LINKED DOCUMENT 1: LITERATURE REVIEW

A. The Pace of Climate Change May Be Uncertain, but Needs To Be Dealt

with
1. Among the key findings of the Intergovernmental Panel on Climate Change (IPCC) are that (i)
warming of the global climate system since the mid-20th century is unequivocal; and (ii) this warming is
very likely (with greater than 90% confidence) a consequence of increased anthropogenic greenhouse
gas (GHG) emissions.1

2. The global mean temperature rise has now reached about 0.8oC above pre-industrial levels. A
prevailing view is that the global mean temperature rise should remain below 2 oC.2 Some climate
models indicate it can possibly exceed pre-industrial levels by 4oC by the year 2100 or earlier.3 Much will
depend on the planet’s climate sensitivity,4 which now appears to be somewhat lower than what was
believed in the 1990s, as the 5-year mean global temperatures have been nearly flat for a decade. 5
Besides, time lags between emissions and climate change and between emission cuts and reduction in
global warming also remain largely difficult to predict.

3. Even if average mean temperatures were to rise somewhat slower, a rise in extreme weather
events is expected, as observed through the increased frequency of meteorological, hydrological, and
other weather-related disturbances since the early 1980s.6 There is a disproportionality of cause and
effect; given feedbacks and synergies, the behavior is often nonlinear. 7 Nonetheless, the world’s
poorest regions are likely to be the worst affected. Low incomes, greater reliance on natural resources,
limited skill, and insufficient attention from government policy makers will exacerbate the climate
change impacts. In 2010, of the 42.3 million people estimated to have been displaced worldwide
owing to the sudden onset of natural hazards, more than 38.2 million were affected by extreme
weather events.8 The Asia and Pacific Region, which contributed 25% of the world’s gross domestic
product (GDP) from 1980 to 2009, suffered 42% of global economic losses due to natural disasters. 9

1
IPCC. 2007. Fourth Assessment Report. Spain.
2
United Nations Framework Convention on Climate Change (UNFCCC). 2009. Report of the Conference of the Parties on its
fifteenth session (Copenhagen Accord). Copenhagen.
3
World Bank. 2012. Turn Down the Heat: Why a 4O C Warmer World Must be Avoided (A report for the World Bank by the
Potsdam Institute for Climate Impact Research and Climate Analytics). Washington DC.
4
Defined as the change (increase) in equilibrium mean global surface temperature expected for a doubling of the atmospheric
concentration of carbon dioxide.
5
As evident from the global seasonal mean temperature data compiled since 1950 by the Goddard Institute for Space Studies
(National Aeronautics and Space Administration, Houston, Texas). For a graph showing seasonal (quarterly) resolution, refer to
http://data.giss.nasa.gov/gistemp/graphs_v3/Fig.E.pdf. Also refer to The Economist. 2013. Climate Science: A sensitive matter.
30 March.
6
Projected mean temperature rises are expected to be accompanied by a sea-level rise, an increase in tropical cyclone intensity
in low-latitude regions, and an increase in aridity and drought in many developing countries located in tropical and subtropical
areas. As per the Emergency Events Database (EM-DAT) (i) meteorological disasters include storms, which may be tropical
storms, extratropical cyclones (winter storms), and local/convective storms such as lightning, snowstorms, sandstorms,
tornados, and strong winds; (ii) hydrological disasters include floods as well as wet mass movements; and (iii) other
climatological disasters include extreme temperatures (heat waves, cold waves, extreme winter conditions), drought, and
wildfires. This does not include (i) geophysical disasters such as earthquakes, tsunamis, volcano eruptions, and dry mass
movements; or (ii) biological disasters such as epidemics, insect infestations, and animal stampedes.
7
When tipping points in the Earth system are reached, extreme nonlinearity is expected to be witnessed. Arctic Sea ice loss,
Greenland ice sheet melt, loss of permafrost, monsoon shifts in the Indian Ocean, etc. are considered as tipping points.
8
K. Haldorsen. 2011. Climate Change and Displacement: 42 million displaced by sudden natural disasters in 2010. Norwegian
Refugee Council. 6 June. http://www.nrc.no/?did=9570125.
9
United Nations Economic and Social Commission for Asia and the Pacific. 2010. Protecting Development Gains: Reducing
Disaster Vulnerability and Building Resilience in Asia and the Pacific. Bangkok.
2 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

B. Responses to Climate Change

4. Climate change is a complex phenomenon that impacts and is impacted by a large number of
factors that encompass economic development, poverty, population growth, resource management,
and sustainable development. The approaches to managing climate change and climate risk therefore
come from myriad disciplines, and broadly fall into two classes: mitigation and adaptation.

5. Global attention first turned to mitigation, although adaptation has also gained importance
since the turn of the century (Box LD1.1). The fact that the amendments to the Kyoto Protocol, which
set emission reduction targets for the second commitment period, 2013–2020, had not entered into
force as of June 2013 increases the need for adaptive responses.

