Adaptation Finance Research Articles

Sovereign insurance to incentivize the shift from disaster response to adaptation to climate change – African Risk Capacity's Extreme Climate Facility

In order to meet the costs of adaptation, additional funds will be required, including private finance. Sovereign insurance is currently used as a contingency for disaster response but, as yet, has not been harnessed to finance a shift to longer term adaptation. In addition to its existing disaster contingency products, African Risk Capacity has designed a new sovereign insurance product – the Extreme Climate Facility – that intends to complement existing bilateral, multilateral and private sources of finance that enable proactive adaptation by leveraging private sector funds through the market. In this viewpoint, we argue that the Extreme Climate Facility contributes to the adaptation financing gap while also being innovative in incentivizing disaster risk reduction and adaptation interventions.

Mobilizing private finance for coastal adaptation: A literature review

Coastal adaptation can reduce climate change impacts and investing now, though costly, will bring greater benefits over the longer term, particularly in urban areas. Yet public actors currently cover a small fraction of needed coastal adaptation investments, a finance gap set to widen as coastal adaptation costs continue to increase. Mobilizing private finance for coastal adaptation is thus a salient challenge, as emphasized in the Paris Agreement. Key under‐researched dimensions of this challenge are what promotes private investment in coastal adaptation and how can public actors’ interest in adaptation be aligned with private investor interests. To address this, we review the literatures on coastal adaptation finance and on financial arrangements involving both public actors and private investors. We describe key actors and interests, and identify coastal financial arrangements that align public actor and private investor interests, finding that private provisioning, public–private Partnerships (PPP), and public debt arrangements are promising. We then survey empirical examples, finding that private provisioning attracts investment when returns are high, for example, in urban real estate, and that PPPs attract dredging and construction companies’ investment, particularly for adaptation measures with a large share of operational costs, for example, beach nourishment. We find little evidence of institutional investment through public debt instruments. A number of policy instruments, for example, concessional loans, tax incentives, and standards, may address this gap and enhance private coastal adaptation investment. Our results are also relevant for other sectors that involve long‐term infrastructure adaptation measures.This article is categorized under:Climate Economics > Iterative Risk‐Management Policy PortfoliosVulnerability and Adaptation to Climate Change > Learning from Cases and Analogies

Optimal adaptation in cities

Due to their vulnerability and their special role as being a center of economic activities cities are particularly important in the context of adaptation to adverse events derogating land quality, e.g. resulting from long-term climate change. This paper analyzes economic efficiency of public investments in adaptation within a spatial general equilibrium framework that focuses on the level of cities. We provide a theoretical analysis that highlights the fundamental forces determining efficient public investment in urban adaptation. We further extend the approach to a spatial computable general equilibrium model thereby identifying optimal urban adaptation investment strategies. Our analyses suggest that full adaptation can be an inefficient strategy even in urban areas due to a wide range of direct and indirect spatial general equilibrium effects. Setting investments optimally only reduces a small fraction of the welfare loss of non-adaptation. The findings are robust with respect to assumptions on the marginal returns of adaptation, the degree of possible relocation as a response to an adverse event (intra-urban relocation and inter-urban migration), and the funding scheme applied to finance adaptation (land tax vs. labor tax). Interestingly, adverse urban effects of adaptation could make non-adaptation more efficient than full adaptation. However, if adaptation measures like building dikes or even relocating cities are available and sufficiently productive, full adaptation could become an efficient policy option being able to offset a large fraction of the potential welfare loss of extreme events. Distributional effects of urban adaptation investment (absentee landowners vs. urban renters) as well as a misleading orientation of policymakers to maximize urban GDP rather than social welfare can result in overinvestment in urban adaptation.

