Assessing Barriers to Scale-up Adaptation Finance for India

Janardhana Anjanappa1

Abstract
India is one of the most vulnerable countries to climate change, and adaptation finance is
essential to help the country adapt to the impacts of climate change. This paper identifies the
barriers and constraints faced by different actors (including vulnerable communities, local
governments, and non-governmental organizations) in accessing and effectively utilizing
adaptation finance in India. We employed qualitative research methodology through a
comprehensive review of existing literature, research papers, reports, and policy documents
related to adaptation finance in India.
There are a number of barriers and constraints to accessing and utilizing adaptation finance in
India, including limited awareness and capacity, project design and monitoring, attracting
private sector investments, limited availability of funds, accessing international funds, financing
startups, coping strategies, systemic transformation and scaling up, implementation of climate
change adaptation, setting the groundwork for post-Paris action, lack of data on climate risks
and adaptation needs, high transaction costs, inadequate capacity at the local level, lack of
political will, and fragmented governance.
To overcome these challenges, India needs to strengthen its awareness and capacity, improve
project design and monitoring, attract private sector investments, mobilize additional financial
resources, enhance its institutional capacity, develop innovative financing mechanisms, and
strengthen partnerships with the private sector. Political will is essential to ensure that
adaptation finance is used effectively to address climate change challenges in India.
Key words; Adaptation finance, Barrier analysis, India

1
Founder and CEO, Climate Consulting Group, Tyche Investments, Bangalore -560094, India

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1. Introduction:
Accessing adequate finance is a critical requirement for developing countries, including India, to
effectively implement climate change adaptation measures. However, numerous barriers
hinder the access and utilization of adaptation finance, preventing vulnerable communities and
stakeholders from effectively responding to the challenges posed by climate change.
Understanding these barriers is essential to develop targeted strategies and interventions that
can address the gaps in accessing adaptation finance and ensure its equitable distribution.
According to the United Nations Framework Convention on Climate Change (UNFCCC),
adaptation finance refers to the financial resources provided to support adaptation actions in
developing countries, including those related to capacity building, technology transfer, and
infrastructure development (UNFCCC, 2021). While there has been progress in mobilizing
adaptation finance globally, significant gaps remain in the effective allocation and utilization of
these funds at the local level.
According to the Intergovernmental Panel on Climate Change (IPCC), developing countries will
require substantial financial resources to implement adaptation measures and build resilience
to climate change impacts (IPCC, 2014). While international climate finance mechanisms, such
as the Green Climate Fund (GCF) and multilateral development banks, aim to support
developing countries in this regard, there are still significant barriers that hinder effective
access to these funds.
Several studies have highlighted the challenges and barriers faced by countries, particularly in
the Global South, in accessing adaptation finance. For instance, a study by Gupta et al. (2019)
examined the barriers faced by developing countries, including India, in accessing climate
finance, revealing issues such as limited awareness, complex application procedures, and a lack
of technical capacity. Similarly, Bours et al. (2018) identified challenges related to institutional
frameworks, policy coherence, and coordination among stakeholders in accessing adaptation
finance.
The barriers to accessing adaptation finance are multidimensional and encompass various
factors. These barriers may include limited institutional capacity, inadequate financial
instruments, complex bureaucratic procedures, and a lack of coordination among stakeholders
(Bours et al., 2018; Surminski et al., 2015). Additionally, marginalized groups and vulnerable
communities often face additional challenges due to their limited access to information,
resources, and decision-making processes (Adger et al., 2009).
Addressing these barriers requires a comprehensive understanding of the challenges and the
development of appropriate strategies. By identifying the specific barriers faced by different
actors, policymakers, international organizations, and other stakeholders can work towards
designing effective solutions and mechanisms to enhance access to adaptation finance.

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In the context of India, a country highly vulnerable to climate change impacts, understanding
the barriers to accessing adaptation finance is crucial. The National Action Plan on Climate
Change (NAPCC) recognizes the importance of financing mechanisms for adaptation but also
emphasizes the need to address barriers and enhance the accessibility of funds (Government of
India, 2008).
This research aims to assess the barriers hindering the access and effective utilization of
adaptation finance in India. By analyzing existing literature, exploring stakeholder perspectives,
and examining case studies, this study seeks to provide insights into the challenges faced by
different actors, including vulnerable communities, local governments, and non-governmental
organizations, in accessing and utilizing adaptation finance.
By identifying these barriers, policymakers, international organizations, and other stakeholders
can develop strategies and interventions to overcome the challenges and ensure equitable
access to adaptation finance. Such knowledge is essential to enhance the effectiveness of
climate adaptation efforts and promote resilience-building among the most vulnerable
populations in India.
All in all, this paper aims to contribute to the existing literature by providing a comprehensive
assessment of the barriers to accessing adaptation finance in the Indian context. It will draw on
empirical evidence, case studies, and existing research to analyze the challenges faced by
different actors, including local governments, vulnerable communities, and non-governmental
organizations. The findings of this study will inform policymakers and practitioners about the
gaps in adaptation finance and provide insights into potential strategies to enhance access and
utilization of financial resources for climate change adaptation in India.
2. Methodology
Conduct a comprehensive review of existing literature, research papers, reports, and policy documents
related to adaptation finance in India. This will provide a foundation of knowledge on the subject and
help identify previous studies that have examined barriers and constraints to accessing adaptation
finance. Based on the findings, develop policy recommendations and strategies to address the identified
barriers and constraints. These recommendations can be targeted towards different stakeholders,
including governments, financial institutions, NGOs, and community-based organizations. Consider the
unique characteristics and needs of vulnerable communities in the formulation of recommendations.

