Climate Financing Through the Adaptation Fund: What Determines Fund Allocation?

• Published date: 01 December 2019
• Date: 01 December 2019
• Author: Syed M. Rahman,Md. Nasir Uddin,Akihisa Mori
• DOI: 10.1177/1070496519877483
• Subject Matter: Articles

Article

Climate Financing

Through the Adaptation

Fund: What Determines

Fund Allocation?

Akihisa Mori

1

, Syed M. Rahman

2

, and

Md. Nasir Uddin

3

Abstract

There is an ongoing debate about criteria based on which allocation of climate

finance, particularly financing adaptation, is made. This article aims at investigating

the determinants of fund allocation and the consequences of rearrangement con-

sidering the case of the Adaptation Fund (AF). This research conducts a mixed-

method approach including binary logistic regression and multiple regressions to

analyze the factors that influence access to and volume of funding from the AF,

respectively, along with a qualitative assessment of the AF’s institutional features.

The findings suggest that the level of vulnerability of a country is likely to affect

accessibility to and the volume of funding from the AF. Besides, low-income countries

are more likely while least developed countries are less likely to access the fund.

Readiness of country is not significant for accessing the AF; however, it affects the

volume of funding. Funding allocation rearrangement may put the AF on pressure for

effective use of the readiness program.

Keywords

climate change adaptation, climate finance, Adaptation Fund, determinants,

multilateral fund

Journal of Environment &

Development

2019, Vol. 28(4) 366–385

!The Author(s) 2019

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/1070496519877483

journals.sagepub.com/home/jed

1

Graduate School of Global Environmental Studies, Kyoto University, Japan

2

Faculty of Business Administration, American International University-Bangladesh, Dhaka, Bangladesh

3

Department of Economics, American International University-Bangladesh, Dhaka, Bangladesh

Corresponding Author:

Syed M. Rahman, Faculty of Business Administration, American International University-Bangladesh,

408/1, Kuratoli, Khilkhet, Dhaka 1229, Bangladesh.

Email: rahman_s_m@yahoo.com

Multilateral climate f‌inance mechanisms have evolved in the recent decades in

response to the criticism over lack of incentives or means for alternative to

developing countries (Heller & Shukla, 2003). Climate change has been one of

the focal areas the Global Environment Facility (GEF) since it was established

as the f‌irst multilateral environmental institution that assists developing coun-

tries to comply with multilateral environmental conventions. Coupled with the

decisions on the rules and procedures for clean development mechanism, three

multilateral funds were created in 2001 to support climate action in developing

countries. These three funds—the Special Climate Change Fund, the Least

Developed Countries Fund (LDCF), and the Adaptation Fund

(AF)—expressed the intention to devote special attention to climate adaptation.

While the former two launched operations right after the their establishment, the

AF had to wait till 2007. At the Conference of the Parties (COP15) in 2009,

developed countries pledged to provide new and additional resources, called the

First Start Finance, approaching US$30 billion between 2010 and 2012 and with

balanced allocation between mitigation and adaptation. Finally, but not the last,

the Green Climate Fund was established in 2010 as part of the United Nations

Framework Convention on Climate Change. It set a goal of raising US$100

billion a year by 2020 to deliver equal amounts of funding to mitigation and

adaptation in developing countries.

Fund allocation has been under hot debate since the inception of the GEF.

The GEF is criticized for concentrating fund allocation to a few global envir-

onmental problems and to a limited number of host countries (Cle

´menc¸ on,

2012). The governance structure dominated by developed countries, coupled

with their reliance on multilateral institutions for implementation, was blamed

for unequal allocation (Grasso, 2010). The rising criticism brought about a

resource allocation framework that attempted to rebalance the fund allocation

between the problems and countries as well as to increase transparency in deci-

sion-making (Evaluation Of‌f‌ice of GEF, 2009).

Climate change adaptation f‌inance has also been criticized for allowing high-

income developing countries to access sizable share, thus not taking equity in

allocation into account (Ferreira, 2017). It tends to take a technology-based view

of adaptation, disregarding the specif‌ic needs and social vulnerabilities of

developing countries (Ayers, Alam, & Huq, 2010). It focuses on capacity devel-

opment of institutions and community representatives rather than communities

in designing projects and programs (Biagini et al., 2012). Despite its focus on

adaptation, the First Start Finance, for instance, allocates the fund mainly to

mitigation rather than adaptation (Fransen et al., 2015) and prioritizes institu-

tional strength of recipient country rather than vulnerability while funding adap-

tation (Barrett, 2014; Robertsen, Francken, & Molenaers, 2015).

With these criticisms, adaptation institutions face complex operational chal-

lenges and may f‌ind it dif‌f‌icult to address, if required to take ef‌f‌iciency, ef‌fect-

iveness, and equity into account at the same time (Fankhauser & Burton, 2011).

Mori et al. 367