The adaptation finance gap for developing countries is much larger than previously thought, around 10–18 times more than the current level, according to a report.
The report, titled “Underfinanced. Underprepared. Inadequate investment and planning on climate adaptation leaves the world exposed,” found that developing countries are likely to need at least $215 billion and up to $387 billion of international public finance for climate adaptation each year this decade.
Despite these needs, public multilateral and bilateral adaptation finance flows to developing countries declined by 15% to $21 billion in 2021. This means that the adaptation finance gap is now widening, with a funding gap for 2021 of at least $194bn.
UNEP admits that it had previously underestimated the gap, with the new figure more than 50% higher than previously thought. Wealthy nations will need to significantly increase their support if they are to meet their COP27 pledges to provide $40 billion per year in climate adaptation finance to developing countries by 2025.
The report echoes comments made by UN Secretary-General António Guterres at the start of the year, who called for sweeping reform of the international financial system to allow poorer countries vulnerable to climate catastrophes to receive adequate funding from richer nations.
Developing nations are the most vulnerable to the impacts of climate change. A recent study estimated that damages in the 55 most climate-vulnerable economies alone exceeded $500 billion over the past two decades. These costs are expected to rise sharply in the coming decades, especially without strong mitigation and adaptation measures.
Even if temperatures eventually stabilise due to more ambitious collective climate change mitigation efforts, climate risks will accelerate with every fraction of a degree due to the compounding and cascading nature of climate-related impacts.
Additionally, the Intergovernmental Panel on Climate Change (IPCC) concludes that residual climate risks—that is, risks that remain after ambitious adaptation efforts—will persist even if the Paris Agreement goals are reached. Residual climate risks will inevitably lead to both economic and non-economic losses and damages in vulnerable nations.
The report offers seven ways to bridge the adaptation finance gap, chief among these is domestic expenditure and private financing. However, the authors suggest that these are not likely to bridge the adaptation finance gap alone.
Additional avenues include remittances, increasing and tailoring finance to small and medium enterprises and a reform of the global financial architecture, as proposed by the Bridgetown Initiative will all be necessary too.
“I urge policymakers to take heed of the Adaptation Gap Report, step up finance and make COP28 the moment that the world committed fully to insulating low-income countries and disadvantaged groups from damaging climate impacts,” said Inger Andersen, Executive Director United Nations Environment Programme.
The report is the latest in a series of reports on climate-related impacts published in the lead-up to COP28 in Dubai. The We Mean Business Coalition’s recent Corporate Climate Stocktake (CCST) assesses businesses’ progress against international and national climate targets and identifies barriers they face. The International Energy Agency (IEA) has also released its World Energy Outlook (WEO), which documents progress and gaps in the global energy transition.
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