Final answer:
The source of energy used to increase the caterpillar's potential energy as it climbs is gravitational potential energy.
Step-by-step explanation:
As the caterpillar climbs, its potential energy is increasing. The source of energy used to effect this change in potential energy is gravitational potential energy. Gravitational potential energy is the stored energy an object has due to its height and the force of gravity. As the caterpillar climbs higher, it gains more gravitational potential energy.