Anand Patwardhan Adaptation Cse Briefing 280809 Final

Anand PatwardhanIndian Institute of Technology-

BombayEmail: [email protected]

Adaptation: status and prospects

Why adaptation? Asymmetry in distribution of impacts

Disproportionately larger impacts may be experienced in developing countries

Mitigation is not enoughRegardless of mitigation, we are faced with a finite, and

significant degree of anthropogenic climate changeThis is true even if we think a 2 C target is possible, and

even more important if we don’t reach it (quite likely)Managing climate risk is important for sustainable

developmentWe are not well adapted to current climate risksA greater focus on adaptation (filling the “adaptation

deficit”) may actually help in advancing the development agenda

August 28, 20092 Anand Patwardhan, IIT-Bombay

Evolution as reflected in the IPCC assessmentsGradual evolution in emphasis from biophysical

changes to impacts to vulnerability and now to adaptation from the first to the fourth IPCC assessment reports

Gradual evolution in focus from making the case (‘why’) to guiding the response (‘what’ and ‘how’)

Gradual evolution of thinking from a largely mechanistic and sequential view of impacts, vulnerability & adaptation to a more complex, process-oriented understanding of the response processBaselines and socio-economic development scenariosPath dependency and the possibility of mal-adaptation

August 28, 2009Anand Patwardhan, IIT-Bombay3

Some relevant findings from the AR4 Adaptation is necessary in the short and longer term to address

impacts resulting from the warming that would occur even for the lowest stabilization scenarios assessed (WG2 SPM, p.19).

More specific information is now available across a wide range of systems and sectors concerning the nature of future impacts, including for some fields not covered in previous assessments. Key impacts would be in water, food, ecosystems, coasts and health sectors (WG2 SPM, p.11).

Though adaptation measures are seldom undertaken in response to climate change alone (WG2, Ch. 17, p.719), in several sectors, climate response options can be implemented to realize synergies and avoid conflicts with other dimensions of sustainable development (AR4 Synthesis Report, p.18).

A wide array of adaptation options is available, but more extensive adaptation than is currently occurring is required to reduce vulnerability to future climate change (WG2 SPM, p.19).


Some relevant findings from the AR4 – contd…. More specific information is now available across the regions of the

world concerning the nature of future impacts, including for some places not covered in previous assessments. In addition to LDCs and SIDS (which are already acknowledged as vulnerable regions under the Convention) other regions have been identified (WG2 SPM, p.13), for example (examples extracted from WG2, Ch. 19, Sec. 19.3.3, p. 791-792): Africa is likely to be the continent most vulnerable to climate change

especially with respect to food security and agricultural productivity, particularly regarding subsistence agriculture, increased water stress, potential for increased exposure to disease and other health risks, increased risks to human health Approximately 1 billion people in South, South-East, and East Asia would face increased risks from reduced water supplies decreased agricultural productivity and increased risks of floods droughts and cholera.

Tens of millions to over a hundred million people in Latin America would face increased risk of water stress.

Low-lying, densely populated coastal areas are very likely to face risks from sea-level rise and more intense extreme events.

Human settlements in polar regions are already being adversely affected by reduction in ice cover and coastal erosion.


Anand Patwardhan, IIT-Bombay6

Adaptation in the UNFCCC and KP

According to Article 4.1 of the UNFCCC, Parties are committed to: Formulate, implement, publish and regularly update national and, where appropriate, regional programmes

containing measures… to facilitate adequate adaptation to climate change (Art. 4.1. (b)); and Cooperate in preparing for adaptation to the impacts of climate change; develop and elaborate appropriate and

integrated plans for coastal zone management, water resources and agriculture, and for the protection and rehabilitation of areas, particularly in Africa, affected by drought and desertification, as well as floods (Art. 4.1 (e)).

Article 4.4 states that: The developed country Parties and other developed Parties included in Annex II shall also assist the developing

country Parties that are particularly vulnerable to the adverse effects of climate change in meeting the costs of adaptation to those adverse effects.

Articles 4.8 and 4.9 of the Convention make specific reference to developing country Parties, in particular least developed and most vulnerable countries. These articles explicitly mention funding and transfer of technology “to meet the specific needs and concerns of developing country Parties arising from the adverse effects of climate change” (UNFCCC 1992).

