Adaptation Investments Research Articles

A focus on market imperfections can help governments to mobilize private investments in adaptation

ABSTRACT Climate change requires significant adaptation of economies, and the largest part of most economies is composed of private sector actors. In this Viewpoint, we argue that it should not be the role of the public sector to cover the full costs of adaptation - which would also typically exceed government's fiscal space. Rather, we suggest that the public sector should set the right conditions to catalyse private investments in adaptation. While the suggestion is not new, we argue that the current focus on generic ‘barriers’ hindering more private investments in adaptation is not expedient. These barriers are descriptive rather than explanatory, sometimes mix cause and effect, and tend to focus on eliminating obstacles, rather than adapting efficiently. Alternatively, we suggest to focus on addressing three market imperfections that give rise to those barriers. In doing so, the overall welfare of society, including the vulnerability of the most marginalized, should be centre-stage. The development of markets should aim to contribute to such welfare - it is not an end in itself. In that sense, our call for a focus on market imperfections is a call for a larger role of public actors, both in developed and developing countries.

An Adaptation-Mitigation Game: Does Adaptation Promote Participation in International Environmental Agreements?

This paper studies how the investment in adaptation can influence the participation in an international environmental agreement (IEA) when countries decide in adaptation before they choose their levels of emissions. Two types of agreements are studied, a complete agreement for which countries coordinate their decisions on adaptation and emissions, and an adaptation agreement for which there is only coordination when countries decide their levels of adaptation. In both cases, we assume that the degree of effectiveness of adaptation is bounded from above, in order words, adaptation can alleviate the environmental problem, but it cannot solve it by itself leading the vulnerability of the country to almost zero. Our results show that the grand coalition could be stable for both types of agreement, but for extremely high degrees of effectiveness of adaptation. If this condition is not satisfied, the model predicts low levels of membership. The standard result of three countries for the complete agreement. For the adaptation agreement participation can be higher than three, but not higher than six countries. In any case, we can conclude that under reasonable values for the degree of effectiveness of adaptation, in our model adaptation does not promote participation in an IEA.

Climate finance potential to unlock private sector investment in adaptation

The increasing variety of climate, water and biodiversity funds and financing facilities, has the potential to increase complementarity. In practice, this increasing fragmentation is becoming a systemic barrier for local access to finance. The development of novel governance structures for collective investments at watershed level and innovative procurement strategies is required to deal with the remaining systemic barriers for private sector participation. A public-private programmatic approach that enables the combination of multiple thematic finance streams is required along with non-traditional global-local partnerships that bring the required expertise to effectively de-risk and significantly reduce transaction costs for investments at the watershed scale.

The cognitive and experiential effects of flood risk framings and experience, and their influence on adaptation investment behaviour

This study explores how decision makers invest in adaptation to protect against flood risks in response to a) different framings of flood risk information, and b) after experiencing losses from a hypothetical flood event. An incentivised economic lab experiment is conducted on a sample of students in Bilbao (Basque Country, Spain). A 2 × 2 between-subject design is used to measure investment behaviour with and without exposure to a flood risk map and after exposure to impacts framed as economic losses versus number of persons affected. Experience is measured through a 2-period repeated game within-subject design. Flood risk maps and impacts framed as number of persons affected were conducive to more experiential forms of decision-making, while decisions based on impacts framed as economic losses were more cognitive in nature. Those that saw text-only framings used a combination of cognitive and experiential factors for making decisions. While exposure to maps evoked more affect-driven responses, they were associated with lower ratings of positive affect and self-efficacy, and resulted in lower investments in protection compared to text-only framings. Greater experiential processing was found for impact framings based on persons affected, but they were not especially effective at increasing personal relevance of the issue or in driving investments. Individuals who experienced losses from a hypothetical flood event had greater ratings of negative affect, and made subsequent decisions that were more affect-driven in nature. In contrast, individuals who did not experience losses had greater ratings of positive affect, and made subsequent decisions based on primarily cognitive factors. Investments in protection reduced for those who did not experience losses, and remained the same for those who did experience losses. Results suggest that changes in adaptation investments between decision points may be dependent on both the experience (or lack thereof) of losses, as well as the extent to which individuals were risk-averse or risk-taking in previous investment decisions.

