This proposal explores the ground rules and principles towards apportioning available fund to foster adaptation among Developing Country Parties.  Recognizing the differences between the DCPs in their respective vulnerability, capability and level of development, a tool to operationalize the implementation of Adaptation Fund is proposed. The proposed tool ensures an incentive based approach, equitable and at the same time accommodating the low carbon thrust toward defining development pathways and ensuring adaptation to avoid adverse impacts of climate change among vulnerable countries.

The global response to climate change recognizes that the vulnerable communities across the globe would require certain levels of adaptation even if the said ‘deeper cut’ is achieved during the second commitment period of the UNFCCC regime and beyond. From the recent literature, it appears evident that global community would require significant levels of adaptation investments to safeguard people’s lives and livelihoods, in the order of US$ 50 to 86 Bn per annum (Stern Report; Oxfam, 2007). It is also understood widely that the amount estimated is only a fraction compared to the amount which has already been forwarded/ committed to ‘bail-out’ the recent financial sector debacle created by the market mechanism across the globe. Moreover, the proposed avenues to raise the amount needed for adaptation appear to be sufficient to meet up the challenge of raising finance for adaptation if the country parties under the UNFCCC behave rationally.

The global response to climate change expects that finance for adaptation will indeed be generated and raised to meet the unavoidable adaptation demands in vulnerable regions and pockets around the world. However, two critical issues must be resolved (preferably by the Adaptation Fund Board) to make the Funds for Adaptation fully operational: 

1. Which institution(s) will manage the Adaptation Fund on behalf of the UNFCCC in the post-2012 regime, and
2. How will the fund be apportioned among developing country parties (DCPs)

This proposal concerns the second question, while recommending for the first that the fund should be managed and administered by the AFB itself and not by any International Financing Institution (IFI). This proposal explores the ground rules and principles towards apportioning available fund to foster adaptation among DCPs.

In order to answer the question regarding rational apportionment of adaptation fund, one must recognize that there are a good number of DCPs where the needs for immediate investments are high. However, one must also recognize competing interests between and among various DCPs towards securing funds for adaptation.

Since UNFCCC attaches much emphasis on the principle of polluters pay, at the same token it must not create an avenue to those ‘High Emitting DCPs’ (HEDCP) to benefit from such funds more than the ‘Very Low Emitting DCPs’ (VLEDCP). Higher levels of polluters within the DCPs would therefore have lesser opportunity to receive ‘compensatory finance’ made available by the fund for adaptation.

It is therefore proposed that, the principle for apportionment of the said adaptation fund should be based on emission performance among the DCPs, where such performance will be evaluated periodically (every three years, starting from the initiation of the second commitment period) to award higher financing opportunity for those DCPs who would take measures to keep their emissions within certain limits.

In doing so, not only the performing DCP would be benefited from greater financing opportunity, a healthy competition among DCPs would result in a net voluntary reduction of emissions, which will eventually contribute to meeting the objectives under the principle of common but differential responsibility.

By adhering to the above principle of apportionment of fund, one may divide DCPs into five categories, based on their emission performance considering average developing country per capita emission in the base year 1990. The critical question in this regard will be: whether the DCP has increased or decreased its emission in (say) 2008 with respect to its relative emission performance in the base year amongst the DCPs. The five classes of emission performers may be identified by the following criteria:

CRITERIA FOR CLASSIFYING EMISSION PERFORMERS IN DEVELOPING COUNTRIES
1.   The Very Low Emitting DCPs (VLEDCP)	successful in keeping their relative emission very low, within 25% of 2008 DCP average levels per capita
2.   The Low Emitting DCPs (LEDCP)	successful in keeping their relative emission low, ranging >25% to 75% of 2008 DCP average levels per capita
3.   The Moderate Emitting DCPs (MEDCP)	successful in keeping their relative emission moderate, ranging >75% to 125% of 2008 DCP average levels per capita
4.   The High Emitting DCPs (HEDCP)	unsuccessful in keeping their relative emission moderate to low (bad performers), ranging >125% to 150% of 2008 DCP average levels per capita
5.   The Very High Emitting DCPs (VHEDCP)	thoroughly unsuccessful in keeping their relative emission moderate to low (i.e., worst performers among all DCPs), being >150% of 2008 DCP average levels per capita

Since the principle of apportionment is to offer better opportunities to best emission performers among the DCPs, one may now apportion the total available resources in a sliding scale.

We propose

• 30% of the fund is earmarked for the VLEDCPs,
• 20% for the LEDCPs,
• 20% for the MEDCPs,
• 15% for the HEDCPs,
• only 5% for the VHEDCPs.
• The rest of the resources (about 10%) will be kept aside for administrative purposes (management, verification, monitoring, compliance, etc.) and to meet up contingency mobilization in case of climate-driven disasters.

The next challenge is to apportion the fund among the DCPs belonging to the same category. In a bid to avoid chaos, funds will be made available among competing DCPs belonging to the same category by applying a Vulnerability Index (VI), as defined by an appointed body (say IPCC) within the UNFCCC regime. The AFB will decide and guide the process of independent assessment of VIs among all the DCPs, set by a criteria which may be decided under SBI.

Within each of the above five categories, the earmarked proportion of the fund will be distributed according to the VI score, i.e., the higher the VI the higher the requirement for adaptation fund. Therefore, the respective DCP will be provided with higher proportionate amounts earmarked for that category of emission performers.

While much focus has so far been placed on generating adaptation finance, little has been said about the institutional operationalization of the adaptation fund. By applying above principles and rationale, a just and equitable distribution of funds can be made possible, leading to a healthy competition among the recipient DCPs to outperform others in terms of emission reduction. In doing so, the principle of common but differentiated responsibility will be upheld as well as honored.

 

BALI TO COPENHAGEN  -  DECEMBER 2008 AT POZNAN