1 Questions: Contact Ilana Solomon at ActionAid, ilana.solomon@actionaid.org or Vanessa Dick at InterAction, vdick@interaction.

org

A Way Forward on
International Climate Adaptation Finance
Recommendations: Robust U.S. leadership on international adaptation is essential to achieving a climate deal
at the Conference of Parties in Copenhagen this December. Adaptation finance is a moral obligation for the United
States because of its significant past and present greenhouse gas emissions. It is also essential to achieving our
country’s national security, economic growth, development, climate, and energy objectives.

A strong U.S. leadership role on international adaptation includes a commitment to providing substantial, new, and
additional resources through the United Nations Framework Convention on Climate Change (UNFCCC) to support
vulnerable developing countries’ efforts to adapt to the impacts of climate change. We request that the official US
position on international adaptation include the following:

1. A commitment to generate $12.5 billion to $21.5 billion per year for international adaptation. This
recognizes the global need for adaptation finance (estimated at $50 - $86 billion annually) and the historic
contribution of the United States to global greenhouse gas emissions of approximately 25%.

2. Support to raise the needed funding by the following measures:

At least $7 billion for international adaptation from federal climate legislation; Congressional Appropriations for
FY 2010 that includes $200 million for the UNFCCC Least Developed Countries Fund (LDCF). This funding
level should increase to at least one billion dollars in and after 2012, and be directed towards the primary
financial mechanism of the post-2012 international climate change agreement.

Promising innovative international mechanisms should also be considered, including auctions of Assigned
Amount Units (the “Norway Proposal”), International Aviation and Shipping Mechanisms, and a currency
transaction tax.

3. Support for a new multilateral financial structure accountable to the UNFCCC with funding windows for
adaptation and mitigation, including clean technology and forest protection. As part of this framework, we
also support an expanded role for the Adaptation Fund Board in a Copenhagen agreement.

4. A commitment to target adaptation finance not only to developing countries affected by climate change,
but also to particularly vulnerable social groups within these countries, such as women. Additionally,
decisions around adaptation funding – how it is disbursed, used, monitored, and evaluated – must include
community level participation.

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Climate Change: Multiplying Threats to the World’s Most Vulnerable

The world’s poorest countries and communities are already experiencing the impacts of climate change. Over the
next decade, yields from rain-fed agriculture in some countries in Africa could be reduced by up to 50 percent,
resulting in increased hunger, malnutrition, and the destruction of rural livelihoods. Projected shifts in temperature
and precipitation patterns mean that between 75 and 250 million people across Africa will likely face more severe
water shortages. Throughout the world, the rates and range of diseases, such as cholera and malaria, will rise.
Climate impacts like these will threaten the livelihoods of over one billion of the world’s poorest people, and will
set back years of efforts to achieve sustainable development.

The world must act to stop this growing crisis; and the United States must lead. Robust US action on international
adaptation is essential to achieving our country’s national security, economic growth, development, climate, and
energy objectives. U.S. leadership will be indispensable to achieving a climate deal at the Conference of Parties in
Copenhagen this December.

A new climate treaty must address not only financing for adaptation, but also robust financing for mitigation to
slow the pace of climate change and help put countries on a clean energy pathway. But climate impacts are
2 Questions: Contact Ilana Solomon at ActionAid, ilana.solomon@actionaid.org or Vanessa Dick at InterAction, vdick@interaction.org

occurring today, and we must respond. This briefing addresses the key elements of adaptation finance: (1) the
amount of funding required; (2) how best to raise the funding; (3) how best to channel the funding; and (4) how the
funding should be used.

1. Adaptation Funding Needs

Because of the profound impacts of climate change to already vulnerable communities, projections of the resources
needed for international adaptation are sobering. The UNFCCC Secretariat estimates that developing countries will
require additional investments of $28 - $67 billion annually by 2030 to address adaptation needs. Oxfam
International approximates the cost to be at least $50 billion a year. And the United Nations Development
Programme (UNDP) calculates the need at $86 billion a year by 2015. If necessary mitigation targets for developed
countries of at least 40% below 1990 levels by 2020 are not agreed to in Copenhagen, the need for adaptation
resources will grow further and will likely reach or exceed the $86 billion estimate. Moreover, given the recent
data suggesting that the impacts of climate change at existing levels of warming are even greater than expected, we
strongly urge policy-makers to produce a financing strategy that generates $50 - $86 billion a year for international
adaptation.

Based on the annual need of $50 - $86 billion, U.S. financial support for adaptation must range from $12.5 billion
to $21.5 billion per year. This calculation factors in the approximately 25% historic contribution of the United
States to global greenhouse gas emissions.

