Funding for Adaptation to Climate Change

Estimated annual climate funding required for a 2°C trajectory compared with current resources. 2°C is not desirable, but there is a growing consensus in policy and scientific circles that this is likely the best we can do. F rom the perspective of development, warming much above 2°C is simply unacceptable. Stabilizing at 2°C will require major shifts in lifestyle, a veritable energy revolution, and a transformation in how we manage land and forests.

Thus far, climate change negotiations have focused almost exclusively on limiting and reducing (“mitigating”) greenhouse gas emissions. It was only in 2007, in its Fourth Assessment Report, that the Intergovernmental Panel on Climate Change (IPCC) began to directly address the issue of adaptation, noting that more attention to adaptation is required, and that adaptive capacity is connected to social and economic development.¹ Some of the best adaptation is, in fact, economic growth that provides poor households and poor countries with resources to adjust and cope with change. Adaptation also entails building strong institutions within these countries that can respond to the changing climate, such as agricultural research and extension services, public education, and health care systems.

Some development advocates are concerned that a focus on climate change would divert resources and attention to adaptation at the cost of international efforts to combat poverty and achieve the MDGs. But this fear is misplaced. Development and adaptation can (and, we would argue, must) be addressed together. “Adaptation,” as more than one author has noted, “is basically development in a hostile climate.”²

The villagers in Fanwargu, Burkina Faso, are living in an increasingly hostile climate to development. Climate change has made it harder for farmers like Natama Alimata to know when best to plant her crops. Centuries of local knowledge passed on by families and neighbors is no longer a dependable guide. Farmers like Alimata use cell phones to gain information about markets in their area, but no one is able to provide reliable weather forecasts. A national weather forecasting station would be an example of the infrastructural improvement needed for development and adaptation. Recently, Alimata started composting plant matter to use as fertilizer. She learned about composting from agricultural extension workers. The compost has helped to boost her yield—another example of a development effort doing double duty by helping people adapt to climate change.

There is a strong moral argument for seeing funding for adaptation as compensation by rich countries for the damage caused to poor countries like Burkina Faso. But there is also a danger that framing the debate as an adversarial “perpetrator versus victim” issue will provoke public resistance in rich countries and make it even harder to achieve a final agreement. A better approach would be to stress the benefits to all of growth and emissions reduction.

Funding for adaptation should be considered separate from official development assistance (ODA). More importantly, adaptation funding should not be part of the annual congressional appropriations process, both to shelter it from political pressures and to reflect a different rationale than development assistance. Cost estimates for adaptation vary widely. One recent study estimates that by 2015, $86 billion annually may be needed to deal with adaptation needs in poor countries.³ This is roughly two-thirds of total global ODA for 2008, although still only one-fifth of 1 percent of global Gross Domestic Product (GDP). Costs will continue to increase with every delay in aggressive emissions reductions.

Climate change, global poverty and the Millennium Development Goals

Determining how to allocate new resources for climate adaptation requires consideration of many factors. A Brookings Institution study makes four important points: (1) it is critical that national governments be the centerpiece for coordination; each national government must own its development plans and be the place where resources come together; (2) private sector participation is essential (e.g. technology transfer) because public resources alone will not be enough; (3) national governments need to demonstrate their commitment through their own budgeting priorities; and (4) there must be formal processes to bring climate considerations into the mainstream of development strategies, “embedding climate sensitivity into development’s DNA.”⁴

New ways of organizing and distributing funding are also essential. China has proposed that developed countries allocate 0.5 percent of their GDP to support actions taken by developing countries to address climate change. This would amount to $185 billion a year for mitigation, technology transfer, and adaptation combined. In the United States and the EU member states, policymakers are considering legislative proposals to create new adaptation funds that would be financed by revenue from climate change mitigation programs within each developed country. Cap-and-trade systems, such as that proposed in the Waxman-Markey bill, could generate a substantial income stream that would be independent of annual appropriations pressures. In Europe alone, by the year 2020, auction fees could generate some $2.3 billion annually for climate change-related activities, including adaptation.⁵ But this is still far short of the looming adaptation costs.

Whatever the source of funding, an international agreement must address governance issues of how such funds would be administered, as well as the related question of how such programs would be integrated or coordinated with ongoing ODA. There are a number of options for administering funds, ranging from existing institutions, such as the World Bank’s Global Environmental Fund or the Adaptation Fund established under the Kyoto Protocol, to entirely new institutions. It would cause problems if too many adaptation funds were established—risking contradictory programs and further depleting the already taxed management capacity of developing countries. Developed countries are unlikely to agree to any sort of new initiative to raise money unless they can be confident that it is accountable and transparent. The International Commission on Climate Change and Development recommends that any fund that will be handling significant additional resources be governed through a “representative and equitable arrangement” between developed and developing countries.⁶

Issues