Financing adaptation to climate change is one of the most challenging aspects of the Copenhagen agenda. Current negotiations are focused primarily on the overarching financial architecture and how to raise international finance, but this runs the risk of losing track of the core aspects of adaptation. This Background Note offers a critique of the ways in which the financial architecture to support adaptation is taking shape in international negotiations, and identifies important issues that need to be taken into account when designing this new architecture.

First, we define ‘adaptation’, paying particular attention to the concept of ‘additional’ and ‘incremental’ costs’. We then examine the three main components of climate change finance:
• Funding sources, and their operational implications, in relation to both public and private  sectors;
• Institutional arrangements – the financial mechanism to generate and manage climate change funds;
• Delivery mechanisms on the ground, through programmes and projects.

Finally, we assess the likely effectiveness of the options that are currently on the table for the activities in question.