Investing in resilience today to prepare for tomorrow’s climate change

ABSTRACTEven as we redouble our efforts to cut greenhouse emissions, we must build resilience against the current and future impacts of climate change. The economic argument for investment in resilience has been well-established, and while financial resources have started flowing to this end, the latest studies suggest that the world is underinvesting in resilience by at least 70 percent. In addition, resources may not be going where they can best protect those who are disproportionately affected by climate-related shocks. While new sources and larger volumes of finance for adaptation are mobilized, decision-makers – particularly in developing countries – would be well advised to add to their toolkit insurance-linked social safety nets, better resilience metrics, and system-of-systems vulnerability assessments to get more bang for their scarce resilience bucks.

Mainstreaming climate change into local governance: financing and budgetary compliance in selected local governments in Ghana

ABSTRACTThrough an interpretive research paradigm, we investigated the extent to which six local governments across three administrative regions of Ghana have complied with mandated climate change financing and budgeting guidelines. Five interesting findings emerged. First, there is enormous evidence of climate change budgeting compliance across all six local governments despite weak compliance incentives. Second, local governments that are most vulnerable to the impacts of climate change are more willing to comply and also allocate more resources for adaptation-related activities than those that are less vulnerable. Third, local governments that complied least are likely to take ad hoc adaptation actions which are often uncoordinated and poorly monitored. These local governments are least likely to attract auxiliary funds that could provide additional resources for adaptation financing. Lastly, the evidence of compliance is only quantitative, presented in various local governments’ fiscal documents, with no qualitative or other relevant explanatory factors on the extent of impact on adaptation.

The Great Lapse: Climate Change, Water Resources and Economic Risks in the Great Lakes

The striking vastness of the world’s largest surface freshwater resource, the Laurentian Great Lakes, has generated the fallacy that they are not highly vulnerable to climate change. This fallacy has created a great lapse in our research and understanding of the effects of climate change on the Great Lakes, which are approaching critical environmental thresholds and jeopardizing ecosystem services. This article takes the novel approach of correcting the disconnect between the perception of vastness and the reality of vulnerability to climate change in the Great Lakes, and takes an additional novel step to link the water risks with the economic risks. The primary purpose is to demonstrate the interdependence of the freshwater ecosystem services affected by climate change with the economies that are highly dependent on those freshwater services in the Great Lakes region. Although many believe that environmental science or ethical arguments should be sufficient to warrant action on climate change, evidence shows that policy-makers are not compelled to generate advances unless there are strong economic components. This article highlights the leading edge of climate science for the Great Lakes, having conducted 32 in depth interviews with experts in microbiology, ecology, and limnology, among others, but it also adds substantively to previous work by providing economic evidence of water risks in the agricultural sector and energy sector, which constitute over $6 trillion in value and jobs that are specifically dependent on lakes waters. The article concludes by articulating three specific conclusions: the economic viability of the agricultural sector and the energy sector are jeopardized by loss of federal funding for climate change adaptation in the water sector; the existing policies such as between sectors such as the Farm Bill and Energy Future Bill are mal-aligned and should be aligned with the water sector; and negative environmental externalities including factors that exacerbate climate change should be incorporated into the true cost of water so we can more accurately conduct ecosystem valuation and, thus, address the true economic and environmental cost of climate change on the Great Lakes and our greatest water resources. This paper has not previously been published.

The Role Of The Adaptation Fund In The International Climate Change Adaptation Finance:, Analytical Review On Resources, Funding, And Decisions (2009-2017)

The Role Of The Adaptation Fund In The International Climate Change Adaptation Finance:, Analytical Review On Resources, Funding, And Decisions (2009-2017)

Using climate finance to advance climate justice: the politics and practice of channelling resources to the local level