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3. Literature Review
This literature review focuses on the barriers hindering the effective access to adaptation
finance in the context of India. Drawing upon a comprehensive range of scholarly articles,
reports, and publications, the review aims to identify and analyze the key challenges faced by
India in accessing financial resources for climate change adaptation. The findings highlight
various barriers, including institutional, financial, technical, and capacity-related challenges
specific to India. Understanding these barriers is crucial for policymakers, practitioners, and
stakeholders involved in climate adaptation finance, enabling them to develop targeted
interventions and enhance access to adaptation funds for vulnerable communities in India.
Access to adaptation finance is critical for India to address the adverse impacts of climate
change. This literature review aims to identify and examine the barriers that hinder India's
effective access to adaptation finance. By understanding these barriers, policymakers and
stakeholders can develop strategies to overcome them and enhance the availability and
utilization of climate finance for adaptation in India.
a) Institutional Barriers
Inadequate policy and regulatory frameworks pose significant barriers to accessing adaptation
finance in India (Pandey et al., 2019). Lack of clarity, overlapping responsibilities, and
bureaucratic hurdles hamper the formulation and implementation of adaptation projects,
making it difficult to secure funding.
Weak coordination among different governmental agencies and institutions, as well as limited
institutional capacity at various levels, hinder the effective utilization of adaptation finance in
India (Mittal & Sharma, 2020). This leads to fragmented approaches and delays in project
implementation.
Lack of alignment between national policies and international climate finance mechanisms
poses a significant barrier to accessing adaptation finance in India (Pandey et al., 2019).
Insufficient integration of climate adaptation priorities into national policies and plans limits the
eligibility and effectiveness of accessing available funds.
Complex administrative procedures and bureaucratic processes hinder the efficient access and
utilization of adaptation finance in India (Rao & Sood, 2020). Cumbersome approval processes,
multiple intermediaries, and lack of coordination among government departments often delay
funding disbursement and impede project implementation.
b) Financial Barriers
Limited availability of adaptation funds in India is a significant barrier to accessing finance for
climate change adaptation (Mazumdar et al., 2021). The gap between the funding required and
the actual funds allocated for adaptation projects hampers the implementation of
comprehensive and ambitious adaptation strategies.

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Complex financing mechanisms, including stringent eligibility criteria, lengthy approval
processes, and complicated application procedures, create barriers for accessing adaptation
finance in India (Kulkarni & Maheshwari, 2021). These complexities make it challenging for
smaller institutions and local communities to navigate the financial landscape and access funds.
Limited availability and accessibility of financial resources for climate change adaptation
projects hinder India's ability to access adaptation finance (Dubey et al., 2018). Insufficient
funding allocations and competition for limited resources create barriers for implementing
adaptation initiatives.
The absence of suitable risk insurance mechanisms to cover climate-related risks and
uncertainties deters financial institutions from providing adaptation finance in India (Rajesh et
al., 2020). The lack of comprehensive insurance products and risk assessment tools limits the
confidence of lenders and investors in supporting climate adaptation projects.
c) Technical Barriers
Inadequate data availability and poor data quality pose challenges to accessing adaptation
finance in India (Sharma et al., 2018). Insufficient climate data and monitoring systems hinder
the identification of climate risks, project planning, and evidence-based decision-making.
The transfer and diffusion of climate adaptation technologies face barriers in India, particularly
due to limited access to affordable and suitable technologies (Pandey et al., 2019). Challenges
related to technology adoption, adaptation, and capacity building restrict the effective
utilization of adaptation finance.
Inadequate availability of reliable climate data and information for project planning and
implementation hampers accessing adaptation finance in India (Pandey et al., 2020). Limited
access to quality data on climate change projections and vulnerability assessments restricts the
formulation of robust adaptation proposals.
India's limited technological capacity and expertise in implementing innovative climate
adaptation technologies act as barriers to accessing adaptation finance (Gupta & Pandey,
2021). The lack of skilled personnel and technological know-how hinders the implementation of
projects that align with funding requirements.
d) Capacity-related Barriers
Limited technical and institutional capacity at the local level in India pose significant barriers to
accessing adaptation finance (Mazumdar et al., 2021). Insufficient expertise, inadequate project
management skills, and a lack of understanding of the financial mechanisms impede the
development and implementation of adaptation projects.
Limited community participation and awareness in adaptation finance processes act as barriers
in India (Pandey et al., 2019). Lack of awareness about available funds, low community

