Adaptation Finance: it’s not a gap, it’s a chasm

The adaptation finance chasm is widening because adaptation finance needs are turning out to be higher and because funding flows are either remaining stable or decreasing.

A flurry of new reports were launched at the Glasgow Climate Change Conference – perhaps more than usual, because the Conference was postponed by a year due to the COVID-19 pandemic. Of particular interest were three reports – two from the Standing Committee on Finance (one assessing climate finance flows in 2018 and 2019 and another – the first of its kind – assessing developing country needs to implement climate action); and another, Adaptation Gap Report 2021 (AGR 2021), from the UN Environment Programme. Read in conjunction, these reports starkly reveal the widening chasm between developing country needs and climate finance flows, particular for adaptation.

According to the SCF report on assessing climate finance flows, developing countries received US$ 24.7 billion in public finance for adaptation in 2017, and US$ 34.1 billion in 2018 – US$ 29 billion on average. The needs assessment report of the SCF meanwhile, found that costed adaptation needs (not all countries have yet costed all their adaptation needs) amount to US$ 10 billion to 3.8 trillion.

The rising costs of adaptation are also reflected in AGR 2021. In 2016, UNEP had estimated annual adaptation financing needs in developing countries at US$ 140-300 billion by 2030. In AGR 2021, UNEP warns that the annual costs are in the upper range of their 2016 estimates, even under ambitious mitigation scenarios. In other words, the adaptation finance chasm is widening because, according to UNEP, adaptation finance needs are turning out to be higher and because funding flows are either remaining stable or decreasing.

SCF’s needs assessment report found that developing countries identified more adaptation than mitigation needs, more costs were identified for the latter (US$ 21.97 to US$ 5.3 trillion). However, this does not imply that mitigation finance needs are greater – according to the report, this is more likely to be due to the lack of available data, tools, and capacity to assess adaptation needs. That chasm, it seems, is likely to be much wider than we can currently fathom.

Did Glasgow manage to build a bridge between adaptation finance needs and provision (or between promises and actions, as UNFCCC Executive Secretary Patricia Espinosa said in the closing plenary)?

The Glasgow Climate Pactnotes with concern” that adaptation finance is insufficient to respond to worsening climate change impacts in developing countries. Developed countries are urged to at least double their collective provision of adaptation finance from 2019 levels by 2025. The language does not clarify whether this doubling applies annually, or over the whole period, leaving room for further uncertainty. Moreover, even a doubling from current levels is well below assessed needs.

Developed countries are also urged to “urgently and through to 2025” deliver on the goal, set in Cancún in 2010, of providing US$ 100 billion annually by 2020. Glasgow launched an ad hoc work programme to deliberate on the post-2025 new collective quantified goal for finance, to be decided by 2024, based on a floor of US$ 100 billion. The deliberations will consider the needs and priorities of developing countries; quantity, quality, scope, and access features; sources of funding; and transparency arrangements to track progress towards achieving the goal. Achieving clarity on these elements will be difficult but crucial, to preserve what trust remains in the process.

Glasgow also launched a two-year Glasgow–Sharm el-Sheikh work programme on the global goal on adaptation (GGA), established under the Paris Agreement to, among other things, track progress on adaptation as part of the Global Stocktake (the first of which will take place in 2023). In addition to discussing methodologies, indicators, data and metrics, needs and support needed for assessing progress towards the GGA, the objectives of the work programme include enabling the “full and sustained implementation of the Paris Agreement… with a view to enhancing adaptation action and support”; and strengthening implementation of adaptation actions in vulnerable developing countries.

Further (and difficult) negotiations therefore still lie ahead for truly bridging the adaptation finance chasm.

An emerging critique of the Conference is that there was too much attention on mitigation goals that are too far into the future, for which today’s decision-makers cannot be held accountable, and not enough on adaptation and finance. These are the elements for a perfect storm, if action is delayed on mitigation while there is lack of climate preparedness on the ground.

Action on the ground must therefore rapidly build pace to counter the onslaught of climate impacts – particularly on the most vulnerable, who pay the highest price for every moment of delay, be it on mitigation, adaptation, or finance. Preparedness must accelerate, by using limited resources more efficiently and targeting the most vulnerable more effectively. The GCA has laid out a three-pronged strategy to achieve this: mainstreaming resilience in investments; building an enabling environment for adaptation investments; and aggressively deploying innovative financial instruments such as blended finance and risk transfer instruments. At the same time, the GCA is committed to prioritizing the needs of the most vulnerable, by promoting locally-led action through its Global Hub on Locally-led Action, whose activities will be launched over the next year.

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