Climate funding for developing countries

Saleemul Huq discusses capacity strengthening activities developing nations can undertake through recently-created funds.

The author is Director of the Climate Change Programme at the International Institute for Environment and Development in London, UK, and is Chairman of the Bangladesh Centre for Advanced Studies in Dhaka, Bangladesh.

The Least Developed Countries are the poorest amongst the developing countries. They consist of 49 countries, mostly in sub-Saharan Africa but also in Asia, and some are island countries.

The Least Developed Countries are recognized as a category of member states in the United Nations system. They are classed as a subgroup within the developing countries group (which is officially known as the ‘Group of 77 and China’ or G-77, though, despite its name, it actually consists of over 100 countries).

The Least Developed Countries have not only been quite active but also relatively effective as a negotiating group within the G-77 on the issues of trade and access to markets in the developed countries under the negotiations of the General Agreement on Trade and Tariffs and its successor the World Trade Organization. Their cause has also been helped by some of the United Nation’s agencies, specially the United Nations Conference on Trade and Development which is based in Geneva, Switzerland. As a result, the Least Developed Countries have been successful in getting a number of concessions on the duty-free import of their products into the developed countries.

In this article, the current position of the Least Developed Countries in the context of the climate negotiations is considered, with particular attention to new opportunities for funding activities in these nations.

The Least Developing Countries group

According to the Intergovernmental Panel on Climate Change (IPCC), there is strong evidence that the most vulnerable areas of the world to climate impacts will be in the tropics where most of the world’s poorest countries and populations are located. In particular, the two groups of countries identified as being amongst the most vulnerable are the Least Developed Countries and the Small Island Developing States.

The United Nations Framework Convention on Climate Change (UNFCCC) has been signed by practically all the countries of the world, including 46 of the Least Developed Countries. In the climate convention negotiations, the Least Developed Countries have, in the past, tended to remain part of the overall G-77 group. The Small Island Developing States organized themselves earlier in the process under the banner of the Alliance of Small Island States (AOSIS) and have become an extremely effective negotiating group within the G-77.

It was not until the Sixth Conference of the Parties (COP-6) to the UNFCCC in November 2000 in the Netherlands that the Least Developed Countries were able to come together and start to negotiate as a group. This grouping is similar to the AOSIS group, even though there is some small overlap in the membership of the AOSIS and Least Developing Countries groups.

The Least Developing Countries group were very soon able to highlight their relative vulnerability to climate change as well as underlining their relative lack of contribution to the global warming problem due to their very low levels of greenhouse gas emissions.

Climate funds

By the time of the Seventh Conference of the Parties (COP-7) held in November 2001 in Marrakesh, Morocco, a number of new funds had been created relevant to the concerns of the Least Developed Countries.

Least Developed Countries (LDC) Fund

The LDC Fund will support the Least Developed Countries to carry out assessments of their National Adaptation Plans of Action which would identify priority actions needed to be done to cope with the adverse impacts of climate change. The Global Environment Facility will administer this fund. So far, Canada and Ireland have committed approximately US$10 million to the fund.

Special Climate Change Fund

The Special Climate Change Fund will assist the developing countries (not just the Least Developed Countries) to deal with climate change, including adaptation as well as mitigation measures.

The Marrakesh Accords agreement specifically lists four activities to be supported under this fund:

  • adaptation;
  • technology;
  • energy, transport, industry, forestry and waste management; and,
  • activities to assist developing country parties in diversifying their economies.

A number of developed countries, including Switzerland, Canada and the European Union, have committed approximately US$450 million a year to this fund which will start operating  from 2005.

Adaptation Fund

The Adaptation Fund will consist of the proceeds of the adaptation levy placed on transactions under the Clean Development Mechanism which is a mechanism for trading greenhouse gas reductions between companies from the developed and the developing countries.  This fund, known as the ‘Kyoto Protocol Adaptation Fund,’ is specifically stated to support “concrete adaptation projects and programmes in developing country Parties that have become Parties to the Protocol.”

