Meaning of “Serve” and Adaptation Fund

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 However, the materials have been prepared for informational purposes only and may have been superseded by more recent developments.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.

Print Friendly, PDF & Email

Date produced: 07/10/2016

With regard to the Paris Agreement and the accompanying COP decision 1/CP.21 (Adoption of the Paris Agreement)

  1. What does “serve” the agreement mean?
  1. What does “serve” mean in relation to the financial mechanism of the Convention/the Paris Agreement?
  1. Is it possible to “move” the Adaptation Fund from the KP to the Paris Agreement? Has it de facto happened with the decisions taken in Paris? What steps need to be taken to “move” it?
  1. Is it possible for the Adaptation Fund (AF) to be accredited to the GCF as an accredited entity? Which part of the AF has legal capacity and could be accredited?

Advice:

1. The Paris Agreement and COP decision 1/CP.21 use the term “serve” over 20 times. According to the Oxford dictionary (online version) the verb “serve” in conjunction with an object means: “Perform duties or services for (another person or an organization)”. In the context of the Paris Agreement it describes a functional relationship between existing institutions, mechanisms, bodies and other arrangements under the UN Framework Convention on Climate Change (UNFCCC) and their role for the purposes of the Paris Agreement.

The Kyoto Protocol (in Arts. 13 to 15) uses the same language (“serve”) to utilise the existing governance framework of the UNFCCC (Conference of the Parties, subsidiary bodies and secretariat) for its operation; and the use of “serve” in this connection is not exclusive to the UNFCCC context. Art. 31 of Cartagena Protocol on Biosafety, for example, equally provides that the Secretariat established under the Biodiversity Convention shall serve as secretariat to the Biosafety Protocol. The use of the term “serve” as such entails the performance of designated functions under the Paris Agreement but does not affect the constitutional structure of the entity tasked to carry out those functions.

2. The same applies with regard to the financial mechanisms of the UNFCCC and the Paris Agreement. The Paris Agreement (in Art.9 para.8) states that the financial mechanisms of the UNFCCC, including its operation entities, shall serve as its financial mechanisms. The accompanying COP decision (adopting the Paris Agreement) specifies that this concerns the Green Climate Fund and the Global Environment Facility (GEF), as the operating entities of the Financial Mechanism under Art.11 UNFCCC, as well as the Least Developed Countries and the Special Climate Change Funds (both funds under the UNFCCC administered by the GEF).[1] So the main finance related functions agreed under the Paris Agreement – whether they relate to, for example, the support of developing countries parties’ mitigation measures or enhancing their capacity to report under the transparency framework – may be carried out through the existing structure of funds, operating entities and governance institutions. Further guidance on matters related to the Agreement may be developed by its governing body – the COP serving as the meeting of the Parties to the Paris Agreement (CMA). Previous and future decisions by the COP shall apply mutatis mutandis (as appropriate, with necessary changes).

The Adaptation Fund is neither an operating entity of the financial mechanism, nor another fund under the UNFCCC. It was formally established in 2001 to finance concrete adaptation projects and programmes in developing countries that are Parties to the Kyoto Protocol and are particularly vulnerable to the adverse effects of climate change.[2] In 2007 the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP) established the Adaptation Fund Board (AFB) as the operating entity to supervise and manage the Adaptation Fund.[3] The AFB is composed of 16 members and 16 alternates representing Parties to the Kyoto Protocol and is supported by a secretariat. The World Bank serves as trustee of the Adaptation Fund on an interim basis. The AFB is fully accountable to the CMP, which decides on the overall policies of the Adaptation Fund. Consequently, the Fund operates under the Kyoto Protocol and is not part of the financial mechanism defined under the UNFCCC. For the time being, it will not serve the Paris Agreement when this enters into force.

3. However, in the future the Adaptation Fund could serve the Paris Agreement and be integrated (and “moved”) into the financial structure of the Paris Agreement (This has not happened yet.) Although the Kyoto Protocol and the Paris Agreement have been adopted under the UNFCCC, they are legally autonomous treaty regimes. Integrating the Adaptation Fund into the Paris Agreement would, therefore, at least require a set of additional CMP and CMA decisions to create and/or transfer organizational structures and assets. This is explicitly recognised in COP decision 1/CP.21 (adopting the Paris Agreement) which states that the Adaptation Fund may serve the Agreement, subject to relevant decisions by the CMP and the CMA, and further invites the CMP to consider the issue and make a recommendation to the CMA.[4] In Paris, the CMP already considered the issue and recommended that the CMA, at its first session, considers that the Adaptation Fund may serve the Paris Agreement, and invited the COP at its 22nd session (in Marrakesh) to request the Ad hoc Working Group on the Paris Agreement (APA) to undertake the necessary preparatory work and to forward a recommendation to the CMP for its consideration and adoption no later than at CMP15 (in 2019).[5]

Scope and content of the recommendation and subsequent next steps will depend on how the Adaptation Fund will be integrated into the financial governance structure of the Paris Agreement and the financial mechanism under Art.11 UNFCCC. Possible scenarios include, for example, the Adaptation Fund serving as an adaptation window of the GCF, a specialized instrument, or a dedicated mechanism based on innovative sources.[6] The Adaptation Fund is financed with a share of proceeds from activities under the Kyoto Protocol. So, to date, no official proposal goes as far as having the fund completely detached from the Kyoto Protocol. In its most recent report to the CMP in Paris, the Adaptation Fund Board identified two specific options for operational linkages with the GCF to channel resources for adaptation: Accreditation of the Adaption Fund as financial intermediary with the GCF; and entering into a joint memorandum of understanding or an ad hoc agreement.[7]

Regardless of the approach eventually chosen, in order to secure a smooth transition, the following steps may be necessary: Corresponding recommendations by the Adaption Fund and the GCF Boards, the Global Environment Facility (GEF) and the World Bank, corresponding decisions by the CMP, the CMA and possibly the COP addressing at least: (a) the technical approach for integration, (b) necessary modifications to the operation of Adaptation Fund (c) the Adaptation Fund Board (authority and guidance) (d) mandates and responsibilities of different entities (e) process (avoiding overlaps) to access adaptation funding.