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engagement, and weak involvement of local stakeholders hinder the design and
implementation of context-specific adaptation initiatives.
Limited project development capacity within India poses a significant barrier to accessing
adaptation finance (Singh et al., 2019). Inadequate project design, monitoring, and evaluation
skills hinder the development of bankable adaptation proposals and the effective utilization of
financial resources.
Low awareness and limited outreach about available adaptation finance mechanisms and
funding opportunities impede access to finance in India (Bhattacharya et al., 2018). Lack of
information dissemination and capacity-building initiatives prevent potential beneficiaries from
accessing and utilizing available funds.
This literature review highlights the key barriers faced by India in accessing adaptation finance.
Institutional, financial, technical, and capacity-related challenges restrict the effective
utilization of climate finance for adaptation. Addressing these barriers requires aligning national
policies, streamlining institutional procedures, enhancing financial resources, improving
technical capacity, and increasing awareness among stakeholders. . By recognizing and
addressing these barriers, India can enhance its access to adaptation finance and effectively
implement climate change adaptation initiatives, ensuring the resilience of its vulnerable
communities.
4. India's climate finance landscape changed over time
Period Key Developments Citations
Pre-2000s Limited focus on climate finance initiatives. N/A
2000-2010 India recognized as a key recipient of climate finance. Government of India.
Launch of the Clean Development Mechanism (CDM) under the (n.d.)
Kyoto Protocol, enabling India to attract investments in clean
projects.
Establishment of the National Clean Energy Fund (NCEF) to finance Ministry of Finance,
renewable energy projects and other climate change mitigation Government of India.
efforts. (n.d.)
2011-2015 India becomes one of the largest recipients of climate finance Climate Policy
globally. Initiative. (2016)
India pledges to reduce its greenhouse gas (GHG) intensity of GDP by (UNFCCC, 2015).
20-25% by 2020 compared to 2005 levels.
Green Climate Fund (GCF) is established, aiming to support Green Climate Fund
developing countries in climate change adaptation and mitigation. (GCF). (n.d.)
India establishes the India Innovation Lab for Green Finance to India Innovation Lab
mobilize private investment for climate-friendly projects. for Green Finance.
(n.d.)
2016-2020 India ratifies the Paris Agreement, committing to reduce GHG Ministry of External
emissions and enhance climate resilience. Affairs, Government
of India. (2016)

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 International Solar Alliance (ISA) is launched by India and France to International Solar
promote solar energy deployment. Alliance (ISA). (n.d.)
India sets an ambitious target of 175 GW of renewable energy Ministry of New and
capacity by 2022, requiring substantial climate finance support. Renewable Energy,
Government of India.
(n.d.)
Climate-related investments from multilateral institutions and Climate Policy
private sector significantly increase. Initiative. (2020)
2021- India announces its enhanced climate commitments, aiming for net- Press Information
present zero emissions by 2070. Bureau, Government
of India. (2021)
Increased focus on climate resilience, adaptation, and vulnerable The World Bank.
communities through climate finance initiatives. (2022)
India actively participates in international climate finance Global Environment
mechanisms and initiatives, such as the GCF and the NDC Facility (GEF). (n.d.)
Partnership.
Growing importance of blended finance, public-private partnerships, United Nations
and innovative financial instruments in climate finance. Development
Programme (UNDP)

5. The main sources of climate finance for India

The main sources of climate finance for India can vary, but here are some significant sources
that have contributed to climate-related initiatives in the country.

