Bridging the gaps in public finance for climate adaptation

The current gap in global adaptation finance for developing countries is estimated at $194-366 billion per year. This brief highlights the critical role of domestic public funding in driving adaptation initiatives. While international climate finance mechanisms exist, their effectiveness is limited by slow disbursement processes and regional disparities in fund distribution. Public finance management systems can act as catalysts for mobilising private finance for climate action. In the context of fiscal constraints and elevated debt levels after the Covid-19 pandemic, the brief explores alternative financing solutions, including parametric insurance and regulatory reforms. The integration of climate-responsive budgeting in public finance systems emerges as a crucial tool for reflecting government accountability and priorities. The brief also examines innovative approaches to expand adaptation finance beyond traditional public funding, particularly in developing countries, where climate vulnerabilities are highest.

Article 7.1 of the Paris Agreement highlights the global goal on adaptation. To support the work towards this goal, signatories to the agreement created the Glasgow-Sharm El-Sheikh work programme at COP26. The two-year work programme was carried out by two technical bodies that support the Meeting of Parties to the Paris Agreement CMA—the Subsidiary Body for Scientific and Technological Advice and the Subsidiary Body for Implementation. While the work programme highlighted that adaptation action has a time-bound goal, the adoption of the global goal at COP28 fell short due to a lack of quantified targets and financial support.

Previous attempts to define the targets of adaptation have had limited success, as adaptation actions have been local and context specific. While these challenges may persist, there are ongoing efforts to create indicators to measure success and collect data to support adaptation planning. Finance remains the key challenge. The COP28 decision reiterates that, by 2025, parties need to double their collective climate finance for adaptation to developing countries from 2019 levels.

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This paper is authored by Suranjali Tandon, ORF, New Delhi.