Available global funds to climate change adaptation programme for the benefit of poor people

Introduction
Climate change is making poor people more vulnerable and marginalised in developing countries despite the fact that they have very little responsibility for causing climate change. Developed countries, with less than 20% of the world’s population, are responsible for 75% of global emissions (UNFCCC 2009 cited in Nakhooda et al. 2011, p. 1). Therefore there is growing consensus to reduce greenhouse gas emissions by developed countries, and in the meantime, to support poor countries by providing finance for climate change adaptation programme (Oxfam 2007, p. 2). Climate finance is defined as financial resources for tackling climate change while delivering sustainable development (Doig 2009, p. 1). Under the United Nations Framework Convention on Climate Change (UNFCCC), developed countries commit to help developing countries in meeting costs of adaptation programmes to combat climate change. Hence, global funding mechanisms under UNFCCC, Kyoto protocol, and bilateral and multilateral donors have been established to fulfil growing demand to support this program since 1992. 

 

Different studies have estimated different amounts required for the adaptation programme which is quite higher than the committed by the developed nations. For example, World Development Report (2010) has estimated USD 30 - 100 billion per year is required to adapt climate change (see Table 1).  This fund must not come from the 0.7% target of UN development assistance, and should cover the extra costs of responding to climate change in as usual scenario. I will argue that the pledged fund is not sufficient for the climate change adaptation programme in order to address the need of developing countries, it should be additional to development assistance, and direct access to funding resources should be provided to developing countries to make funds efficient. I will analyse in this paper i) how much global funds under different mechanisms are available and what are the shortfalls, and ii) does direct access to these funds make them efficient and benefit to developing nations?


Problem: Insufficient and inaccessible funds

The estimation of global cost of adapting to climate change has been always a challenge for the researchers and scholars due to the high uncertainty involved, lack of data and methodology, and different adaptation measures taken at the local level. However, the major international organizations, government agencies and nongovernmental organizations working in climate finance issues have calculated, using different methodology, the cost of adaptation to climate change which comes various tens of billions dollars. For instance, as Table 1 below depicts, seven separate studies have estimated seven different costs required for climate change adaptation. These studies show the dire need of the funds for short, medium and long period adaptation programmes.

 

Table 1 - Estimates of the incremental costs of adaptation in developing countries ($bn per annum)
Study	2010-2015	2010-2020	2030	2010-2050
World Development Report (2010)				30-100
World Bank EACC (2010)				70-100
Project Catalyst (2009)		13-38
UNFCCC (2007)			27-67
Oxfam (2007)	> 50
UNDP HDR (2007)	86-109
World Bank (2006)	9-41
Stern Review (2006)	4-37
Source: Climate Funds Update 2012a

To meet the needs of developing countries for adaptation programmes, there are three global funding mechanisms established, namely the UNFCCC mechanism; the Kyoto Protocol mechanism; and multilateral and bilateral channels (Nakhooda et al. 2011). As part of the UNFCCC mechanism, the Global Environment Facility (GEF) plays the lead role for the transfer of funding to developing nations from developed nations. The funding instruments are the GEF Trust Fund, the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF). The Trust fund mainly deals with adaptation measures while the latter two deal with adaptation measures. Likewise, under the Kyoto Protocol, the Clean Development Mechanism (CDM) is basically for mitigation measures providing funding mainly to implement greenhouse gas emission reduction programmes. The programme consists of trade of carbon between developing and developed nations in the form of marketable credits. Two percent of the issued credits go to the adaptation fund. Similarly, multilateral and bilateral funds come mainly from country specific support programmes and multilateral development banks. The emerging trend of global funding mechanism is very complex. Mainly they are channelled through multilateral mechanisms but there is an increasing trend to trade via bilateral mechanism too. Besides, there are several national funds established in developing countries to obtain and channel funding from different donors.

 

Despite the heavy demands pointed out by numerous studies (Table 1), the committed funds to the climate change adaptation programme are significantly lower (Table 2). For example, Oxfam International (2007, p. 36) estimated the annual cost of adaptation programme is over USD 50 billion but the funds pledged under adaptation fund are only about USD 120 million per year. If we sum up all the pledged funding by developed nations from Table 2, it comes to only around USD 34 billion including both adaptation and mitigation programmes. This gives a clear picture of fund deficiency for climate change adaptation programmes. However, the World Bank (2006, p. 40) states that the present financial equipment is technically enough to respond the challenge posed by climate change on development practices. It is clear that the gap is so large that the funding should be substantially increased. 

 

Table 2: Global trends of fund size and spending

Fund	Pledged	Deposited	Approved	Disbursed
All figures are in US$ million.
Adaptation Fund (AF)	119.49	119.44	166.36	29.14
Amazon Fund	1,032.42	102.77	153.57	45.94
Australia's International Forest Carbon Initiative	216.27	67.06	125.54	31.7
Clean Technology Fund (CTF)	4,847	3,389.47	2,070.75	96.3
Congo Basin Forest Fund (CBFF)	165	165	95.85	15.83
Forest Carbon Partnership Facility - Carbon Fund	218.3	138.1	0.57	0.2
Forest Carbon Partnership Facility - Readiness Fund	239.4	212.6	27.24	11.47
Forest Investment Program (FIP)	644	459	50.96	3.18
GEF Trust Fund (GEF 4)	753.74	753.74	991.31	931.8
GEF Trust Fund (GEF 5)	1,141	1,048.10	311.35	21.37
Germany's International Climate Initiative	851.28	851.28	655.253	0
Global Climate Change Alliance (GCCA)	226.12	224.62	296.81	130.99
Global Energy Efficiency and Renewable Energy Fund (GEEREF)	169.5	65.66	64.07	0
Indonesia Climate Change Trust Fund	18.61	8.81	6.28	5.509999
Japan's Fast Start Finance	15,000	12,500	1,599.41	0
Least Developed Countries Fund (LDCF)	414.94	368.43	180.32	115.04
MDG Achievement Fund	89.5	89.5	89.52	88.9
Norway's International Climate and Forest Initiative	1,607.82	1,607.82	169.82	160.13
Pilot Program for Climate Resilience	1,208	807.54	164.561	4.299999
Scaling Up Renewable Energy Program	417	330	195.67	0.26
Special Climate Change Fund (SCCF)	216.55	170.65	125.17	91.6
UK's International Climate Fund	4,640	1,318.20	231.44	0
UN-REDD	150.84	118.25	108.13	90.91
Source: Climate Funds Update 2012b