The Adaptation Fund created as a part of the Marrakech Accords was finally operationalized at CMP3 in Bali. The process involved decisions regarding the basic elements of the fund (28/CMP.1), principles underlying operation and management (5/CMP.2) and giving specific form to these arrangements (1/CMP.3) under which the Adaptation Fund Board is serviced by a Secretariat and a Trustee.

The Special Climate Change Fund and LDC Fund also created as part of the Marrakech accords.

August 28, 2009

Adaptation is addressed under different agenda itemsSBI

Financial mechanism of the Convention (guidance to the GEF regarding SCCF and LDCF)

1/CP.10 (Buenos Aires programme of work) and Art 4.8 SBI (CMP)

Adaptation FundSBSTA

Nairobi Work ProgrammeAWGLCA

One of the pillars of the BAPAWGKP

Extending share of proceeds



Multilateral response on adaptationBased on the two pillars of

National and local adaptation responses

Technology Financing

Generation Delivery

• Criteria for project selection and cost-sharing•Methodologies

‘How’ to support

‘What’ to support

• Adequacy and predictability of source of funds• Scale of funds

• Research: utilize S&T cooperation• Development: approaches for joint technology development • Deployment: and appropriate financing models

Should support and enable

•Institutional structure• Financial instruments

Mechanisms for development &

transfer

What technolog

y• Technology in the broadest sense• Traditional knowledge capture

Effective financing and resource delivery is key

July 31, 2009Anand Patwardhan, IIT-Bombay9

Resource generation Adequacy and predictability of resources Scale of resources required: chronic vs. acute change

Resource delivery What to support?

Making the space of potential projects tractable: criteria and parameters for additional cost, baselines and project outcomes / benefits

Need standardized, simplified methodologies How to deliver?

Institutional structure for delivery, including governance of mechanism

Appropriate financial instruments for delivery Recognize that in the case of adaptation (unlike mitigation),

for most sectors, the actions being supported will be those of public entities

Difficulty with directly applying ideas from mitigation (baselines, additionality, incremental cost, global / local benefits)


ElementsDemand

What are the needs and their characteristics and resource requirements?

SupplyHow do we generate the resources for

meeting these needs?Delivery

How do we deliver the resources effectively? What are the appropriate institutional arrangements and modalities?


SupplyCharacteristics

AdequacyPredictabilityAutomaticityNew & additionalMeeting demand characteristics

OptionsContributionsLevy on transactionsOthers….

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Rationale for enhanced financial flows

Sector Areas / Adaptation measures considered

Global(billion USD)

Developing countries (%)

Agriculture, forestry and fisheries

Production and processing

Research and development

Extension activities

14 50 %

Water supply Water supply infrastructure 11 80 %

Human Health Treating increased cases of diarrhoeal disease, malnutrition and malaria

5 100 %

Coastal zone Beach nourishment and dykes 11 40 %

Infrastructure New infrastructure 8130 25 %

UNFCCC, 2007: Additional investment and financial flows in 2030 for adaptation amount to tens of billions of USD, estimates depend on underlying scenarios

Adaptation costs depend on level of mitigation activities

August 28, 2009Anand Patwardhan, IIT-Bombay

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Rationale for enhanced financial flows – cont.

UNDP HDR 2007/2008: adaptation investment needs will be USD 86 billion by 2015

Evolution from adaptation costs studies at the global level towards studies that will likely develop more information on adaptation needs at regional and national levels UNDP project to estimate adaptation costs for agriculture, water

resources, human health, forestry, and tourism in 10 countries

Regional Economics of Climate Change Studies, e.g. by ECLAC and ADB

However there are big questions about the adaptation cost numbers, including Assumptions (e.g.,10-20% of investments for climate-proofing)Limited sectors and adaptation ‘Nebulous nature’ of adaptation or what are we exactly

estimating costs of?


