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Challenges faced by developing countries to access adaptation finance

At this juncture, this thesis examines the difficulties or challenges faced by developing countries to access adaptation finance. Climate finance has been historical bias toward mitigation, and developed countries hold say in climate finance governance.

Prioritization of mitigation finance over adaptation finance is a major challenge for developing countries in accessing adaptation finance. Initially, developed countries were skeptical about discussions on adaptation finance, as they fear it may be perceived as admittance to liability imposed through climate change.379 The UNFCCC during its early period considered only mitigation as a policy tool to fight climate change, while adaptation was secondary.380 The IPCC AR3 liberated adaptation in the UNFCCC process, when it reported that adaptation is necessary alongside with mitigation.

There are different funds that developing countries have to navigate. The institutions engaged in delivery of adaptation finance has become increasingly multifaceted over the years.381 Some institutions saddled with the responsibility to deliver climate finance are existing institutions from the development assistance system.382 Institutional fragmentation is unavoidable with the operations of “multilateral funds such as the GCF, multilateral development banks, bilateral aid agencies and funds in contributor countries, national climate change trust funds in recipient countries”383 that are involved within adaptation finance delivery. Funds have different rules and criteria for accessing funding. These institutions have different membership criteria, “some are

379Lisa – Schipper RECIEL 2006, p. 84.

380UNFCCC Art. 2.

381Horstmann – Günther 2014, p. 123.

382Greene IDS 2004, p. 68.

383Pickering et al. Int. Environ Agreements 2017, p. 6.

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industrialized membership (OECD), while others are regional (regional development bank), and some with universal membership (UN institutions)”.384 Notwithstanding the challenges associated with multiplicity of actors in adaptation finance, some positive measure are identified. The fragmented system is said to be advantageous, in the sense that, ‘‘the multiplicity of actors has made it easier to find a match between the need for finance and potential suppliers’’.385

Lack of sufficient awareness of the need for adaptation and sources of funding is one of the challenges facing developing countries in accessing adaptation finance. Although at the national level there is growing knowledge and adaptation activities, but there is lack of understanding at the local level and non-state stakeholders. Whereas, these local and non-state stakeholders are actively involved in sectors that are exposed to the impacts of climate change. The provision on information on adaptation finance is contained at different levels, i.e. international, national and local. These may prove difficult for local and domestic stakeholders to identify the proper source of funding.386

Another challenge for developing countries in accessing adaptation finance is failure to meet funds’ procedures and standards. This particular challenge bothers on lack of national institutional arrangements, “one structural feature of multilateral climate funds that affects access is that these funds are typically trust funds with very small institutional footprints. Many were designed to deliver finance through other organizations and do not have the mandate or staff to finance transactions directly. For instance, multilateral international entities have been responsible for project development, facilitation and management functions used to access international public climate finance. This feature means that there is often a multi-step process to access finance”.

Although direct access permits national entities to apply for funds on behalf of countries, however the requirement that national institutions must have a robust fiduciary standards and environmental and social safeguards is particularly difficult for many LDCs.387

384Ibid, p. 7.

385Gomez-Echeverri Climate Policy 2013, p. 641.

386OECD 2015, p. 6.

387OECD 2015, p. 7.

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The lack of technical know-how to design and develop project or programme proposal also hinders developing countries access to adaptation finance. However, with the assistance of LDCF and SCCF, there has been improvement from developing countries through the help of support programmes.388 In addition the process to monitor and evaluate projects is a challenge for developing countries, whereas ability to monitor and evaluate projects is required to access climate finance.389

The sparse information on climate contributes to the difficulty experienced by developing countries to access adaptation finance. These poor countries lack “relevant data on climate, socio-economic statistics and reliable estimates of past socio-economic and climate phenomena”. More so, these developing countries do not have enough historical climate data, in addition they are without

“technical expertise for developing climate models and interpret the results”. The LDCF, SCCF and PPCR, have taken steps to address this challenge by rendering climate information platforms to developing countries, such as, the EWS to reduce risk.390

The absence of coherent policies, legal and regulatory frameworks and budget also limits access to adaptation finance for developing countries.391 The importance of a well-organized policy, legal and regulatory structure is undeniable, as these will encourage public and private investment. The attraction for either public or private investment is usually based on how enabling the environment is, in terms of policy stability and good governance.392 For instance lack of sufficient details on adaptation strategies in NAPAs and NCs will not attract donors, these are tools that give information on adaptation needs of developing countries. 393

A major challenge for developing countries to access adaptation finance is how to differentiate a development project and adaptation project. Funders try to distinguish adaptation and development finance, although it is difficult to separate development and adaptation outcomes because they share a close link in practice. The issue of adaptation and development finance as argued by some

388Ibid.

