The effectiveness of climate finance: a review of the Adaptation Fund

Research reports and studies
March 2013
Nella Canales Trujillo and Smita Nakhooda

The Adaptation Fund has many innovative features, and represents a new model of climate finance governance:

  • It is not wholly dependent on contributions of funding from developed countries, as it is primarily capitalised through a 2% levy on certified emission reductions from the Clean Development Mechanism (CDM).

  • Developing country governments hold the majority of seats on the Adaptation Fund board.

  • The fund finances the full cost of concrete adaptation projects and programs.

  • The fund has also departed from the traditional structures of climate funds where multilateral institutions such as development banks and UN agencies manage projects, to give developing countries the option of “direct access” to finance through their own national institutions.

These innovations have inspired the design of new climate finance mechanisms such as the Green Climate Fund (GCF), and efforts to reform existing climate finance mechanisms such as the Global Environment Facility (GEF). But how effective has the fund been as a channel of climate finance?

Five years after its establishment, and with formal financial architecture of the UNFCCC under renegotiation, the moment is right to take stock of the operations and achievements of the Adaptation Fund. This paper reflects on the effectiveness of the Adaptation Fund with consideration for the processes by which it spends money, and the likely outcomes of the funding that has been delivered.

It is part of a series of studies of the effectiveness of dedicated climate funds and is based on a framework for reflecting on the effectiveness of international climate, developed by ODI through an iterative process of research, analysis and engagemen, released as working papers to stimulate discussion and feedback.  It is part of a series of studies of the effectiveness of dedicated climate funds, released as working papers to stimulate discussion and feedback. These studies will be further revised and refined to respond to discussion and feedback, and new developments.