2. How to Raise Adaptation Funding

A combination of financing mechanisms will need to be leveraged in order to generate the funding necessary for
adaptation. The mechanisms we most urgently support are:

First Priority: US Climate Legislation

Federal climate change legislation should generate $7 billion a year for international adaptation. This number is
25% (the relative historical contribution of the U.S. to global greenhouse gas emissions) of $28 billion, the low-end
of the range of possible adaptation resource needs. This would constitute a small fraction of the allowance value
under a cap-and-trade program, but would demonstrate that the United States is serious about finding new,
additional and sustainable financing for international adaptation.

Second Priority: Congressional Appropriations

While the majority of financing for adaptation will come after 2012, there is an urgent immediate need to begin
funding the most vulnerable developing countries’ adaptation priorities. To that end, we advocate a U.S.
contribution to the UNFCCC Least Developed Countries Fund (LDCF) of at least $200 million in 2010 (which is
just one tenth of the target size of the LDCF). Contributions to the LDCF must be additional to Official
Development Assistance. We urge Congress and the Administration to increase that level of funding to at least one
billion dollars in and after 2012, directed towards the primary financial mechanism of the post-2012 international
climate change agreement.

Additional adaptation finance should also be raised through innovative international mechanisms. We
believe that, if designed fairly and effectively, the following approaches are important mechanisms to raise
the level of global funding needed:

Auction of Assigned Amount Units (The “Norway Proposal”)

The Norway proposal calls for the auctioning of developed country emissions allowances (assigned amount units)
under a post-2012 climate agreement. While the Norwegian proposal suggests a 2% auction, in order to generate
more substantial finance we propose an auction of at least 7.5% with a floor price of at least of $30 per ton of
carbon.1 This would raise approximately $34 billion.2

International Aviation and Shipping Mechanisms

1
The suggested floor price of $30 is an example of a way to generate the necessary amount of funding. Additional analysis would be needed to
determine specific price floor once more is known about other elements of a post-2012 climate agreement.
2
Oxfam International. (2008). “Turning Carbon into Gold.”
3 Questions: Contact Ilana Solomon at ActionAid, ilana.solomon@actionaid.org or Vanessa Dick at InterAction, vdick@interaction.org

The international aviation and shipping sectors have been identified by country delegations and observers to the
UNFCCC negotiating process as potential areas for mitigation and for the generation of revenue for adaptation.
Such measures can be designed as passenger or fuel levies or as emissions trading schemes with close to 100% of
the allowances auctioned.

Finance estimates vary depending on program design, the size of the levy, and the estimated cost of allowances.
However, in one example, an International Air Travel Adaptation Levy, formally tabled by the Maldives on behalf
of the Least Developed Countries, could raise approximately US$13 billion per year for adaptation.3 An
international aviation emissions reduction scheme could raise approximately $12 billion per year (assuming a
carbon price of $45).4

Currency Transaction Tax

A currency transaction tax would entail a very small levy on international currency transactions. A CTT levied at a
rate of 0.005% could generate approximately $40 billion a year if it captured the world’s most traded currencies.5
While there are many potential uses of such funds to address the climate crisis, a significant portion could be
directed to international adaptation.

3. How to Channel the Funding

Even if necessary levels of money were generated tomorrow for adaptation, that money will only truly meet the
needs of poor countries and communities if it is directed to the appropriate institutions and targeted to key
communities and needs.

The two primary multilateral institutions with a role in adaptation finance are the World Bank (which in 2008
initiated the Pilot Program for Climate Resilience) and the Global Environment Facility (GEF, the primary financial
mechanism for the UNFCCC). We have particularly serious concerns regarding the World Bank’s role in climate
finance. This is primarily because the governance structure of the World Bank is based on a one-dollar-one-vote
system which does not allow developing countries sufficient voice in how the institution is managed or how funds
are disbursed. The World Bank also has a poor track record of engagement with affected communities and civil
society, which we see as essential to the effectiveness of funding. We are also very concerned about the World
Bank’s vast increase in fossil fuel lending over the past few years -- from FY 2006 to FY 2008, coal lending at the
World Bank Group increased an incredible 648 percent, and in FY 2008 fossil fuel funding increased 102 percent. 6

More specifically, however, we have serious concerns about the World Bank’s adaptation fund, the Pilot Program
for Climate Resilience (PPCR). The stated objective of the PPCR is to “pilot and demonstrate ways to integrate
climate risk and resilience into core development planning.” Funding from the PPCR will be given in the form of
grants and loans. While the loans are technically optional, many countries will have no other option than to take on
loans just to access desperately needed funding. We believe that loans for adaptation are simply unacceptable.

