Adaptation Fund under UNFCCC

Legal assistance paper

All reasonable efforts have been made to ensure the accuracy of this information at the time the advice was produced. However, the materials have been prepared for informational purposes only and may have been superseded by more recent developments. They do not constitute formal legal advice or create a lawyer- client relationship. To the extent permitted any liability is excluded. Those consulting the database may wish to contact LRI for clarifications and an updated analysis.

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Date produced: 11/08/2010

1. What are the legal implications of making the Adaptation Fund (“AF”) under the Kyoto Protocol the Adaptation Fund under the UNFCCC?

2. What is the international precedent for taking the Adaptation Fund (“AF”) under the Kyoto Protocol under the UNFCCC?

3. What is the relevance of Mexico’s suggestion of 3 legal instruments?


It is possible to expand the role of the AF but there are practical obstacles. Their resolution will depend on the existence of considerable consensus in the COP and CMP and will require significant amendment to the present structure of the AF and its Board.  In certain scenarios, such changes may give rise to disputes regarding whether matters fall within the AF’s original or expanded remit, with implications for which countries should participate in any relevant decision.


This is a recurring theme.  It is possible to expand the role of the AF so that it has authority beyond the scope of Kyoto Protocol adaptation issues, but there are practical obstacles.  These concern the relationship of the AF to existing climate funds, such as the Global Environment Facility (“GEF”) and present restrictions on which parties can participate in decision making relating to the AF.  The history of the various institutions is relevant here.


Article 11 of the UNFCCC defines a “mechanism for the provision of financial resources” which shall “function under the guidance of and be accountable to the COP” and whose operation shall be “entrusted to one or more existing international entities.”  The COP has since entered into MOUs with the GEF to enable the latter to fulfil this role.

Article 12(8) of the Kyoto Protocol does not define a financial mechanism, but instead provides that the CMP shall “ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.”  It was left to the parties to the Kyoto Protocol to develop this concept by setting up and operationalising the AF “under the authority and guidance of the CMP” by means of CMP decisions.  Article 13(2) of the Kyoto Protocol clarifies that non-parties to the Kyoto Protocol cannot participate in CMP decisions.


The question does not make it clear whether it is envisaged that an expanded AF would displace the GEF as the financial mechanism of the UNFCCC or whether it would work alongside or as part of the GEF.  If displacement is intended, the issue of whether the AF can be regarded as an “existing international institution” pursuant to Article 11 of the UNFCCC needs to be addressed.  The AF did not exist at the time Article 11 was agreed.  Assuming sufficient support exists for expanding the AF’s role, the COP could overcome this issue by passing a decision by consensus which deems the AF to be an “existing international institution” under Article 11.  It would also need to unwind any existing MOUs with the GEF and this could take some time.  Clearly, hostile parties could exploit these points if consensus does not exist.

Kyoto Protocol

Following on from the above, the practical difficulties arising due to the fact that non-parties to the Kyoto Protocol cannot presently participate in CMP decisions would also need to be addressed.  It is the CMP which has authority over the AF and its Board.  Countries such as the US which are not represented in the CMP or the AF Board are unlikely to support an increase in its authority and scope without significant structural change.  Any such change is likely to require considerable consensus and collaboration between the COP and CMP.

An amendment to Article 13(2) of the Kyoto Protocol, which provides that non-parties cannot participate in CMP decisions, requires 6 months advance notice before it can be adopted.  Such an amendment could allow countries such as the US to participate in the governance of the AF Board, but this approach may also give rise to objections which have nothing to do with adaptation funding and which are beyond the scope of this advice.   There is, however, a potential way forward in the absence of such an amendment.  In any event, the CMP and AF Board would also need to address the issues below.

If there is sufficient support for the  COP to agree that the AF can act as the financial mechanism of the UNFCCC under Article 11 or that it should work with the GEF, there may also be sufficient support for the CMP to decide by consensus to revise its prior decisions regarding the AF and the AF Board and for it to submit those bodies to the authority of the COP.  Careful scrutiny of all relevant decisions would need to be undertaken and consideration given to how best to amend them.  The COP has a broad supervisorial remit under the UNFCCC and is able, provided other hurdles are overcome, to exercise authority over a modified AF.

AF Board procedures would need to be revised in order to include non-parties to the Kyoto Protocol, such as the US.  Again careful consideration of its constitutional documents would be required. However, in the absence of an amendment to Article 13(2), it is our view that when such a new AF Board is dealing with matters that solely relate to Kyoto Protocol adaptation issues, the restriction on participation by non-parties to the Kyoto Protocol would need to be respected and that provision would need to be made to ensure this.  This would be complex and would be likely to give rise to disputes regarding whether matters should be characterized as falling under the Kyoto Protocol or not.  Having said that, the amendment to Article 13(2) which would remove this particular problem would itself raise many significant issues in areas going beyond adaptation.

