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Adaptation Structural Options Jake Schmidt, Senior Policy Analyst Center for Clean Air Policy ******** Dialogue on Future International Actions to Address Global Climate Change Stockholm, Sweden 16-19 May, 2004 Estimated Funding for Adaptation between 2000-2012 (in million $US)[1] Special Climate Change Fund[2] $3,320[3] Adaptation Fund $10-15[4] Least Developed Countries Fund[5] $16 GEF Trust Fund $140[6] Other ?? Total $3,486 Source: Author’s Calculation [1] This estimate is intended to provide an order of magnitude assessment and does not pretend to be a comprehensive assessment or list. Some sources of funding are likely to be left out and the funding levels depend on a variety of factors that have yet to be clearly defined. [2] The Special Climate Change Fund provides money for other things than adaptation (e.g., technology transfer). Shown is the total amount promised for the SCCF to provide an estimated maximum amount. The amount for adaptation is expected to be less than this total amount, since some will be dedicated to other SCCF priorities. [3] The political declarations made in Decision 7/CP.7 stated the group would contribute $410 million annually by 2005, with this level to be reviewed in 2008. It is assumed that this level of funding is provided for an eight year period (2004-2012). It is unclear how this money will be allocated among the three funds. Here, it has been allocated solely to the SCCF for simplicity. [4] Based upon estimated value of CER market of $500-750 million dollars (PointCarbon, 2003). Point Carbon estimates that this value may increase as key players appear far from their Kyoto targets. [5] As of June 2003, the total committed to the LDC Fund was $16 million (UNFCCC, 2003). [6] GEF, 2003 shows values for FY05 of $10 million and $20 million in FY06 and FY07. It was assumed that funding levels would continue at $20 million through FY11 and that half of the FY12 funding would be available since the fiscal year cuts across the calendar year. 1 Structural Options for Adaptation Linking mitigation and adaptation ! Mainstreaming and integrating adaptation and sustainable development ! Insurance-related approaches ! Others? ! Mitigation and Adaptation ! ! ! Combining mitigation and adaptation projects to increase feasibility by increasing funding or removing other barriers Use of CDM, ODA, or other funding? Role of alternative approaches, for example: » Sector CDM » Policies as projects » Adaptation CDM (A-CDM) 2 Example Mitigation and Adaptation Actions ! Preserving or replanting mangrove ecosystems » Promotes carbon sequestration and minimizes damages from storm surge ! Farming techniques that reduce water needs » Could reduce energy demands for irrigation and reduce susceptible of farming technique to reduce water supply ! Modified building codes » Combining changes to building codes so that buildings are less susceptible to extreme weather events and are more energy-efficient ! Others Adaptation and Sustainable Development ! Adaptation and sustainable development (SD) are intertwined: » Enhancement of adaptive capacity entails a variety of similar actions to sustainable development (e.g., improved access to resources, poverty reduction, and improved infrastructure). » SD can be hampered by the impacts of climate change » Some SD actions could lead to maladaptation. 3 Development Funding Net Resource Flows from OECD to Aid Recipients Official development in 2002 ! assistance (ODA) 5% Official Aid (OA) 26% 9% Other ODF 3% 6% Total net ODA disbursed in 2002 was $58.3 billion—0.23 percent of GNI » Anticipated to increase to $76.8 billion for 2006—0.29 percent of GNI (OECD, 2004b). Direct investment International bank lending 3% 2% Total bond lending Other (including equities) 46% Grants by NGOs Source: OECD, 2004b 2002 ODA Disbursements in Select Sectors Million $ % of Total Health 2,425 5% Water Supply and Sanitation 1,295 3% Transport and Storage 2,745 6% Energy 2,133 5% Agriculture 1,714 4% Forestry 220 0% Fishing 149 0% Tourism 10 0% General Environment Protection 1,280 3% Food Aid excluding Relief Food Aid 1,398 3% Emergency Assistance 3,377 7% 16,746 37% Total in Highlighted Sectors Source: OECD, 2004a 4 Mainstreaming Adaptation and Sustainable Development ! ! ! Some have supported the need to “mainstream and integrate adaptation and sustainable development”. Mainstreaming