389Ibid, p. 8.

390Ibid.

391Ibid.

392Christiansen et al. CECSD 1999, p. 9.

393Tippmann et al. IDRC 2013, p. 25.

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authors, asserts that climate risk measures could reflect in development projects, which should not mean that such measures cannot count towards adaptation. The authors are of the opinion that the “relationship between the activity and the context, the adaptation logic or justification, must be clearly articulated by those seeking funding and other forms of support”.394

Some developing countries from Africa complain about the refusal of their proposals for having development, but the GCF seems to be interested in projects with core climate change.395 Although there is no precise rules for approval of proposals by GCF, it has been suggested that development could surface in adaptation projects.396 It was also argued that the difference between adaptation and development assistance is not pronounced, that they are one and same.397 In practice, the need for efficiency, effectiveness and equity poses some operational challenges that adaptation institutions may find difficult to address, such as “the integration of adaptation and development;

the identification of adaptation priorities in the face of uncertainty; and the balance between hard structural adaptation and soft behavioral measures. Aggravating them all is the sheer scale and scope of the adaptation problem”.398 How to discover a better approach between climate and development finance is an obstacle for adaptation finance.399

It has also been mentioned that the division between adaptation and development is a false one, it is believed that “adaptation is about doing development differently in response to climate change”.400 The involvement between adaptation and development finance is said to be a complex relationship, which is a contentious matter with no solution.401 The challenge in trying to distinguish between adaptation and development is baseless. This unnecessary challenge could be resolved by accepting that both adaptation and development can co-exist.402 Since adaptation finance is without any particular definition, this may “provide multilateral organizations with greater autonomy to develop contextual, practice-based understandings of what adaptation requires

394Hammill – McGray IISD 2018.

395Fonta et al. Climate policy 2018, p. 1211.

396Phakathi 2017.

397Schipper TCCR 2007, p. 9.

398Fankhauser – Burton Climate policy 2011, p. 1038.

399Jans Legal Issues of Economic Integration 2000, p. 245.

400Chan – Amerasinghe WRI 2018, p. 2.

401Sharma – Venturini ECBI 2019, p. 53.

402Ibid.

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in different local circumstances, and arguably also enhance mainstreaming of adaptation into development finance”.403

Failure to redeem pledges or pledges redeemed late by developed countries cause challenge in accessing adaptation finance for developing countries, thereby denying developing countries quick access to funds. Adaptation funds available do not match up with pledges from developed nations, the USD 100 billion target by 2020 is no-where near the funds available.404 While developed countries worry about some developing countries in how they manage funds, hence this creates lack of trust and disrupts flow of resources.405 Contributions by developed nations is on a basis of voluntary action. There is no strict rules on developed countries for failure to redeem their pledges, hence the reason why GCF battles with insufficient funding.406 The current provision in terms of contributions from developed countries which allows voluntary pledges obviously has a negative effect on adaptation finance.407 Therefore the need to establish clear method of responsibility for developed countries’ financial contribution which will aid free flow of finance is necessary.408 This chapter reveals the need of adaptation finance for developing countries in detail, here the thesis explained the impacts of climate change on developing countries. The costs of climate change impacts were examined, and how much of adaptation finance has been provided to developing countries. The thesis examined the modalities of operation of the GCF and AF, and how adaptation finance governance works in practice. Lastly, the thesis examined the challenges faced by developing countries to access adaptation finance.

403Hall Int. Environ Agreements 2017, p. 45.

404Nakhooda et al. CFF 2015, p. 1.

405Fankhauser – Burton Climate policy 2011, p. 1038.

406Kumar Nature 2015, p. 420.

407Cui et al 2014, p. 270.

408Cui - Huang World development 2018, p. 173.

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CHAPTER FIVE – Conclusions and Recommendations

The structure of the thesis as organized in a systematic way shows the reality of adaptation finance need of developing countries being the focus of the paper. The rationale behind adaptation finance and the need for it was examined, specifically in the developing countries, thereafter the thesis critically explained the background of the study.

It is clear that up to now and to the not so distant future, climate change will continue to be a challenge regardless of whether all carbon discharges are halted. The UNFCCC was introduced to tackle climate change through mitigation, subsequently adaptation became an important policy tool in the fight against climate change. The IPCC have established through their various reports that adaptation is necessary.

