Financing climate change adaptation in LDCs
Batu Uprety

  • A cyclone victim sits in a makeshift shelter in the aftermath of Cyclone Sidr in 2007. In the background, construction hsa begun on new boats. Despite the devastating effects of climatic events, Bangladeshis persist in their efforts to rebuild their lives. The LDC fund is much-needed support for these hardworking and resilient people 
    Photo- www.DirectRelief.org creative commons via flickr

The world’s least developed countries (LDCs) have been recognised as needing financial and technological support to adapt to climate change under Article 4.9 of the UN Framework Convention on Climate Change (UNFCCC).

LDCs have to prepare themselves to adapt to, and build resilience to, climate change impacts. Adaptation is not a choice but a “survival dream” for poor people who have little or no capacity to cope with the adverse effects of climate change.

Adaptation is a priority, especially as extreme events have become more frequent in recent years. Realising the additional burden of climate change to poor and climate vulnerable LDCs, parties to the UNFCCC agreed in Marrakesh in 2001 to support LDCs, through the LDC Work Program, National Adaptation Program of Action (NAPA) preparation guidelines and through the establishment of an LDC Fund (LDCF) and LDC Expert Group (LEG). The LDCF provides funding for the preparation and implementation of NAPAs to address the most urgent and immediate adaptation needs in the LDCs.

In 2010 in Cancun, parties decided to establish a process to enable LDCs to formulate and implement National Adaptation Plans (NAPs), building on their experience with NAPAs to address the medium and long-term adaptation needs. In 2012 they decided to provide funding for LDCs from the LDCF for NAP preparation.

All of the LDCs, except South Sudan, have now prepared their country-specific NAPAs and started implementation of between one and three priority adaptation projects. Few LDCs have as yet started to formulate their NAPs.

Funding gap for adaptation

Within the UNFCCC regime, adaptation action is funded through the pledge-based LDCF, and the Adaptation Fund (AF), established under the UNFCCC and the Kyoto Protocol respectively, and the Special Climate Change Fund (SCCF). Being pledge-based, these remain mostly “empty” and LDCs continue to wait in hope. Securing access to this funding is also complicated.  

The Green Climate Fund (GCF) will also start providing funding soon. Country pledges for climate change activities in developing countries have now reached about $10.2bn. The GCF will allocate 50% of its resources for adaptation and half of this will be channelled to LDCs, Small Island Developing States (SIDS), and Africa.

Many LDCs secured funding to implement some of their NAPA-prioritised actions from the LDCF, or directly from bilateral or multilateral donors. This funding has amounted to approximately $900m so far, yet over $5bn is required to implement all of the LDCs’ NAPAs. This means there is an urgent need to fill the funding gap of over $4bn.

In fact, there are a number of projects that have been technically cleared for implementation by the LDCF, but cannot be implemented due to a lack of funds. The LDCF’s current “empty” status has resulted in frustration at the country level, where urgent actions identified in NAPAs have had to be put on hold while countries wait for new contributions to be made.

The GCF and AF has direct access provision, which means that countries can apply directly for funding. To access funding from GCF, institutions (legally established national, sub-national, regional or international and public or private entity) are required to follow a multi-tiered and rigorous accreditation process. Seven institutions, ranging from an agency in Senegal to the UN Development Program (UNDP) have recently been accredited by the GCF.

The LDCF has adopted an equal access approach, providing equal amounts to each LDC. The LDCs have accumulated experience in accessing funds from the LDCF and this should make it easier to develop the capacity needed to understand and engage in securing funding from the GCF.

Key issues

Despite urgent and immediate adaptation needs, LDCs have experienced funding gaps. Securing funding for medium and long-term adaptation needs is an additional challenge. The LDCF has no or low funding support at present. The gap between the pledges made and the disbursement of funding is an additional issue.

The GEF seeks to ensure that LDCF-funded adaptation actions happen in the larger context of development and seeks (for the most part) to fund adaptation costs, defined as any cost that is additional to a business-as-usual development activity (a business-as-usual activity is one that would be implemented in the absence of climate change).

So LDCs must demonstrate “co-financing” by giving evidence of, eg development assistance, government budget-lines, and NGO and community groups contributions, in cash/grant, loan, soft-loan, or in-kind form that support the “larger” development outcome the proposed project aims to achieve.

This means it can be very difficult (especially for LDCs, who have limited capacity) to draw the line between what constitutes the “additional” adaptation component of the development project and its cost, and what is just “business-as-usual” development, because adaptation and development are very closely linked.

For the same reason, it’s also difficult to find the “larger development project” to supplement an adaptation action. For example, a $1m adaptation project may require LDCs to show $3m in co-financing.

LDCs continue to call for direct access to LDCF so that they can build country capacity to access and mobilise funds. Although, direct access provision exists for AF and GCF, the stringent accreditation process is a major barrier when it comes to accrediting national implementing entities.

In addition, accessing funding from “intermediaries” is a complex and lengthy process. The time taken by the Global Environment Facility (GEF) Implementing Agencies (IAs) and Multilateral Implementing Entities (MIEs) to prepare projects, get endorsed and disburse funding to field level activities is quite significant.

Experience also indicates that the service charge that must be paid under the funding mechanism for “implementation” projects is quite significant (10%). Sharing experiences and good practices on “what worked” and “what did not” would provide a basis for replication and for improvements designed to meet people’s adaptation needs and contribute to their aspirations.

Experience shows there is an urgent need for simplifying the process for accessing funding. The LDCs need better support from the existing funds to improve the planning and implementation of adaptation actions, including support for people’s participation, for the people and by the people.  

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