The Adaptation Fund Board was granted legal capacity (to enter into contracts, acquire and dispose of assets and to be party to legal proceedings) by German Federal Law to establish the legal capacity of the Adaptation Fund Board in Germany of 1 February 2011.[8] It appears that unless, as a result of the Adaption Fund’s integration into the financial mechanism of the Convention and/or the Paris Agreement, the AFB’s name or its character (as operating entity of the Adaptation Fund established under the Kyoto Protocol) change fundamentally, an amendment of the law or a new act are not required.[9] However, this assessment also depends on the future of the Kyoto Protocol.

4. The governing instrument of the GCF (in para.48) provides that recipient countries will be able to access the fund “through accredited international entities, including United Nations agencies, multilateral development banks, international financial institutions and regional institutions”. Accredited international entities currently include, for example, the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), the Inter-American Development Bank (IDB), the International Bank for Reconstruction and Development and International Development Association (World Bank), International Finance Corporation (IFC), the United Nations Development (UNDP) and Environment Programmes (UNEP), and the World Meteorological Organization (WMO).

The Adaptation Fund is an intergovernmental financial institution with a specific mandate (to finance adaptation activities in developing countries that are Parties to the Kyoto Protocol). The AFB is its main organ and manages the fund. It would have to initiate the application for accreditation, which is likely to be prepared and submitted by the secretariat. The Adaptation Fund is already one of currently 52 International Entities (IE) which have been registered as observers to the Green Climate Fund. So provided its application is accompanied by the required documentation (e.g. governing instrument or Agreement to establish it)[10] there is little to suggest that the Adaptation Fund (not the AFB) as such would be accredited. However, the AFB’s operates under the authority and guidance of and is fully accountable to the CMP, which decides on its overall policies. The AFB may decide on projects and operational issues but its mandate is generally limited to do so in line with broader guidance and strategic decisions by the CMP.[11] It, therefore, appears that in order to seek accreditation with the GCF prior approval by the CMP should be obtained.[12]

___________________________

[1] Decision 1/CP.21, Adoption of the Paris Agreement, para.58, in Report of the Conference of the Parties on its twenty-first session, held in Paris from 30 November to 13 December 2015, Addendum, Part two: Action taken by the COP FCCC/CP/2015/10/Add.1, 29 January 2016.

[2] Decision 10/CP.7, Funding under the Kyoto Protocol, para.1, in: Report of the COP on its 7th session, held at Marrakesh from 29 October to 10 November 2001, Addendum, Part two: Action taken by the COP, FCCC/CP/2001/13/Add.1 21 January 2002; and subsequently endorsed by Decision 28/CMP.1

Initial guidance to an entity entrusted with the operation of the financial mechanism of the Convention, for the operation of the Adaptation Fund, in: Report of the COP serving as the meeting of the Parties

to the Kyoto Protocol on its first session, held at Montreal from 28 November to 10 December 2005

Addendum Part Two: Action taken by the CMP, FCCC/KP/CMP/2005/8/Add.4, 30 March 2006; and also Decision 1/CMP.3, Adaptation Fund, para.2, in: Report of the COP serving as the meeting of the Parties to the Kyoto Protocol on its third session, held in Bali from 3 to 15 December 2007, Addendum, Action taken by the CMP, FCCC/KP/CMP/2007/9/Add.1, 14 March 2008.

[3] Decision 1/CMP.3, Adaptation Fund, para.4.

[4] Decision 1/CP.21, Adoption of the Paris Agreement, paras.59 and 60.

[5] Decision 1/CMP.11, Report of the Adaptation Fund Board, paras.8 and 9, in: Report of the CMP on its eleventh session, held in Paris from 30 November to 13 December 2015, Addendum, Part two: Action taken by the CMP, FCCC/KP/CMP/2015/8/Add.1, 29 January 2016.

[6] Strategic Prospects for the Adaptation Fund, AFB/B.19/5, 13 November 2012, Annexed paper, para.11.

[7] Report of the Adaptation Fund Board, FCCC/KP/CMP/2015/2, 18 September 2015, para.42.

[8] Gesetz zur Verleihung der Rechtsfähigkeit an den Rat des Anpassungsfonds in Deutschland.

[9] This is based on advice by LRI “Adaptation Fund legal personality under German law”, 2013, available through the LRI database at http://legalresponseinitiative.org/legal-assistance.

[10] See 1.1.4 of the Green Climate Fund Accreditation Application Form (Version 1.1 of July 2015)

[11] Decision 1/CMP.3, Adaptation Fund, para.5 (on functions of the AFB).

[12] Decision 1/CMP.3, Adaptation Fund, para.5 (f) states that the AFB functions include: “To monitor and review implementation of the operations of the Adaptation Fund, including its administrative arrangements and the expenditure incurred under the Adaptation Fund, and recommend decisions, as may be appropriate, for adoption by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol”.