Accounting for the Effects of Employment, Equity, and Risk Aversion in Cost–Benefit Analysis: An Application to an Adaptation Project

AbstractThis paper sets out to explore to what extent integrating employment effects, equity, and risk aversion within cost–benefit analysis (CBA) affect the economic appraisal of a climate change adaptation project designed to protect against flood risk in a region of Bilbao (Basque Country, Spain). Four CBAs are conducted: (i) a standard CBA; (ii) a standard CBA considering equity; (iii) a standard CBA considering equity and employment; and (iv) a standard CBA considering equity, employment and risk aversion. All CBAs are conducted using a time frame of 2014–2080 and considering a 100-year return period under a middle of the road emission scenario (RCP4.5). A sensitivity analysis is also undertaken. Results suggest that the economic efficiency of the adaptation investment is contingent on what types of considerations are included within CBA. Integrating elements of employment, equity and risk aversion can strengthen or weaken the case for action (leading to higher or lower net-present values) and (depending on the discount rate chosen) may even be the deciding factor for determining whether a particular action should be carried out or not (whether the net-present value is positive or negative).

Climate Policy and Optimal Public Debt

This paper analyzes the optimal level of public debt when taxes are used not only for funding public expenditures but also for correcting externalities from climate change. Taking into account externalities implies that the optimal policy deviates from tax smoothing. Provided cumulative marginal damages are larger from today’s than from tomorrow’s emissions, the internalization of externalities decreases [increases] optimal debt if tax rates are on the increasing [decreasing] side of the Laffer curve. The reversed holds if the cumulative marginal damages increase over time. Allowing for endogenous adaptation investments reduces the deviation from tax-smoothing, but nevertheless increases optimal debt.

Reshaping Monitoring, Evaluation and Learning for Locally Led Adaptation

Locally led adaptation recognizes that people closest to the effects of climate change, especially those facing structural marginalization, require the financing and decision-making power to ensure that adaptation investments reflect their priorities. Supporters of locally led adaptation can leverage monitoring, evaluation, and learning (MEL) processes to balance power, promote mutual accountability, elevate local knowledge and priorities, and create value for local actors. This paper recommends a systemic shift toward MEL that is locally led, context-aware, and itself adaptive. It provides steps throughout the MEL cycle and specific approaches, methods and tools that promote local agency in the interest of more effective and equitable locally led adaptation interventions. It builds on the recommendations of the Global Commission on Adaptation to increase decentralization of adaptation finance to the local level, and aims to support implementation of the eight Principles for Locally Led Adaptation that were developed for the Commission.

Європейський досвід адаптації соціально-економічного розвитку до кризових умов: програми та фінансові інструменти

The paper presents analysis of European counter-crisis response programs: investment initiatives in response to the coronavirus; REACT-EU package of measures; a long-term recovery program (budget for 2021-2027) and Next Generation EU; and a banking package of measures titled “Supporting businesses and households amid COVID-19”. The sources of financial instruments for the recovery and adaptation of EU member states to the transcrisis state are described, and the most effective mechanisms for supporting entrepreneurship in the COVID-19 crisis are shown. The example of Slovakia and Poland is used to demonstrate the European experience in organizing the credit process, providing guarantees, intensifying social entrepreneurship in the face of the ongoing epidemic shock. The European investment trends and the participation of financial intermediaries in the post-crisis recovery are determined and used as a basis to characterize nationalization of the European long-term investment process. The special role of the state and the formation of state funds in the process of ensuring the effective adaptation of the Ukrainian financial and institutional environment to new challenges is substantiated; the importance of developing long-term programs for adapting the Ukrainian economy and society to the challenges of sanitary, humanitarian, climatic and political and economic nature, as well as forming appropriate institutions is shown. It is concluded that, given the peculiarities of the operational behavior of Ukrainian banking institutions, which are now focused on operations with government securities and commission activities, the adaptation investment process should be provided by public financial institutions.

Tracking and Reporting Finance for Locally Led Adaptation to Climate Change

This working paper discusses how governments can use practical, flexible approaches to determine if and how finance is supporting locally led adaptation (LLA) to climate change. As national governments invest in building resilience to climate impacts, many are recognizing the importance of LLA. LLA recognizes that people closest to the effects of climate change are often best placed to identify adaptation solutions and must have financing and decision-making power to ensure that adaptation investments reflect their priorities. The paper provides metrics for governments to track how much finance reaches the local level for adaptation, and how well that finance supports local agency in adaptation decisions. It also recommends tracking and reporting options governments can adapt to their country contexts and climate finance objectives. These recommendations are practical, near-term steps toward longer-term transformational change needed to support locally led adaptation. Tracking and reporting finance for LLA is important for ensuring adequate and sound investments, and ultimately for ensuring that finance reaches and meets the needs of those most directly affected by climate change.

