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 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 $950mclean development mechanismcertified emission reductions (CERs)

Expected Supply of CERs Approximately 1.6 billion tons of CERs are projected to be issued by 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).Adaptation Fund Board 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 Poznań, 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