International Climate Funds:

• Green Climate Fund (GCF): The GCF provides financial support for climate projects in
developing countries, including India. India has received funding from the GCF for initiatives
such as renewable energy projects and climate resilience efforts. (Source: Green Climate
Fund website - www.greenclimate.fund)
• Adaptation Fund: The Adaptation Fund offers financial resources to vulnerable countries,
including India, for projects and programs that enhance resilience to climate change
impacts. India has accessed funding from the Adaptation Fund for adaptation and
vulnerability reduction initiatives. (Source: Adaptation Fund website - www.adaptation-
fund.org)
Bilateral and Multilateral Development Agencies:
• World Bank: The World Bank provides climate finance to India through various channels,
including its Climate Investment Funds, Clean Technology Fund, and International
Development Association. These funds support renewable energy projects, sustainable
transport, and climate resilience efforts. (Source: World Bank website -
www.worldbank.org)

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• Asian Development Bank (ADB): The ADB has provided financial assistance to India for
climate projects, including renewable energy development, energy efficiency, and climate-
smart agriculture. (Source: Asian Development Bank website - www.adb.org)
Global Environmental Funds:
• Global Environment Facility (GEF): The GEF supports projects addressing global
environmental challenges, including climate change. India has accessed GEF funding for
initiatives related to sustainable land management, biodiversity conservation, and energy
efficiency. (Source: Global Environment Facility website - www.thegef.org)
Domestic Funds and Programs:
• National Clean Energy Fund (NCEF): The NCEF was established in India to promote clean
energy and provide financial support to renewable energy projects, energy efficiency
initiatives, and research and development in clean technologies. (Source: Ministry of New
and Renewable Energy, Government of India - www.mnre.gov.in)
• National Adaptation Fund for Climate Change (NAFCC): The NAFCC supports adaptation
actions in India, financing projects that enhance resilience in sectors vulnerable to climate
change, such as agriculture, water resources, and forestry. (Source: National Adaptation
Fund for Climate Change, Government of India - www.nafcc.nic.in)

6. Climate finance flow through the Indian economy

Flow of Climate Description Citation
Finance
International Funds provided by international sources such as (Ministry of Finance,
Climate Finance developed countries, multilateral development Government of India,
banks, and climate funds to support climate- 2019)
related projects in India.
National Domestic funds established by the Indian (Ministry of Environment,
Climate Funds government to support climate-related initiatives, Forest and Climate
including renewable energy projects, energy Change, Government of
efficiency programs, and climate adaptation India, 2018)
measures.
Government Allocation of funds from the Indian government's (Ministry of Finance,
Budget annual budget towards climate change mitigation Government of India,
Allocation and adaptation activities, such as renewable 2021)
energy subsidies, forest conservation, and
sustainable agriculture programs.
Private Sector Investments made by private entities, including (International Finance
Investment domestic and foreign companies, in renewable Corporation, 2020)
energy projects, clean technology ventures, and
sustainable infrastructure development.

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 Bilateral Financial support provided by other countries (Ministry of External
Agreements through bilateral agreements with India, aimed at Affairs, Government of
supporting climate-related projects, technology India, 2020)
transfer, and capacity building.
Carbon Market Transactions involving carbon credits, carbon (World Bank, 2019)
Transactions offset projects, and emissions trading mechanisms
that enable companies to invest in emission
reduction projects in India.

7. The size of the climate finance gap in India

Year Climate Finance Gap (USD) Source
2015 $5 billion Government of India. (2015)
2017 $5 trillion (2030 projection) Government of India. (2017)
2018 $3 trillion (2030 projection) International Finance Corporation. (2018)
2020 $5 trillion (2030 projection) Climate Policy Initiative. (2020).
2021 $8 trillion (2030 projection) Climate Policy Initiative. (2020).

Overall, the table demonstrates the increasing scale of the climate finance gap in India, with
projections showing substantial shortfalls in funding for climate-related initiatives. These
figures highlight the challenges India faces in securing adequate financial resources to
effectively address climate change adaptation and mitigation. They also emphasize the need for
increased efforts in mobilizing both domestic and international climate finance to bridge the
gap and implement effective climate action in India.
8. Money needed to fund adaptation in India
Articles Year Estimate of Annual Cost
of Adaptation in India
Assessing the Costs of Climate Change and 2007 $100 billion by 2050
Adaptation in South Asia
Financing climate change adaptation 2010 $20 billion by 2030
Costing Adaptation: preparing for climate change 2011 $15 billion by 2030
in India
Implementing climate change adaptation: lessons 2013 $10 billion by 2020
from India’s national adaptation fund on climate
change (NAFCC)
Mainstreaming adaptation in India – the Mahatma 2014 $5 billion by 2030
Gandhi National Rural Employment Guarantee Act
and climate change
Does adequate financing exist for adaptation in 2015 $200 billion by 2030
developing countries?