On the other hand, if we look at Table 2, there is a substantial gap between committed funds and disbursed funds. For instance, the pledged amount for adaptation funds is about USD 120 million per year while the disbursed amount is only around USD 30 million per year.  This significant gap is mainly due to various barriers such as lack of information about how it works, composite nature of programme and implementation mechanism, and the abidance need with deluging administrative and financial requirements (Action Aid 2007, p. 9). The needs of developing countries as relevant to adaptation funding include both the need to be able to access funds and the need to be able to use these funds in line with the country’s adaptation requirements (Sagasti et al. 2005). Moreover, during the 12^th session of the UNFCCC Conference of Parties meeting, developing nations expressed their concerns about the existing complexity and barriers to access funds for adaptation programmes (UNFCCC Decision 3/CP 12 2006). For instance, recently, Nepal reiterated in its position paper to UNFCCC the need for easier and direct provisions to access funds and expressed dissatisfaction over the complex process and service charges taken by implementing agencies (Bhushal 2012, pp. 5). In brief, the gap between committed funds and distributed funds is underlying the existing complexity of funding mechanisms.

 

Solution: New and Additional fund, and direct access

Realising the heavy gaps between the required and committed funds for adaptation programmes, a new climate fund mechanism under UNFCCC was proposed at the Copenhagen meeting of Conference of Parties in 2009. In the meeting, developed countries committed a total amount of USD 30 billion for the period 2010-2012 as a ‘new and additional’ fund named the Green Climate Fund with balanced allotment between mitigation and adaptation programmes. They have also committed to a goal of mobilising USD 100 billion per year by 2020 from a wide variety of sources – multilateral and bilateral, public and private – to meet the needs of developing countries. Although the global climate community widely accepted the proposal, the term ‘new and additional’ is yet to be defined clearly.

 

At present, there are four different definitions of ‘new and additional’ in the current discourse: climate finance should be aid but additional to the 0.7% official development assistance (ODA); increase in 2009 ODA levels spent on climate action; rising ODA levels that include a limited portion for climate finance; and increase in climate finance without connecting to ODA (Brown et al. 2010a, p. 2). A feasible solution for the short run is to use baselines on the basis of projections made in a business-as-usual scenario of ODA whereas provision of truly new funds from new sources could be the longer-term benchmark which can be achieved via substantial up-front negotiations between developing and developed countries (IIED 2010). In the current debate, most people believe that ODA will be the source of finance for this additional funding, at least, for the short term because it is a significant channel (Brown et al. 2010a, p. 6). Hence, it is important to track ODA to make sure that financial resources going to climate change are truly an additional amount. However, the details of the mechanism, governing body, its procedure, and reporting, monitoring and verifying mechanism are yet to be negotiated. Likewise, the institution for fund disbursement has to be agreed between the countries. There is no agreed baseline for assessing whether the funds are ‘new and additional’.

 

Besides new and additional funds, direct access is another solution to make global climate funding more efficient and approachable. In general, direct access is defined as without any third party implementing agency, so fund recipient countries can access money directly from the source. According to UNFCCC (2007), in direct access implementing or executing national entities selected by governments can submit their project proposal directly and access the fund directly without any third party interference (Paragraph 29, Decision 1/CMP.3). The main idea is to heighten the country's ownership of the adaptation programme, make fund recipient countries more accountable, increase involvement in adaptation programmes, and clear any third party role from fund disbursement (Brown et al. 2010b, p. 2). It is believed that direct access will be instrumental to speed up the delivery of desired outcomes of adaptation programme with harmonization of national plans, policies and system; potentially focusing on local priorities (Adaptation Fund 2009, p. 7). In fact, these principles of direct access have already been implemented and have become successful programmes at a global scale. Most noticeably, two global health funding mechanisms, Global Fund to Fight AIDS, Tuberculosis and Malaria and the Global Alliance for Vaccines and Immunisation (GAVI), are two outstanding programmes (Brown et al. 2010b, p. 2). These programmes can lay a good foundation for the whole climate change adaptation programme, in particular the newly established Green Climate Fund, because of its commitment to country ownership; democratic governance; civil society participation; sustainable funding, and access for the most vulnerable communities (Action Aid 2011, p. 19). Recently, the same model of direct access was also prepared and implemented by the Adaptation Fund which is now fully operational and has approved two proposals and endorsed six. Furthermore, unlike other funding mechanisms mentioned above, if we can establish direct access to this newly established Green Climate Fund, the fund will be directly channelled to the national implementing entities that will primarily expend this much needed amount in vulnerable communities.

 

Conclusion

Adaptation to climate change is the best solution for poor people, for whom funding is required to formulate different adaptation programmes. There is a high deficiency in the climate funding due to lack of fulfilment of commitment by developed countries. Also, committed funds are not available to poor countries due to complexity in funding mechanisms. This can be solved by providing additional funds to developing countries from developed countries and by providing easy and direct access to the funding source.

 

References

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