Adaptation and the $100 billion Commitment: Why private investment cannot replace public finance in critical climate adaptation | Climate Change Mitigation | Climate Resilience

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Private finance has a vital role to play in the global response to climate change, but it is not a substitute for public finance. Developed countries have committed to mobilizing $100 billion in climate finance per year by 2020 to support climate adaptation and mitigation in developing countries. Reliance on private finance over public to meet these financing goals presents a triple whammy for pro-poor adaptation. Private finance will struggle to meet the essential adaptation needs of poor and marginalized people
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  OXFAM ISSUE BRIEFING NOVEMBER 2013 www.oxfam.org Villagers tend their vegetables as part of Oxfam's Farmer's Field School, designed to mitigate the effects of climate change in West Timor. Photo: Tom Greenwood   ADAPTATION AND THE $100 BILLION COMMITMENT Why private investment cannot replace public finance in meeting critical climate adaptation needs   Private finance has a vital role to play in the global response to climate change, but it is not a substitute for public finance. Developed countries have committed to mobilizing $100 billion in climate finance per year by 2020 to support climate adaptation and mitigation in developing countries. Reliance on private finance over public to meet these financing goals presents a triple whammy for pro-poor adaptation. Private finance will struggle to meet the essential adaptation needs of poor and marginalized people; it overwhelmingly favours mitigation over adaptation; and it favours richer developing countries over less developed countries. COP19 in Warsaw must make commitments to scaling up public finance for adaptation, so that the world’s poorest countries and communities a re not left without promised adaptation support.  2 1 INTRODUCTION Climate change is an immediate, grave, and growing threat to development, making the battle to overcome poverty ever harder and more expensive. International climate finance is vital in the global effort to combat climate change. The lives and livelihoods of poor women and men at increased risk of floods, hunger, droughts, and disease depend on it. But most rich countries are failing in their obligations and commitments to support developing countries to cope with a more hostile climate they did least to cause. They are also increasing the risk of climate change by failing to slash their emissions far or fast enough. Efforts to scale-up public finance have stalled In 2009, developed countries committed to mobilizing $100bn per year by 2020 to support adaptation and mitigation in developing countries. Yet four years on, with vulnerable developing countries facing climate-related shocks of increasing frequency and severity, there is no certainty on how they will be supported to adapt. Efforts to scale up climate finance hit a wall at the 2012 international climate summit in Doha. The Fast Start Finance period came to an end, 1  and developed countries walked away without agreeing any new collective finance commitments for the coming years. And only a handful of countries stated what climate finance they would be providing in 2013-14. 2  The long-term commitment to mobilize $100bn remains, but with no agreed roadmap, trajectory, or milestones for getting there. Without any such commitments, international climate finance is at risk of declining, when what is needed is an urgent and rapid scale-up. High expectations for private finance Developed countries are fiscally constrained, and momentum is gathering around the need to mobilize private finance as the solution to meeting the $100bn commitment. In 2013, two US-hosted ministerial meetings and the pre-COP finance discussions focused almost exclusively on the role of private finance. Glaring uncertainties around the provision of public finance were barely discussed. Women and men living in poverty are highly vulnerable to the impacts of climate change. How their adaptation needs will be supported is a question that must be front and centre in determining how international climate finance is scaled-up. Yet an analysis of the needs of the poorest has been alarmingly absent from discussions to date. The drive to scale-up private finance has been largely focused on mitigation. It lacks an analysis of the barriers and limits to private investment in adaptation in poorer countries, and an understanding of which activities and recipients are likely to benefit  –  and crucially  –  which are not. ‘  Now the hard reality: no step change in overall levels of public funding from developed countries is likely to come anytime soon.’    