Chair: Adaptation Fund could expand to manage post-2012 climate aid

Farukh Iqbal Khan.jpg

The Kyoto Protocol's Adaptation Fund could take on a wider role to manage money destined to help poor countries deal with the consequences of climate change, Farrukh Iqbal Khan, chair of the Adaptation Fund Board, told EURACTIV in an interview. 

Farrukh Iqbal Khan is the Pakistani chair of the Adaptation Fund Board.

He was speaking to Susanna Ala-Kurikka.

To read a shortened version of this interview, please click here.

What does the Adaptation Fund currently do?

It is a small fund as of now. We started from scratch, unlike other places. It started off in 2007 and we had to build institutional architecture, but still within that period we have reached a point where we have not only started delivering – the first two projects have been approved. The projects are worth about $14 million, one is for Senegal and the other is for Honduras.

One is being done through the national implementing entity, which is the innovative direct access that we have introduced, and the other is through the UNDP [United Nations Development Programme] Honduras fund.

All developing countries are eligible to receive funding from the Adaptation Fund. We have received about fourteen concept papers and two fully developed projects. A signal for go-ahead has been given to six concepts and two fully developed projects have been approved. My understanding is that we have started receiving more.

What role do you see for the Adaptation Fund under a possible new climate treaty?

The Adaptation Fund is a reality by itself now. It will have its own legal personality.

Developing countries and I personally have always said that we should rationalise our funds within the [United Nations Framework on Climate Change] Convention, which would include the Adaptation Fund as well. The role of adaptation funding in the larger system is very simple: the Adaptation Fund could be the adaptation window for the larger new climate change fund. So at least the majority of funding for adaptation should be channelled through the Adaptation Fund.

So there would be a special mention of the Adaptation Fund's role in a climate new treaty?

We are discussing this. It's not that we have already decided – we haven't even decided on the new fund – it's just an idea we have. We have not decided about governance at all. All these issues are under consideration and I cannot say, as of now, how the Adaptation Fund will be treated in the new treaty and when that treaty is going to come about – that is a million-dollar question in itself.

The UN Certified Emission Reduction (CER) credits make up the basis of the Fund. Could this be expanded to use revenues from a global carbon market once more countries put in place emissions trading systems?

That still depends on the Parties. It is true that developing countries have asked, on occasion, to increase sources of adaptation funding. Right now we have a 2% levy, which of course does not yield very significant financing.

There are other mechanisms in the Convention, such as the Joint Implementation Fund, and the European Union has other mechanisms.

There are going to be many mechanisms. Hopefully we will come up with some understanding on how to replenish adaptation funding and its sources of finance as well.

I think that other sources of funding must include whatever market-based sources we will take, for instance any levies. If that levy has to be imposed then it should in some way also contribute to adaptation funding.

But I think we're slightly going ahead of our role here. We have to first construct that governance system and sources of funding for climate finance before we can determe how much of it would go towards adaptation.

We have no agreement as of now on the sources for the new fund and haven't even discussed it in the first place. So once we're down to that level of detail, then probably we will be in a position to look for how much of it should be channelled to adaptation. Adaptation is a strategy for developing countries and therefore substantial resources are required.

How do you ensure that the money is indeed going to adaptation rather than mitigation, which is a priority for industrialised countries?

Developed countries' priority is indeed mitigation and developing countries' priority is adaptation. The balance between these two views will indeed lead us in our determination of distribution of finance within the new climate fund that we are talking about.

From the projects the Adaptation Fund has received, most of them are focused on vulnerable communities, small communities. And what are the issues? Agriculture, farming, livelihood issues. And what do they tell you? They tell you that there is a clear link between development and adaptation.

What balance should be struck between funds from public sources and loans?

Loans are not in the spirit of the Convention. I am not saying that I should suggest what others should do, but if we all follow one Convention, loans are not the spirit of financing.

It is an obligation to provide funding for both mitigation and adaptation, and that obligation cannot be converted into a loan because then you give the obligation to the recipient by giving them a loan. So how can you switch roles like this?

How do you think the Cancún climate talks will advance the debate on climate finance?

There are going to be roughly three issues.

One is the governance question, the other is the new fund and the most important portion is going to be sources for that fund. You cannot create an empty shell – you cannot take the decision to establish a fund without knowing where the money is going to come from.

Governance on its own is a priority for the developing countries. There should be a decision on how to link all these actors together.

The G77+ China group recently proposed that there should be a standing committee on finance established under the Convention, which should look at all these governance issues: the need for measurement and reporting and verification of climate finance, a vital part of any plan of action. It should look at how it can bring all these actors together – climate change finance universe is huge – how do you bring them all together on one platform?

These are the governance issues. Perhaps they could also take a decision to establish a fund and give rise to a process whereby this is operationalised.

The developing countries proposed that this standing committee that we are going to establish will have two roles: one is a short-term role to operationalise the fund once a decision has been taken. This is easier said than done – creating a fund is not a small job. A fund requires institutional infrastructure, secretarial support, procedures, how to allocate funding – these things take time.

Even if we take a decision now in Cancún, the fund is not likely to be operational before 2012 or even 2013. We can take the decision in principle and launch the process by this standing committee to operationalise and the same time discuss and agree on sources of that funding. I am a bit sceptical on the sources part, since we have not discussed or agreed on it.

So in your opinion it will be the fund and the governance that will come first and then we start discussing sources?

For the developing countries, yes. Putting the system right is very important.

Thus far there is no agreement on anything. What has happened during these past six months is that options have become very clear.

When we say that finance is ready for a decision, there is a level of maturity in finance negotiations. There are three proposals: one from the US, one from the EU and one from the G77. Three clear-cut proposals: they need to discuss and distil them into one.

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