TWN Info Service on Climate Change (Jan21/01)
22 January 2021
Third World Network

Annual adaptation costs in developing countries is USD 70 billion, says UN report

Kathmandu, 22 Jan (Prerna Bomzan): A newly released UN report on adaptation to climate change impacts, estimates that annual adaptation costs in developing countries currently is USD 70 billion.

The Adaptation Gap Report (AGR) 2020, released on 14 Jan, by the United Nations Environment Programme (UNEP), also states that adaptation costs in developing countries are “expected to reach USD 140-300 billion in 2030 and USD 280-500 billion in 2050”.

However, according to the report, adaptation funding channeled through the UN Framework Convention on Climate Change’s (UNFCCC) multilateral climate funds was only USD 1.25 billion per year, although it almost doubled between 2015-2016 and 2017-2018.

The report further finds that while international public adaptation finance is slowly increasing, there is insufficient evidence that this increase over time is narrowing the distance to meet the increasing adaptation costs.

The UNEP AGR 2020 provides an “update on the current actions and emerging results of global adaptation planning, finance and implementation” and it says “all three elements are critical for tracking and assessing progress towards the global goal on adaptation”.

[Article 7.1 of the Paris Agreement (PA) under the UN Framework Convention on Climate Change (UNFCCC) establishes “the global goal on adaptation of enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change….”].

[The UNFCCC funds are the Adaptation Fund (AF), the Global Environment Facility (GEF), the Green Climate Fund (GCF), the Least Developed Countries Fund and the Special Climate Change Fund].

According to the AGR further, while multilateral support for adaptation increased from “8% to 14.6%” between 2013 and 2017 out of the overall multilateral development finance, the bilateral adaptation support as a share of overall bilateral development finance increased slowly from “4.6% to 6.1%” over the same period.

Further, the AGR 2020 chapter on finance covering its global progress, provides various challenges that complicate the estimation of both adaptation costs and adaptation finance. These challenges are depicted in a figure as well as detailed in two annexes, respectively.

With regard to estimation of adaptation finance, challenges listed are: coverage of sectors and sources; defining what counts as adaptation finance; double-counting; other parameters; evolving accounting methodologies; reporting on non-grant instruments; is finance new and additional; and precision of accounting. For each of the challenges, improved accounting modalities could lead to either higher or lower finance estimates or could go in both directions, highlights the report.

With regard to estimation of adaptation costs, the report lists the challenges as follows: consideration of soft and hard adaptation measures; co-benefits of adaptation; learning, innovation and scaling up; trade-off costs, mitigation, adaptation and residual impacts; omission of autonomous adaptation; socio-economic development; integrating positive impacts of climate change; incomplete coverage of sectors and risks; and unforeseen indirect climate effects. For each of the challenges, improved accounting modalities could lead to either higher or lower costs than estimated or could go in both directions.

Despite these challenges, the AGR 2020 chapter on finance emphasizes the importance of measuring and monitoring adaptation finance needs and progress in finance provision, as “it can foster better understanding of the alignment of adaptation investments with country priorities and it will help gauge the accountability of developed countries given their commitments under the UNFCCC to provide adaptation finance. Together, these can lead to increased ambition and effectiveness of support for adaptation”, it said further.

Highlighting the role of the private sector and markets, the other two key messages carried by the chapter on finance are as follows:

“(i) Efforts are being made to expand the instruments, actors and approaches through which adaptation finance is delivered. The role of public finance adaptation in catalysing private adaptation finance is increasingly being tested as it takes on the upfront risks of investments. New solutions and financial instruments such as insurance and results-based finance are being tested.

(ii) New impetus for adaptation may be provided by the increasing momentum to ensure a sustainable financial system. This momentum is underpinned by growing recognition that both material physical risks and the risks introduced as we shift to a climate-resilient economy impact company returns, asset values and, ultimately, financial stability. New tools should be used to identify and factor in these risks in investment decision-making and financial stability monitoring”.

The AGR 2020 chapter on finance concludes by stating that “the understanding of the link between sustainable finance and implementing Article 2.1(c) (of the Paris Agreement) should be further researched to inform and support climate finance tracking. Future Adaptation Gap Reports should look into this in greater detail”, it adds further.

(Article 2.1(c) of the Paris Agreement states “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”).

In relation to assessing global progress on adaptation planning, following are the key messages from the report:

“(i) Adaptation planning is critical to enable both public and private actors to prepare for and respond to the impacts of climate change. By committing all countries to engage in adaptation planning processes, the Paris Agreement underscores the importance of national-level adaptation planning in particular.

