1. Financing Adaptation in the Water Sector
Water and Climate Change Adaptation Workshop
Sandra Valencia
Sustainable Energy & Climate Change Unit
March 22nd, 2011
Port of Spain, Trinidad and Tobago

2. Investments and financial flows needed for adaptation
Sector
Costs for developing countries (US$bn per annum by 2030)
Agriculture 7
Water 9
Human Health 5
Coastal Zones 4
Infrastructure
2-41
TOTAL
27-66
Globally: Several tens of billion $ per year will be required for adaptation (estimates between 40 to 170 billion $ globally by 2030)*
Amounts are large in absolute terms, but small relative to global GDP and investment
Existing climate change funds would need to be enhanced at a greater scale
Creating a safe future with climate change will require:
Shifts in investment patterns,
Scaling up funding,
Optimizing the allocation of existing funds.
*Source: UNFCCC, Assessing the costs of adaptation to climate change;
a review of the UNFCC and other recent estimates, 2009

3. Difficulties and limitations in estimating the exact costs of adaptation
Differences in adaptive capacity between countries
Most adaptation measures must be implemented not only in the context of climate change
Uncertainties associated with the methods used to calculate costs of adaptation
The existence of an adaptation “deficit ”

4. Funding for adaptation for developing countries
UNFCCC Funds:
GEF:
Enabling activities: adaptation in the context of national communications
SPA (funding as part of the GEF trust fund - projects shall have global benefit
Special Funds under the Convention:
SCCF
LDCF
Adaptation Fund under the KP
Green Climate Fund
Multilateral Funds:
Climate Investment Funds, MDBs (example of SECCI at IDB), etc.
Bilateral Funds
Other UN Conventions
Wetlands – Ramsar Convention- Wetlands for the Future Fund
a Small Grants Fund for Wetland Conservation and Wise Use
Risk transfer Mechanisms
Decisions tend to identify SIDS, LDCs and Africa as most vulnerable and
priority countries for finance

5. Special Climate Change Fund (SCCF)
Eligibility and framework to allocate funds
Governance Support services
Implementation
Source and levels of funds
All developing countries that are Party to the Convention
SCCF priority is adaptation planning and measures in climate-sensitive sectors.
Co-financing required
Council under the GEF
GEF secretariat /
GEF implementing and executing agencies
Through GEF framework – implementing agencies
Voluntary contributions by donors
About $ 100 million pledged

6. Least Developed Country Fund (LDCF)
Eligibility and framework to allocate funds
Governance Support services
Implementation
Source and levels of funds
Under LDCF, LDCs receive support for the preparation of NAPAs as a framework for further funding of immediate needs
Prioritizes “urgent and immediate” adaptation needs
Supports priority NAPA activity implementation.
Council under the GEF
GEF secretariat
GEF implementing and executing agencies
Through GEF framework – implementing agencies
Voluntary contributions by donors
About $200 million pledged

7. SCCF and LDCF – Lessons learned
Experience in designing climate change projects in relation to the development baseline.
Delivering funding through the GEF-managed SCCF and LDCF has been challenging, but has resulted in enhanced national capacity to identify climate change risks and develop projects that complement baseline development activities.
Linking climate change risks with development challenges requires experience that is often limited.
Climate change risks must be translated into the context and language of existing management challenges to have greatest resonance with stakeholders.

8. SCCF and LDCF - Lessons learned
Project proponents draw heavily on existing climate change assessments such as NAPAs and NCs for developing adaptation projects and initiatives, but there are limitations to their usefulness.
A critical role for development agencies lies in establishing relationships and brokering consultations among actors in climate risk management that may not be familiar collaborators.
Stakeholder-determined adaptation responses are not always the most appropriate middle- to longer-term adaptation strategies.
Existing adaptation deficits and maladaptation to climate risks pose major hurdles to managing climate change risks – there is a clear need for integrated approaches, and for government agencies to work collaboratively on development challenges linked by climate.

9. Adaptation Fund Eligibility and framework to allocate funds
Governance Support services
Implementation
Source and levels of funds
All developing countries that are Party to the Kyoto Protocol
Concrete adaptation projects or programs
Allocation of resources take into account:
Level of vulnerability
Level of urgency and risks arising from delay
Ensuring access to the fund in a balanced and equitable manner
Lessons learned in project and program design and implementation to be captured
Securing regional co-benefits to the extent possible, where applicable
Maximizing multi-sectoral or cross-sectoral benefits
Adaptive capacity to adverse effects of climate change
Adaptation Fund Board
GEF secretariat
World Bank as trustee
Through “Accredited executing agencies”
“Direct access” to National Implementing Entities (NIE)
2 % share of proceeds of CDM
Voluntary contributions by donors
Depending on quantity and price of CERs (until 2012). Assumingly $ 80−300 million per year

10. Fast-start 2010-2012 US$ 30 billion/ year
Criteria
Balanced funding between adaptation and mitigation
EU member states & EU Commission: EUR 2.2 billion mobilized towards its 2010
New
Countries such as UK & USA counting previous commitments to CIF
Additional
Funds should be additional to development aid
Disbursement through international institutions
- pledges are clear, their delivery is uncertain
- CIFs and GEF are the primary multilateral institutions of choice
Most vulnerable developing countries prioritized
least developed countries, small island developing States and Africa
It is not clear that developed countries’ fast-start finance contributions fulfill these criteria
Source: WRI

