Climate finance for adaptation

Climate finance distinguishes between mitigating global warming and adapting economies to this warming. Only mitigation contributes to the preservation of a global public good (GPG : a resource, good or service that benefits everyone, whose exploitation or preservation may justify international collective action; in this case, maintaining temperatures at a level favourable to human life). Adaptation, on the other hand, is the correction of negative externalities (an activity that generates negative costs that are borne not by the individual or legal entity that generates/creates the activity but by the entire community affected by these negative consequences) due to rising temperatures; in other words, the inadequacy of mitigation policy. The negative effects of climate change differ from one country to another. Thus, an adaptation policy targets local impact, unlike a mitigation policy, which has a global objective. Because they are largely responsible for the global carbon stock but highly exposed to the impacts of climate change, developing countries have long been calling for a larger share of international funding for adaptation. This report presents an original empirical assessment of international climate finance flows dedicated to adaptation over the period 2019–2023. The authors have constructed a harmonised database based on sources from the OECD/DAC's TOSSD and SNPC. Through an overview of the different funding flows (grants, concessional loans, non-concessional loans) provided by different types of donors (bilateral, multilateral, etc.) and an analysis of the different channels through which the flows are channelled and their sectoral allocation, the authors examine the main characteristics of the geographical allocation of funds (by continent and by per capita income level of recipient countries). Finally, they address the most important point, which is the distribution of flows according to countries' physical vulnerability to climate change. The aim is to assess the adequacy of climate finance for adaptation in relation to the relative needs of developing countries. The main finding/conclusion is that climate finance for adaptation does not sufficiently benefit the poorest and most vulnerable countries, due to an excessive proportion of loans (particularly non-concessional loans) at the expense of grants or aid in general. This raises the question of the particular responsibility of multilateral donors in this regard. Finally, this report includes a methodological appendix (carried out in partnership with the French Development Agency) that explains the methodology and sources underlying the database used for the analysis presented in this paper. It covers several key concepts, such as climate adaptation finance and concessionality.