Adaptation Fund (AF)

While the decision to establish the Adaptation Fund (AF) was made in 2001 during the seventh climate conference in Marrakech, the fund was not able to commence its work until 2008. It has been fully functional since 2009. The AF is managed by the Adaptation Fund Board (AFB), which consists of 16 members and their deputies. It is the only Fund with a developing country majority among Board members.

Objectives

The Fund finances concrete adaptation projects in developing countries that have signed the Kyoto Protocol and are particularly vulnerable to the adverse effects of climate change. Target countries have the opportunity for direct access to financial resources without going through multilateral institutions, an unparalleled feature in international climate change financing architecture to date. It is also the only fund that even has a maximum limit of 50% of resources for projects implemented by multilateral institutions.

Key developments

The Adaptation Fund is currently active in 73 countries and has approved a total of $778 million for 114 adaptation projects. Thanks to the Readiness Programme launched in 2014, the fund has been able to steadily increase the number of implementing entities from developing countries as well as the total number of projects submitted via direct access. Through the start of a pilot program for regional projects in 2015, it aims at funding projects that extend beyond national borders. For this purpose the board of the fund committed a total volume of $30 million for 2021 and another $60 million for 2022. Other recent developments are the introduction of the Enhanced Direct Access Window, the Innovation Facility and the  lifting of the country cap to 20 million USD per country and opportunity to get up to 2 National Implementing Entities accredited (before it was one only).

The Adaptation Fund Board adopted a medium term strategy in October 2017 to define its role as funder of local and regional adaptation projects more clearly within the international climate finance landscape. As of January 1st 2019 the AF is now also serving the Paris Agreement based on a decision taken in Katowice.

Funding volume and Germany’s contribution

The Adaptation Fund was originally financed by revenues from the trading of certified emission reductions (CERs) and voluntary contributions from donor countries. However, donor countries have been restrained with their contributions for a long time because of the innovative financing basis. In recent years the financial situation of the Adaptation Fund has been strained due to the ongoing poor state of emissions trading. The lack of revenue from the sale of CERs has made it almost entirely dependent on donations. Under the Paris Agreement, the Fund is expected to be funded by a fee on international emissions trading schemes as well as voluntary public and private contributions.

At the end of 2020, the international donor community has committed a total of $116 million to the AF. Over the past years, Germany has established itself as the biggest supporter of the fund, contributing a total of €228 million since 2013. During the donor conference in December 2020 Germany pledged another €50 million to the Adaptation Fund. (June 2021)