Mainstreaming, Accessing and Institutionalising Finance for Climate Change Adaptation - Sambal member upload

This Paper reviews the current state of practice and debates related to mainstreaming of adaptation finance and synthesises experience and key lessons from the ACT programme that might be of relevance to practitioners and government.

BY: Deepak Kumar
Original Source / Author: ACT & OPML 08 Jan, 2018
Original Source Website: Visit Website

The cost of adapting to climate change in developing countries could rise to between USD280 and USD500 billion per year by 2050. Moreover, adaptation costs are likely to increase, even if the world succeeds in limiting the global temperature rise to well below 2°C above pre-industrial levels by 2100. Past assessments seem to have substantially underestimated the adaptation costs in developing countries due to the omission of some sectors, only partial coverage of others, and unforeseen costs from maladaptation. What further leads to lower cost estimates is that much of the literature on adaptation costs focuses on planned public adaptation and overlooks autonomous and private adaptation, which - if included – would potentially raise cost estimates significantly.

While the Paris Declaration’s Nationally Determined Contributions (NDCs) represent laudable progress on adaptation, the cost of adaptation actions of the NDCs substantially exceed current finance levels. The shortage in adaptation finance has been aggravated by the fact that climate funds have been created, but not sufficiently capitalised. Many climate funds are slow to disburse in general and even more delayed to disburse for adaptation (as opposed to mitigation), hampering much-needed adaptation actions. While climate funds are popular with governments and fulfil an important role, the sheer volumes required for adaptation far exceed the current climate fund amounts, making it evident that the bulk of adaptation action will have to be funded through expenditure from core development budgets and fiscal means in most countries.

To this end, governments can benefit from a framework that allows them to mainstream climate change into their core development budgets. Financing Frameworks for Resilient Growth (FFRG) offer a way to estimate the economic cost of climate change damages, quantify adaptation benefits of current expenditure, assess the adequacy of that expenditure relative to the projected economic cost of climate change, and identify areas where additional financing is needed to reduce the economic impact of climate change.

Action on Climate Today (ACT) responds to these challenges with its focus on mainstreaming climate change across budgets, and helping government access new finance while strengthening institutions to take action on both. ACT, a UK Aid funded programme focused on climate-proofing growth in four South Asian countries, has utilised the financing frameworks as a mechanism for (i) raising government awareness of adaptation needs; (ii) helping governments identify key priority sectors or actions where investment is needed, (iii) mobilising finance from development budgets and assessing the adequacy of effort, and (iv) reporting on adaptation relevant expenditure thereby adding to accountability and transparency.

This paper reviews the current state of practise and debates related to mainstreaming of adaptation finance and synthesises experience and key lessons from the ACT programme  

that might be of relevance to practitioners and governments working to mobilise financing for climate resilient growth and development.

In particular, this paper reviews:

Methods for estimating climate relevance of budgets or expenditure

Approaches to budget tracking and expenditure review

Estimation of economic loss and damage estimates

Calculation of the adaptation financing gap

Development of financing scenarios

Approaches to closing the adaptation gap

Key entry points for mainstreaming of climate adaptation finance

The paper also discusses necessary institutional mechanisms and capacity development required for effective climate finance mainstreaming and provides key lessons for practitioners and government agencies looking to undertake similar work.

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