Civil Society Dialogue │29th Adaptation Fund Board Meeting

Innovative Financing for the Adaptation FundPathways and Potentials

Ritika Tewari, NewClimate Institute16/03/2017

205/02/2023

Introduction

• Assessment of the potential of seven innovative options as sources of adaptation finance and discussion of their implementation pathways

• Following the history and experiences of the CDM levy, focus was on innovative options* deriving from carbon pricing instruments

• SOP/levy from crediting/offsetting mechanisms, revenue earmarking from Emission Trading Schemes, Carbon Taxes

• A multi-criteria assessment was undertaken • criteria included financial performance (predictability and performance against climate

finance criteria), impact (climate impact, fairness) and feasibility (operational feasibility, stakeholder support)

*Innovative sources of finance - ‘new’, ‘independent of the general budgets’, ‘beyond conventional ODA funding’, and ‘not dependent on donor’s discretion’

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A. International instruments Option A.1: Share of proceeds (SOP) on international crediting (Article 6.4, PA)Option A.2: SOP from international unit transfers (Article 6.2, PA)Option A.3: Contributions from ICAO’s CORSIA scheme

B. National instruments Option B.1: Earmarking auctioning revenues from national ETSsOption B.2: Earmarking revenues from national carbon taxes

C. Instruments by non-state actors Option C.1: SOP from Voluntary Carbon MarketsOption C.2: Earmarking auctioning revenues from subnational ETSs

Options discussed in the paper

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Results: Potential of options as sources of adaptation finance

All options have a high operational feasibility

Options can be designed to lead to fair adaptation finance contributions, and neutral climate impact overall (indirect climate impacts minor and mutually cancelable)

Limited stakeholder support is currently the main stumbling block

Options fare variously due to differences in the nature of underlying instruments (i.e. inherent price volatility, potential of political interference with the option)

Pathways and revenue generation potentials

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Results: Pathways and revenue generation potential

A mixed bag of prospective adaptation finance options with varying revenue generation potential and overlapping implementation timeframes can be sought to develop a diversified future portfolio

Reliance on a single source can be avoided with proactive efforts to pursue more than one option

Option C.1 and C.2 most plausible in the pre-2020 timeframe; can push the envelop in raising ambition of countries

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Way forward and recommendations

Proactively pursue a ‘2% campaign’, with a vision to establish global norm of adaptation SOPs from carbon pricing instruments• Follow a dynamic resourcing strategy through the Resource Mobilisation Taskforce

Follow and engage in the process for operationalising Article 6 of the Paris Agreement• a reasonable SOP under Article 6.4 mechanism (Option A.1) • highlight potential adaptation contributions from transfers under Article 6.2 (Option A.2)

Create specific relations with cities and regions to kick-start voluntary contributions from regional ETSs (Option C.2)

Identify proactive countries for national funding schemes to discuss possibilities to pilot earmarking of auctioning revenues (Option B.1) and national carbon taxes (Option B.2)

Create momentum at the level of ICAO: While ICAO dismissed any direct SOP, alternative routes should be explored to cover demand from the aviation sector

Target SOPs from Voluntary Carbon Markets: engage with the Voluntary Carbon Market actors to explore a good practice adaptation levy/price premium (Option C.1)

Thank you!

https://newclimate.org/

Ritika Tewari

r.tewari@newclimate.orgNewClimate Institute

http://germanwatch.org/

Julia Grimm

grimm@germanwatch.orgGermanwatch

https://newclimate.org/2017/02/16/innovative-financing-adaptation-fund/

805/02/2023

Assessment framework

*except for ‘climate impact’; which is rated positive, negative or neutral

Option A.2

Option A.3

Option B.1

Option B.2

Option C.1

Option C.2

Option A.1

Finance

performance

Impact

Feasibility

Predictability Performance against climate

finance criteria

Climate impact Fairness

Stakeholder support Operational feasibility

Each sub-criteria is rated for its performance on a scale of low, medium and high* on a comparative basis

Options Multi-criteria assessment framework Rating

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leads to…

Results for each option Summary of results for all options