Justice in climate change adaptation planning: conceptual perspectives on emergent praxis

Abstract. The measures implemented to adapt to climate change are primarily designed to address the tangible, biophysical impacts of climate change in a given geographic area. They rarely consider the wider social implications of climate change, nor the politics of adaptation planning and its outcomes. Given the necessity of significant investment in adaptation over years to come, adaptation planning and implementation will need to place greater concern on justice-sensitive approaches to avoid exacerbating existing vulnerabilities and creating maladaptive and conflicting outcomes. Building on recent calls for more just and transformative adaptation planning, this paper offers a flexible analytical framework for integrating theories of justice and transformation into research on climate change adaptation. We discuss adaptation planning as an inherently normative and political process linked to issues pertaining to recognition justice as well as distributional and procedural aspects of justice. The paper aims to contribute to the growing discussion on just adaptation by intersecting theoretical justice dimensions with spatial, temporal and socio-political challenges and choices that arise as part of adaptation planning processes. A focus on justice-sensitive adaptation planning not only provides opportunities for examining spatial as well as temporal justice issues in relation to planning and decision-making processes. It also paves the way for a more critical approach to adaptation planning that acknowledges the need for institutional restructuring and offers steps towards alternative futures under climate change conditions.

Maturity Improvements in Flood Protection Asset Management across the North Sea Region

North Sea Region countries depend heavily on flood protection infrastructure, such as dikes, dams, sluices and flood gates. Knowledge on where, when and how much to invest to ensure functioning is of crucial importance for asset owners and operators. This requires asset management approaches that are adaptable, respond to feedback and function within various contexts. The FAIR (Flood defense infrastructure Asset management & Investment in Renovation, adaptation, optimisation and maintenance) project has developed a unique framework to ensure that asset management processes are adaptive, comprehensive and make effective connections across strategic, tactical and operational contexts. The framework has for the first time informed an assessment of maturity of five flood protection asset management organisations in the North Sea Region, using a seven-factor maturity assessment model. This paper describes the self-assessment process and the self-reported maturity changes during the project. Maturity assessments were undertaken on two occasions, at the start of the project, and again toward the end. This has revealed how the baseline level of maturity for each organisation developed over the course of the three-year project. The observed maturity changes indicate that adopting the FAIR framework has added value in improving current approaches to asset management.

Games with Adaptation and Mitigation

We formulate and study a nonlinear game of n symmetric countries that produce, pollute, and spend part of their revenue on pollution mitigation and environmental adaptation. The optimal emission, adaptation, and mitigation investments are analyzed in both Nash equilibrium and cooperative cases. Modeling assumptions and outcomes are compared to other publications in this fast-developing area of environmental economics. In particular, our analysis implies that: (a) mitigation is more effective than adaptation in a crowded multi-country world; (b) mitigation increases the effectiveness of adaptation; (c) the optimal ratio between mitigation and adaptation investments in the competitive case is larger for more productive countries and is smaller when more countries are involved in the game.

Reliability Based Life Cycle Management of Bridge Subjected to Fatigue Damage

In recent times, there has been an increase in transport infrastructure failure. This increase is due to aging infrastructure, increased number of extreme weather events caused by climate change, and increased traffic loading. Accordingly, the need for planned and unplanned maintenance interventions is rising. Associated costs do not only involve direct maintenance or reconstruction costs, but also secondary effects experienced by users of the transport network as well as the environment and society in general. Infrastructure managers require tools for accurate quantification of infrastructure resilience that will enable rational adaptation investment strategies, so as to maintain high level of safety of transport networks. Through the development of a Global Safety Framework, at the core of which is a Multi-modal Network Decision Support Tool, the SAFE-10-T project (Safety of Transport Infrastructure on the TEN-T Network) is providing integrated solutions to issues related to infrastructure safety and planning. The paper presents a reliability-based whole life cycle model developed within this project enabling strategic investment decisions that maximize safety, minimize disruption, and environmental impacts and allow for the best use of limited resources. The model is applied on a case study of a bridge in the Port of Rotterdam in the Netherlands.