ABSTRACTAdaptation finance is primarily allocated to multilateral entities and national governments, rather than local organizations. This means that the social, political and economic processes that create and sustain inequalities within a country will be the same processes that determine how adaptation finance is used. Using an urban lens, we consider the obstacles currently faced by local governments and local civil society groups in accessing adaptation finance, and show that these are a function of systemic power imbalances between levels of government, and between government and vulnerable communities. We argue that even relatively small amounts of adaptation finance could have a catalytic effect on the capacities and impacts of local organizations, contributing to greater levels of both distributive and procedural justice. We analyse different financial intermediaries and planning systems that could be used to make disbursements from multilateral climate funds fairer and more effective. This could potentially create political opportunities both to respond to direct climate threats and to address underlying drivers of vulnerability, such as marginalization and exclusion. In this way, channelling adaptation finance to the local level could deliver more just processes and outcomes.Key policy insightsMore multilateral climate funds should establish direct access modalities, and introduce ‘fit-for-purpose’ accreditation procedures and approval processes. Those that have already established such enabling frameworks should prioritize providing readiness support to local organizations, and incentivize state and citizen collaboration in adaptation projects.National governments should consider clearly enshrining the rights and responsibilities of local authorities in National Adaptation Plans, and help them to collect the information, build the capacities and acquire the resources needed to plan and implement adaptation measures. National governments should further encourage local authorities to adopt participatory planning, budgeting, monitoring and evaluation procedures to encourage citizen participation.Local civil society groups should identify or establish collective entities that can seek accreditation with multilateral funds and then disburse money to their members. Collaboration between groups can facilitate up-scaling through replication (particularly where peer-to-peer learning is embedded in the network) and reduce the transaction costs associated with myriad small projects.

Adaptation to Climate Change

This article reviews the economic and analytical challenges of adaptation to climate change. Adaptation to climate risks that can no longer be avoided is an important aspect of the global response to climate change. Humans have always adapted to changing climatic conditions, and there is growing, if still patchy, evidence of widespread adaptation behavior. However, adaptation is not autonomous as sometimes claimed. It requires knowledge, planning, coordination, and foresight. There are important knowledge gaps, behavioral barriers, and market failures that hold back effective adaptation and require policy intervention. We identify the most urgent adaptation priorities, including areas where delay might lock in future vulnerability, and outline the decision-making challenges of adapting to an unknown future climate. We also highlight the strong interlinkages between adaptation and economic development, pointing out that decisions on industrial strategy, urban planning, and infrastructure investment all have a strong bearing on future vulnerability to climate change. We review the implications of these links for adaptation finance and what the literature tells us about the balance between adaptation and mitigation.

Post-Paris / Post-Trump: The Green Climate Fund and Climate Finance Governance in the Eye of the Storm

The Green Climate Fund (GCF), established in 2010, is a significant and potentially innovative addition to the frameworks in place under the UN Climate Convention to mobilise finance for climate change mitigation and adaptation. In addition to its challenges of operationalisation as a new international fund, the GCF confronts further difficulties as a result of US President Donald Trump's June announcement that the United States would renege on its pledged contributions to the GCF and withdraw from the Paris Agreement. As a result, the GCF faces a major reduction in actual contributions from the projected amount, as well as potential governance challenges at the levels of its Board and the UNFCCC Conference of Parties (COP), to which the GCF is ultimately accountable. This paper analyses these challenges with reference to the GCF's internal regulations and its agreements with third parties such as the United States. It goes on to discuss how COP-mandated design features of the GCF can be built upon to strengthen the GCF's resilience in the face of such challenges. These features are the GCF's linkages with UNFCCC constituted bodies, in particular the Technology Mechanism, and its engagement with non-Party stakeholders, especially through the Private Sector Facility. It is argued that deepening GCF engagement with both the Technology Mechanism and non-Party stakeholders would increase both the coherence of climate finance governance and the GCF's ability to contribute to ambitious climate action in uncertain times.