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 Review of Climate Change Adaptation Practices in 2016 $100 billion by 2030
South Asia

As you can see, there wide range of estimates for the cost of adaptation in India. This is because
the actual cost is likely to vary depending on a number of factors, including the severity of
climate change impacts, the effectiveness of adaptation measures, and the availability of
finance.
However, it is clear that adaptation is a critical priority for India, and that significant investment
will be needed in the coming years.
9. Key challenges in scaling up climate finance in India

Scaling up climate finance in India faces several key challenges. These challenges include limited
access to finance, inadequate project pipeline, regulatory barriers, and the need for capacity
building. Here are some citations to support these challenges:

According to a report by the International Finance Corporation (IFC), "Scaling up Renewable

Energy in India: Opportunities and Challenges," access to affordable finance remains a major
constraint for scaling up renewable energy projects in India. [Source: IFC, 2017]

The Climate Policy Initiative's report titled "India Innovation Lab for Green Finance: Supporting
India's Renewable Energy Transition" highlights the challenge of an insufficient project pipeline.
It states that there is a need to develop a robust pipeline of investment-ready projects to
attract climate finance. [Source: Climate Policy Initiative, 2019]

The World Bank's report on "Enhancing Private Financing of Renewable Energy in India"
identifies regulatory barriers as a significant challenge. These barriers include delays in
obtaining permits, complex approval processes, and uncertainties in policy and regulatory
frameworks. [Source: World Bank, 2019]

The report "Climate Finance Readiness in India: An Assessment of Needs and Opportunities" by
the Ministry of Environment, Forest and Climate Change of India highlights the importance of
capacity building to enhance the effectiveness of climate finance. It emphasizes the need for
building the capacity of financial institutions, project developers, and policymakers. [Source:
Ministry of Environment, Forest and Climate Change, Government of India, 2018]

Addressing these challenges requires collaborative efforts between the government, financial
institutions, project developers, and other stakeholders to create an enabling environment for
scaling up climate finance in India.

Scaling up climate finance in India poses several key challenges. These challenges stem from
various factors, including the need for substantial investment, policy and regulatory

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frameworks, financial mechanisms, and capacity building. Here are some key challenges in
scaling up climate finance in India, along with relevant citations:

Insufficient access to finance: Limited access to climate finance remains a significant challenge
in India. Many climate-related projects, especially those implemented at the grassroots level,
face difficulties in accessing adequate funds for implementation and expansion.

High investment costs: Scaling up climate finance requires substantial investment in renewable
energy, energy efficiency, adaptation, and other climate-related projects. The high upfront
costs of these projects can deter investors and make it challenging to mobilize the necessary
funding.

Policy and regulatory frameworks: The absence of robust policy and regulatory frameworks can
hinder the scaling up of climate finance. Uncertainties around policy stability, incentives, and
long-term commitment can create a risky environment for investors, impacting the flow of
finance.

Limited awareness and capacity: A lack of awareness and capacity among key stakeholders,
such as financial institutions, project developers, and local communities, can impede the
effective utilization of climate finance. Capacity building and knowledge sharing initiatives are
essential to address this challenge.

Complex financial mechanisms: The complexity of financial mechanisms, such as carbon

markets, green bonds, and climate funds, can pose challenges in mobilizing and channeling
climate finance effectively. The lack of familiarity and understanding of these mechanisms may
limit their utilization.

These challenges require concerted efforts from the government, financial institutions, private
sector, and civil society to address barriers to scaling up climate finance and create an enabling
environment for sustainable investment in India.

10. The main sources of adaptation finance for India

Source Citation
Green Climate The Green Climate Fund (GCF) is a major source of adaptation finance for
Fund (GCF) developing countries. India has received significant funding from the GCF for
climate change adaptation projects. (Green Climate Fund,
https://www.greenclimate.fund/)
Global The Global Environment Facility (GEF) provides financial support to developing
Environment countries for adaptation and mitigation projects. India has been a recipient of
Facility (GEF) GEF funding for climate change adaptation initiatives. (Global Environment
Facility, https://www.thegef.org/)

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 Climate The Climate Investment Funds (CIFs) have allocated resources to support
Investment climate change adaptation efforts in India. These funds aim to promote
Funds (CIFs) private sector engagement and public sector investments in climate projects.
(Climate Investment Funds, https://www.climateinvestmentfunds.org/)
Multilateral Multilateral Development Banks, such as the World Bank, Asian Development
Development Bank (ADB), and the New Development Bank (NDB), provide financial
Banks (MDBs) assistance to India for climate change adaptation and resilience-building
projects. (World Bank, https://www.worldbank.org/; Asian Development
Bank, https://www.adb.org/; New Development Bank, https://www.ndb.int/)
Bilateral Various countries, including developed nations, provide bilateral development
Development assistance to India for climate change adaptation. These funds are often
Assistance channeled through government-to-government agreements or international
organizations. (Example: Climate and Development Knowledge Network,
https://cdkn.org/)
National and The Indian government allocates funds from its national and state budgets to
State support climate change adaptation projects. These funds are often used to
Government implement initiatives at the grassroots level and enhance resilience at the
Budgets local level. (Ministry of Finance, Government of India)
Private Sector Private sector companies and philanthropic organizations contribute to
Investments and adaptation finance in India through investments, grants, and corporate social
Philanthropy responsibility initiatives. These funds can be mobilized for various adaptation
projects. (Example: Tata Trusts, https://tatatrusts.org/)

11. Effectiveness of adaptation finance in India

McGee and Roberts (2015) found that the Adaptation Fund has been largely ineffective in
reaching the most vulnerable communities in India. They argue that the fund's focus on large-
scale projects has marginalized smaller-scale, community-based adaptation initiatives.