Box LD1.1: Global Attention to Mitigation and Adaptation Actions

1. Mitigation

By 1995, the realization that emission reduction provisions in the United Nations Framework Convention on
Climate Change (UNFCCC) were inadequate engendered negotiations to strengthen the global response to
climate change. As a result, the Kyoto Protocol was adopted at the 3 rd Conference of Parties (COP) in 1997 and
entered into force on 16 January 2005. It focuses solely on climate change mitigation.

The Kyoto Protocol legally binds developed countries to emission reduction targets. It committed 37
industrialized countries and the European Union to reducing greenhouse gas (GHG) emissions by an average of
5% against 1990 levels during the first commitment period ending December 2012. It initiated three mitigation
mechanisms: international emissions trading, clean development mechanism, and joint implementation.

At the 18th COP in December 2012, amendments to the Kyoto Protocol were adopted to extend it to 2020.
Selected Parties committed to reduce GHG emissions by at least 18% below 1990 levels in the 8-year period from
2013 to 2020. As of June 2013, the amendments were still to enter into force. Besides, the first commitment
period targets were also not fully met. As a result, global efforts on climate change mitigation have gone more
slowly than planned—and are likely to remain slow at least until the amendments to the Protocol enter into
force. As a result, the pressure on implementing climate change adaptation measures has been increasing
considerably over the years.

2. Adaptation

Attention to adaptation appears to have gained prominence in 2001 at the 7 th COP in Marrakesh. Initially, the
focus was essentially on least developed countries.

The first Meeting of Parties to the Kyoto Protocol in Montreal in 2005 also focused on adaptation issues, which
led to the launch in 2006 of the Nairobi Work Program (NWP) at the 12 th COP. The NWP broadened the scope of
adaptation-related work to include all developing countries, including least developed and small developing
countries. The objective was to improve the understanding of developing countries on issues related to
vulnerability and impacts of climate change, and to assist them in making informed decisions on practical
adaptation measures.

The Cancun Framework Agreement firmed up at the 16th COP in December 2010 sought to enhance action on
adaptation through a five-pronged agenda:
(i) Implementation—to urge all Parties to plan, prioritize, and implement adaptation actions and
to use existing channels to provide information on support provided and received for
adaptation; to enable least developed countries to formulate and implement national
adaptation plans based on their NAPAs; and to formulate work programs to address loss and
damage associated with climate change impacts in developing countries that are particularly
vulnerable;
(ii) Support—wherein developed country Parties provide to developing country Parties (taking into
account the needs of those that are particularly vulnerable) long-term, scaled-up, predictable,
new and additional financing, technology, and capacity building to implement adaptation
actions;
(iii) Institutions at the global, regional and national levels to be strengthened and/or established,
including the establishment of an Adaptation Committee to promote the implementation of
enhanced action on adaptation in a coherent manner;
 Linked Document 1: Literature Review 3

(iv) Principles—all adaptation actions to be in accordance with the Convention; to be country-

driven, gender-sensitive, participatory, and fully transparent; to be based on and guided by
best available scientific knowledge, and, as appropriate, traditional and indigenous
knowledge; and to be undertaken with a view to integrating adaptation into relevant social,
economic, and environmental policies and actions; and
(v) Stakeholder engagement—to engage, as relevant, multilateral, international, regional, and
national organizations as well as the public and private sectors, civil society, and other
relevant stakeholders.

The Climate Investment Funds embody many of the aspects of the Cancun Framework Agreement.

CoP = Conference of Parties, GHG = greenhouse gas, NWP = Nairobi Work Program, UNFCCC = United Nations Framework
Convention on Climate Change.
Source: Independent Evaluation Department.

6. Mitigation is a proactive approach. It comprises actions to limit the magnitude and/or rate of
long-term global warming and climate change by reducing anthropogenic emissions of GHGs or
increasing the sequestration capacity of carbon sinks (Table LD1.1).10 Adaptation can be reactive (to
experienced climate change) as well as proactive (to avoid projected climate change) and normally
refers to the reduction of vulnerability to climate change of human and economic systems, as well as of
biological systems and ecosystems. Adaptation can also refer to the exploitation of beneficial
opportunities.