(ii) In terms of quantity, the last two decades have seen significant progress in adaptation planning: 72 per cent of countries have at least one national-level planning instrument in place that addresses adaptation, and 125 developing countries have begun the process of formulating and implementing national adaptation plans (NAPs). Countries have also increasingly established sectoral (58 per cent of countries) or subnational (21 per cent of countries) planning instruments.

(iii) In terms of quality, it is difficult to assess the degree to which adaptation planning efforts are adequate or effective in achieving adaptation objectives. An assessment of variables relevant to adequacy and effectiveness paints a mixed picture. While around half of countries meet the criteria for comprehensive and inclusive adaptation planning, significantly less than half meet the criteria for implementability and monitoring and evaluation. The picture for the integration criterion is mixed, with about two-thirds having horizontal coordination mechanisms in place, compared with around one-quarter that have vertical coordination mechanisms.

(iv) Looking ahead, as countries increasingly submit more consistent information under the Paris Agreement, more rigorous analyses can provide more nuanced insights into global progress on adaptation planning.”

On progress in implementing adaptation (covering insights from project proposals and scientific literature), the AGR 2020 informs that since 2006, the UNFCCC climate funds (AF, GCF and the GEF) have financed “close to 400 adaptation projects”, half of which started after 2015 and with more than half being implemented in least developed countries (LDCs) and almost 15% in small island developing states (SIDS).

It also states that “a trend towards larger projects (from more than USD 10 million to over USD 100 million) is apparent since 2017, which might signal a shift in programming from smaller pilots to larger scale implementation”.

According to the report further, among the three sectoral project priorities under the UNFCCC climate funds, agriculture and water are the most frequently addressed while health as the third priority is rarely featured. Drought, rainfall variability, flooding and coastal impacts remain the most common climate hazards addressed while scientific articles show that extreme heat is the fourth most-targeted climate hazard globally.

The report finds that “engagement of the private sector has remained low except for tourism, agriculture and the insurance industry”.

A key message put forth is that “evidence of adaptation outcomes, such as reduced vulnerability, however, is still rare to find even within evaluations of UNFCCC climate fund projects. To understand whether adaptation actions make a difference, more attention is needed to assess the effects of adaptation, safeguard against maladaptation and share lessons learned”.

The AGR 2020, additionally features a deep-dive topical focus on “Nature-based Solutions (NbS)”, a term which has been increasingly used recently. The dedicated chapter treats the NbS subject in terms of the three critical elements - planning, financing, implementation – as well as includes a summary of key messages.

The overall framing of the AGR 2020 is against the backdrop of the year 2020 as the year of COVID-19. It says “the fallout of the pandemic is expected to significantly influence the ability of countries to plan for finance and implement adaptation actions in response to current and future climate impacts, disproportionately affecting the most vulnerable countries and population groups”.

“While it is too early to gauge the full extent to which COVID-19 will affect global adaptation processes, in the short term the acute need to manage the direct public health impacts of the virus and the subsequent economic fallout has seen adaptation fall down the political agenda at all levels of governance and resources earmarked for adaptation planning, finance and implementation have been reallocated to combat the pandemic,” states the report, adding that “in the longer term, the socioeconomic consequences of the pandemic can be expected to have lasting implications for adaptation processes, as the economic downturn will put additional pressure on public finances and may change national and donor priorities regarding climate action”.

It further states that “2020 was not only the year of the pandemic, it was also the year of record temperatures and growing climate change impacts: floods, droughts, storms, wildfires and locust plagues. Even more worrying is that, based on current pledges under the Paris Agreement, the world is heading for at least a 3°C temperature rise this century, which will only intensify these impacts”.

The report, therefore, emphasizes that “strong action on reducing greenhouse gas emissions is essential to meet the Paris Agreement goals of holding global warming this century to well below 2°C and pursuing 1.5°C. This would limit, but not eliminate, the impacts on vulnerable countries and communities. However, given the current uncertainties around efforts to limit climate change, the world must plan for, finance and implement climate change adaptation measures appropriate for the full range of global temperature increases or face serious costs, losses and damages”.

The report further states that the entire AGR process is “closely aligned” with that of the ‘Global Stocktake’ (referred to in Article 14 of the Paris Agreement), while remaining an “independent assessment”.

Reviewing the overall progress made in achieving the global goal on adaptation is one of the four adaptation-related functions of the Global Stocktake which will start in 2023 and take place every five years thereafter under the UNFCCC.