11. Green Climate Fund Decision from Cancun Negotiations 2010
Transition Committee
The GCF
In charge of developing the operational documents and making recommendations to the COP in Durban
Fund Board: equal representation of developed and developing countries
25 developing countries and 15 developed countries
Fund Board: 24-member board - who will be part of the board?
Tasks:
Legal and institutional arrangements
Fund Board Rules of Procedure
Financial instruments, funding windows and access modalities
Complementarity with other funds and institutions
Role of secretariat
Independent performance evaluation
Standards, safeguards and accountability
Expert and technical advice mechanisms
Stakeholder input and participation
Capacity to provide “direct access” to national institutions, without the intervention of international implementing agencies
Trustee with competence to administer the fund and adhere to fiduciary standards:
WB invited to serve as interim Trustee subject to review after three years
A Standing Committee has also been established to ensure the Fund does not sit empty, by assisting the COP in mobilizing financial resources and measuring, reporting and verifying their delivery
Decision from Cancun Negotiations 2010

12. Possible Sources of Funding for GCF
Source: Report of the Secretary-General’s High-level Advisory Group on Climate Change Financing, 2010.

13. CIF: Structure of the Funds
Climate Investment Funds (US$ 6.1 Billion)
Clean Technology Fund (CTF)
(US 5.1 Billion)
Objective: To promote investment in clean energies
Strategic Climate Fund (SCF)
(US 1.0 Billion)
Objective: to support targeted programs aimed at providing financing to pilot new approaches at a specific climate change challenge or sectoral response.
Pilot Program for Climate Resilience (PPCR)
Forest Investment Program (FIP)
Program for scaling-up renewable energy in low income countries (SREP)

14. St. Vincent & Grenadines program
PPCR – Caribbean Pilot
Activities will proceed along two tracks:
Country-based investments in highly vulnerable countries: Haiti, Jamaica and four small island states from the Organization of Eastern Caribbean States (Dominica, St. Lucia, St. Vincent and the Grenadines, and Grenada)
Region-wide activities: focused on climate monitoring, institutional strengthening, capacity building and knowledge sharing
Implementation of a regional PPCR pilot should be characterized by:
Participating countries should share a similar range of climate risks
Enable pilot activities to focus on building responses to climate threats of high relevance to region & countries
Build on existing collaboration on climate sensitive development issues and/or regional programs
Type of regional activities likely to depend on degree of ongoing regional collaboration, capacities, and degree of regional political support of an existing regional institution
Jamaica program
Haiti program
Regional program
Dominica program
St. Lucia program
St. Vincent & Grenadines program
Grenada program

15. Bank Response and Lessons Learned
SECCI:
An effective initiative to identify opportunities and channel assistance for climate mitigation and adaptation activities
Has evolved into a critical tool for:
Mainstreaming CC into Bank activities
Developing innovation and policy instruments
Scaling-up financing for public and private sector investments
Need to articulate better the SECCI support to Bank’s country programming and investment instruments, and improve cross-sectoral coordination

16. Case study: Peru- Olmos Project
IDB-NCAR Partnership
Olmos project: The project aims to promote regional agricultural activity through the development of cultivable lands in the Olmos Region (Northwest Peru), by diverting water from the Huancabamba river through a tunnel across the Andes
IDB’s support: Assess the potential impacts of CC and climate variability on the Olmos project and provide the government with decision support systems to manage the project under climate uncertainties
Main activities:
Development of novel climate scenarios developed through dynamical downscaling using the WRF model, coupled to the land surface model PARFLOW-Noah
Results from climate scenarios will be used to develop a water resource planning model of the Olmos project –looking both at supply and demand in an integrated decision support planning process
Training to technical staff of local govt on a water evaluation and planning tool
Project Diagram
Mention: IDB-NCAR partnership (MOU and retainer contract)
NCAR= National Center for Atmospheric Research, based in Colorado
WRF: Weather Research and Forecasting Model (NCAR’s regional model)
WEAP: Water Evaluation and Planning tool (developed by Stockholm Environment Institute and David Yates of NCAR)
Study is currently being developed by NCAR

17. AquaFund Fund for innovative solutions in water and sanitation
Facilitates investment in:
water supply and sanitation
water resources management
solid waste management
wastewater treatment
Contributes to make these services sustainable and accessible to the poor
Goal: Finance 100 cities and 3000 communities by 2011
Who is eligible to receive AquaFund grants?
National, sub-national, and local government entities, water and sanitation service providers (public, private, mixed-capital, cooperatives), and academic and research institutions are eligible. NGOs may be eligible at the request of governments.
Provides grants that contribute to the achievement of the water-related Millennium Development Goals and the targets established under the IDB’s Water and Sanitation Initiative.
60M (45 del Banco y 15 de donantes de afuera) se han aprobado del a hoy 24 M
The fund also assists IDB client countries in coping with the emerging challenges of climate change, the rapid degradation of freshwater ecosystems, and mounting water insecurity.

18. Sources of investment and financial flows
Private sources of funding can be expected to cover a portion of the adaptation costs in several sectors. In particular in the Infrastructure sector where investment in privately own physical assets would be needed.
However, public resources are expected to play a predominant role in all adaptation sectors.
National measures will be needed to encourage/support private sector adaptation and additional sources of funding dedicated to adaptation will be needed.

19. THANK YOU!
Sandra Valencia,