Table LD1.1: Typology of Mitigation Activitiesa

Activities
Demand-side, brownfield energy efficiency Commercial and residential sectors (buildings)
Public services
Agriculture
Industry
Demand-side, greenfield energy efficiency Construction of new buildings
Supply-side, brownfield energy efficiency Transmission and distribution systems
Power plants
Renewable energy Electricity generation, greenfield projects
Transmission systems, greenfield
Heat production, greenfield or brownfield projects
Transport Vehicle energy efficiency fleet retrofit
Urban transport modal change
Urban development
Interurban transport and freight transport
Agriculture, forestry, and land use Afforestation and reforestation
Reducing emissions from the deforestation or
degradation of ecosystems
Sustainable forest management
Agriculture
Livestock
Biofuels
Waste and wastewater Solid waste management
Wastewater treatment
Waste recycling
Non-energy GHG reductions Industrial processes
Air conditioning and cooling
Fugitive emissions and carbon capture

10
Geo-engineering is beginning to emerge as another option: and includes solar radiation management (reducing sunlight or
increasing reflectivity) and carbon dioxide removal (increasing ocean capacity to absorb carbon dioxide).
4 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

Activities
Cross-sector activities Policy and regulation
Energy audits
Supply chain
Financing instruments
Low-carbon technologies
Activities with greenhouse gas accounting
GHG = greenhouse gas.
a
In the absence of a commonly agreed method among multilateral development banks (MDBs) for GHG analysis,
mitigation activities considered in the joint approach are assumed to lead to emission reductions, on the basis of
past experience and/or technical analysis. Ongoing efforts to harmonize GHG analysis among MDBs will bring
more consistency regarding the identification of mitigation activities in the long term. This typology of mitigation
activities defined by the Joint MDB Report excludes supply-side greenfield energy efficiency. However, according
to the energy sector as defined in the Asian Development Bank (ADB) sector classification categories in the
project classification system, investment in (i) greenfield fossil fuel-fired power plants using less GHG intensive
technology come under the “energy efficiency and conservation” subsector; and (ii) greenfield natural gas-fired
power plants come under “conventional energy generation.” Such greenfield projects are potentially eligible for
support from internally managed climate finance windows. For instance, the Tianjin Integrated Gasification
Combined Cycle Power Plant Project (Loan 2616) received support from (i) the Climate Change Fund; and (ii) the
Carbon Capture and Storage Funds under the Clean Energy Financing Partnership Facility.
Source: Joint MDB Report on Mitigation Finance 2011. http://www.eib.org/attachments/documents/joint_
mdb_report_on_mitigation_finance_2011.pdf

7. Even if GHG emissions can be stabilized within this decade, climate change and its effects will
last many years and make adaptation necessary. 11 It is very likely that in the absence of mitigation
efforts, the effects of climate change would reach such a magnitude as to (i) make it impossible for
some natural ecosystems to cope or adapt; and (ii) impose extremely high social and economic costs of
unmitigated climate change.12 The benefits of strong and early action to mitigate climate change far
outweigh the economic costs of not acting. Compared with the cost of mitigating the worst impacts of
climate change of around 1% of global GDP per year, the cost of inaction could be 5–20 times higher.13

8. Interrelationships between adaptation and mitigation. Adaptation and mitigation have been
considered separately in the literature. It is noted however, that a broad cross-section of adaptation
and mitigation actions encompass (i) technological, institutional, and behavioral options; (ii) the
introduction of economic and policy instruments to encourage and facilitate the use of such options;
and (iii) research and development to reduce uncertainty and to enhance the effectiveness and
efficiency of deploying such options. 14

9. Adaptation and mitigation options can interact at various levels and in a variety of ways. Such
interactions can best be understood by taking into account the (i) spatial, temporal, and institutional
scales at which the two operate; and (ii) different perspectives and priorities of a vast range of
stakeholders separated in space and time.15 However, the experience accumulated thus far does not
support sufficient understanding of the full scope of commonalities, one-way implications, trade-offs,
and synergies between the two.

10. Some interactions between adaptation and mitigation activities at the global level are (i)
increasing attention to adaptation activities owing to the difficulties in instituting mitigation efforts

11
The net lifetime of carbon dioxide in the atmosphere exceeds 100 years.
12
R.J.T. Klein et al. 2007. Inter-relationships between adaptation and mitigation. In M. L. Parry, et al., eds. Climate Change 2007:
Impacts, Adaptation and Vulnerability; Contribution of Working Group II to the Fourth Assessment Report of the
Intergovernmental Panel on Climate Change. Cambridge, United Kingdom: Cambridge University Press.
13
N. Stern. 2007. The Economics of Climate Change (The Stern Review) . Cambridge, United Kingdom: Cambridge University
Press.
14
M. L. Parry, et al., eds. 2007. Climate Change 2007: Impacts, Adaptation and Vulnerability; Contribution of Working Group II to
the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, United Kingdom: Cambridge
University Press.
15
Although both adaptation and mitigation can be related to sustainable development goals, they differ in terms of benefits—
which are global and longer term for mitigation, but local and shorter term for adaptation.
 Linked Document 1: Literature Review 5

across the globe; and (ii) accumulations to the Adaptation Fund, which depend on the value of certified
emission reductions from mitigation projects under the Clean Development Mechanism (CDM). 16

11. Interactions between adaptation and mitigation activities are also observed at the local level,
for instance (i) increased energy use, which impinges on mitigation efforts owing to the proliferation of
cooling technologies (e.g., air-conditioning) in homes and buildings, which is an adaptive response; (ii)
mitigation implications of changing land use and hydropower generation that stem from integrated
water resource planning and management, which can be considered an adaptive response; and (iii)
increased cost of adaptation through higher energy prices on account of fossil fuels taxes that are
aimed at reducing fossil fuel use and GHG emissions.

