Speech of the Board Chair to the Kyoto Protocol Parties

REPORT OF THE CHAIR OF THE ADAPTATION FUND BOARD, MR. LUIS SANTOS, TO THE CONFERENCE OF THE PARTIES SERVING AS THE MEETING OF THE PARTIES TO THE KYOTO PROTOCOL

1.      Mr. President of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol, distinguished Delegates, Ladies and Gentlemen,

2.      I have the pleasure to present the report of the Adaptation Fund, which describes in detail the work of a year that saw major progress, especially in implementing the modality of direct access to the resources of the Fund. The projects approved at the start of the Fund’s operations are now in their advanced stage of implementation, and the number of accredited National Implementing Entities has increased significantly, thanks in part to the regional and subregional workshops held in the course of the past and current year. The number of projects funded has also increased, and several of these projects have presented reports on their progress to the Board. However, without a doubt, the issue that has dominated the Board’s discussions, and been a major source of concern for Parties concerned with the development and progress of this innovative Fund during the period, has been the steep fall in the price of Certified Emission Reductions, which is the Fund’s main source of income. The trend, which began in November 2011, has accelerated, and the outlook is not hopeful. The Fund finds itself today in a critical situation that could prevent it from continuing its work in the not too distant future, especially bearing in mind the shortage of financing from other sources.

3.      I will return to the subject of funding at the end of my presentation. But first, I would like to talk about the main challenges that the Board and its advisory bodies have had to address this year.

4.      From the outset, the Fund’s Board has given special priority to the implementation of direct access projects. Since the previous report presented at this Conference by my predecessor, new National Implementing Entities have been accredited to the Board based on the recommendations of the Accreditation Panel, bringing their total number to fourteen. The new additions are: the Jordanian Ministry of Planning and International Cooperation; the Rwandan Ministry of Natural Resources; Argentina’s Unit for Rural Change; Kenya’s National Environment Management Authority; the Mexican Institute of Water Technology; the Indian National Bank for Agriculture and Rural Development; the Moroccan Agency for Agricultural Development; and the Costa Rican Fund for Sustainable Development Cooperation. The Board also decided to accredit a new Multilateral Implementation Entity: the United Nations Organization for Education, Science, and Culture. Currently the Accreditation Panel is considering more than 20 new requests, some of which will be discussed by the Board at its next meeting. Because of the Panel’s heavy workload, the Board decided to increase its membership from three to four experts.

5.      The cycle of regional workshops, mandated by the Parties with a view to familiarizing potential candidates with the National Implementing Entities’ process and requirements for accreditation, came to an end during the first half of the current year. In addition to the two workshops held last year, new ones were organized for the Asia and Eastern European region in Manila, Philippines, and for the Pacific subregion in Apia, Samoa. The Board collaborated actively with the secretariat of the United Nations Framework Convention on Climate Change. At these workshops, presentations were made by Accreditation Panel experts and personnel from the secretariat of the Board. The impressive increase in requests for accreditation bears out the usefulness of this exercise.

6.      Among the measures that have helped to preserve and disseminate the Fund’s experience in the implementation of direct access is the Accreditation Panel’s compilation of the lessons learned since the start of its work in the form of a live document that can be viewed on its website and will be being updated regularly. In addition, with a view to making this process more efficient and improving the handling of documentation presented by the requesting entities, the presentation and processing of requests for accreditation were fully computerized this year.

7.      The accreditation process is the first step in the implementation of direct access. The next step is the development, approval, and implementation of a proposed project or program by the National Implementing Entity. The three national entities accredited during the first year of the Fund’s operations—from Senegal, Uruguay, and Jamaica—are already implementing projects, two of which were approved during the reporting period. Concepts developed by national entities in Benin and Argentina have also been approved. Finally, of all the projects approved by the Board, the one that has made the most progress is the one being carried out by the national entity in Senegal. The site was recently visited by the Board’s secretariat on a learning mission, and the conclusions will be reviewed by the Board at its next meeting. This project, in fact, had the honor of being selected by the secretariat of the Convention on Climate Change as a Momentum for Change Lighthouse Activity.

8.      So far, a total of 25 project and program proposals have been approved since the Fund began its operations, and of this number, 14 were approved during the reporting period, representing a total of US$96.7 million. In all, the Board has assigned approximately US$166.5 million for the implementation of projects and programs in the last two years.

