A Struggling Climate Fund: Germany’s Role in Strengthening the Adaptation Fund

Photo: S. Minninger, Brot für die Welt

The UN Adaptation Fund once again fell well short of its $300 funding target at the United Nations Climate Change Conference in Baku in November 2024. It is uncertain whether the fund will even be able to implement all the projects in the pipeline for 2025 with the funds currently available. The financial resources of the Fund, which is highly regarded by both developing and industrialized countries and currently depends almost exclusively on voluntary contributions from donor countries, are not in good shape. This also raises the question of what Germany can do in 2025 to support this vital Fund.

Unpredictable and unreliable resources

In the future, the Adaptation Fund is to generate additional financial resources by receiving five percent of the emission reduction certificates traded under the new market mechanism under the Paris Climate Agreement. The Adaptation Fund can then sell these certificates at market prices through its trustee – the World Bank – to raise funds. However, the Fund assumes that initial income from this source will not be expected until 2026 at the earliest. Experience also shows that such income is neither predictable nor reliable and can vary significantly. Therefore, continued reliable payment of voluntary contributions by donor countries will remain essential in the future.

Limitations due to insufficient resources

Sufficiently predictable and reliable funding will be crucial if the Adaptation Fund is to significantly expand its measures and impact. At present, demand for the Fund’s resources and its implementation capacity are constrained by a per-country cap of $20 million on the maximum funds available for regular projects and the restriction to only two possible national implementing entities (NIE) per country. These caps were in turn introduced due to the Fund’s limited financial resources.

With its projects, the Adaptation Fund delivers some of the highest quality contributions to international climate finance. This is exactly the kind of funding that should be available more. Negotiators at the UN climate conference broadly agree on this point. Paradoxically, this is not reflected in the financial contributions to the fund.

Comparing donor countries is complex

Comparing financial contributions of different countries to the Adaptation Fund is challenging. Various approaches exist for evaluating international climate finance contributions and calculating fair shares among donor countries. These take into account that countries’ economic power, size, and historical contributions to global warming vary significantly. They also vary in their assumptions about the base of donor countries: Some models include only traditional donor countries, while others consider a broader range of contributors.

The table below compares Germany’s contributions to the Adaptation Fund from 2022 to 2024 with those of other countries that provided funding in the same years. To compare countries’ contributions, we used each country’s fair share based on Option 3 from the Center for Global Development’s 2024 paper, “Climate Finance: Fair Shares Revisited” . This is more of a “progressive” approach among industrialized countries, because it allocates “fair shares” not only to traditional donors but also to a larger group of additional countries.

Germany’s contributions to the Adaptation Fund in relative comparison based on allocated “fair share” of climate finance for countries[1]

Explanation notes on the table: [1] The “fair share” used for this calculation is an assigned percentage that countries should contribute to international climate finance, based on a methodology outlined in the Global Center for Development’s paper “Climate Finance: Fair Shares Revisited”. This paper presents several options for calculating the “fair share.” The option applied here is Option 3, which considers cumulative emissions since 1979, aggregate gross national income, and population size. Under this approach, commitments increase with both emissions and income.
The announced contributions of donor countries to the Adaptation Fund for 2022, 2023, and 2024 were compared using their assigned “fair share” percentages. A figure greater than 1 (>1) indicates that a country’s contribution for the respective year was higher than Germany’s contribution in relative terms. Conversely, a figure less than 1 (<1) means the country’s contribution was comparatively lower than Germany’s for the same year.
[2] Includes contributions from the Brussels and Wallonia regions.
[3] Includes contributions from the Province of Quebec and the Canadian government.

In relative terms, other countries outperform Germany

Germany has been a long-standing supporter of the Adaptation Fund and remains its largest overall donor. However, if one looks at Germany’s contributions in relative comparison according to their allocated “fair share” of climate finance, some countries have contributed significantly more. In 2024, Spain and Sweden contributed more than twice as much as Germany in relative terms. In 2023, Austria and Sweden’s contributions were more than four times higher than Germany’s by the same measure.

In recent years, Germany has made it clear that it also expects other countries to lead the way with their financial contributions to the Adaptation Fund. The relative comparison in the table shows that in 2022-2024, four countries (Ireland, Iceland, Sweden and Spain) consistently contributed more to the Adaptation Fund each year than Germany. In 2023, there were even eight countries (Belgium, Denmark, Ireland, Iceland, Norway, Austria, Sweden and Spain) that outperformed Germany in relative terms.

Many countries contribute irregularly or in small amounts

The relative comparison in the table also shows which countries have contributed, but only to a very small extent. While Germany has consistently contributed to the mobilization targets of the Adaptation Fund in recent years, there are countries that have contributed sporadically or not at all. The overview for the three years 2022-2024 alone makes it clear that many countries did not make annual contributions to the Adaptation Fund during this period. Italy, Japan, New Zealand, Portugal and the United States contributed only in 2022 and have not contributed to the Fund since then. The UK, for example, does not appear in the table at all because its last contribution was in 2021. Although Denmark performs well in relative terms, it made its first contribution to the Fund only in 2023 and did not contribute before then. Sweden, just like Germany, has been a consistent supporter over the years. The relative comparison over the last three years therefore also has weaknesses, but overall, it is a good reference for governments to identify the size of future contributions and lagging countries.

Germany should align its contributions with top performers

Germany should adjust its contributions to match those of the leading countries identified in the relative comparison. To ensure more predictable and reliable financial resources, Germany should commit to multi-year contributions to the Adaptation Fund. Other countries, such as Ireland, Iceland, Norway, Sweden, Switzerland, and South Korea, have already adopted this approach in the past. Multi-year contributions should become standard practice in the future. However, it is crucial that these commitments are clearly announced to prevent older contributions from being diluted retroactively.

Germany and other leaders must pressure lagging countries

Germany must also form a coalition with other leading countries to exert pressure on nations that lag far behind in their relative contributions to the Adaptation Fund. This includes countries that contribute sporadically, have not contributed for a long time, or have never contributed at all. Germany should use its diplomatic skills early in 2025 to pursue this goal and avoid another shortfall in funding for the Adaptation Fund at the climate summit in Brazil at the end of the year. If Germany and other leading countries succeed in convincing others to make significant (multi-year) contributions, this could positively influence the strained climate finance negotiations.

A significant increase in resources for the Adaptation Fund is essential for the newly agreed climate finance target

A substantial increase in resources for the Adaptation Fund is critical for achieving the New Collective Quantified Goal (NCQG) agreed upon at the climate summit in Baku. The new climate finance target aims to significantly increase the share of international climate finance channeled through UN climate funds, including the Adaptation Fund. The NCQG sets a goal of tripling annual outflows from these funds by 2030 compared to 2022 levels. It also calls on all stakeholders to enhance efforts to provide developing countries with efficient and effective access to multilateral climate finance. The Adaptation Fund, which reserves at least half of its resources for direct access by developing countries, plays a pivotal role in this effort. At the climate conference in Brazil in late 2025, donor countries must send a clear signal that they are committed to this promise and ensure a steady and significant increase in financial resources for the Adaptation Fund.

Julia Grimm, Germanwatch