Innovative Financing Options for the Adaptation Fund

Assessing potentials and pathways for financing adaptation through carbon pricing approaches

The Adaptation Fund is an established fund that supports developing countries in managing impacts of climate change with special attention given to the needs of the most vulnerable communities. It has pioneered features such as direct access, has streamlined its project cycles to allow participation of small institutions and holds an increasing track-record of result-based implementation of adaptation projects. The Fund’s intended main funding source is a share of proceeds from the Kyoto Protocol market mechanisms which has lost relevance as a result of crashed CO2 certification prices. The Adaptation Fund is thus in great finance demand since this innovative financing source could only partially be compensated through donor contributions.
NewClimate Institute has partnered with Germanwatch to develop a position paper which aims to provide an updated analysis to a suite of options from carbon pricing instruments to serve as a new source of innovative finance for the Adaptation Fund. Seven options have been identified from carbon pricing instruments operating at an international, national and non-state actor level. A multi-criterion based analysis of finance potential for all options was applied. Based on the results of the assessment, models of engagement and political pathways for the Adaptation Fund are discussed. The study is supported by the German Federal Ministry of Environment, Nature Conservation, Building and Nuclear Safety (BMUB).