IPR, grant finance and support for technology development and transfer.
- Insurance – a re-insurance mechanism to deal with catastrophic losses due to climate hazard may be created and a portion of the global resources generated for adaptation may be assigned for such a re-insurance fund.
- Mainstreaming in ongoing development programmes – in general such activities should be eligible for full cost funding.
The framework/mechanism must be established under the Convention to identify and finance the most urgent and immediate needs of all developing countries. The framework must establish a climate change adaptation committee under the convention with a majority of members from developing countries and establish regional adaptation network centres/ and or centres of excellence in all developing country regions.
The financing for the work plan under the framework/mechanism must be predictable and stable, new and additional, adequate and timely, for the implementation of adaptation planning, projects and activities, including priorities identified through NAPA-like process and national adaptation strategies.
The funded should be provided from the assessed contributions of developed countries as part of their commitment under the convention. It should be massively scaled up (by 2-3 orders of magnitude) to be adequate and must redress the historical inequity in allocation of funds for adaptation.
Brazil (September 30, 2008)
Developing countries, despite their limited historical responsibility for climate change, face the highest costs regarding its impacts.
Current barriers that hinder adaptation include knowledge gaps, impediments to information flows relevant for adaptation decisions, and most importantly insufficient resources for building adaptative capacity and action.
The work programme must include vulnerability mapping, which must be country driven and based on national circumstances.
The establishment of national and regional centres for adaptation planning must be entitled to full incremental cost funding. Enhanced implementation of the adaptation provisions established in the convention will require significant new financial resources. To bridge the adaptation gap, predictable, stable and adequate funding should be ensured by means of the new financial mechanism established under the convention. These resources must be new and additional, beyond ODA.
China (September 28, 2008)
Establish an adaptation fund under the convention. Annex 1 parities shall provide necessary resources, including assessed contributions.
These funds will be used to prepare and fund National Adaptation Programmes of Action (NAPA).
Establish Regional Adaptation Network Centres and adaptation committee under the convention
Switzerland (misc.1/add.1), August 2008
Adaptation measures must complement mitigation, if damages are to be kept from growing to truly catastrophic levels, especially in vulnerable countries of the developing world. According to World Bank and UNFCCC estimates the cost of adaptation will be between US$ 10-40 billion per year, which neither the adaptation fund under the CDM of the Kyoto Protocol nor other pledged funds can provide.
To fund adaptation, Switzerland is proposing a global burden sharing system, based on the principle of common but differentiated responsibilities and legally binding on all nations. The elements are as follows:
1. The funds would be raised, according to polluter pays principle, through a uniform global levy on carbon of US$ 2 /tonne of CO2 on all fossil fuel emissions – this translates to a burden of about US$0.5 cents/litre of liquid fuel. A global and uniform CO2 levy reflects the need to address the climate change problem on a global scale.
2. A basic tax exemption of 1.5t/CO2e per inhabitant would be given, to take into account the principle of common but differentiated responsibilities.
3. On the basis of GHG emissions, the total revenues collected will amount to US$ 18.4 billion, which would be allocated to a multilateral adaptation fund. The share of industrialised countries to this fund is US$ 15.2 billion -- 76 per cent.
4. Each country will operate its own national climate change fund, which will work as partner institutions to the multilateral adaptation fund. The national funds can be used according to national priorities for mitigation measures as well as adaptation. The China CDM fund and the Green Investment Scheme between Russia and potential AAU buyers are examples of such funds.
5. Implementation issues need to be studied carefully to meet the challenge of administrative efficiency. Experience in several countries suggests that an upstream approach is most feasible in the levy on CO2.
European Union (July 2008)
EU has proposed a framework for action on adaptation (FAA). It accepts that even with the most stringent mitigation measures, there will be a need to adapt to climate change. It is challenge facing all countries, especially those particularly vulnerable, such as least developed countries, small-island developing states and African states that are prone to drought, desertification and floods. Also accepts that adaptation actions on their own are not sufficient, and should be “complemented” by concerted efforts to mitigate climate change.
Whose responsibility is adaptation?
EU says effective action is the responsibility of every country and should be addressed at the local, national or regional level, complemented by international support. EU Framework for action on adaptation:
- Should be a partnership between developed and developing countries. The action on adaptation under the UNFCCC would give importance to the climate regime in catalysing action.
- Developed country responsibility would be to “improve access to new, additional and predictable financial flows”.
- They would also integrate adaptation into bilateral and multilateral development programmes;
- Developing country responsibility would be to produce and implement climate resilient plans, budgets and prioritise measures.
- They would also create ‘enabling’ environment for adaptation responses (policy, legislative, institutional).
How will adaptation be implemented?