The consequences of climate change will gravely impact generations incapable to defend their sustainable existence in the face of this life-threatening malady. Most of those beset by this malady, are the poorest countries on the planet and the poorest individuals inside these countries, mainly the SIDS, LDCs and African states. This calls for how to draw in these individuals in the progressing climate change moderation and adaptation methodologies and projects.409 In order for developing countries to adapt to the impacts of climate change, they need finance assistance to implement adaptive measures. Adaptation finance will be valuable to the most underdeveloped and vulnerable parties.410 To this end, contemplations about the effects of climate change to these poor populaces are fundamental.411

The thesis examined relevant and current information under literature review which dissected and analyzed existing literature on the topic. The available literature on the architecture or the structure within which adaptation finance exists and operates within the climate change framework were studied. Literature review was a pointer to the right direction for the research as it showed what needed to be discussed and the direction of discussion. It also looked at the legal framework of adaptation finance which narrowed down the thesis into the legal landscape and discovered what

409Carlarne 2012, Houghton (ed.) 1996. IPCC WGI AR2 1995.

410Ivanova 2018, p. 716.

411Ibid.

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exists in relation to adaptation finance. The thesis introduced the history of adaptation finance so as to set a proper background for the study. It looked at the international agreements in climate change and how these international agreements included the issue of adaptation finance and the road map to the current legal standing of adaptation finance.

Developed country Parties accepts the responsibility to provide adaptation finance to developing country Parties. Under the Convention, the obligation to provide adaptation finance by developed country Parties is established. The legality of the provision of adaptation finance under the Convention is limited to agreed full incremental cost. The provision contained in the KP under Article 11, para. 2(b), relates to provision of financial resources for developing country Parties to meet “agreed full incremental costs”, while the provision under Article 12 of KP seeks to assist developing country Parties to meet cost of adaptation. The COP in Decision 2/CP.17, para. 126 shows a mandatory obligation for developed countries to report on climate finance through their national communications every 4 years and biennial reports biennially.

The findings from history and development of adaptation finance paved way to conduct a more informed and focused research. Thus, how funds were mobilized and the legal framework within which that was done under UNFCCC was examined, and then followed by how it was handled under the Kyoto Protocol. Having analyzed the two international agreements, the paper establishes the legal roadmap that adaption finance adopted earlier and what the current scenario is. The core of the research was explored with a critical look at adaption finance under the Paris Agreement.

This sets the thesis into perspective and looks at the obligations of developed country Parties with regards to adaptation finance for developing country Parties.

Under the PA, the thesis finds that obligation to provide adaptation finance falls on all developed country Parties, including Other Parties that are able to do so. This is a legal obligation which is mandatory for developed country Parties, however the non-performance of the obligation to provide adaptation finance is not punishable. In general, failure to meet commitment under the PA attracts no penalty.412Also the PA instructs that public and grant based resources should be made available for adaptation finance. The provisions of the PA requires developed country Parties,

412Falkner International Affairs 2016, p. 17.

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others are encouraged to do so, to report on information for adaptation finance. This report of information is in two folds, the first being, report of information on finance to be provided in the future, and the other is report of information on finance provided and mobilized. The reporting of information on adaptation finance under the PA is directed at all Parties, with flexibility for developing countries that need it in the light of their circumstances. While reporting of information on adaptation finance by developed countries is subject to review.

In view of the MPGs currently agreed under the UNFCCC, the thesis finds that developed country Parties are at liberty to determine what they consider new and additional resources. Unfortunately the issue of what counts as new and additional funds has been an issue between developed and developing countries. The reporting of information on what is new and additional resources provided by developed country Parties creates challenge with regards to achieving the set goals for adaptation finance. Without a viable and verifiable transparency and accountability framework for new and additional resources, it will become increasingly difficult to genuinely count new and additional resources for adaptation finance. Developing countries are at a precarious position with climate change impacts being experienced more across the globe but the initiatives of the Paris Agreement, being the latest, will not be fully realized unless developed countries apply a reporting system that shows absolute transparency.

The importance of adaptation finance reporting will show what Parties, particularly developed country Parties, are doing in terms of adaptation finance contribution. The report of information will also inform the global stocktake. More so, it is difficult to ensure that developed countries comply with their financial obligations and hence the need for a more cohesive reporting system in climate change adaptation finance. Hence reporting of adaptation finance is important, and should be sophisticated. The outcome of the global stocktake will show the experiences on adaptation finance, i.e. the lack or excess of it, if the former, this information could encourage developed country Parties to increase adaptation finance.

An overview of the cost of adaptation in developing countries reveal that the current provisions of adaptation finance provided so far falls short of what is needed by developing countries. There is limited funds for adaptation for developing countries, the non-performance of developed countries in their financial obligations and failure to have detailed rules on reporting of information on