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Unified Adaptation Taxonomy and Adaptation Finance
Context:
Global spending on climate change adaptation is estimated to fall short by as much as 18 times the required levels.
More on News:
- This shortfall is even more pronounced than that of mitigation finance, which already fails to meet the goals of the Paris Agreement.
- According to the Climate Bonds Initiative, only 19% of sustainable bonds issued worldwide by the end of 2022 were allocated to adaptation initiatives.
- This chronic underinvestment stems from multiple factors, with the OECD identifying 12 critical barriers grouped into three key themes.
Key Barriers to Adaptation Finance:
- Limited Financial Resources: Countries most vulnerable to climate change often lack the budgetary capacity to fund adaptation projects.
- The Notre Dame Global Adaptation Initiative Index highlights a near-linear relationship between a country’s income and its adaptation needs, underscoring a stark North-South divide.
- Institutional Constraints: Limited institutional capacity in low-income countries hinders their ability to secure funds from international donors.
- Lengthy approval processes within donor organisations further delay the availability of funds, often rendering them ineffective as priorities shift.
- Lack of Standardisation and Metrics: The absence of universally accepted definitions, methods for measuring adaptation outcomes, and a shared understanding among stakeholders hampers progress.
The Role of Taxonomies in Addressing Adaptation Challenges:
- The introduction of a credible international adaptation taxonomy could play a transformative role.
- Green finance taxonomies have been instrumental in mobilising resources for mitigation efforts by providing a framework to identify and verify climate-positive projects while mitigating the risk of greenwashing.
Greenwashing refers to the practice where companies present misleading information about their environmental practices or products, creating a false impression of sustainability. This term combines “green,” indicating environmental benefits, and “whitewashing,” which means concealing wrongdoing.
- By adapting this approach to climate adaptation, taxonomies could guide investors and policymakers toward more targeted and impactful solutions.
Existing Adaptation Taxonomies and Frameworks:
Although most taxonomies include adaptation activities alongside mitigation, the former remains underdeveloped. Examples include:
- The EU Taxonomy: Primarily mitigation-focused, with adaptation criteria bolstered by “do-no-significant-harm” rules to prevent maladaptation.
- Thailand and Colombia: Plans to integrate adaptation activities as climate science evolves.
- UNDP and World Bank Guidelines: Offering principles for robust adaptation taxonomies, though these remain at the conceptual stage.
Towards a Common Modular Framework:
- Adaptation Solutions Taxonomy (AST): Focused on supporting SMEs in developing countries but limited in scalability.
- Taxonomy of Climate Change Adaptation Technology: Offers a sector-based classification of technologies but lacks region-specific guidance and market integration.
- Climate Bonds Initiative Framework (2023): Proposes an investment-focused taxonomy that includes categories for adapted and enabling investments, with safeguards to prevent maladaptation.
Recommendations for Developing Adaptation Taxonomies:
- International Coordination: Global entities like UNEP, UNDP, or the World Bank could lead the development of a universal framework, combining global principles with regional adaptations.
- Climate zones could guide the creation of standardised yet flexible criteria tailored to local conditions.
- Sector-Specific Guidelines: Broad criteria could be established for areas such as agriculture, water management, and infrastructure, with room for regional adjustments.
- For example, universally applicable practices like intercropping could be complemented by local innovations to address unique precipitation challenges.
- Alignment with Financial Markets: Ensuring compatibility with financial instruments, such as green bonds, would facilitate investment in adaptation projects while maintaining transparency and credibility.