Migrants’ remittances

PurposeThe much-trumpeted Green Climate Fund and several other official financial mechanisms for financing adaptation to climate change under the UN Framework Convention on Climate Change have fallen short in meeting adaptation needs. Many poorer people are still grappling with the scourge of climate change impacts. Consequently, there has been a dominant research focus on climate change financing emanating from official development assistance (ODA), Adaptation Fund, public expenditure and private sector support. However, there has been little attempt to examine how migrants’ remittances can close adaptation financing gaps at the local level, ostensibly creating a large research gap. This paper aims to argue that migrants’ remittances provide a unique complementary opportunity for financing adaptation and have a wider impact on those who are extremely vulnerable to climate change.Design/methodology/approachThe paper is aligned to the qualitative research approach. Both secondary and primary data acquired through interviews and focus group discussions were used for the study. Multiple sampling methods were also used to select the respondents.FindingsThe findings show that remittances are used to finance both incremental costs of households’ infrastructure and consumption needs, as well as additional investment needs to be occasioned by ongoing or expected changes in climate.Originality/valueIn the wake of dwindling government/public revenue, ODA and poor commitment of Annex II countries to fulfil their financial obligations, the study makes the following recommendations: First, the financial infrastructure underpinning money transfers in both sending and recipient countries should be improved to make transfers attractive. Second, significant steps should be taken to reduce the fees on remittance services, especially for the small transfers typically made by poor migrants. Finally, adequate climatic information should be made available to local people to ensure that remittances are applied to the right adaptation option to avoid maladaptation.

Readiness for climate change adaptation in the Arctic: a case study from Nunavut, Canada

There is limited knowledge on institutional factors constraining and enabling climate change adaptation in Arctic regions, or the overall readiness of governing bodies and communities to develop, implement, and promote adaptation. This paper examines the preparedness of different levels of government to adapt in the Canadian Arctic territory of Nunavut, drawing upon semi-structured interviews with government personnel and organizations involved in adaptation. In the Government of Nunavut, there have been notable developments around adaptation planning and examples of adaptation champions, but readiness for adaptation is challenged by a number of factors including the existence of pressing socio-economic problems, and institutional and governmental barriers. Federally, there is evidence of high-level leadership on adaptation, the creation of adaptation programs, and allocation of funds for adaptation, although the focus has been mostly on researching adaptation options as opposed to supporting actual actions or policy change. The 2016 Pan-Canadian Framework on Clean Growth and Climate Change, and increasing emphasis on climate change federally and in the Government of Nunavut, offer opportunities for advancing adaptation, but concrete steps are needed to ensure readiness is enhanced.

Perception of climate change and adaptation strategies in Vietnam

PurposeThe purpose of this study is to first examine the factors affecting the intra-household perception of climate change. Second, the study investigates the impact of the perception of climatic stress on the operators’ and spouses’ intra-household adaptation strategies (farm and household financial strategies).Design/methodology/approachThe study uses household survey data from Vietnam’s Mekong Delta. The study uses probit and negative binomial count data approaches to evaluate the empirical model.FindingsResults confirm the existence of intra-household gender differences in the adaptation strategies. The authors found that although spouses perceive climatic stress, they are less likely to adapt to such stresses when it comes farming enterprise, but more likely to adapt to household financial strategies. In contrast, farm operators, in the presence of climatic stresses, undertake both farm and household finance adaptation strategies.Practical implicationsInvestment in climate smart agriculture can help households in managing climatic stresses.Originality/valueA farmer in Asia, and Vietnam in particular, faces significant risks from climatic changes. In Vietnam, agriculture is easily affected by natural disasters and climatic changes. This study provides insights into the perception of climatic changes by operators and spouses in Vietnam’s Mekong Delta. Perceived changes in the climate have a greater impact on women because they typically lack the necessary tools to adapt to climate change. The current findings could be useful in managing climatic risk in Vietnam’s Mekong Delta and be helpful to policymakers in designing risk management strategies in response to climatic changes.