Todd D. Stern, US Special Envoy for Climate Change, October 2013   3 A ‘ triple whammy ’  for pro-poor adaptation The upfront costs of moving to low-carbon, climate-resilient economies are high. Private investment has a critical role to play, given the scale of the challenge that adaptation and mitigation pose to countries, economies, and vulnerable communities. 3  But this paper argues that private finance cannot be a substitute for public finance, and a myopic focus on mobilizing private finance to meet the $100bn commitment is unlikely to achieve pro-poor adaptation. Instead, over-reliance on private finance threatens to undermine pro-poor adaptation on three counts: ã  Private finance will struggle to meet the essential adaptation needs of poor and marginalized people in all developing countries; ã  It will favour mitigation activities, intensifying the neglect of adaptation finance; and ã  Private finance will favour richer developing countries because they are more capable of absorbing private investment. These countries must not be denied their fair share of vital support. The outcome of COP19 in Warsaw must be a commitment to an urgent scale-up in public finance for adaptation. 2 ADAPTATION FINANCE: HOW MUCH  AND FOR WHOM?  Adapting to climate change comes at a high price. From its work in developing countries, Oxfam knows that rising sea levels are already forcing people to move from their homes in the Pacific, Bangladesh, and elsewhere. Farmers in many parts of Africa are coping with the devastating consequences of prolonged drought. Poor consumers in many countries are regularly facing higher food prices as a result of climate impacts. How much? $100bn is a floor not a ceiling Estimates of adaptation costs in developing countries range from $27bn to well over $100bn per year (see Table 1). The true costs are likely to be much higher than this. 4  Where case studies and national assessments exist, many suggest adaptation costs in excess of existing global estimates. For example, the UNFCCC NEEDS study estimates Nigeria’s  annual adaptation costs to be around $11bn per year between now and 2020 (10 per cent of the World Bank’s global estimate) , 5  while Kenya has estimated the cost of its National Climate Change Action Plan 2013  – 2017 (mitigation and adaptation) to be over $12bn. 6  Carbon emissions are rising at three per cent a year, putting the world on a potential path of 4 o C or more of warming in this century. The $100bn committed by developed countries is substantial, but it is likely The $100bn commitment is one of the most important  potential sources of  public climate finance that poor and vulnerable countries are likely to have access to.  4 to be significantly lower than the actual financing required for adaptation. It is also substantially lower than the public finance required to catalyse the larger private investments needed for mitigation  –  estimated to be in excess of $1 trillion globally  –  which is why Oxfam believes that the $100bn commitment should be met through public finance. 7   Table 1: Estimates of adaptation finance needs in developing countries Source 8  Finance needed ($ billion per year) Timescale and scenario Notes UNFCCC (2007) 27  – 66 Costs by 2030, based on IPCC SRES A1B and B1 scenarios. This estimate is based on emissions scenarios that we are exceeding. It ignores many important aspects of adaptation. Parry et al.  (2009) 54  – 198, plus 65-300 for ecosystem protection Costs by 2030, based on UNFCCC (2007), but modified to account for methodological concerns. This estimate takes account of deficiencies in the UNFCCC scenario above. It estimates costs up to five times higher than the $100bn commitment. World Bank (2010) 75  – 100 Costs between 2010 and 2050 of adapting to 2 o C of warming. This estimate is based on warming of 2 o C by 2050, but we are currently on track for higher levels of warming. For whom? Hardest hit and least able to pay Developed countries may be financially constrained, but the resources most developing countries have to cope with climate change are even more limited. The challenge for poorer countries is particularly acute, given that many already lack sufficient resources to meet the basic needs of their citizens, such as health, education, and access to water. Over the coming decades, billions of people in developing countries will face water and food shortages and increased risks to health and life as a result of climate change. 9  Women, children, and the elderly will be disproportionately affected. Climate finance is essential if we are to reduce and overcome these risks. Developed countries must live up to their commitments to deliver $100bn per year by 2020 in a way that supports vulnerable populations most in need. 10   Developed countries may be financially constrained, but the resources most developing countries have to cope with climate change are even more limited... many already lack sufficient resources to meet the basic needs of their citizens, such as health, education, and access to water.
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