12. The need to explore and promote synergy between mitigation and adaptation is increasingly
being realized.17 For instance, forests can be managed through a combination of adaptation and
mitigation activities to preserve their carbon sequestration capacity and their role as carbon sinks.
Managing pressures that lead to overgrazing, overharvesting, and land-use change are adaptation
activities that can attenuate the adverse effects of climate change, while activities that reduce the
vulnerability of forest ecosystems and plantations (e.g., preserving protected areas), and other
approaches such as sustainable logging and anticipatory planting are mitigation activities.

13. As experience in trade-offs and synergies is accumulated across sectors, it can be expected that
global climate negotiations and arrangements will strive for a regime that facilitates the harnessing of
such synergies.

C. Development and Climate Change

14. The effect of climate change on societies, economies, and other human and natural systems is
difficult to predict, which calls for policy and decision making under uncertainty. A larger number of
unknown unknowns are to be dealt with than in the business-as-usual development planning
processes.18 Climate change, which is increasingly becoming evident, will exert pressure on societies,
especially the vulnerable. That economic development and poverty reduction can be sustained without
due attention to mitigating climate change and adapting to it will most likely recede. The Group of
Eight (G8) recognizes that management of climate change impacts and sustainable development are
mutually reinforcing.19

15. The post-2015 development agenda, which includes work on Sustainable Development Goals
(SDGs), provides an opportunity to place sustainable development at the core of humankind’s pursuit
of shared progress.20 The SDGs seek to address in a holistic and balanced manner the three dimensions
of sustainable development (economic, social, and environmental) and their interlinkages. Efforts are
being made to articulate SDGs that are transformative and address the challenges ahead. 21 In broad
terms (i) transformation can be achieved through an interdisciplinary process that seeks to create
desirable and sustainable outcomes, including changes in the form and behavior of individuals,
systems, and organizations; and (ii) challenges relate to (among others) poverty reduction and other

16
2% of the certified emission reductions issues for a CDM project activity is allocated to the Adaptation Fund. Donor
governments, the private sector, and individuals can also contribute to the Adaptation Fund through voluntary pledges.
17
N.H. Ravindranath. 2006. Mitigation and adaptation synergy in the forest sector. Indian Institute of Science. Bangalore, India.
18
T. Homer-Dixon. 2009. Climate Change and the Renewal of Civilization. Presented at The Great Transformation: Climate Change
as Cultural Change. Essen, Germany.
19
The G8 is a forum for the governments of 8 of the world’s largest 11 economies (excluding Brazil, India, and the People’s
Republic of China). The G8 continues to function with regular meetings of governments, although since 2009, the G20 has
replaced the G8 as the main economic council of wealthy nations.
20
United Nations General Assembly. 2013. A life of dignity for all: Accelerating progress towards the Millennium Development
Goals and advancing the United Nations development agenda beyond 2015, Report of the Secretary General . New York.
21
Advanced unedited copy: Progress report on the work of the General Assembly Open Working Group on SDGs at its first four
sessions (as of 28 August 2013). http://sustainabledevelopment.un.org/content/documents/1927 interimreport.pdf.
6 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

social dimensions, continued economic development and prosperity, capacity development, biodiversity
conservation, local environmental issues, and climate change.

16. Both climate change adaptation and mitigation contribute to sustainable development, albeit
in different ways. Mitigation measures are relative easy to identify, and there is widespread agreement
on what constitutes a mitigation measure, as evident from the set of activities that qualify under the
Kyoto Protocol.22 Adaptation, however, is inherently linked to economic development, and it is difficult
to make a distinction between the two, for the ultimate aim of development is also to make people
more resilient to external pressures, including climate change-related pressures.

17. Economy-wide implications. Climate change is increasingly recognized by custodians of

national, provincial, and local economies as a priority concern for assuring the continued economic
growth and people’s well-being. Their concerns essentially are the potential for climate-related loss to
the economy and the society; whether or not it is possible to take measures to avert some climate-
related losses; and if yes, then how much loss can be averted and at what cost. 23

18. However, it is difficult for decision makers to have definitive answers. For the economy and the
climate coexist in a feedback loop, and uncertainty is fundamental to climate change. 24 The uncertainty
increases at each step of the chain in Figure LD1.1, despite massive successes in raising climate change
awareness, policy-making capability, knowledge generation, and resource mobilization.