Funding mechanism

The Global Environment Facility, which is the designated executing agency for the disbursement of the Special Climate Change Fund and the Least Developed Countries Fund, does not actually disburse funds to countries directly.

Funds are disbursed through one of three agencies:

  • the World Bank (responsible for the investment sector);
  • the United Nations Development Programme (responsible for capacity building); and,
  • the United Nations Environment Programme (responsible for technical and scientific inputs).

Although, in theory, there is supposed to be some degree of separation and complementarity between the three executing agencies, in practice, there has been some overlap and competition between them.

Most countries, in the past, have criticized the slow and tedious bureaucratic and administrative process of the Global Environment Facility. Many of the developing countries have also complained about the difficult process involved in gaining access to the Facility’s funds. It is, therefore, necessary for the Global Environment Facility to develop streamlined and easily understood and applied procedures to enable Less Developed Countries to gain access to the new funds.

The following are three suggestions on some possible ways for the Global Environment Facility to efficiently and appropriately proceed in its administration.

1. Determine priorities by global analysis of who is most vulnerable and where adaptation can do the most good.

This would have the advantage of being the most equitable, at least theoretically, by directing funds to where they will be most needed or will do the most good. However, it has major disadvantages as it requires the funding agency to make the, essentially political, judgement of which countries or regions are ‘more’ vulnerable than others.

It should also be noted that where funds will be most needed and where they will do the most good is not necessarily the same. Funds are likely to do the most good, that is, be the most effective, in those countries where there is already some physical and/or institutional infrastructure in place and where a clear understanding exists of the nations’ vulnerabilities. Yet funds will be needed in those countries where these conditions are not met. The funding agency would, therefore, have to ensure that local stakeholders are not left out of any equation and that the diversity of the local situations is not missed or ignored.

2. Fund individual projects on a case-by-case basis.

This would have the advantage of being the easiest and quickest way to disburse funding and would be relatively easy to administer. There is, however, a major disadvantage to taking this route. Funds would very likely go to those projects which were presented first in the correct format which could well mean that the projects that are needed more would be missed. This has, indeed, been the experience of some of the previous Global Environment Facility-funded projects where the smaller and poorer countries were unable to prepare projects in accordance with the stated criteria and, therefore, tended to get less funding than other nations.

3. Allow countries to set their own priorities.

This would have the advantage of ensuring a comprehensive assessment of the needs and priorities of a country at national level and would make possible the involvement of the local stakeholders. The COP-7 decision for the Least Developed Countries to carry out the National Adaptation Plans of Action is a tacit support to this approach.

The disadvantages would obviously be that this approach, in not setting priorities for countries, may not result in addressing the greatest risks. It may also delay the disbursement of funding for actual adaptation plans.

National Adaptation Plans of Action

In addition to the newly-created funds, the Marrakesh Accords also approved the guidelines for the preparation of the National Adaptation Plans of Action by the Least Developed Countries. At the same time, through the Marrakesh Accords agreement, an Expert Group was set up consisting of experts from a number of the least developed countries to assist them in preparing their National Adaptation Plans of Action.

The Least Developed Countries Expert Group has met since COP-7 and is now in the process of finalizing guidelines for the National Adaptation Plans of Action whilst the Global Environment Facility has prepared the procedures for application for the fund for these countries to carry out these plans of action.

A major conference of the Least Developed Countries is planned for the second half of September 2002. The conference is being hosted by the Bangladesh government and will be organized by the UNFCCC Secretariat with support from the United Nations Development Programme. Representatives from all the Least Developed Countries will attend.

The major concern will be to officially launch the National Adaptation Plans of Action immediately prior to the Eighth Conference of the Parties (COP-8) which is to be held in New Delhi, India, 23rd October to 1st November 2002.

The delegates will be presented with detailed guidance so as to facilitate their plans of action as prepared by the Expert Group. The Global Environment Facility has also prepared detailed funding formats for presentation to the delegates.

