Legal implications of Adaptation Fund as operational entity of the UNFCCC

Legal assistance paper

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Date produced: 04/06/2013

What are the legal implications of the Adaptation Fund becoming an Operational Entity under the Financial Mechanism of the Convention?


Two different sets of legal implications would arise from accrediting the Adaptation Fund (AF) as an Operating Entity (OE) of the Financial Mechanism (FM) under UNFCCC Article 11. The first consequences are automatically triggered with the sole act of accreditation and consist of the following: i) Since Article 11 would directly apply to the AF, a relevant consequence would be that the COP will have to extend its process of identifying the “amount necessary and available” for the implementation of the AF operations under Article 11(3)(d); ii) the COP will have to address means by which AF Board’s (AFB) decisions might be reconsidered in light of the policies and other criteria developed under the guidance of the COP or CMP (Article 11(3)(b)); iii) being UNFCCC Article 11 directly applicable to the AF, also Article 4(3 and 4) would be applicable by extension; and iv) as an OE the AF would be subject to the periodical reviews of the FM under the Convention.

The second set of legal implications depends on the mutually exclusive institutional arrangements that might be agreed upon between the COP, the CMP and the AFB. Hence, with the caveat that a transfer of the AF under the aegis of the COP from the CMP is just one of the institutional options available, and assuming that such transfer would happen, the core legal implications would consist in the possibility for the COP to decide directly on the role of the AF and its integration with the relevant policy processes of the Bali Action Plan (BAP) and the Durban Platform for Enhanced Action (DP). Still, the actual impact of this integration might reveal to be scarce, because the Adaptation Fund Board might already be de facto engaged into those policy processes.


1. The Adaptation Fund (AF) is a financial intermediary established according to a COP decision (10/CP.7), with the task of channelling adaptation-related finance to non-Annex I countries according to Article 12 of the Kyoto Protocol (KP). Whilst the same decision envisioned the AF to be operated by an OE of the UNFCCC Financial Mechanism (FM), the following CMP Decision 1/CMP.3 established the AF Board (AFB), without appointing it (neither via a COP decision) as an OE of FM. Therefore, the AFB is currently an operating entity under the guidance of and is accountable to the CMP rather than the COP. The AF raises financial resources through two avenues: by monetizing the 2% of issued certified emissions reductions under the KP’s Clean Development Mechanisms, and – like other UNFCCC climate funds – by way of direct contributions of States, the private sector and individual donors.

2. Before addressing the legal consequences of accrediting the AFB as an OE of the FM, it is worth highlighting that the accreditation process would not necessarily require the AFB to be relocated under the direct guidance and accountability of the COP. Rather, there are different governance options that, while legally feasible, ultimately depend on political agreement. Given the limited, their thorough investigation falls outside this advice. While UNFCCC Article 11(1) prescribes that the FM shall work under the guidance and be accountable to the COP, the latter has a wide margin of discretion on how to ensure that its operating entities comply with its guidance. One way to guarantee control might consist of the COP delegating the CMP to provide guidance and seek accountability of the AFB according to its own processes. Furthermore, this would be in compliance with Article 13(4)(j) of the Kyoto Protocol where it is stated that the CMP shall consider any assignment resulting from a decision by the COP.

3. With the above clarifications, the legal implications of entrusting the AFB as an OE can be divided in two types: direct consequences from the mere act of appointment as an OE, and other legal consequences, which instead depend on the final choice by Parties on the institutional governance of the AFB in relation with the COP and the CMP. This advice will adopt the option that a full transfer of competence of the AFB under the COP will be enacted between the CMP and the COP.

4. The main direct legal implication is that the principles and obligations of Article 11 of the UNFCCC will automatically apply to the AF. While several norms have already de facto been implemented through the CMP and AFB practice, there are three provisions that would find novel application:

i) UNFCCC Article 11(3)(d) prescribes that the COP shall determine in a predictable and identifiable manner the amount necessary and available for the implementation of the Convention and the conditions under which that amount shall be periodically reviewed. Despite this provision might work towards a more stringent procedure to secure and raise adequate and predictable financial resources, the current implementing practice within the FM sees the Global Environment Facility (GEF) and the World Bank as its trustee to assess and coordinate with donors the raising of resources. According to the letter of the same provision, the COP would then be obliged to agree with the AFB on modalities to implement such determination process.

ii) Finding direct application, UNFCCC Article 11(3)(b) would require to COP to agree with the AFB on modalities to review AFB funding decisions, in order to secure compliance with policies, programme priorities and eligibility criteria provided by the COP. Also this provision, however, has not found significant implementation in the practice of the COP and GEF. A recent step is marked by the recent establishment of a redress mechanism under the Green Climate Fund.

iii) UNFCCC Article 11(4) would instead imply that, as an OE, the AFB would be covered under the periodical reviews of the FM under the Convention. The fifth review has been initiated at COP18 , with the Standing Committee on Finance mandated to review the existing guidelines. Being an OE, the AF would thus be subject to review for compliance purposes with UNFCCC Article 11.

5. Assuming a full transfer of competence from the CMP to the COP in terms of guidance and accountability on the AFB (see paragraph 3 above), a potential legal implication would be that the COP, having extended competence on the operation of the AFB, might find appropriate to formally integrate the AFB within the following processes under the UNFCCC:

i) Green Climate Fund’s Adaptation Window;

ii) Adaptation Committee;

iii) Least Developed Countries Fund and Special Climate Change Fund’s operations in the context of NAPs and NAPAs;

iv) and the Technology Executive Committee and the Climate Technology Centre Network.

Yet this finding has partial relevance. Despite that the COP must work to provide an efficient implementation of the FM, such mainstreaming of processes would depend on a political choice by the COP. Another reason for doubting about any a significant legal impact is that the AFB might already be substantially involved in the above processes, which would make any integrating decision by the COP superfluous.