Figure LD1.1: Uncertainty in Climate Change Impacts on the Economy

Scenarios based on modeling of GHG emissions and

Change in GHG concentrations
carbon cycle

Change in temperature Investigated in climate models of varying complexity

Change in climatic variables Frequently modeled, but significant uncertainty of

down-scaled projections

Direct impact on sectors More research needed; understanding varies across

sectors and geographies

Wider impact on economy Require macroeconomic or multisectoral studies and

modeling
GHG = greenhouse gas.
Source: Adapted from Vivid Economics. 2013. The macroeconomics of climate change, report prepared for Defra.
United Kingdom.

22
Includes (i) carbon emissions trading that supplements domestic actions of Annex I parties for the purposes of meeting their
emission reduction obligations under the Kyoto Protocol; (ii) Joint Implementation, a project-based mechanism that enables
industrialized countries to jointly implement projects with other developed countries; and (iii) CDM, a project-based
mechanism that involves investment in emission-reducing sustainable development projects in developing countries. A large
variety of projects qualify as mitigation projects under the CDM of the Kyoto Protocol (see UNFCCC. CDM Methodologies.
http://cdm.unfccc.int/methodologies/index.html).
23
Economics of Climate Adaptation Working Group. 2009. Shaping Climate-Resilient Development: A Framework for Decision-
Making. http://mckinseyonsociety.com/downloads/reports/EconomicDevelopment/ECA%20%20%20Shaping%20Climate
%20Resilent%20Development%20%20%20Report%20Only.pdf.
24
Vivid Economics. 2013. The Macroeconomics of Climate Change, Report prepared for Defra. United Kingdom.
 Linked Document 1: Literature Review 7

19. It is generally expected that in the absence of barriers (market, policy, governance and
behavioral), loss and damage can be avoided with measures where benefits exceed costs. 25 However, it
is not clear whether, and if so how soon, economic planning- and resource allocation-related decision
making (including investment decisions) in countries can take into account climate change-related
aspects. This would call for (among other requirements) a complete assessment of the benefits and
costs of various investment choices. With the present level of knowledge and accumulated experience,
such benefits and costs are difficult to quantify. Besides, issues other than climate change continue to
influence decision making, policy, and resource allocation in many countries; and other barriers
continue to exist.

20. The continuum. Development and adaptation are not identical; and the achievement of one
does not guarantee the other. For instance, even though it is recognized that many development
activities contribute to reducing vulnerability to climate change and other pressures, it is possible for
development activities to be maladaptive if not properly planned or executed (Box LD1.2). On the other
hand, engineering modifications for climate proofing of existing projects (that enable them to better
withstand climate extremes, or reduce the vulnerability of those affected by the project) have not been
traditionally done, and are not labeled as economic development in the strictest sense.

Box LD1.2: Maladaptation

Measures that reduce vulnerability in the near term may lead to unintended but real maladaptive outcomes over
the longer term. Some examples include (i) small dykes that provide protection from chronic floods, which
encourage settlements in low-lying areas could end up causing more harm to those communities when a more
intense flood occurs; (ii) inappropriately designed afforestation programs could result in unsustainable drawdown
of aquifers and deplete groundwater; (iii) new coastal infrastructure could disturb the offshore sediment balance,
and result in erosion in adjacent coastal areas; and (iv) irrigation could lead to salination of groundwater and
degradation of wetlands, and thus reduce access of subsistence farmers to groundwater and productive land.

Such maladaptation tends to disproportionately affect the poor and weak, who have limited access to resources
in the first place.

Sources: (i) World Bank Independent Evaluation Group. 2012. Adapting to Climate Change: Assessing the World Bank Group
Experience. Washington DC; (ii) Tyndall Center for Climate Change. 2007. Portfolio Screening to Support Mainstreaming of
Adaptation to Climate Change into Development Assistance. Norwich, United Kingdom.

21. Figure LD1.2 summarizes an often quoted framework that shows a range of adaptation
activities along a continuum. Themes 1 and 2 address a range of vulnerability drivers and response
capacity issues that provide a strong development foundation and are not limited to climate change
related threats. Interventions under Themes 1 and 2 are justified mainly on the basis of their
development benefits, and if they address climate threats, they also entail climate resilience benefits.26
In contrast, interventions under themes 3 and 4 directly address risks associated with climate variability
and change, and are justified essentially on the basis of their propensity to reduce weather- and
climate-related impacts. Theme 3 can also encompass management of risk associated with climate
variability (the domain of traditional disaster risk management). Theme 4 focuses entirely on the
management of specific impacts from climate change that are beyond historical experience. 27