Tourism Industry Financing of Climate Change Adaptation: Exploring the Potential in Small Island Developing States

In many small island developing states (SIDS), tourism is a principal driver of the economy and of infrastructure development. The SIDS’ tourism sector is, however, threatened by climate change impacts, which will likely incur high costs for climate change adaptation (CCA). Discussions are starting about who should pay for the costs of adapting to climate change, especially the balance amongst sectors such as between governments and the tourism industry. Through the perceptions of selected industry stakeholders, this study explores the potential of the tourism industry in SIDS in financing its own CCA. Fiscal and political mechanisms were examined, such as adaptation taxes and levies, adaptation funds, building regulations, and risk transference. The study’s exploratory method combines nine in-depth key stakeholder interviews from various SIDS and an extensive literature review to develop a schematic of suggested mechanisms. The results reveal a high overall potential for the tourism industry funding its CCA, but with significant challenges in realizing this potential. Consumer expectations and demands, governmental hesitation in creating perceived investment barriers, and assumptions about cost effectiveness could undermine steps moving forward. Varying incentive structures, the sector’s price sensitivity, and the differing abilities of tourism industry stakeholders to adapt are factors suggesting that government frameworks are needed to ensure effective and substantive action.

Managing Climate Change Risks in Africa - A Global Perspective

Africa is projected to experience diverse and severe impacts of climate change. The need to adapt is increasingly recognized, from the community level to regional and national governments to the donor community, yet adaptation faces many constraints, particularly in low income settings. This study documents and examines the challenges facing adaptation in Africa, drawing upon semi-structured interviews (n=337) with stakeholders including high-level stakeholders, continent-wide and across scales: in national government and UN agencies, academia, donors, non-governmental organizations, farmers and extension officers. Four key concerns about adaptation emerge: i) Climate data, scenarios and impacts models are insufficient for supporting adaptation, particularly as they relate to food systems and rural livelihoods; ii) The adaptation response to-date has been limited, fragmented, divorced from national planning processes, and with limited engagement with local expertise; iii) Adaptation policies and programs are too narrowly focused on explicit responses to climate change rather than responses to climate variability or broader development issues; and iv) Adaptation finance is insufficient, and procedures for accessing it present challenges to governments capacities. As a response to these concerns, we propose the 4-Cs framework which places adaptation for Africa at the center of climate projections, climate education, climate governance and climate finance, with corresponding responsibilities for government and non-government actors.

A case for further refinement of the Green Climate Fund’s 50:50 ratio climate change mitigation and adaptation allocation framework: toward a more targeted approach

Created in 2010 and made operational in 2015, the Green Climate Fund (GCF) is expected to become the main mechanism for transferring public and some private funds to non-Annex I countries to address climate change. It aims to achieve a 50:50 balance between adaptation and mitigation financing over time. While there is a diplomatic history leading to this arrangement, we argue the GCF’s allocation strategy requires further refinement if it is to adequately address climate change. We advocate prioritizing climate mitigation over adaptation in funding while not ignoring climate justice concerns all together. We recommend a more targeted approach to its funding allocations based upon the GHGs abatement potential for mitigation or climate vulnerability for adaptation of very specific non-Annex I countries. We believe these refinements will help to improve the efficiency and effectiveness of scarce climate change financing resources required to achieve the Intergovernmental Panel on Climate Change’s (IPCC) central objective of no more than 1.5 °C by 2100, which requires emissions reductions between 70 and 95% (2010 levels) by 2050.

A Universal Human Right to Shape Responses to a Global Problem? The Role of Self‐Determination in Guiding the International Legal Response to Climate Change

International climate change law is at a critical juncture. Two decades of international treaty negotiations have delivered rising greenhouse gas emissions and minimal adaptation funding. The pattern of negotiations suggests that key States will often only make significant commitments that are aligned with their material interests and reciprocated by their competitors. This ‘logic of reciprocity’ in international climate negotiations has limited ambition such that vulnerable States are facing existential threats from sea level rise, storm surge and salt‐water inundation. We consider whether the international legal system offers any alternative logics that might found a duty on emitters to reduce their emissions in a timelier fashion and respond to climate‐change‐induced forced migration. We therefore focus on the foundational principle of the self‐determination of peoples, a collective human right which has supported movements towards decolonization and the emancipation of oppressed peoples. We argue that self‐determination might offer an alternative logic of duty on high‐emitting States to the plight of populations who find their territory (and potentially their nationhood) under threat from anthropogenic climate change.