The new funds for adaptation will take some time to be up and running. The Special Climate Change Fund and the Least Developed Countries Fund are unlikely to start before 2005. The Kyoto Protocol Adaptation Fund is unlikely to start until 2008. In view of this, there is a window of opportunity to be innovative and provide funding in the first two to four years for all developing countries, particularly the Least Developed Countries.

National-level adaptation assessments could be carried out using similar (but not necessarily exactly the same) methodologies. The involvement of local stakeholders could provide a basis for setting priorities for action. This will produce National Adaptation Plans of Action which will identify and prioritize adaptation activities, including both adaptive capacity building as well as ‘concrete’ adaptation projects.

This process would very likely be best accomplished through a capacity building-type programme implemented through the United Nations Development Programme, as they have the necessary offices in each country to provide adequate back-up support. It could make use of the in-country teams that were involved in earlier studies.

It is important to note that most developing countries have already carried out their preliminary vulnerability and adaptation national assessments, many of which have been included in their National Communications. Thus, they will be able to build on what has been and follow up using more up-to-date methodologies, such as the adaptation policy framework being developed by the United Nations Development Programme.

Another point for consideration is that the developing countries, especially the least developed countries and the small island developing states, could benefit from technical and scientific advice through the United Nations Environment Programme. This process could include international and regional experts as well as training workshops, together with other possible means of sharing experiences and knowledge.

The field of adaptation science is a rapidly developing field. Developing country teams need to have access to the latest scientific knowledge to produce well-presented and appropriate National Adaptation Plans of Action.

The United Nations Environment Programme, together with the IPCC, has already started a project in support of scientific research on adaptation in developing countries through the Assessment of Impacts and Adaptation to Climate Change project which is funded by the Global Environment Facility. The results of such research should be fed into national adaptation planning in real time.

At the same time, in those regions and countries which have already completed stage 11 of their adaptation assessments such as the Caribbean, the Pacific and Bangladesh, a number of pilot projects could be undertaken in different sectors. These could be chosen to provide a mixture of geographical areas as well as sectors, such as coastal zone management, disaster mitigation, water resource management and agriculture, so as to provide lessons on what works best.

Such a series, of, say 15 to 20 pilot projects, would be best supported through the World Bank. The World Bank would then be able to learn from the experiences documented and thereby incorporate the lessons into their normal bank lending portfolio for infrastructure in the appropriate sectors in developing countries.

If processes and projects such as those outlined above were to be comprehensively undertaken then, by 2005 when the funding levels would be raised and stabilized, there would be a substantial body of knowledge of adaptation measures which are needed at the country level. There would also be a better in-country understanding of and capacity to carry out such projects through the National Adaptation Plans of Action.

Finally, there would be, through the pilot projects, better understanding and knowledge of what projects were best suited in which areas. All this would enable and ensure that the next phase of actual adaptation funding proceeds on the basis of a much better understanding than we have at present.

In conclusion, we can say that, even if the recommendations discussed here are not fully initiated, then at least the newly-created funding mechanisms will provide an opportunity for the Least Developed Countries to undertake, over the next year or so, major initiatives through their National Adaptation Plans of Action.

These nations will, therefore, be in a better position to set their own priorities and agendas for action so as to adapt to climate change for which the new funds should provide, hopefully, substantial additional investment opportunities.

Further information
Saleemul Huq, International Institute for Environment and Development, 3 Endsleigh Street, London WC1H 0DD, UK. Fax: +44-20-73882826. Email: Web:

On the Web
The full text of the Marrakesh Accords and the Marrakesh Declaration can be found at the UNFCCC Secretariat website. Detailed coverage of the ongoing negotiations surrounding the climate treaty can be found at the Linkages web site, maintained by the International Institute for Sustainable Development. The Tiempo Newswatch facility, updated every hour, lists climate news items from around the web.