Guest Article #25

The Adaptation Fund - where is it heading?

The Adaptation Fund (AF) was established under the Kyoto Protocol of the UNFCCC and launched at COP-7 in Marrakech, in 2001. The aim was to finance adaptation projects in vulnerable developing countries. Real work to establish the Fund started only in 2008 with the establishment of the Adaptation Fund Board (AFB). The Board with its first Chair, Richard Muyungi from Tanzania, managed to get the legal framework prepared and adopted at the Poznan climate change conference by the end of 2008. Further work by the Board in 2009 has resulted in, among other accomplishments, agreed Operational Policies and Guidelines, a framework to assure so called ‘direct access' and an accreditation process for national implementing entities. Thus the Fund is becoming operational before the climate change conference in Copenhagen at the end of this year.

What is special about this Fund?

First of all, it has a unique governance structure reflecting an equitable and balanced representation of all parties to the Kyoto Protocol. Developing countries have a majority in the Board (16 members and 16 alternates). Direct access is a central feature in the provision of funds. This means that implementing entities at the country level, after having gone through an accreditation process, can access funds directly from the AF for approved projects and programmes. In this way, one can claim that the AF represents an important step towards real ownership by developing countries.

Secondly, the funding mechanism is not dependent on traditional development assistance. Instead, the Fund is self-financed through the carbon market, receiving 2% of the proceeds from Clean Development Mechanism (CDM) project activities. This innovative mechanism points to new possibilities for the future.

With these features, it would have great symbolic value if the AF receives approval for a quick start up, and could get positive support in Copenhagen and be allowed to be scaled up.

Secretariat services for the AFB are now provided by the Global Environment Facility (GEF), and the World Bank serves as trustee for the AF, both on an interim basis. More permanent and enlarged facilities would be required in the long term if the AF operations are scaled up.

The credibility of the AF is very much linked to strong fiduciary standards, good and clear policies and procedures, good recipient accountability, and proper monitoring and evaluation systems. Good groundwork has been done to establish these objectives and it is now up to the AFB to apply and implement what has been decided. There will also be a need to adjust policies and procedures as practical experience is gained.

Openness and transparency has been a hallmark of the AFB that should be continued. Involvement of different stakeholders is not only important at the AFB meetings but even more in project and programme preparation processes.

The ultimate aim of the AF is to support people in developing countries who are vulnerable to climate change. In designing and deciding on such support, these developing countries must of course have a voice – a strong voice. It is the responsibility of the AFB to secure that.

There are many challenges for the AFB ahead. One of them is to define allocation criteria for funding. Who is more vulnerable than others? Another is to widen the funding base. With the present system, the AF would have approximately US$500 million until 2012. This is not very much in view of estimated adaptation needs. How can the funds be scaled up?

The AF has made a good start. It now needs political support and backing in Copenhagen. It represents a unique opportunity for the future. Let us hope it will not be missed.