Do direct-access and indirect-access adaptation projects differ in their focus on local communities? A systematic analysis of 63 Adaptation Fund projects

Recent literature suggests that direct national access to multilateral climate funds could promote climate change adaptation investment that focuses more on the needs of vulnerable local communities when compared to indirect access through multilateral agencies. However, there has been no systematic comparative assessment of the level of community focus of direct-access and indirect-access projects. The lack of a standardized methodology to assess the level of community-focused adaptation has also constrained such comparison. To address this gap, this paper proposes a new framework to assess the level of community focus in adaptation projects, using a combination of financial, participatory, devolutionary, and design for policy adoption and replicability criteria. Using the Adaptation Fund (AF) as a case study, we apply the framework to systematically assess 63 projects approved by the Fund as of May 2017, comprising 22 direct-access and 41 indirect-access projects. We find that direct-access projects are more community-focused than indirect-access projects because they exhibit higher community-oriented financial, participatory, and devolutionary characteristics. We find no difference between the direct-access and indirect-access projects with regard to how they are designed to promote policy adoption and replicability of AF project-financed adaptation actions through policy and geographical mainstreaming. Our findings contribute to an improved understanding of the pattern of adaptation investment that takes place in developing countries with the support of international adaptation finance under both access modalities. The proposed assessment framework could also inform the development of a standardized methodology to track the delivery of international adaptation finance to the community level.

Decision frameworks for restoration & adaptation investment-Applying lessons from asset-intensive industries to the Great Barrier Reef.

Asset-intensive industries (including water and power utilities, mineral resources and energy) are those which require significant levels of capital investment in their assets in order to operate. These industries face challenges from uncertainty in resource availability and demand for end products, the intricate and complicated nature of their assets, and the complexity of the economic, ecological and social settings in which they operate. In these industries, the application of decision frameworks that account for this uncertainty and complexity in guiding asset investment and development is standard practice. Lessons from asset-intensive industries were applied during the concept feasibility phase of the Reef Restoration and Adaptation Program (RRAP) to establish the investment case for research and development into interventions to help the Great Barrier Reef (GBR) resist, adapt to, and recover from the impacts of climate change. The authors worked with RRAP partners to define a decision framework that included structured decision-making processes (SDM), a cost-benefit analysis (CBA), and a value of information (VoI) analysis, to establish the investment case for intervening on the GBR which led to success in securing Australian Government commitment for the next phase of the Program. With climate change expected to drive increased demand for significant levels of restoration and adaptation investment in large integrated social, ecological and economic assets (such as the GBR), the lessons from RRAP offer insights for the application of decision frameworks to inform public and private investment priorities.

A systematic approach for assessing climate vulnerabilities and adaptation options in large property portfolios: influences on property owners’ transformative capacity

Climate change and urban densification pose major challenges to the built environment. In Swedish cities, fluvial and pluvial floods risk being aggravated, necessitating adaptation efforts to make the build environment more resilient. A recent governmental inquiry states that owners are primarily responsible for adapting their property, and that the existing built environment is particularly tricky. Property owners often lack tools and approaches to strategically adapt to climate risks. This paper presents and tests a structured approach intended for large property owners to assess and visualize flood vulnerability in both individual buildings and the property portfolio, and organizational adaptive responses. The approach was developed and tested using the municipal housing company Hyresbostäder in Norrköping, Sweden as case. The study builds on workshops with staff, a systematic flood vulnerability mapping of 575 buildings, and in-situ inspections of the 85 most vulnerable buildings. The vulnerability and need for adaptation of individual buildings were visualized on a map, and adaptive avenues were identified. The approach was found useful for identifying the most vulnerable buildings, concrete adaptation measures and five broad adaptation avenues: risk-focused adaptation investments, area-focused adaptation, regular inspection and maintenance, informed collaboration and tenant dialogues. The property owner’s transformative capacity was improved by creating a shared vision, empowerment and learning, innovation capacity, gaining overview supporting transformative leadership and external cooperation likely to contribute to meeting SDGs 13 and 11. In further studies the approach will be tested by other large property owners under limited research support.

How Do Floods and Drought Impact Economic Growth and Human Development at the Sub-National Level in India?

