The Adaptation Fund and the 2015 Instrument

Legal assistance paper

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Date produced: 11/06/2014

1. What might be the legal status of the Adaptation Fund if the Green Climate Fund is the finance mechanism for the 2015 Agreement, as some parties are suggesting? 

2. What could be the governance options for the Adaptation Fund if adopted in the 2015 Agreement?

3. What would be the legal implications for the clean development mechanism (CDM) if the Adaptation Fund is adopted under the 2015 Agreement?

Advice:

The Adaptation Fund (AF) and the Adaptation Fund Board (AFB) are set up under the Kyoto Protocol, as opposed to the UNFCCC. While it was originally envisioned that the AF would be operated by an Operating Entity (OE) of the UNFCCC, CMP Decision 1/CMP.3 established the AFB, without appointing it as an OE under the Convention. Therefore, the AFB is currently an operating entity under the guidance of, and is accountable to, the CMP under the Kyoto Protocol rather than the COP. This means that its legal status is likely to be affected by the possible introduction of a new legal instrument in 2015, which may effectively supplant the Kyoto Protocol.

1. The legal status of the AF if the GCF is the finance mechanism for the 2015 instrument

The legal status of the AF, as noted above, is linked with the continuing existence of the Kyoto Protocol. It may be noted that in Doha, Parties adopted in 1/CMP.8 an amendment to the Kyoto Protocol extending emissions reductions commitments until 2020.  Existing mechanisms under the Kyoto Protocol, such as the AF, are likely to continue to operate through till that point.

The exact status of the AF and the AFB beyond that point, however, is difficult to predict.  There is nothing in the UNFCCC or the Kyoto Protocol currently that determines the status of the mechanism post-2015 or post-2020. The AF and AFB continue to exist under the Kyoto Protocol unless, for example, the application of the provisions of the Protocol are discontinued by the new 2015 instrument.  Furthermore, the constituent documents for the AF and the GCF do not establish any level of coordination between the two funds. The legal status of the AF would depend wholly on the nature of the agreement that parties draw up in Paris.

For a post-Kyoto scenario, it is possible that the parties will seek to build on the existing financial mechanisms, as opposed to re-inventing them. This approach looks likely given the broad international consensus to build on existing institutions and processes and avoid inefficient duplication of efforts. For instance, the ‘Summary report on the workshop on enhancing adaptation through the 2015 agreement’[1] highlights the political will to adapt the existing mechanisms into the 2015 agreement. Similarly, the submissions of Greece and the EC on behalf of the EU and its member states[2] recommends that efforts must be made to continue to develop linkages with existing mechanisms even after 2015. Consequently, it is likely that the AF and the AFB will have some role to play post the 2015 instrument. That being said, there is nevertheless a chance that the AF and AFB will be fundamentally changed in order to streamline the financial flows to developing countries. Several developing countries have expressed their reservations about the AF, including about its establishment under the KP (as opposed to the UNFCCC) and about the fact that it is nearly ‘empty’.[3]

2. Possible governance options for the Adaptation Fund if adopted in the 2015 Agreement:

(i) The AF and AFB as part the financial mechanism of the 2015 instrument

The Adaptation Fund established under the Kyoto Protocol could continue to operate and be integrated into the financial structure of the Green Climate Fund. This would create a streamlined system, and would enable participation of non-Kyoto signatories in the governance of the AF.

(ii) The AF and AFB are subsumed within the GCF

The AF and the AFB could alternatively be wholly subsumed within the Green Climate Fund (GCF), particularly in light of the intent of the GCF to scale up support for adaptation. The AF has established a portfolio of adaptation programs, management systems, and established useful systems for monitoring and evaluation, although these presently work at a modest scale.

It may be reiterated that the future of the AF depends wholly on political will and, more importantly, the text of the 2015 instrument.

3. The legal implications for the clean development mechanism (CDM) if the Adaptation Fund is adopted under the 2015 Agreement

The CDM is established under Article 12 of the Kyoto Protocol, and, similar to the AF, operates under the Protocol (as opposed to the UNFCCC). However, it operates independent to the Adaptation Fund. It is directly governed by the CDM Executive Board, which in turn is governed by the CMP.  Consequently, there are no legal implications on the CDM by the mere fact that the AF is adopted under the 2015 instrument (in whatever form). The funding mechanism that links the two i.e. 2% share of the proceeds from CDM project activities are used to finance the cost of adaptation may be changed depending on the structure of the 2015 instrument.

However, the overall fate of the CDM mechanism will be contingent on the negotiations and text of the 2015 instrument. The CDM has been relatively successful in achieving its goals under the first phase of the Kyoto Protocol. However, the CMP meetings in Warsaw (November 2013) highlighted the reservations against the modalities of the CDM mechanism, and indicated that an overhaul of the CDM may be possible. This is likely to impact its role under the 2015 instrument.

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 [1] http://unfccc.int/resource/docs/2013/adp2/eng/11infsum.pdf

[2] http://unfccc.int/files/bodies/application/pdf/el-02-28-eu_adp_ws1_submission.pdf

[3] http://www.twnside.org.sg/title2/climate/news/warsaw01/TWN_update14.pdf and http://ldcclimate.files.wordpress.com/2014/05/submission-by-nepal-on-behalf-of-ldc-group-on-second-review-of-af-final.pdf