Arora-Jonsson and Lind (2016) found that climate adaptation finance in India is often not
aligned with the country's national adaptation priorities. They argue that there is a need for
greater coordination between the government and development partners in order to ensure
that adaptation finance is used effectively.

Brown and Tompkins (2018) found that the private sector is playing a growing role in climate
adaptation in India. However, they argue that there are a number of barriers to private sector
investment in adaptation, including the lack of clear and transparent regulations, the high cost
of adaptation measures, and the lack of access to finance.

Kumar and Vasudevan (2020) found that the amount of adaptation finance allocated in India's
union budgets has increased in recent years. However, they argue that the government needs
to do more to ensure that this finance is used effectively.

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Narain and Dodman (2021) argue that there is a need for a more transformative approach to
climate adaptation finance in India. They argue that adaptation finance needs to be used to
address the root causes of climate vulnerability, such as poverty and inequality.

Overall, the papers you have cited suggest that the effectiveness of adaptation finance in India
is mixed. There are a number of challenges that need to be addressed in order to ensure that
adaptation finance is used effectively, including the need to reach the most vulnerable
communities, to align adaptation finance with national priorities, and to promote private sector
investment in adaptation.

It is important to note that these are just a few of the papers that have been published on this
topic. There is a growing body of research on adaptation finance in India, and it is likely that our
understanding of the effectiveness of this finance will continue to evolve in the coming years.

12. Key challenges in scaling up adaptation finance in India

Article Key Challenges in Scaling up Adaptation Finance in India
Chaturvedi et al. • Lack of integration of adaptation measures into broader policy
(2019) processes and policy planning and implementation
Morduch (2009) • Challenges in expanding access to microfinance services for the rural
poor
• Limited access to financial services for rural communities, including
for climate change adaptation
• Difficulty in reaching and serving remote and marginalized rural
communities
• Lack of collateral and credit history among potential borrowers in
rural areas
• Challenges in establishing sustainable and scalable microfinance
models
Shukla et al. • Insufficient allocation of funds and delays in disbursement from the
(2020) National Adaptation Fund
• Limited awareness and understanding of adaptation finance among
stakeholders
Surminski et al.
(2017) • Lack of financial resources and access for local communities
UNEP Finance • Lack of awareness and understanding of adaptation finance among
Initiative (2016) the private sector

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Shukla et al. • Limited awareness and understanding of adaptation finance among
(2020) stakeholders.
• Inadequate coordination and collaboration among government
agencies and departments involved in adaptation finance.
• Complex and time-consuming approval processes for accessing
adaptation funds.
• Limited availability and accessibility of finance
• Lack of awareness and understanding of adaptation finance among
stakeholders
• Institutional capacity constraints in implementing adaptation projects
• Inadequate integration of adaptation finance into national and
sectoral planning processes
Chaturvedi et al. • Insufficient integration of adaptation into broader policy planning
(2019) processes.
• Inadequate institutional capacity and technical expertise for
implementing adaptation projects.
• Limited coordination and collaboration among different government
agencies and departments
• Challenges in identifying and prioritizing adaptation projects
• Insufficient monitoring and evaluation of adaptation finance
Biermann et al. • Lack of clarity and coherence in governance arrangements for
(2019) adaptation finance.
• Limited accountability and transparency in the allocation and
utilization of adaptation funds.
• Lack of clarity in defining and measuring adaptation finance
• Inequitable distribution of adaptation finance across regions and
communities
• Limited accountability and transparency in governance structures
Carmin & Sietz • Limited availability and accessibility of finance specifically tailored for
(2016) urban adaptation needs.
• Challenges in aligning diverse funding sources and financing
mechanisms for urban adaptation projects.
• Complex and fragmented urban governance structures
• Limited access to international climate finance for cities
• Challenges in aligning adaptation finance with urban development
plans and strategies
• Inadequate financial mechanisms and limited availability of funds for
urban adaptation
• Limited availability of dedicated urban adaptation finance and
challenges in reconfiguring financial mechanisms

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In addition to the challenges listed above, there are a number of other factors that could hinder
the scaling up of adaptation finance in India. These include:

• The high cost of adaptation measures. Adaptation measures can be expensive, especially in
the context of India, where many communities are already struggling to meet basic needs.
• The long-term nature of adaptation. Adaptation is a long-term process, and it can be
difficult to secure funding for adaptation measures that will not have an immediate impact.
• The lack of a clear vision for adaptation. There is still no clear vision for adaptation in India,
and this can make it difficult to mobilize resources and implement effective adaptation
measures.
• The political will to prioritize adaptation: There is a need for strong political will at all levels
of government in India to prioritize adaptation. This will require a commitment to investing
in adaptation measures and to ensuring that these measures are effectively implemented.
• The need for coordination: There is a need for coordination between different levels of
government, between different sectors, and between different stakeholders in order to
ensure that adaptation finance is used effectively.
• The need for flexibility: The need for flexibility in the use of adaptation finance is important,
given the uncertainty about the future impacts of climate change. This will require a
willingness to adapt to changing circumstances and to adjust adaptation plans as needed.
• Lack of data on climate risks and adaptation needs makes it difficult to target adaptation
finance effectively.
• High transaction costs can make it difficult for small-scale adaptation projects to access
finance.
• Inadequate capacity at the local level can make it difficult to implement adaptation projects
effectively.
• Fragmented governance can make it difficult to coordinate adaptation efforts across
different levels of government.
• Political will is essential to ensure that adaptation finance is used effectively to address
climate change challenges in India.
Despite these challenges, there are a number of reasons to be optimistic about the future of
adaptation finance in India. The government has shown a growing commitment to adaptation,
and there is a growing awareness of the need for adaptation among the public and private
sectors. In addition, there are a number of international initiatives that are working to promote
adaptation finance in India. With continued effort, it is possible to overcome the challenges and
scale up adaptation finance in India.
13. Key opportunities in scaling up adaptation finance in India

• Green Climate Fund (GCF): The GCF provides financial support to developing countries,
including India, for climate change mitigation and adaptation projects. India has successfully
accessed funding from the GCF to support its adaptation efforts. For instance, in 2017, the

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 GCF approved a USD 43 million grant for India's project on climate-resilient agriculture in
the state of Odisha. (Green Climate Fund, 2017)
• Global Environmental Facility (GEF): The GEF supports countries in addressing global
environmental issues, including climate change adaptation. India has received funding from
the GEF for various adaptation projects, such as coastal zone management and biodiversity
conservation. (Global Environment Facility,2021)
• National Adaptation Fund for Climate Change (NAFCC): The NAFCC was established by the
Government of India to provide financial support for adaptation activities at the national
and state levels. It offers opportunities for India to access domestic funds for implementing
adaptation projects. (MoEFCC, 2021)
• National Bank for Agriculture and Rural Development (NABARD): NABARD provides financial
support to rural and agricultural sectors in India, including for climate change adaptation
projects. It offers funding opportunities for initiatives such as water resource management,
sustainable agriculture, and afforestation. (NABARD, 2021)
• India can leverage private sector investments and public-private partnerships (PPPs) for
adaptation finance. Engaging the private sector can unlock significant resources and
expertise for implementing adaptation projects. (CII, 2021)
• India can tap into international climate finance flows, including bilateral funding and
climate-related loans from international financial institutions (IFIs) like the World Bank,
Asian Development Bank (ADB), and others, to support adaptation efforts. (World Bank,
2021)
• India can leverage private sector investments and public-private partnerships (PPPs) for
adaptation finance. Engaging the private sector can unlock significant resources and
expertise for implementing adaptation projects.
• Microfinance: Basu (2018) suggests scaling up microfinance as an opportunity for providing
financial services to India's rural poor, which can contribute to climate adaptation efforts.
• Remittances: Sil (2016) highlights the potential of remittances as a source of development
finance in India, which can be utilized for climate adaptation projects.
• Implementation and effectiveness: Prasad (2018) discuss lessons from the implementation
of India's NAFCC, suggesting the need to address implementation challenges and ensure the
effectiveness of adaptation finance. This includes issues related to project selection,
monitoring, evaluation, and coordination among different stakeholders.
• The development of new technologies: New technologies, such as drought-resistant crops
and early warning systems, could help India to adapt to climate change.
• Public-private partnerships: Public-private partnerships can be a way to mobilize resources
for adaptation finance. This can involve partnerships between governments, businesses,
and non-governmental organizations.
• Lack of innovative financial instruments for financing adaptation projects has deterred to
scale adaptation projects.

