Marcia Levaggi, Manager of the Adaptation Fund Board’s Secretariat, on the innovative approach of the Adaptation Fund to capitalising on the carbon market, and the Fund’s potential following COP21.

There are less than three months to go until COP21. Whatever the outcome may be, we already know that climate finance – particularly the under-resourced area of adaptation funding – will be key to an ambitious global climate agreement. And whatever the specifics of the new climate finance architecture, the combination of expertise, flexibility, and innovation means that the Adaptation Fund (AF) is uniquely placed to make a significant contribution to the post-Paris world. The Adaptation Fund is a transparent and innovative fund, with an established track record of delivering adaptation activities through a portfolio of 50 concrete adaptation projects and programmes. It is complementary to other funds under the UN Convention on Climate Change (UNFCCC). Its projects can offer replication and up-scaling potential to bigger funds and donors, which could leverage the Adaptation Fund’s existing assets in their quest for transformational change.

The Adaptation Fund occupies a clear role in the climate finance landscape: the provision of funding for small-scale concrete adaptation projects to the most vulnerable communities in developing countries, especially through our Direct Access modality. Direct Access enhances country ownership in line with the Paris Declaration on Aid Effectiveness. As of yet, the Adaptation Fund is the only climate fund with an operational direct access portfolio, implementing 14 approved projects through a swift project cycle. Alongside this, the very first enhanced Direct Access project, a small grant facility in South Africa proposed by the South African National Biodiversity Institute (SANBI), and a pilot programme for regional projects that focus specifically on supporting innovative approaches to adaptation finance.

The Adaptation Fund has a successful track record in accrediting 20 national implementing entities (NIEs) to date, and in building local capacity. A streamlined accreditation process for small entities responds to the specific circumstances of small countries, with the Micronesia Conservation Trust being the first NIE of this kind eligible to access funding of up to one million dollars. This ability to directly engage with countries is also supported by the Adaptation Fund’s readiness programme, which effectively underpins direct access, generating an engaged NIE community who gather annually to share lessons and discuss common challenges. South-South cooperation in accreditation is one of the key tools of the readiness programme, supporting peer to peer learning. Four grants have been awarded for the NIEs in Senegal and Rwanda to provide support to Cabo Verde, Chad, and Niger, and Burundi, respectively. We also value maintaining transparent dialogue with civil society. The NGO community coordinated by Germanwatch is very active and has been instrumental in bringing civil society representatives from the countries where the Adaptation Fund operates, to provide their feedback to its Board.

The Adaptation Fund has been associated with innovative approaches to finance since its creation, in particular with a levy from the carbon markets as a revenue source. This levy, initially from the clean development mechanism proceeds, was further extended to those from joint implementation and emissions trading mechanisms in Doha (2011), enhancing the linkage between the Fund and the carbon markets. This trend continues in the decision made by the Parties in Lima (2014) requesting the Adaptation Fund Board to consider, among other options for diversifying the Adaptation Fund revenue streams, the application of voluntary levies on developed countries’ national and regional emission trading schemes.

However, whilst the role of the carbon market as a revenue source of the fund remains as one of the Adaptation Fund Board’s core innovative features, the low carbon price means that contributions by developed countries have become our main source of funding, at least temporarily – and the Adaptation Fund urgently needs a sustainable revenue stream as part of the Paris deal so that it can develop its work further.

Openness, cooperation, and political will are needed if we are to unlock the full potential of climate finance. This means identifying what everyone can offer, and working together to deliver results. The Adaptation Fund can play a special role in putting adaptation funding to work quickly and effectively, supporting innovative, country driven projects that are small-scale but with significant up-scaling potential. We have the expertise on the ground to protect the environment and the livelihoods of the most vulnerable at the same time. The Adaptation Fund is ready; now COP21 needs to create the conditions for truly transformational climate finance.

This blog was originally produced for the Adaptation Fund NGO Newsletter. Read the original here.

 Occasionally, CDKN invites guest bloggers to share their views on cdkn.org The views expressed here do not necessarily reflect those of CDKN or its Alliance partners.