25
Government of the United Kingdom. 2013. The National Adaptation Programme Report: Analytical Annex, Economics of the
National Adaptation Programme.
26
Interventions under Themes 1 and 2 can also address threats arising from earthquakes, epidemics, civil war, and terrorism.
27
Such as relocation due to sea-level rise, building coastal defenses owing to sea level rise, or managing glacial lake outbursts.
8 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

Figure LD1.2: The Continuum of Adaptation Activities from Development to Climate Change

Vulnerability focus Impacts focus

Theme 1 Theme 2 Theme 3 Theme 4

Addressing Building response Managing climate Confronting climate
drivers of vulnerability capacity risks change

Activities seek to Activities seek to build Activities seek to Activities seek to

reduce poverty and robust systems for incorporate climate address impacts
other nonclimatic problem solving: information into associated exclusively
stressors that make decision making: with climate change:
people vulnerable:
 Livelihood  Natural resources  Climate proofing  Relocation due to
diversification management projects sea level rise (SLR)
 Literacy and  Weather data  Disaster response  Coastal defenses
education collection, planning from SLR
 Women’s rights forecasting  Drought-resistant  Managing glacial
 Community health  Disaster early crops; cropping lake outburst
 Food security warning systems systems floods (GLOF)
 Water supply,  Communication  Robust, adaptive  Extra storage to
sanitation systems technologies capture glacial
melt

Traditional development funding New and additional funding

Source: Adapted from H. McGray et al. 2007. Weathering the Storm: Options for Framing Adaptation and Development.
Washington DC: World Resources Institute.

22. Themes 1 and 2 also show that unmet development needs (as manifest in poverty or weak
institutional capacities) drive vulnerability, including vulnerability to climate change. Such development
needs need to be addressed to ascertain that adaptation activities (as in Themes 3 and 4) can be
effective and sustained. From this perspective, a separation of development from adaptation may in
fact be counterproductive to the ultimate goal of achieving climate resilience. 28

23. The joint multilateral development banks (MDB) report on adaptation finance defines the
adaptation categories somewhat differently (Box LD1.3).29 It is recognized that the joint MDB report is
the first attempt to come up with a harmonized approach to quantifying adaptation finance, and that
it can be improved in the coming years.

24. The joint MDB report on adaptation finance does not exclude any vulnerability-reducing
activities from its spectrum of adaptation categories, as long as a strong case can be made for (i)
justifying a project’s vulnerability context, (ii) making explicit the intent to address climate change risks,
and (iii) establishing the direct contribution of project activities to climate resilience. Thus the joint MDB
report acknowledges the difficulty of separating development from adaptation.

28
Stockholm Environment Institute and Regional Climate Change Adaptation Knowledge Platform. 2013. Adaptation or
Development? Exploring the Distinctions (or lack thereof) through case studies in Bangladesh and Vietnam. Partner Report
Series No. 8. Bangkok.
29
http://climatechange.worldbank.org/sites/default/files/Joint%20MDB%20Report%20on%20Adaptation%20Finance%202011.pdf.
 Linked Document 1: Literature Review 9

Box LD1.3: Adaptation Categories

According to the joint multilateral development bank (MDB) report on adaptation finance,a the approach for
adaptation finance is based on the following principles:
(i) Explain the context of climate vulnerability (exposure, sensitivity, adaptive capacity), considering
both the impacts from climate change as well as the risks related to climate variability.
(ii) Include a statement of purpose or intent to enhance climate resilience in order to differentiate
between “good development” and adaptation to current and future climate change.
(iii) Link project activities to the context of climate variability (e.g., socioeconomic conditions and
geographical location), reflecting only direct contributions to climate resilience; the activities
should reflect at least one of the following adaptation categories:
Category 1: Addressing current drivers of vulnerability, especially in the poorest countries or
communities, e.g., investments in poverty reduction, income and livelihood diversification, or
health programs, when specifically designed in response to climate risks.
Category 2: Building resilience to current and future climate risks, e.g., reducing land
degradation, reforestation programs, introducing new varieties of crops or farming techniques
better suited for increased droughts and shorter rainfall seasons, investment in adaptation
products and services, supporting effective early warning systems.
Category 3: Incorporating climate risks into investments, especially for infrastructure with a long
lifespan, e.g., in energy generation and supply, airports, ports, water storage infrastructure,
major roads, bridges, railways, and other transport corridors.
Category 4: Incorporating management of climate risk into plans, institutions, and policies, e.g.,
in local and national planning, health system policies, water allocation programs/policies,
education programs/policies, support for research including climate information, agriculture,
health, etc.

MDB = multilateral development bank.

a
Joint MDB Report on Adaptation Finance. 2011; http://climatechange.worldbank.org/sites/default/files /Joint%20MDB %20
Report%20on%20Adaptation%20Finance%202011.pdf
Source: Joint MDB Report on Adaptation Finance. 2011; http://climatechange.worldbank.org/sites/default/files/Joint%
20MDB%20Report%20on%20Adaptation%20Finance%202011.pdf.

