How can an agreement on adaptation finance be reached as part of the United Nations Framework Convention on Climate Change (UNFCCC)? This report examines the issues in relation to the three stages of adaptation finance: generation, governance and delivery. The block in negotiations can often be attributed to different perceptions of what is ‘equitable’ and ‘fair’ burden-sharing. Recommendations include the need for agreement on measurable allocation criteria to facilitate objective decision-making.
Finance has emerged as one of the thorniest issues in negotiations on climate change adaptation. Parties to the UNFCCC have expressed very different ideas about the principles that should underpin an agreement. As a result, Parties have held widely diverging views of the role of the UNFCC in generating, governing and delivering resources to support adaptation in developing countries.
Negotiations on adaptation finance have centred on questions of supply and demand. Firstly, identifying the adaptation needs in developing countries and identifying which of these call for new and additional financial resources. Secondly, determining at what level to set new and additional financial resources and how these can be generated and delivered.
Adaptation is not well-defined in the UNFCCC, which is one reason why needs assessments and cost estimates are uncertain and possibly underestimated. Further issues that emerge include the following:
- A range of different types of legitimate adaptation needs have been identified in various UNFCCC documents. This diversity may be challenging when deciding on the allocation of scare funds.
- Adaptation finance can be delivered on the ground through public (domestic, multilateral or bilateral), private sector or civil society delivery channels. Public sector delivery plays a non-negotiable key role in adaptation finance.
- The current institutional architecture of the financial instruments for adaptation under the UNFCCC is overly complex. Its governance is inadequate in terms of efficiency, fairness and responsiveness to the needs of developing countries.
- The adaptation funding gap will not be addressed by existing funding. Options for new and additional financial resources include setting aside specific monies or identifying fundraising instruments to generate new funds.
Uncertainty about the investment and financial flows needed for adaptation should not be used as an excuse for acting indecisively. Other overarching principles emerging from the study are that:
- Adaptation actions need to be prioritised and implemented in a country-driven manner at the national or sub-national level, rather than negotiated at the international level.
- Agreement needs to be reached on measurable allocation criteria. These can be used to decide objectively the share of adaptation finance to which eligible countries are entitled.
- A substantial degree of consolidation of international adaptation funding streams is required to ensure an efficient, fair and flexible payment process.
- Many different sources will be necessary to provide adequate levels of funding to meet current and future adaptation needs in developing countries.