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Generation of financial resources - options

Fundingsource

Current

Proposed

Public funding Private funding

Voluntary Contributions Defined Contributions

Contributions though levies on market

instruments/commoditiesMultilateral Bilateral International National

• Convention Funds under the GEF (SPA, SCCF and LDCF)

• PPCR

ODA, including

• GCCA• Japanese

Cool Earth Partnership

• Spanish MDG Fund

Fixed % of GNP or based on criteria such as GDP, GHG and population

• CDM levy for AF

• EU ETS • Investments• Financial risk

management instruments, including insurance

Market finance, including•venture capital,•commercial loans•revolving credits

• Share from global carbon tax

• Expansion of CDM levy to 3-5%

• SOP from JI and ET

• Auctioning allowances

• Levies on international air travel and bunker fuels


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Current available and pledged funding in USD million

Source Estimated level of funding

Period Nominal annual level of funding

Funding under the Convention SPA

LDCF SCCF

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172 91

As of Oct 21, 2008 As of Oct 21, 2008

n.a. n.a.

Adaptation Fund 400-1 500 2008-12 80-300 Multilateral

PPCR 640 2009-12 160 Bilateral

Japanese Cool Earth Partnership 1 000 2008-12 200 German International Climate Initiative 385 2008-12 77

GCCA of the European Commission 84 2008-10 28

Spanish MDG Fund 143 2008-11 36

Call for resources to be:

Adequate and sustainable to address identified needs

Predictable to enable proper planning or sequencing of adaptation actions

New and additional to not divert funds from ODA


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Potential of proposed options in USD billion

Proposed by Source Nominal annual level of funding

G77 and China

0.25 to 0.5 % of GDP from Annex I Parties 100.5–201

Switzerland 2 USD/t CO2 18.4 Norway 2% levy on auctioning AAUs 15–25 Mexico contributions based on GDP, GHG and

population and markets 0.2

EU 2% levy on SOP from CDM 0.25–2.5 Pakistan 3-5% levy on SOP from CDM 0.375–6.25 LDCs 2% levy on SOP from JI and ET 0.03–2.25 LDCs Levy on international air travel (IATAL) 4–10 LDCs Levy on bunker fuels (IMERS) 4–15

Private sector will likely play a critical role in funding adaptation investments

and will at some stage undertake adaptation out of self-interest

Need to identify levers to further encourage the private sector to optimise and shift its investments towards more climate-resilient activities, for example

Public-Private-Partnerships for infrastructure projects or financial risk management, including insurance, where public takes over risks and ensures a certain economic rate of return



Demand: what to support? The adaptation = development conceptualization has led to an unfortunate

paradox:Because adaptation = development, “normal” development actions ought to take

care of the problem, as long as agents (and decisions) are “fully informed” If adaptation = development, donor countries fear that “normal” development cam

get put under adaptation projects, thus “opening the floodgates” in terms of demand on resources

To move forward we will need to recognize that adaptation to climate change:Poses a distinct, additional burdenThe costs of responding to this additional burden would need to be met

through (grant financing) under the financial mechanism of the ConventionThat while mainstreaming or integration is an approach for putting

adaptation into practice, and not a means for removing the needs for funding

Given that the estimation of these additional costs in practice may be rather difficult we may need (a) better characterization of adaptation demand, (b) a process for determination and (c) negotiated levels of co-financing

Our response will need to address chronic and acute hazards (reinsurance)

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Characterization of adaptation

Adaptation may be examined and characterized along two dimensions: Nature of additionality, and Nature of the intervention

Nature of additionality and primary drivers1. Integrating climate risk into socio-economic

activities to ‘climate-proof’ a current or future socio-economic activity to harness development benefits, e.g. airport in coastal zone

2. Expanding adaptive capacity to deal with future and not only current risks to harness development and adaptation benefits, e.g. crop insurance

3. Directly addressing observed impacts from climate change to harness adaptation benefits, e.g. changing Malaria zones


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Characterization of adaptation – cont.

