ADAPTATION FUND:

status and issues

Richard Muyungi,
United Republic of Tanzania

Focus
Introduction
The Adaptation Fund uniqueness
Progress towards accessing resources
from the Fund
Procedure for parties to access
resources

Introduction
Financing Climate Change adaptation needs
vast amounts of financial resources. Precise
estimates of the amount needed to
address adaptation Estimates from the
UNFCCC review is at USD 67 bn annually.
Other estimates have shown ranges of
$10-40 bn (World Bank) in 2020 to $ 86
bn by UNDP annually in 2015.
Unlike many other funds such as the LDCF
and SSF under the UN Framework
Convention on Climate Change (UNFCCC)
the AF falls under the Kyoto Protocol.

Introduction
Established in 2001 in Marrakech and adopted in Bali
in December 2007 to finance concrete adaptation
projects and programmes in developing country
Parties to the Kyoto Protocol that are particularly
vulnerable to the adverse effects of climate change.
It is financed from the share of proceeds on the clean
development mechanism project activities and other
sources of funding. The share of proceeds amounts
to 2% of certified emission reductions (CERs) issued
for a CDM project activity. Estimates for the revenue
that will be generated from the sale of the two per
cent CER share until 2012 has been between $160m
to $950m

Expected Supply of CERs

Approximately 1.6 billion tons of CERs

are projected to be issued by 2012.
Expected CERs generated by CDM projects
400,000
350,000

k CERs

300,000
250,000
200,000
150,000
100,000
50,000
2008

2009

2010

2011

2012

The Adaptation Fund Uniqueness

It is a unique Fund:
Majority representation from Developing countries in
order to address the issue of ownership. It is
supervised and managed by the Adaptation Fund
Board which is composed of 16 members and 16
alternates (20 out of 32 Members and alternates are
from developing countries).
Funds primarily concrete adaptation projects
recognizing that the impacts of climate change are
already taking toll.
Allows for Direct access to avoid the existing barriers
for developing countries to access resources
embedded in current approaches and institutional
arrangements

Progress
For the past year and half focus has been on putting
in place the institutional and legal arrangements to
ensure that the Fund becomes operational before
Copenhagen. At CMP 4, in Pozna, December 2008,
Parties adopted the necessary administrative and
legal arrangements for the full operationalization of
the Adaptation Fund.
Parties also considered how to ensure that developing
countries can directly access resources under the
Adaptation Fund. They decided that the Adaptation
Fund Board be conferred such legal capacity as
necessary for the discharge of its functions with
regard to direct access by eligible Parties --,
consistent with decisions 5/CMP.2 and 1/CMP.3

Progress

The following has been achieved:

Rules of Procedure of the Adaptation Fund Board adopted

Legal Arrangements for the Adaptation Fund Board Secretariat
Arrangements between the CMP and the World Bank
Regarding the Services to be Provided by the Trustee for the
Adaptation Fund adopted by CMP
Strategic Priorities, Policies and Guidelines of the Adaptation
Fund adopted by CMP
Secretariat to the AFB in place with its roles and
responsibilities adopted by CMP
Board has been conferred with the legal capacity that is
necessary for the discharge of its functions with regard to
direct access
initialization of the monetization of the certified emission
reductions agreed but not executed because of the global
financial crisis

Current Dynamics
of Carbon Prices

CER prices have been affected by the

current economic context
Financial crisis and economic slowdown is
projected to cause a decline in industrial
production, lowering the demand for CERs.

We hope that the economic environment

which makes the financing of new projects
more difficult, may pushing up the price of
CERs. This might happen in the later part of
2009.

Falling carbon prices

CER prices have fallen from a high of 23 to 14 per ton.

Source: Bloomberg

How will Parties access

resources
At the next meeting scheduled in June the
Board will finalize the Document with
criteria and guidelines for parties to access
resources. This document among others
includes the criteria for national
implementing entities ( such as Ministries
of Finance) to directly access resources
from the adaptation Fund.
The Board will also prepare template for
parties to use in requesting for financial
support from the Board.

How will Parties access resources

The Board will also consider the offer by
parties that have shown interest to host the
Adaptation Fund Board so as to enable it
exercise its legal capacity.
The Board will also consider a report from
the World Bank on the monetization status.
Once enough CERs have been monetized,
Parties will be notified.
For the first monetization phase, priority
has been given to the most vulnerable
countries, particularly those in Africa and
LDCs.

I thank you for your attention