Adaptation finance refers to the transfer of funds, including mobilization of new finance, by the North to support activities in the South construed as climate change adaptation, on the basis of equity principles politically negotiated and adopted under the United Nations Framework Convention on Climate Change (UNFCCC). As such, adaptation finance serves not only an instrumental and practical purpose in financing concrete adaptation activities or investments, but also a legitimacy and credibility purpose, which is of critical importance to the success of the climate regime at large. This chapter discusses how these dual purposes – the practical and the political – create some challenges specific to international adaptation finance. First, we describe the evolution of adaptation finance and identify recent trends with regards to its definition, the gap between funds made available so far and estimated needs, current spending patterns, and institutions and instruments involved in its delivery. In the following section, we discuss three key challenges facing adaptation finance: the ambiguous relationship between adaptation and development finance, issues around ownership and accountability of adaptation finance, and problems of monitoring and evaluating effectiveness of adaptation projects. Finally, we provide some concluding remarks and areas for further research.
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