SUBMISSION OF PROPOSAL FOR THE ESTABLISHMENT OF THE ADAPTATION BENEFITS MECHANISM (ABM) BY THE REPUBLIC OF UGANDA, 15 March 2017

Uganda would like to submit its proposal for the establishment of an Adaptation Benefits Mechanism (ABM) as an element to be addressed in the decision on the framework for non-market approaches referred to in Article 6, paragraph 8, of the Paris Agreement.

This proposal is In response to the SBSTA 45 invitation, contained in document FCCC/SBSTA/2016/4, paragraph 101, for submission of views by Parties on, inter alia, the elements to be addressed, including their operationalization, in the decision on the work programme under the framework for non-market approaches to sustainable development defined in Article 6, paragraph 9 of the Paris Agreement, overarching issues, and relationships between Article 6, paragraphs 8 and 9, and other provisions in the Paris Agreement, the Convention and its related legal instruments.

Having considered:

-The provisions and goals in the Paris Agreement;

-Decision 1/CP.21;

-Decision -/CP.22 on Long-term finance, paragraph 7.(c);

-The current misbalance between finance for mitigation and adaptation;

-The financial needs of [developing][African] countries to realize their sustainable, low-emissions and climate resilient development communicated to the UNFCCC through NDCs and INDCs, which in total exceed the pledge of developed countries to provide 100 billion per year by 2020;

Uganda is convinced that the creation of ABM is justifiable and needed in addition to increased public finance for adaptation. ABM will beone of the tools available to Parties and non-state actors to implement the Paris Agreementand scale-up ambition, action and support for adaptation and joint adaptation and mitigation activities.

Uganda proposes several features of ABM as basis for further discussions on the establishment, design and operation of ABM during the roundtable on the framework for non-market-based approaches in May 2017 and SBSTA46 with the view to recommending a decision on the establishment and operationalization of ABM for adoption by CMA, at the second part of its first session (November 2017).

Uganda is aware that this proposal might be of relevance for other on-going work, such as on cooperative approaches, mechanisms, adaptation, NDCs and long-term finance and invites the SBSTA Chair to inform co-facilitators and Chairs of other relevant processes about this proposal and the progress of the discussions.

Purpose

In accordance with Article 6, paragraph 8, of the Paris Agreement, the purpose of ABM will be to assist Parties inthe implementation of their nationally determined contributions, in the context of sustainable development and poverty eradication, in a coordinated and effective manner, including through, inter alia, mitigation, adaptation, finance, technology transfer and capacity-building, as appropriate.

As recognized under Article 6, paragraph 1, cooperation under ABM will be voluntary. It will allow for higher ambition in mitigation and adaptation actions, while promoting sustainable development and environmental integrity.

ABM will ultimately contribute to the achievement of the Paris Agreement, in particular to the global goal for adaptation, as referred to in Article 7.1 and Article 2.(b) and the goals on finance, as referred to in Article 2, paragraph 1.(c), Article 9.3 and Article 9.4 of the Paris Agreement.

ABM activities will also contribute to the achievement of the Sustainable Development Goals and development priorities of the host countries and may have multiple other co-benefits, including for mitigation, technology transfer and capacity building.

Scope

The scope of ABM will cover integrated, holistic and balanced adaptation and/or joint adaptation and mitigation projects and programmes in countries that have ratified the Paris Agreement and have appointed a focal point for ABM. In accordance with Article 6, paragraph 8 of the Paris Agreement, the ABM activities shall aim to:

(a) Promote mitigation and adaptation ambition;

(b) Enhance public and private participation in the implementation of nationally determined contributions; and

(c) Enable opportunities for coordination across instruments and relevant institutional arrangements.

Governance

Uganda envisages ABM under the guidance and authority of the CMA.

Institutional arrangements

ABM will besupervised by a new or existing executive body appointed by the CMA and assisted by the UNFCCC secretariat. This executive body will report to the CMA and seek guidance annually, either directly or through the SBSTA.

The ABM body will have to coordinate its work with other relevant bodies facilitating the implementation of the Paris Agreement.

Further thoughts on how ABM could work

  • Features of ABM

ABM will be a results-based mechanism that will create incentives for the private sector to finance the incremental costs of activities with the view to deliver adaptation, joint adaptation & mitigation and other benefits for households, communities and economies affected by the dangerous impacts of climate change.