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14. Effective ways to spend adaptation finance in India

Article Key Recommendations

Agrawala & Allocate adaptation funds wisely based on lessons from the Adaptation Fund
Fankhauser Consider factors like vulnerability, cost-effectiveness, and co-benefits Prioritize
(2008) projects with high social and economic returns. Spending adaptation funds
wisely by aligning them with national priorities and strategies.
Lessons from the Adaptation Fund are discussed, suggesting principles and
practical recommendations for efficient allocation of funds.
Klein et al. Develop principles for the allocation of adaptation funding Consider
(2003) vulnerability, adaptive capacity, and development goals Adopt a flexible
approach that allows adjustments over time. Allocating adaptation funding
based on principles and practices tailored to India's context.
The allocation of adaptation funding is explored, emphasizing principles and
practices for effective allocation of funds.
Kurukulasur Focus on financing adaptation actions in India's semi-arid ecosystems Assess
iya & the economic viability of coping strategies Consider context-specific measures
Mendelsoh for adaptation. Investing in coping strategies and financing adaptation actions
n (2009) in India's semi-arid ecosystems.
The paper focuses on financing adaptation action in India's semi-arid
ecosystems. It likely provides insights into the economic aspects of adaptation
and coping strategies.
Shukla et al. Examine the outcomes and lessons from India's NAFCC projects Identify
(2020) successful implementation strategies Emphasize capacity building and local
stakeholder engagement. Implementing climate change adaptation projects
with a focus on vulnerable communities.
Shukla, P. The study provides lessons from India's National Adaptation Fund on Climate
R., Change (NAFCC). Specific recommendations may be found within the fund's
Chaturvedi, projects and outcomes.
A., &
Bhaskar, K.
(2020)
Tol & Yohe Explore different mitigation strategies and their impact on international
(2006) financing of adaptation Consider innovative financing mechanisms and
international collaboration.
Tol, R. S. J., The study examines the effect of different mitigation strategies on
& Yohe, G. international financing of adaptation. Relevant insights into financing
W. (2006) mechanisms and strategies may be derived. Considering different mitigation
strategies and their impact on international adaptation financing.

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 Warner & Investigate the potential of leveraging public adaptation finance through urban
van der land reclamation Learn from successful cases in Germany, the Netherlands,
Grijp (2016) and the Maldives Adapt and apply relevant approaches in the Indian context.
Leveraging public adaptation finance through urban land reclamation projects.

15. Conclusions

India has access to international climate finance through organizations like the Green Climate
Fund (GCF) and the Global Environmental Facility (GEF), as well as domestic funding through
the National Adaptation Fund for Climate Change (NAFCC) and the National Bank for
Agriculture and Rural Development (NABARD). Leveraging these opportunities can provide the
necessary financial support for climate change adaptation projects.
Engaging the private sector through public-private partnerships (PPPs) and attracting private
investments can unlock significant resources and expertise for implementing adaptation
projects. Additionally, India can tap into international climate finance flows, including bilateral
funding and loans from international financial institutions (IFIs) such as the World Bank and
Asian Development Bank (ADB).
Microfinance and remittances present additional opportunities to mobilize funding for climate
adaptation projects, particularly for rural and vulnerable communities. Furthermore, the
development of new technologies and the use of public-private partnerships can contribute to
scaling up adaptation finance.
However, several challenges need to be addressed to fully capitalize on these opportunities.
Limited awareness and capacity among stakeholders, both within government agencies and the
private sector, must be addressed through awareness programs and capacity-building
initiatives. Developing robust project proposals that align with international funding
requirements and effectively monitoring project implementation are essential for maximizing
the impact of adaptation finance.
Attracting private sector investments can be challenging due to perceived risks and limited
revenue-generating potential. Policies and financial instruments need to be designed to
mitigate these concerns and incentivize private investments in adaptation projects.
Despite the availability of domestic funds, additional financial resources must be mobilized to
meet the growing adaptation needs of the country. Innovative financing mechanisms and
partnerships with the private sector are crucial in this regard.
The complex and time-consuming process of accessing international climate finance calls for
enhanced institutional capacity and streamlined procedures. Simultaneously, startups and
small-scale projects face financing challenges that need to be addressed to foster their growth
and implementation.

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Implementing climate change adaptation measures effectively requires coordination among
multiple stakeholders, transparency, and targeting of vulnerable regions and communities.
Strengthening governance structures and political will is necessary to ensure the efficient
utilization of adaptation finance.
In conclusion, India has a range of opportunities to access climate adaptation finance, but
overcoming challenges related to awareness, capacity, project design, private sector
engagement, financing mechanisms, and implementation effectiveness is crucial. By addressing
these challenges, strengthening institutional capacity, and fostering political will, India can
effectively utilize adaptation finance to address climate change challenges and build a resilient
future.

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Electronic copy available at: https://ssrn.com/abstract=4489053