The practical and political difficulties are not inconsiderable but they can be overcome with sufficient consensus to pass the relevant COP and CMP decisions.  Given sufficient political will, such decisions and the associated consideration of required amendments could be progressed reasonably quickly.  The amendment to Article 13(2) of the Kyoto Protocol discussed above requires 6 months notice.

There are examples of other funds in international law, for example, under the Montreal Protocol and the oil spill regime.  We will follow up this answer with a consideration of whether any lessons can be learned from them which are relevant to the issue of expanding the role of a fund from a focus on the needs of a Protocol to those of the wider Convention.  We will also follow up with comment on whether the suggestion of 3 legal instruments affects the expansion of the role of the AF.

2. There are many examples of the role of international funds developing and changing over time. For example;

The Global Environment Facility (“GEF”) was established in 1991 as a programme within the World Bank to promote protection of the global environment and sustainable development.  It was restructured into an independent entity in 1994 and has since assumed the role of financial mechanism for (i) the Convention on Biodiversity, (ii) the UNFCCC, (iii) the Stockholm Convention of Persistent Organic Pollutants, (iv) the UN Convention to Combat Desertification, and it also supports implementation of the Montreal Protocol in countries with economies in transition.

The Multilateral Fund for the Montreal Protocol on Ozone Depleting Substances was also established in 1991, but its structure and remit has remained largely unchanged since then.

The International Monetary Fund has restructured its concessional financing to developing countries a number of times.  From the mid-1970s such assistance was made available through the Trust Fund.  This was replaced by the Structural Adjustment Facility in 1986 and then the Enhanced Structural Adjustment Facility (“ESAF”) in 1987.  The ESAF was extended in 1993 and made permanent in 1996 as the centre-piece of the IMF’s strategy for assisting low-income countries.  ESAF was replaced by the Poverty Reduction and Growth Facility (“PRGF”) in November 1999.

The International Oil Pollution Compensation Funds (“IOPC Funds”)  are 3 inter-governmental funds (the 1971 Fund, the 1992 Fund and the Supplementary Fund) which provide compensation for oil pollution damage resulting from spills of persistent oil from tankers.  The Funds have different member states and different scopes.  The later ones were created to address liability limit problems in earlier funds.  The 1971 Fund will continue until all pending claims under its terms are dealt with.  The 3 Funds have similar and overlapping, but separate structures and share a secretariat based in London.

The above examples show that the development of international fund structures depends on the context in which they operate.  There is no particular bar to one fund assuming responsibility for matters arising under a number of international conventions (as the GEF has done) or for overlapping funds to deal with the same issues (as the IOPC has done) or for funds to be replaced when they are no longer relevant (as the IMF has done).  By contrast to these, the remit of the Multilateral Fund for the Montreal Protocol has remained stable.  Provided there is sufficient political will to support the Adaptation Fund assuming a broader role, and the necessary structural changes are addressed, such a development is not unusual in terms of international practice.

3. We were asked to consider how the Adaptation Fund would be affected if there are 3 legal outcomes, as suggested by Mexico recently.  We understand that Mexico’s suggestion was prompted by the failure of the US to pass domestic climate change legislation. Mexico is envisaging a legal outcome for each of the KP and LCA tracks plus a legal outcome which is acceptable to the US and compatible with its domestic law.

Such an outcome need not affect the Adaptation Fund at all.  The 3 legal outcomes suggestion envisages the continuation of the Kyoto Protocol in revised form.  Unless the parties make significant structural changes, the fund will remain as the Adaptation Fund under this revised Kyoto Protocol.

We have commented above on the potential for significant structural change so that the Adaptation Fund’s assumes broader responsibilities under the UNFCCC and these responsibilities would obviously include functions associated with the LCA outcome.  Although complex, this is possible.  Broadening the Adaptation Fund’s responsibilities so that they included not only LCA functions, but also functions under a third outcome designed to accommodate the US position, is also possible.  It will however add to the complexity of the process for achieving the goal.  Its achievement will depend on the terms of that third legal outcome for the US and sufficient political consensus to make necessary structural changes.  Key will be US willingness to submit to the authority of the AF.

The 3 legal outcomes scenario envisaged is one where the US has not ratified an amended Kyoto Protocol. The issue of non-KP party participation in CMP decisions about the governance of the Adaptation Fund which is discussed above is therefore relevant.  As stated, amendment to Article 13(2) of the KP requires 6 months notice and would be likely to be controversial if it were done merely to give the US influence over the AF Board in order to win US support for an expanded role for the AF.  The other option, in the absence of amendment to 13(2), of pursuing the steps necessary to submit the AF to the authority of the COP will, as discussed, need complex governance structures so that the restrictions of Article 13(2) are respected when the AF is addressing KP adaptation matters and avoided when it is addressing wider issues.  There will be potential for dispute about how issues should be categorized in any 2 legal outcomes scenario, and we would expect a 3 legal outcomes scenario to have equivalent or greater potential for such dispute.