It is no secret that Least Developed Countries (LDCs) and Small Island Developing States are the most vulnerable to climate change impacts, particularly to food security, water, infrastructure, health and economic sustainability. While funds available for adaptation range from US$120 million to $360 million, the World Bank estimated total costs of adaptation in developing countries would require between $10 billion and $40 billion annually. It is urgent that this gap be bridged.

The key to this is an operational Adaptation Fund (AF) which can become a potential major vehicle for collecting and delivering innovative funding for adaptation. The AF’s advantage is that it is not based on voluntary contributions from developed countries but on the Adaptation Levy on the Clean Development Mechanism (CDM).

The operationalisation and sufficiency of the Convention and Protocol adaptation funds are significant agenda items for COP/MOP 2. The AF was set up as part of the Kyoto Protocol to support “concrete adaptation” in the most vulnerable developing countries. It is based on a 2 per cent levy on Certified Emissions Reductions (CERs) generated from projects under the CDM.

The operationalisation of the AF was tackled in Montreal last year. However, no agreement was reached mainly due to the insistence by some developed countries to designate the Global Environment Facility (GEF) to operate the AF. Many developing countries argued that the GEF had a poor track record among the poorest and most vulnerable countries. In addition, the GEF Council is also dominated by the US, which is not even a Party to the Protocol. While the agenda item was taken up again at SB24 in Bonn in May this year, the impasse remained and discussions at times became acrimonious.

A recent paper put forward by Bubu Jallow of Gambia, Mohammad Reazuddin of Bangladesh and Amjad Abdullah of Maldives proposes that Parties should first address the governance of the AF before deciding on who should manage it. The authors propose the AF should have its own Executive Body with representation from all major world regions (similar to the CDM Executive Board) with one additional seat for the LDCs. They further propose this Executive Board operates under the “direct authority and instructions” of COP/MOP and not merely under “guidance” as the GEF does at present. In their paper, adaptation projects should be prioritised for the most vulnerable countries and communities, and the full adaptation costs of the proposed activities be deemed eligible for funding from the AF.

Parties should seriously regard this proposal as a basis for reaching agreement in Nairobi. Such a proposal would not preclude the GEF or any other institution from being the fund manager as long as the designated institution accepts the governance structures and rules agreed by COP/MOP. While the appointment of the AF manager is important, the governance and structure under which it will operate may actually be a higher priority.

The provision of adequate funding for adaptation is paramount. ECO strongly urges Parties to apply the 2 per cent Adaptation Levy on all other flexible mechanisms along with other emissions generating activities such as international air travel.