Adaptation Fund

Adaptation Fund: a record number of new projects, but an uncertain financial and political outlook

Photo: Krackhardt, Brot für die Welt

The 26th meeting of the Adaptation Fund (AF) Board, which was held in Bonn from the 6th to the 9th of October 2015, was a memorable gathering. The AF, which finances concrete adaptation programs and projects in developing countries, had a total of 32 project applications to consider at the meeting.

Never before in its history had so many project applications been received and discussed by the Board. This shows that awareness of climate risks and the need to adapt has grown significantly. It also testifies to the good work of the AF in recent years. With measures such as the Readiness Program launched in 2014, it has increased the capacity in the countries and accredited institutions to the point that they are now able to develop good project applications that benefit the most vulnerable people and communities while complying with the Fund’s high environmental and social standards.

The 32 project applications included twelve projects submitted under the AF pilot program for regional projects – the first such applications since the pilot program’s inception in May 2015. These projects implement adaptation measures with multiple beneficiaries that extend across entire regions, not just individual countries as in the past. Within this context, one of the project proposals approved, for example, contains joint measures such as the establishment of early-warning systems to enhance the capacity of local centers for risk reduction and management in the Caribbean.

With the implementation of this pilot project, the AF is once again entering new realms and underscoring its pioneering role in the architecture of international climate finance – one that it first demonstrated with the establishment of direct access for national institutions. The promotion of regional, cross-border projects is an innovation in climate finance that could serve as a model for other institutions such as the Green Climate Fund (GCF).

A paradox: good work but an uncertain future

Despite its consistently successful work, the AF’s financial situation remains difficult. The originally intended source of funding – revenue from carbon credits – remains negligible due to inadequate climate protection targets, and so the Fund’s work remains dependent on financial pledges from governments. The AF did not reach its fundraising goal of $80 million in 2014 – despite Germany’s contribution of around $60 million. So far this year, there have been no signs of additional funding from the donor country camp. Faced with the increasing number of promising project applications requiring a decision at the next Board meeting, as well as the ongoing implementation of the pilot program for regional projects, the AF will be forced to discontinue its good work in the near future.

Setting the course in Paris

The financial situation of the AF is becoming increasingly precarious due to the nearly complete operationalization of the GCF. The attention of the international climate community is still focused mainly on the new multilateral fund, which is slated to approve its first projects and programs just before the climate summit in Paris – an admittedly vital political signal for the negotiation of a new global climate agreement.

The international community should nevertheless ensure that the AF can continue its vital work – which certainly complements that of the GCF – through 2015 and beyond. The GCF can only benefit from a close relationship to the AF in light of the latter’s years of experience in the adaptation sector, its promotion of concrete adaptation measures in developing countries, the successes of the implementation of the Readiness Program and its general cooperation with local stakeholders in the affected countries. Experience can be gained in the “small” AF in a number of areas before applying it to the GCF. While initial attempts at convergence between the two funds have already taken place, the climate summit in Paris must provide a further positive signal with respect to the AF to secure its future expansion.

New pledges in Paris covering at least the AF’s 2015 fundraising goal of approximately $100 million will be crucial. Moreover, a political commitment to preserve the AF must be made in the negotiations on the new climate agreement, and the Fund must be placed on a stronger financial foundation. To this end, the UNFCCC Parties should also consider different sources of funding as alternatives to those currently available. The first step in this direction will be to recognize the important role and good work of the AF in Paris, and to highlight the AF as an institution that will support developing countries in the implementation of the Paris agreement. The reality so far has been the contrary: The draft text by the co-chairs of the working group for the new climate treaty does not mention the AF at all – neither in the draft of the new climate treaty, nor in the accompanying draft decision of the UNFCCC Parties.

A positive example for Paris

Germany once again bears a special responsibility here, and not only because Bonn hosts the headquarters of the AF. As of the next meeting, Germany will also co-chair the AF Board, making it the number-one ambassador of the Fund.

Germany’s pledge to the AF already had a positive effect on the dynamics of the climate negotiations in Lima last year. More than ever, it remains to be hoped that Germany will continue to support the AF as it has in the past, and that as the AF’s leading advocate, it will mobilize other donors for a positive signal in Paris.

David Eckstein, Germanwatch