Implications of the transition from adaptation to resilience finance

Adaptation finance is the generic term for resources used to assist institutions and populations addressing climate risks. As donors aim for adaptation at scale, a conceptual and practical transition is underway: first, policy framing concepts of ‘adaptation’ and ‘vulnerability reduction’ are yielding to ‘resilience’ as emphasis grows on theoretical frameworks for the design of ‘resilient systems’ particularly suitable for institutional change; second, the practice of adaptation increasingly takes the form of mainstreaming climate resilience that reforms ongoing development policy. This viewpoint documents emerging evidence that the conceptual and practical shift away from adaptation finance – towards what is more accurately termed ‘resilience finance’ – influences the objectives of policy, and perhaps most importantly, the actors privileged by policy. Resilience finance tends to raise the capacity of higher level government institutions, meaning that as funds increase, disproportionately fewer small-scale local/community-level projects directly benefit the poorest with highest exposure to adverse climate effects. Policy-makers need to ensure the poorest are privileged in the design of climate mainstreaming, through initiatives such as integrating climate resilience into social protection.

The impact of methodological choices on the outcome of national‐level climate change vulnerability assessments: An example from the global fisheries sector

AbstractClimate change vulnerability assessments have been receiving increasing attention from policymakers and academics. Given scarce funds for adaptation, the UNFCCC Secretariat has suggested that eligible countries be prioritized for support based on their vulnerability to climate change. National‐level fisheries sector climate change vulnerability assessments as well as other overall vulnerability assessments to date have lent support to the idea that least developed countries (LDCs) are more vulnerable to climate change than small island developing states (SIDS) and other coastal countries. We demonstrate that these perceived differences in vulnerability among country groups are partly due to methodological choices made during these assessments. We argue that national‐level vulnerability assessments, and particularly those dealing with the fisheries sector, often suffer from four main methodological shortcomings: (i) an inconsistent representation of countries belonging to each group, (ii) use of socioeconomic indicators that are not scaled to population size, (iii) use of a small number of indicators and (iv) lack of accounting for potential redundancy among indicators. Building on a previous framework, we show that by addressing the four aforementioned methodological shortcomings, the ranking in fisheries sector vulnerability among SIDS, LDCs and other coastal countries is altered significantly. Our results underscore that the vulnerability of SIDS was partially concealed in previous assessments and suggest that SIDS are in fact the most vulnerable group. Although this study focuses on assessing the vulnerability of the fisheries sector to climate change in SIDS, LDCs and other coastal countries, the implications also apply to other sectors and country groupings.

What is adaptation to climate change? Epistemic ambiguity in the climate finance system

Over the past decade developed states have committed significant public financing for climate change adaptation. Much of this public financing flows through international development organizations. States have delegated the implementation and monitoring of adaptation to existing international organizations such as the World Bank, the United Nations Development Programme, and the Organisation for Economic Co-operation and Development. Scholars have noted that states delegate discretion to specialized organizations to perform a task on their behalf, but have not explored how uncertainties about the nature of the task affect delegation. This article addresses this gap by distinguishing the concept of epistemic ambiguity (when states are uncertain about the exact nature of a task) from strategic ambiguity (when states do not reach consensus over a task due to political differences) in order to address the question: how have states and international organizations defined and implemented adaptation activities? The question is answered through case studies of: (1) adaptation projects administered by the United Nations Development Programme and the International Organization for Migration in Kenya; and (2) states’ and international organizations’ attempts to develop methodologies for reporting adaptation financing. The case studies are based on: primary documents published by states and international organizations, secondary literature on climate finance, and interviews with adaptation experts. This article argues that states have not precisely defined adaptation, and that this is substantially due to epistemic ambiguity. It then identifies two consequences of epistemic ambiguity: a proliferation of activities labelled as adaptation, and difficulties tracking and monitoring adaptation assistance.