25. Consequently, all Themes in Figure LD1.2 can also qualify for being reported as adaptation
financing, and can also be eligible for adaptation finance from climate funds. Themes 3 and 4 qualify,
as they address climate risks and impacts directly. Interventions under Themes 1 and 2 are also eligible
for reporting in adaptation finance—provided it can be shown that the intervention addresses
vulnerability to climate change (Theme 1) or builds capacity to better manage risks from climate change
(Theme 2).

D. Additionality
26. The global climate negotiations under the United Nations Framework Convention on Climate
Change (UNFCCC) tend to focus on additionality. Traditional official development assistance (ODA) does
not fully address adaptation requirements; 30 and adaptation calls for financial additionality in the sense
of increasing the resource envelope.

27. However, the concept of additionality remains open to various interpretations. One refers to
the causality between international finance support for an activity and the extent to which that activity
would have happened in the absence of such support. 31 Another refers to the extent to which the
overall resource envelope provided by developed countries to developing countries increases beyond

30
World Bank. 2010. Economics of Adaptation to Climate Change: Synthesis Report. Washington, DC.
31
C. Streck. 2010. The Concept of Additionality under the UNFCCC and the Kyoto Protocol: Implications for Environmental
Integrity and Equity. London: University College.
10 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

traditional ODA levels. Here, issues that need to be addressed relate to (i) whether the reference ODA
level should be the actual ODA flows (i.e., annual average over a certain time period) or the ODA target
(0.7% of gross national income); and (ii) whether climate change financing should be somehow
completely distinct from traditional ODA; or (iii) whether there can be a certain limited overlap between
climate change financing and ODA. 32 Nonetheless, the extent to which public climate funds become
available will be a key influence in determining the role of the private sector in adaptation and
mitigation finance.33

28. The additionality concept can also be considered to include investment that would not be
required if adaptation and mitigation issues were not relevant. In terms of adaptation, this means that
Themes 1 and 2, which address concerns not exclusively caused by climate change, would tend to be
overlooked—unless the climate change related concerns are made explicit up front. Interventions that
fall under Themes 3 and 4 would normally qualify for adaptation finance. In some cases, the entire
investment capital can be considered as adaptation finance, while in others, it may only be the
incremental cost.34

29. Both investment capital and incremental costs are important parameters for mitigation finance
as well. Although mitigation also calls for financial additionality, traditional ODA can fully
accommodate some types of mitigation measures. For instance, the entire level of financial support for
a renewable energy technology project qualifies as mitigation finance—not just the increment over a
suitable conventional alternative—which means the investment requirements of the business-as-usual
(the conventional alternative) are not considered for purposes of computing mitigation finance. This
appears to be standard operating practice,35 and is in sync with the joint MDB report on mitigation
finance.36

E. Tracking Financial Flows for Adaptation and Mitigation

30. At the global level. Tracking of gross flows that reveals the level of climate finance mobilized by
the international community37 is perhaps most straightforward. Commitments from developed
countries are more easily tracked compared with actual approvals for interventions in developing
countries or actual disbursals to recipients. 38 The tracking of net flows 39—which reveal the net
contribution of developed countries to developing countries—is likely to be more difficult.

31. Recent estimates show a broad range of finance flows for climate change mitigation and
adaptation, estimated at $343 billion–$385 billion for a 1-year period in 2010–2011.40 This perhaps
indicates that the level of financing for mitigation and adaptation is already high. However, it is
noteworthy that climate funds contribute to less than 1% of this value. Annual flows of climate finance
by source are shown in Table LD1.2.

32
Overseas Development Institute. 2010. Fast Start Finance and Tracking Commitments: Where are we now and what can be
done? London.
33
B. Buchner, et al. 2012. The Landscape of Climate Finance 2012. San Francisco: Climate Policy Initiative.
34
Investment capital refers to the tangible investment in mitigation and/or adaptation projects. Incremental cost refers to the
difference in investment capital required between a less climate-resilient and/or GHG-emitting investment option versus a less
costly investment option (which may be a business-as-usual option). It may so happen that the entire investment capital is
incremental (such as relocation in anticipation of sea-level rise, or making extra storage to capture glacial melt during times it
occurs), in that the business-as-usual option is to do nothing. Or only a portion of the project investment is incremental (as
when a portion of a road constructed through a project is to be climate proofed).
35
ADB. 2010. Guidelines for Estimating ADB investments in Renewable Energy and Energy Efficiency Projects. Manila.
36
http://www.eib.org/attachments/documents/joint_mdb_report_on_mitigation_finance_2011.pdf.
37
Gross flows refer to financing (through grants and both nonconcessional and concessional loans mobilized through bilateral
and multilateral institutions, direct access, private capital flows, from GHG offset projects) flows to developing countries.
38
In the particular case of MDBs, climate finance outflows from the MDBs need not be same as inflows during any 1-year period.
39
Gross flows less amounts repaid by recipient countries (e.g., loan principal repayment).
40
Same as Footnote 33.
 Linked Document 1: Literature Review 11

