Institutionalising climate adaptation finance under the UNFCCC and beyond

Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge? / Åsa Persson. Stockholm Environment Institute, 2011, 30 p. (SEI Working Paper No. 2011-03)

http://sei-international.org/mediamanager/documents/Publications/Climate/Adaptation/sei-wp-2011-03-adaptation-commodification.pdf

A new institutional architecture is emerging for climate change adaptation finance, with the UNFCCC Adaptation Fund now operational and dialogue underway on post-2012 arrangements. Some donor countries have also begun to channel official development assistance (ODA) through designated adaptation funds. This paper examines how adaptation finance is being institutionalised, and explores whether an adaptation market could emerge, akin to the development of carbon markets, with adaptation projects traded as commodities. The key question is whether such a multifaceted, locally contextualised phenomenon as adaptation can be converted into a uniform and standardised product, with measurable outcomes and benefits that ‘buyers’ can take credit for. The paper explores two ways to commodify adaptation: focusing on adaptation benefits – the most obvious parallel to carbon markets – or trading in credits for spending adaptation funds. The former is unfeasible for multiple reasons, the paper concludes, including the lack of viable metrics and lack of demand at the international level. Examining the latter, it does find signs of ‘supply’ and ‘demand’, but nothing close to a true ‘marketplace’ or commodification process. Analysis of adaptation in a market context, however, does point to crucial unresolved issues, such as the need for better metrics and accountability systems, as well as questions about whether incentives for effectively delivering adaptation benefits from projects – as opposed to just demonstrating that money was spent – are sufficiently strong. There is also a need for more research on potential new motivations for providing adaptation finance, such as indirect economic, political, strategic or security benefits. Finally, it is important to study the distribution of adaptation finance across countries, sectors and communities to see whether there are sources of bias in institutions and in the emerging professional industry. (© the author)


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