But some countries insist that its fundamental structure be changed
The Adaptation Fund was set up in 2001 under the Kyoto Protocol to finance projects and programmes in developing countries to adapt to the harmful effects of climate change. The finance was raised, in part, by levying a 2 per cent “share of proceeds” on the value of credits traded on the international carbon market under the Protocol — known as the ‘Clean Development Mechanism’. It also relies on contributions from developed countries.
Since 2010, the Adaptation Fund has directed $532 million to 80 concrete adaptation projects in the most vulnerable communities of developing countries, serving 5.8 million direct beneficiaries. In 2018, the Fund raised $129 million in new pledges, a record-setting year. This is owing to its consistent success in financing projects which build national capacities and foster developing country ownership of climate change adaptation.
It has done so, in part, because close to 70 per cent of its Board is represented by members from developing countries. This fact has become the core of a disagreement over the future of the Fund, which is being discussed at the Conference of Parties 25 (CoP25) in Madrid.
The technical issue is that the Adaptation Fund needs to be transitioned from serving the Kyoto Protocol to serving the Paris Agreement. The Kyto Protocol refers to Annex I and non-Annex I countries, where the Paris Agreement refers to developed and developing countries. A decision is needed to address how the composition of the Board will account for this shift.
Several developed countries want to change the governance structure of the Adaptation Fund to ensure more developed country participation. One proposal is to expand the size of the Board to 18, and allocate separate seats to Eastern and Western European nations. Developing countries are adamant that developing world presence on the Board should not be diluted. Some developed countries expressed support for maintaining a developing country majority on the Board, but consensus looks far off.
Nor are there plenty of avenues for adaptation finance. Despite the Paris Decision calling for a balance in finance between mitigation and adaptation, only one-fifth of finance provided by the OECD went to adaptation in 2017. At the Green Climate Fund, the largest dedicated climate fund (with around $9.8 billion in pledges), board battles between developed and developing country representatives have become common.
Developed countries consistently raise questions regarding the ‘quality’ of proposals, and regularly oppose proposals for adaptation projects on dubious grounds. These disagreements derailed the fund-raising process last year, which has only partially recovered this year.
The Adaptation Fund, therefore, despite its limited size, is one of the few consistent avenues for finance sourced from developed countries, over which developing countries have significant control. If markets under the Paris Agreement take off, the amount of money from “share of proceeds” available to the Fund could become significantly larger, as we discuss here.
The challenge is to keep raising money from developed countries, while retaining control in the representatives of those who are most vulnerable to the climate crisis. A decision on these lines, however, is unlikely to emerge from Madrid.
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