  • Matching activities with sources of funding for ABM and incentives

The need for implementing ABM activities will be defined on the one hand by the ambitions, priorities and needs of the host countries expressed in their NDCs, NAPAs, NAPs, TNAs, TAPs and/or adaptation communications that require international support and, on the other hand, by the pledges of developed countries to scale-up climate finance, as well as by the call to all actors to urgently accelerate the global response to the threat of climate change. Non-state actors may also participate in ABM with the view to meet their corporate and social responsibility strategies or their philanthropic objectives throughhelping vulnerable communities to adapt to climate change.

ABM activities will be delivered by public or private project developers, who would divert from business-as-usual due to the incentives provided through ABM. The project developers may also use ABM as a guarantee for obtaining loans from financial organizations.

The ABM incentives will be in the form of measurable and verifiable units, for instance Adaptation Benefit Units (ABUs).

Unlike the units of market-based mechanisms, ABUs will not be transferrable to third parties, but can only be forwarded one way: from project owner to investor. Therefore, ABUs will not be subject to price speculationsand will not commodity nature.

ABUs will have two components. First, they will represent real adaptation benefits expressed through indicators that might be quantitative or qualitative, depending on the benefits (to be) delivered through the activity in the specific context. Second, ABUs will reflect in a transparent manner the incremental costs of activities. It should be noted that ABUs may be unique for each ABM project and, therefore, may not be comparable to ABUs from other ABM projects.

Investors are expected to be incentivized, because of the prospect of receiving verifiable and credible ABUs in exchange for funding, as it will help them justify, communicate or demonstrate how their investments are helping to meet the needs of affected communities. Such incentives are likely to appeal in particular to philanthropic organizations and private sector organizations with corporate and social responsibility strategies and/or strategies for supply chain responsibility. However, ABUs may also be of interest to private persons and public organizations. Issuance of ABUs is an alternative to presenting large grant needs. This approach will allow to attract multiple and diverse donors for an ABM activity, provided that each ABU represents a comprehensive portion of the benefits and incremental costs. Attracting a larger range of donors will help to scale-up finance.

ABUs can be used for cancellation or for reporting of measurable and verifiable results of ABM activities towards implementation of the Parties’ NDCs targets for adaptation, finance and technology transfer, as well as towards other objectives of the countries or organizations involved.

In short, governments, the private sector, other non-state actors and financial organizations will provide various sources of funding for ABM through purchasing ABUs to meet their objectives and justify their investments.

  • Methodologies

It is envisaged that ABM will have its own methodologies, which can be developed bottom-up by the project participants based on the circumstances of specific projects and best available knowledge. The ABM body may make these methodologies publicly available to promote information sharing and over time to extract guidance on best practices.

  • Registration and issuance

Registration of ABM projects and issuance of ABUs and their use will be based on specifications provided by the project participants, verification reports, including on avoidance of double-counting, a letter of approval by the ABM focal point of the host country and letters of approval of the participation of the private sector entities issued by the ABM focal point of a Party to the Paris Agreement, as agreed. The approval of the countries involved is needed to secure contribution to sustainable development and that the adaptation (and mitigation) activities are in line with national adaptation planning in the host country, as well as to register and report the contributions to the implementation of NDCs and other objectives of the respected countries.

A pilot stage before 2020 with low burden requirements may help learning-by-doing.

  • Verification and accreditation

Verification and accreditation of verifiers will be done in accordance with guidelines prepared by the ABM body, taking into account the similarities and differences of adaptation and joint adaptation and mitigation activities with existing practices for mitigation activities. It should build upon existing infrastructure, experiences and good practices, as appropriate, and avoid duplication of efforts. This guidance will aim to create a simple process and lower the administrative burden for scaling-up finance and action for ABM activities to avoid exclusion of the Least Developed Countries, Small Island States, vulnerable communities, indigenous people and women. Moreover, it should aim at encouraging their participation.

It could be considered that for adaptation and joint adaptation and mitigation projects, it may not be known in advance with full certainty whether and how the project will evolve and what will be the actual results. Therefore, verification may need to be arranged differently than for mitigation activities, for instance ex-post with several checks over a longer period, while funding may need to be provided in advance. The concept of ABUs and the verification requirements should address this sensitivity.