International adaptation finance : the need for an innovative and strategic approach

Working paper

Although existing estimates of adaptation funding needs in developing countries are still very vague, they all indicate that they are and will be in the tens of billions €/$ per annum. At the same time, many developing countries presently do not have the relevant 'absorptive capacity' – the capacity to carry out the adaptation measures needed −even if the funding were available. Most will unnecessarily have to suffer adverse impacts of climate change that could be avoided under an improved adaptation regime. The responsibility for these avoidable adverse impacts – whether due to a lack of funding or of absorptive capacity − will fall squarely on industrialised countries.
Some stakeholders, mainly from the developed world, have been tempted to cite the lack of certainty about the adaptation funding needs of developing countries and their lack in absorptive capacity as reasons to postpone a debate of the thorny issue of international adaptation finance. This is short-sighted at best and disingenuous at worst. The two issues are intricately linked, and there is an urgent need to look into ways of simultaneously scaling up the provision of adaptation funds for developing countries of the appropriate kind, and the absorptive capacity to use these funds meaningfully. While this paper is about the former, the debate on how the funds are best spent on the ground is by no means of lesser importance.
At present, all international adaptation funding instruments − except the recently operationalised Kyoto Protocol Adaptation Fund − are replenished through ODA-type bilateral donations. The level of international funding for adaptation in developing countries is woefully inadequate to meet projected needs. The current bilateral donation instruments are unlikely to ever be able to generate the required levels of funding, especially as it is meant to be additional to ODA (viz. experience with the Monterrey 0.7% GNI commitment for ODA).
Moreover, adaptation funding is seen by most developing countries not as a matter of 'donations' but as one of costs imposed by developed countries, and as such as debt incurred by them. Accordingly, neither of the traditional ODA funding modes (grants or concessionary loans), are seen to be appropriate payment modes. Funding is expected, and must be 'acceptable', in the sense of being not only appropriate, but new and additional, predictable, equitable, and adequate.

Authors: Müller, B

• Publication status: Published
• Peer review status: Reviewed (other)
• Publisher: Oxford Institute for Energy Studies
• Series: OIES paper
• Publication date: 2008-01-01
• Edition: Publisher's version
• Paper number: EV42
• ISBN: 9781901795769
• Language: English
• Keywords: climate policy; absorptive capacity; climate change finance; adaptation fund; multi-lateral fund; developing countries; funding; OIES; World Bank; MCCF