This paper tries to shift the focus of research on the impact of natural disasters on economic growth from global and national levels to sub-national levels. Inadequate sub-national level information is a significant lacuna for planning spatially targeted climate change adaptation investments. A fixed-effect panel regression analyses of 19 states from 2001 to 2015 assess the impacts of exposure to floods and droughts on the growth of gross state domestic product (GSDP) and human development index (HDI) in India. The flood and drought exposure are estimated using satellite data. The 19 states comprise 95% of the population and contribute 93% to the national GDP. The results show that floods indeed expose a large area, but droughts have the most significant impacts at the sub-national level. The most affected GSDPs are in the non-agriculture sectors, positively by the floods and negatively by droughts. No significant influence on human development may be due to substantial investment on mitigation of flood and drought impacts and their influence on better income, health, and education conditions. Because some Indian states still have a large geographical area, profiling disasters impacts at even smaller sub-national units such as districts can lead to effective targeted mitigation and adaptation activities, reduce shocks, and accelerate income growth and human development.

Modelling the impacts of climate and land use change on water security in a semi-arid forested watershed using InVEST

Water security, a key policy objective for sustainable development, is under stress as a result of land use and climate change, especially in (semi-)arid areas like Iran. Land use change alters surface runoff and affects basin-wide hydrological processes and water consumption, while climate change modifies precipitation and temperature patterns and consequently evapotranspiration and water supply. In this study, water yield, supply and consumption are simulated in a watershed draining into the Caspian Sea in northern Iran, using the water yield model in the Integrated Valuation of Environmental Service and Tradeoffs (InVEST) tool. The novelty of this study is found in the combined modelling of the impacts of climate and land use change scenarios on water security, translating these results into a water stress indicator, and estimating the associated economic costs of reduced future water supply. The results show substantial spatial variation of the negative impacts of water supply and future water security across the watershed, further increasing the pressure on its inhabitants, their economic activities and ecological values. The estimation of the economic costs of increased water insecurity allows us to inform policy and decision-makers about future investments in climate adaptation and mitigation.

Adapting to climate change: gaps and strategies for Central Asia

Adaptation is an urgent and critical way to cope with the impact of climate change. The Paris Agreement has noted that adaptation is a key component of the global response to climate change. Nations with lower incomes and greater vulnerability to climate change have and will continue to suffer from the potential or actual impacts of climate change due to their limited and fragmented adaptation. Here, we consider Central Asia as a case study due to its increasing temperature, increasing rainfall variability, worsening drought, rapid institutional changes after independence, and uneven economic investment in adaptation. This paper identifies five urgent fields (including the theoretical basis, technology and measure, law and regulation, funding, and the political system) and analyzes the gap between ideal and real adaptation, finds the direction for future adaptation, and provides adaptation strategies for similar nations by using CiteSpace, which is based on the Web of Science Core Collection from 1990 to 2019. The detailed strategies present four mainstream development directions: (1) improve the theoretical basis of adaptation and increase investment in research; (2) encourage research and development into targeted approaches of adaptation and acquire technology transfer from developed countries; (3) integrate adaptation into medium- and long-term plans for national sustainable development, widely involving non-government agencies in the process; and (4) obtain financial support from international organizations.

Inter-model agreement on projected shifts in California hydroclimate characteristics critical to water management

Shifts away from the historical hydroclimate in populated regions can have dire consequences for water management. Regions like the state of California—where highly engineered, geographically interconnected, and inflexible water management systems are predicated on particular spatiotemporal patterns of water availability—are particularly vulnerable to hydroclimate shifts. However, much of the analysis of hydroclimate sensitivity to anthropogenic climate change has focused on gross metrics like annual mean precipitation, which is highly uncertain at the regional scale. This perceived uncertainty has deterred adaptation investments and quantitative integration of climate projection data into regional water management. Here, we assess projected future shifts in the state of California in a range of hydroclimate metrics critical to water management, using data from 10 statistically downscaled global climate model and two emissions scenarios currently used by the state. We find substantial inter-model agreement under both emissions scenarios—and > 80% inter-model agreement under the more severe climate change scenario—across metrics that collectively point toward an increasingly volatile, temporally concentrated, and extreme precipitation future for the state. We show, via hydrologic and operations modeling, that accounting for shifts in these more nuanced metrics reduces the projected reliability and sustainability of current water management practices to a greater degree than would be inferred from changes in total annual precipitation alone. These results highlight both the viability and critical importance of incorporating climate change projections quantitatively into water management decisions in California and other regions vulnerable to hydroclimate shifts, and underscore the need to develop integrated climate-hydrologic-operations models and decision-making protocols capable of accounting for all projected hydroclimate shifts.