We also have concerns about the GEF, particularly with respect to its governance structure (also one-dollar-one-
vote) and due to the difficulties that many vulnerable countries and communities have faced in accessing its funding
in a timely manor. However, given the urgency of current adaptation needs, the LDCF, managed by the GEF, is the
best adaptation fund that currently exists to channel funding in the near-term (before 2012). Particularly given its
role as the funding mechanism for implementation of the urgent and immediate adaptation activities spelled out in
Least Developed Countries’ National Adaptation Programs of Actions (NAPAs), we believe it is the most
appropriate channel for immediate-term funding.

For the post-2012 agreement, we believe a new multilateral financial structure accountable to the UNFCCC, with
windows for adaptation and mitigation, is the appropriate framework for funding (including clean technology and
forest protection). We also believe that existing institutions, such as the World Bank, should reform their existing

3
“Stamp out Poverty“ www.stampoutpoverty.org
4
Oxfam International. (2008). “Turning Carbon into Gold.”
5
See Stamp Out Poverty, www.stampoutpoverty.org, for a series of papers describing how the CTT could be implemented and potential
revenue generated, particularly the report by Professor Rodney Schmidt of the North-South Institute for the UN University:
http://www.stampoutpoverty.org/reports
6
Bank Information Center, World Bank Energy Sector Lending: Encouraging the World’s Addiction to Fossil Fuels (February 2009), available at
http://www.bicusa.org/en/Article.11033.aspx.
4 Questions: Contact Ilana Solomon at ActionAid, ilana.solomon@actionaid.org or Vanessa Dick at InterAction, vdick@interaction.org

practices to make them consistent with climate mitigation and adaptation goals. That said, we do not believe that a
reformed World Bank is a replacement for a new UNFCCC governed financial framework.

As part of this framework, we also support an expanded role for the Adaptation Fund (AF) Board in a Copenhagen
agreement. The AF was created under the Kyoto Protocol to support adaptation measures in highly vulnerable
countries that are parties to the Protocol. It was made operational in December 2008 at the 14 th Conference of
Parties in Poznan, Poland. The AF is governed by a board made up of representatives from a small majority of
developing countries. It is particularly unique because of its provision for direct access, which will allow
implementing and executing entities to access funding directly from the Board without having to work through
bureaucratic implementing agencies. Because of the Adaptation Fund’s commitment to democratic governance,
compensatory funding, access for the most vulnerable, transparency and accountability, we believe the AF should
have a significant role in the Copenhagen agreement, potentially as the adaptation window of a new global climate
fund.

4. How to Spend the Funding

Poor communities are already adapting to climate change, and they know what adaptation strategies will work best
in their local context. Therefore, decisions around adaptation funding – how it is disbursed, used, monitored, and
evaluated, must include community participation.

It is also important to note that adaptation funding must be targeted not only to developing countries vulnerable to
climate change, but also to particularly vulnerable social groups within vulnerable countries. Women, for example,
are particularly vulnerable to climate change because they often have less economic and financial capacity to
respond and are the providers of food, water, healthcare, and fuel wood – all of which will be negatively affected by
climate change.7 Women have also been leaders of innovative adaptation strategies in their communities, and
therefore in many cases must be primary beneficiaries of adaptation funding.

While it is impossible to state exactly how adaptation funding should be spent (since such decisions should be made
at the developing country level, and be tailored to local conditions), our work at the community level shows that
adaptation funding must include support for:

(A) Rural livelihoods, food security, and sustainable development, particularly the needs, knowledge, and
capacities of small-scale farmers;

(B) Resilience and adaptation to water scarcity and for water and sanitation;

(C) Enhancement and diversification of agricultural, fishery, and other livelihoods;

(D) A systematic assessment of socio-economic vulnerability within high-risk geographic regions in order to
identify the people and social groups most vulnerable to climate change and their adaptation needs, with
particular attention to gender equity concerns of women and girls;

(E) The protection and rehabilitation of natural ecosystems in order to provide increased resilience to climate
change for local communities and livelihoods while protecting biodiversity and ecosystem services; and

(F) Disaster risk management, including activities to reduce disaster risk.

Contributing Organizations:
ActionAid USA Friends of the Earth
InterAction’s Climate Change Working Group Oil Change International
CARE USA Jubilee USA
World Wildlife Fund US Climate Action Network
Oxfam America

7
For more information on women and climate change, see ActionAid, “We Know What We Need: South Asian Women Speak Out on Climate
Change Adaptation.”