Table LD1.2: Global Climate Finance Estimates

($ billion)
2010–2011 2012 (Mitigation) 2012 (Adaptation) 2012 (Total)
Public Sources
 Government budgets 16.0–22.6 9 3 12
 Development finance institutions 76.8 104 18 122
 Climate funds 1.5 1.0 0.6 1.6
Private Sources
 Project developers 115.0–129.3 102 -- 102
 Corporate actors 69.3–80.5 66 -- 66
 Households 32.3 33 -- 33
 Institutional investors 0.6 0.4 -- 0.4
 Commercial financial Institutions 30.7–40.4 21 -- 21
 Venture capital, private equity, 2.4 1.2 -- 1.2
and infrastructure funds
Total 343–384.8 359 -- 359
-- = insignificant; not estimated.
Source: B. Buchner, et al. 2012. The Landscape of Climate Finance 2012. San Francisco: Climate Policy Initiative.; and B. Buchner,
et al. 201. The Global Landscape of Climate Finance 2013. San Francisco: Climate Policy Initiative.

32. MDBs have been working towards a common approach to reporting climate finance. Following
two joint reports (on adaptation finance and mitigation finance, respectively) in December 2012, the
MDBs jointly released a new report in November 2013 that covers both adaptation and mitigation
finance.41 This new report provides regional and sectoral breakdowns of climate finance, and avoids
double counting for projects that contribute to both mitigation and adaptation. As of now, given the
difficulties in estimating allocations on adaptation and mitigation measures in their interventions, the
new report mentions some simple approaches (for instance, splitting between mitigation and
adaptation finance on the basis of number of activities). Internal tracking and monitoring systems
within MDBs need to be refined to arrive at better estimates of overlaps.

33. Within the recipient country. Tracking of financial flows within a recipient country is perhaps
most difficult. Yet, interest in doing so is rising with the increased availability of climate finance, which
enables recipient countries to raise investment in climate resilience building and GHG reduction. With
this, interest in understanding how recipient country governments integrate climate finance into the
national budgetary process is also on the rise. This impinges on a broad range of capacity
development-related issues that include (i) the extent of collaboration between various government
bodies, (ii) public finance management issues that can affect governance, and (iii) accountability
mechanisms for public environmental actions. 42

F. Response to Climate Change at the Project Level

34. The need to analyze climate change risks on long life-span projects, such as infrastructure
projects, and incorporating adaptation measures is broadly recognized. However, considering that
climate change will make adaptation necessary even if GHG emissions can be stabilized in the short
term, it is also useful to analyze how a proposed project can address GHG emissions abatement during
construction and operation.43

41
http://reliefweb.int/sites/reliefweb.int/files/resources/climate-finance-2012.pdf
42
United Nations Development Programme and Overseas Development Institute. 2012. Climate Public Expenditure and
Institutional Review: Methodological Note. Bangkok.
43
GHG emissions during project construction can come from (i) stationery energy consumption (e.g., diesel-based on-site power
generation), transport of construction material to the project site and waste from the project site; and (ii) land-use change
(land clearing), if any. During the operation phase, the infrastructure project design has implications for GHG emissions for all
types of infrastructure projects. For instance, the extent to which indoor and outdoor lighting and air-conditioning are
required at power plants, ports, airports, water treatment facilities, mass rapid transit, and metro rail projects influences GHG
emissions. And GHG emission abatement measures (such as extent of insulation, natural lighting, efficient light bulbs, efficient
12 Real-Time Evaluation of ADB’s Initiatives to Support Access to Climate Finance

35. Climate-ready infrastructure reduces vulnerability to climate risks, ensures that resources are
invested in sustainable infrastructure, and avoids high-cost future changes to address climate change
impacts. Further to no-regrets options that yield benefits in the absence of climate change are options
to make new infrastructure with designs that allow flexibility 44 and/or incorporate built-in safety
margins.45 For existing infrastructure, it is possible to incorporate adaptation measures when it is to
undergo major maintenance or to be upgraded. Other activities that yield benefits are a regular review
of long-term plans for new constructions and retrofits of existing constructions, insurance, and policy
and regulatory changes.46

air-conditioning) become important. See Government of Queensland (Australia), Department of Local Government and
Planning. 2011. Climate Ready Infrastructure Initiative. Brisbane.
44
Constructions that can be easily retrofitted or upgraded; or with design features that can be changed.
45
For instance, by designing and constructing a project that can withstand more than the projected levels of climate extremes.
46
The Climate Institute. 2012. Coming Ready or Not: Managing climate risks to Australia’s infrastructure. Sydney.