is where adaptation responses are considered into sustainable development processes (AfDB, 2003). Integrating is when specific adaptation measures are added to design and implementation strategies (AfDB, 2003). Mainstreaming (cont.) ! ! Some specific mainstreaming approaches have been identified (AfDB, 2003) For development agencies and donors: » Analyze projects and practices that show how translation of adaptation into project design will provide real benefits; » Start implementing adaptation activities where sufficient information is available (including more proactive disaster prevention and preparedness); and » Implement priority adaptation activities identified by the UNFCCC. ! For gov’ts in developing countries: » Incorporating climate change adaptation in Poverty Reduction Strategy Plans; » Integrate climate change management in the economic planning and budget process to ensure proper planning, financial management, and prioritization amongst competing resource demands; » Strengthen the links and coordination between government agencies working on sustainable development, climate change policies, finance, economic affairs, planning, and specific sectors. 5 Possible Advantages of Mainstreaming ! ! ! Ensures consistency with adaptation and poverty eradication needs. More efficient means which can avoid duplication of efforts. Larger share of funding potentially available. » Funding for ODA could be twice as much as funding for adaptation Possible Disadvantages of Mainstreaming ! Mainstreaming may not imply additional funding » But may simply replace ODA funding for other purposes. ! ODA funding may not necessarily go to countries with the highest adaptation needs » Distribution of ODA is based upon a number of factors not necessarily intertwined with adaptation. » Some countries garner a large share of ODA funding ! Development of NSDS or PSRP » OECD supports distribution of ODA funding based upon the priorities outlined by recipient countries in their NSDS or PSRP – Some countries may not have the resources to conduct such processes 6 Some Options for Mainstreaming and Integrating ! ! ! ! ! ! Alter the priority of sustainable development projects so that adaptation approaches are more favorably viewed by development agencies. Set aside a specific portion of existing ODA explicitly for funding adaptation projects. Develop adaptation guidelines for sustainable development funding Develop debt-for-adaptation projects Increase ODA funding explicitly for adaptation Others? Bahamas tourism case study CDERA 2003 ! ! ! ! ! ! Tourism - key to sustainable development With frequent hurricanes, and external events (9/11), insurance rates rising. Expensive insurance cover impedes development. In Caribbean, tourism provides 2 million jobs, 14% of regional employment, 14.3% of GDP. Bahamas, Antigua-Barbuda, St.Kitts-Nevis, Montserrat, Anguilla - direct and indirect impact of tourism on GDP is over 50%. Tourism infrastructure concentrated on coast. 7 Possible Insurance-related actions International Support for: ! ! ! ! ! ! ! ! Incentives that offer insurance in exchange for risk reduction (building codes, retrofitting) Reinsurance schemes Creation of national insurance or disaster funds (FONDEM, FNDRRF) Regional, inter-regional risk pools to lower cost of insurance Alternative risk transfer mechanisms (catastrophe bonds, catastrophe insurance, weather hedges) Public-private partnerships (TCIP, CAT-NAT, NFIP) Small States insurance schemes – triggers/debt servicing relief Micro-insurance schemes Some Key Adaptation Issues ! Building additional support for more detailed vulnerability & adaptation (V&A) assessments in priority sectors » e.g., agriculture and food security in Africa ! ! ! ! Eligible projects? Incremental? Global vs. local benefits? Others? 8 Questions for Discussion ! ! ! ! How to address these key issues? Are there other adaptation “structural” options? What combination of approaches? These or others? How should a mitigation and adaptation approach be structured? » What form could it take (e.g., A-CDM, removal of other barriers, etc.)? ! What role for mainstreaming and integrating adaptation and sustainable development? ! What role for insurance? » What options are most promising/problematic? » For what impacts would insurance approaches be most appropriate (e.g., weather-related extremes?, agriculture?, public infrastructure?)? 9