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Sunday, July 6, 2008

New Report on Adaptation Financing

The Oxford Institute for Energy Studies has released a report discussing international arrangement for financing adaptation in developing nations. The report outlines three key issues for adaptation financing:

Innovative Sourcing. Further innovative financing mechanisms apart from the CDM Adaptation Levy are needed to fill the adaptation ‘funding chasm.’ The only way to provide funding for developing country adaptation which is acceptable, in the above-mentioned sense, is through international levies on emissions from international maritime transport and aviation/air travel and/or through international auctioning of assigned amount units (i.e. an adaptation levy on the proceeds of international emissions trading).

Strategic Allocation. Internationally, funds for adaptation need to be allocated on a strategic basis and not involve international micro-management at the project level. The strategic allocation of international adaptation funds should not attempt to re-invent the wheel. It should use the existing international bodies and initiatives to allocate funding streams, and not try to duplicate them under a ‘climate change banner.’ Domestically, as mentioned above, there is a need to enhance ‘absorptive capacity’ not only at the project level, but more importantly – following the Paris Declaration − at the level of domestic policy (‘adaptation mainstreaming’).

Governance. The governance of the recently operationalised Kyoto Protocol Adaptation Fund represents a milestone in the evolution of international funding mechanisms, since for the first time developing countries have genuine ownership of such an instrument. In the case of adaptation funding, developing country
ownership and public transparency of decision making is not only desirable but a prerequisite for success, particularly in the context of mainstreaming activities. Given this, the Adaptation Fund should be the main instrument for the purpose of raising and managing of international adaptation finance for developing countries.

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