Nature of the intervention in line with the Bali Action Plan

Context of intervention at national and sectoral level Policies

Programmes and plans

Projects

Type of intervention Capacity-building

Research and assessments

Disaster risk reduction and risk management, including insurance

Technology

Specific adaptation action (e.g., infrastructure, cultivating drought-resistant crops)

Economic diversificationAugust 28, 2009Anand Patwardhan, IIT-Bombay


Examples of adaptation interventions (from NAPA’s)

Intervention

Additionality

Type of intervention Context of intervention


Disaster risk reduction

Programmes Projects

Integrating climate risk into socio-economic activities

Research on micro hydro-power production (Burundi)

Introduce drought tolerant crop varieties (Comoros)

Incorporate adaptations from NAPAs in Ministry Operational Plans (Kiribati)

Increase water supplies to combat increasing drought (Comoros)

Expanding adaptive capacity to deal with future and not only current risks

Research on drought, flood and saline tolerant crop varieties (Bangladesh)

Strengthen early warning systems (Zambia)

Integrated protection and management of coastal zones (Cape Verde)

Plant vegetation to reduce risks from storms (Cambodia)

Directly addressing impacts from climate change

Improve understanding of groundwater resources in light of persistent drought (Mauritania)

River flood warning system (Bhutan)

Mainstreaming adaptation into sectoral programmes (Bangladesh)

Lowering of water levels in the Thorthormi Lake to reduce risk of a future GLOF (Bhutan)


Delivery arrangementsInstitutional arrangements

GovernanceHow much to fund?

Matching demand and supplyMethodologies for additional cost

determinationHow to disburse?

Access to resources

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Current institutional arrangements


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Proposed institutional arrangements

Call for adaptation funding being structured and governed under an umbrella financial mechanism of the Convention

Policy choice:Using and improving existing institutions, e.g. GEF

Establishing new ones, e.g. Adaptation Fund under the Convention overseen by a board appointed by the COP with equitable and balanced representation of all Parties


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Current access

For whom?All developing country Parties to the Convention

SPA under the GEF Trust Fund (for global environmental and adaptation benefits)

SCCF (for adaptation benefits)Only LDCs that are Parties to the Convention

LDCF (for preparation and implementation of NAPAs)Developing country Parties to the Kyoto Protocol that

are particularly vulnerable Adaptation Fund (concrete adaptation projects and

programmes )How?So far only indirect access through implementing

agencies, direct access to Adaptation Fund being operationalized


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Proposed access

For whom?All developing country Parties to the Convention with a

possibility of prioritization regarding vulnerability BAP: LDCs, SIDS and countries in Africa affected by

drought, desertification and floodsProposals:

“Poorest and most vulnerable” Vulnerability index or indicators reflecting a country’s:

o Circumstanceso Respective capabilitieso Level of associated risk o Physical impacts

How?Direct and easy access with streamlined and transparent

procedures


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Disbursement considerations

Current disbursementUnder the SPA

2 increments: one for GEB and one for adaptation, developed for each project

Under the SCCF and the LDCF1 increment for adaptation, determined through a sliding co-

financing scale based on the size of the project

Proposed disbursement Adaptation funding to be provided based on the

nature of additionality and the nature of interventionMay need negotiated levels of co-financing and

possibly a process by which this may be accomplished (example: Methodologies Panel to the AF)


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Examples of disbursement for adaptation

Intervention

Additionality

Type of intervention Context of intervention


Disaster risk reduction

Programmes Projects

Integrating climate risk into socio-economic activities

Full cost Negotiated co-financing depending on sector and project/ Full costs of marginal adjustments

Negotiated co-financing depending on sector and project/ Full costs of marginal adjustments

Negotiated co-financing depending on sector and project/ Full cost of marginal adjustments

Expanding adaptive capacity to deal with future and not only current risks

Negotiated co-financing

Negotiated co-financing depending on sector and project



Directly addressing impacts from climate change

Full cost Full cost Full cost Full cost


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Disbursement – cont.

Way of disbursementProject support, as currently practised

Appropriate for piloting adaptation actions in countries and sectors

Less suitable in delivering up-scaled financial resources Programmatic support as envisaged by the

Adaptation Fund and several PartiesAllow for implementation at scaleSupport for national adaptation plans

Budget support as piloted in development assistanceAllows for integration of national budgets, climate funds

and other development funds


Beyond financingExpert support for adaptation

Adaptation Committee of ExpertsRegional centers and global and regional

networksResearch and capacity-building

Tools, methodologies and metrics for assessing implementation and outcomes


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Contact information

Anand Patwardhan

Shailesh J Mehta School of Management

Indian Institute of Technology

Powai, Mumbai 400076, India

Phone: 91.22.25767788

Fax: 91.22.25722872

Email: [email protected]

August 28, 2009