EU: FAA: Enhanced action on adaptation should strive for consistency and coherence with national development priorities and strategies. These should be integral part of national development plan and be taken into account in budget planning and tailored to the particular circumstance of the country or region affected and implemented at the local level. Mainstreaming climate change poses challenge as there needs to be an adequate information basis to make the right decisions and define necessary policies and associated responses. Also climate change adds on to the challenge of development and has a cost associated with it. Given this, EU proposes that FAA should develop ‘guiding principles and approaches to facilitate the integration of adaptation actions into national and sectoral planning processes’. For this, ongoing work by OECD/DAC should be used. FAA should facilitate efforts to prepare vulnerability assessments and develop methods and tools to prioritise adaptation actions.
Who and how will technology transfer for adaptation work?
The EU:FAA would assist in identifying priority technology needs for adaptation. It would mobilise those organisations with relevant expertise. It would facilitate support for technology research and development, deployment and diffusion, including from the private sector.
What will be the financial architecture?
EU:FAA On the provision of adequate and predictable financial flows to assist developing countries that are particularly vulnerable. While the estimates of the financial flows required for adaptation remain imprecise, there is a consensus that they will need to be large. Further work by UNFCCC should clarify the costs. Meeting costs will require variety of sources of funding. For many countries, the costs of adaptation will have to be borne domestically. But this will need to be supported by international finance, especially for poorest and most vulnerable countries. And while public resources will play an important role, private investments can be expected to cover a portion of the adaptation costs in several sectors. Effective provision of finance will require a coherent, consistent and effective financial architecture that as strong synergies with national and international policies and efforts.
Where will the money come from?
US (October 1, 2008)
EU:FAA proposes a broad toolbox, which can leverage private and public financial flows. The funds would come from: CDM levy; public-private partnerships in national policies and ways to generate finance while enhancing mitigation. In the EU, 15% of EU-ETS allowances for aviation will be auctioned from 2012 onwards and revenues used to tackle climate change including adapting to the impacts of climate change, especially in developing countries.
There are different options to structure the adaptation framework:
- A sectoral approach – organised by economic or resource structures
- A functional approach – organised by information/methods like vulnerability assessment, adaptation planning etc
- By level and type of actor – by local, national, regional and international actors
Adaptation should be consistent with national development priorities and strategies – country driven. The responsibility for adaptation lies with each party, assisted by action taken under the UNFCCC. It is important to link adaptation with mitigation, in that enhanced action on mitigation will limit the need for adaptation. While there may be standalone actions – actions that are purely for climate change adaptation – but we do not believe that there are effective adaptation strategies independent of development strategies in relevant climate sensitive sectors and contexts.
US thinks a diversity of funding sources is appropriate, because:
- Adaptation actions and actors are diverse;
- We have an interest in ensuring our funding is used effectively and we are convinced this can best be done if adaptation funding is integrated into broader development assistance;
- Funding obligation in UNFCCC with respect to adaptation is different from mitigation. Under article 4.4 of the Convention, the obligation is to “assist” developing country parties that are particularly vulnerable to the adverse effects of climte change in meeting costs of adaptation to those adverse effects – and assistance can and should take different forms.
The US does not support calls for an additional fund or intergovernmental insurance mechanisms.
On the nature of institutional arrangements for adaptation, Parties proposed that:
(a) Mechanisms are needed to coordinate adaptation, such as a United Nations coordination mechanism for linking institutions doing adaptation work (AOSIS, adaptation workshop);
(b) The institutional set-up for adaptation should be reorganized and focused (South Africa, adaptation workshop);
(c) Institutional frameworks for adaptation should include an institutionalized structure and process to identify and fund the most urgent and immediate needs of SIDS and LDCs, and a mechanism for delivering resources and technical support to address these priority needs. This will require mutually reinforcing institutional structures at the national, regional and international levels (AOSIS, MISC.2/Add.1)
(d) Links with other international, regional and national bodies and stakeholders that are implementing adaptation and related activities should be facilitated (African Group, MISC.2/Add.1);
(e) The UNFCCC could draw on the approach used in the Pacific Islands Framework for Action on Climate Change 2006–2015 for advancing adaptation (Australia, MISC.2/Add.1);
(f) A portfolio of possible areas of action and international cooperation on adaptation should be identified (United States, adaptation workshop);
(g) A protocol on adaptation within the UNFCCC should be part of the post-Kyoto regime (Bangladesh, MISC.1);
(h) Consideration of international cooperation should build upon, and be in addition to, the work already being undertaken under the Convention (Philippines, MISC.1);
(i) Parties to the UNFCCC could outline the roles and responsibilities of different actors and agree on the principles to guide adaptation action, where possible identifying priority areas through information provided by national governments, and regional and multilateral bodies (Australia, MISC.2/Add.1);
(j) There is a need to establish a “climate change adaptation committee” under the Convention, to enhance adaptation and allow the international community to act together as early as possible to adapt to climate change, focusing on providing help to developing countries for capacity-building and practical actions (China, adaptation workshop, MISC.5);
(k) National climate change committees for adaptation, similar to the “ozone units” created by the Multilateral Fund of the Montreal Protocol, would enhance coherence in national policies for adaptation (Brazil, MISC.5).