9.      Since the German Act of Parliament went into effect granting legal capacity to the Board, a total of 29 agreements have been signed with implementing entities either for approved projects and programs or for financing the development of proposals.

10.    I would like to say a few words about results-based implementation, which is one of the characteristics that distinguishes this Fund from others that are addressing climate issues. The resources approved for the implementation of a project are disbursed in amounts tied to the presentation of a progress report by the implementing entity. This system makes for greater control over resources and also provides an incentive for satisfactory progress toward fulfillment of the project’s goals, because when the results are delayed, so is the disbursement. To date, four projects have presented their annual progress reports. The first annual report on the Fund’s performance was considered in December 2011, and the report for the current year will be presented at the next meeting of the Board.

11.    Another point to be emphasized is the interaction between the Board and civil society organizations. In addition to regular dialogues with representatives of these organizations, the Board receives information and comments on progress implementing the Fund’s projects from civil society organizations located in the countries where the projects are being executed. Some of these organizations will accompany the Board at a parallel session on Friday, November 30, at 6:30 p.m., to present case studies based on projects approved by the Board. It is worth noting that the IATI 2012 Aid Transparency Index ranks the Adaptation Fund first among the climate-funding institutions studied.

12.    In conclusion, I would like to speak about the Fund’s financial resources. Since the start of the monetization program in May 2009, the trustee has sold the equivalent of 14.3 million tons of CO2 Certified Emission Reductions, resulting in US$187.26 million to date. Over the past year, the price of Certified Emission Reductions has fallen from EUR 12.00 per ton of CO2-equivalent emissions to less than EUR 1.00 per ton. This drop has had a severe impact on resources and threatens the continuity of the Fund, since the donations from the Parties listed in Annex I are not sufficient to offset the deficit generated by the fall in prices of Certified Emission Reductions.

13.    The Fund has received donations amounting to a total of US$119.46 million. At the end of 2011, donations were received from Sweden (SKr 100 million) and the United Kingdom (£10 million), for which I would like to express great thanks. Recently, Sweden signed a new agreement with the trustee for an additional donation of SKr 100 million, the third donation from this country since the Fund started. Sweden is the only donor country that has contributed resources to the Fund each year. The regional capital of Brussels, Belgium, is also considering a donor agreement for the contribution of EUR 1.2 million, which would be the first regional donation that the Fund has received.

14.    The resources available to date for financial decision making come to US$120 million. The trustee has made transfers to implementing entities amounting to a total of US$41.55 million as of the date of the present report. According to the estimates given in the last financial report, if the prices for Certified Emission Reductions continue at current levels, the Adaptation Fund could end up having less than US$40 million per year for new projects and programs through 2020.

15.    The Board had decided not to allocate more than 50 percent of Fund resources to projects to be implemented by multilateral agencies, and today we are very close to reaching this ceiling. With more than 40 percent of its available resources allocated for projects implemented by multilateral agencies, the remaining resources will not be sufficient to finance all the proposals being presented to the Board at its next meeting. According to a decision made last March, these proposals will go into a pipeline, to be financed when more resources are available in the Trust Fund.

16.    Faced with these circumstances, the Board is implementing a strategy for mobilizing funds and has set a goal to raise US$100 million by the end of 2013. As part of this strategy, two weeks ago I signed an agreement with the United Nations Foundation that will allow the Adaptation Fund to receive private donations through the Foundation’s website. The link on the websites of both the secretariat and the Foundation is already active and available for those who wish to support the activities of the Fund.

17.    Given the fall in the market prices of Certified Emission Reductions, I would like to emphasize to the Parties that their donations, as listed in Annex I, are essential. I therefore reiterate the request for financial support that my predecessors have made in the past to ensure that the Fund’s ability to respond to the adaptation needs of those who are most vulnerable is not compromised. I call upon all the Parties to be creative in negotiating and seeking alternatives that will permit the continuity of this Fund whose innovative characteristics place it in a position to receive contributions from nontraditional sources. Its effectiveness has been proven through the resources disbursed over the last two years. Moreover, it has helped to make direct access a reality. Disappearance of the Fund could threaten the continuity of this access modality in its embryonic stage of development.

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