Financing for Climate Adaptation – an Overview of Current Regimes

This report reviews the main funding mechanisms for climate adaptation/resilience programmes in developing countries. This rapid review finds that the majority of climate adaptation and resilience activities in developing countries are financed through domestic resources. However, the academic and policy literature reviewed does not reveal much about how these revenues are generated. The international public sector finance is heavily skewed towards mitigation; however, it is still an important source for climate adaptation activities. A Public Financial Management (PFM) tool that has significant potential to raise climate finance is environmental tax reforms (ETRs). ETRs are packages of policies that combine environmental taxes with tax shifts (reductions in other taxes) and expenditure policies, yet they have rarely been used in developing countries.