Spending adaptation money wisely

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<ul><li><p>This article was downloaded by: [University of Southern Queensland]On: 10 October 2014, At: 07:54Publisher: Taylor &amp; FrancisInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office:Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK</p><p>Climate PolicyPublication details, including instructions for authors and subscriptioninformation:http://www.tandfonline.com/loi/tcpo20</p><p>Spending adaptation money wiselySamuel Fankhauser a &amp; Ian Burton b ca Grantham Research Institute and Centre for Climate Change Economicsand Policy, London School of Economics , Houghton Street, London, WC2A2AE, UKb University of Toronto , 105 George Street, Toronto, MSA 2N4, Canadac International Institute for Environment and Development , 4 EndsleighStreet, London, WC1H 0DD, UKPublished online: 23 May 2011.</p><p>To cite this article: Samuel Fankhauser &amp; Ian Burton (2011) Spending adaptation money wisely, ClimatePolicy, 11:3, 1037-1049, DOI: 10.1080/14693062.2011.582389</p><p>To link to this article: http://dx.doi.org/10.1080/14693062.2011.582389</p><p>PLEASE SCROLL DOWN FOR ARTICLE</p><p>Taylor &amp; Francis makes every effort to ensure the accuracy of all the information (the Content)contained in the publications on our platform. 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Terms &amp; Conditions of access and usecan be found at http://www.tandfonline.com/page/terms-and-conditions</p><p>http://www.tandfonline.com/loi/tcpo20http://www.tandfonline.com/action/showCitFormats?doi=10.1080/14693062.2011.582389http://dx.doi.org/10.1080/14693062.2011.582389http://www.tandfonline.com/page/terms-and-conditions</p></li><li><p>Spending adaptation money wiselySAMUEL FANKHAUSER1*, IAN BURTON2,3</p><p>1 Grantham Research Institute and Centre for Climate Change Economics and Policy, London School of Economics,</p><p>Houghton Street, London WC2A 2AE, UK2 University of Toronto, 105 George Street, Toronto MSA 2N4, Canada3 International Institute for Environment and Development, 4 Endsleigh Street, London WC1H 0DD, UK</p><p>Discussions about adaptation finance have largely concentrated on process: how money should be raised and how adaptationspending should be governed and monitored. This article seeks to move the focus of the debate towards the substance ofadaptation by asking what good adaptation in developing countries would look like. It is argued that the best use of funds in theshort term may be for soft, less tangible developmental activities that increase adaptive capacity. Building a minimum level ofadaptive capacity everywhere is central to efficient, effective and equitable adaptation, and yields immediate benefits irrespectiveof future climate regimes. A number of operational challenges in delivering this kind of adaptation are discussed, including apreoccupation with additionality which makes the integration of adaptation and development harder and a preference forconcrete and more readily visible adaptation projects. Although the question of whether and how the adaptation regime that isemerging from the Cancun Agreements will be able to deliver wise adaptation decisions is left open, the presented analysisrecognizes that further institutional development is required.</p><p>Keywords: adaptation finance; climate change and development; economic efficiency</p><p>Les discussions au sujet de la finance pour ladaptation ont surtout porte sur les procedes: comment lever les fonds et commentgouverner et controler les depenses liees a ladaptation. Cet article tend a reorienter lobjet du debat vers ladaptation ensubstance, en demandant ce a quoi ressemblerait une bonne adaptation dans les pays en developpement. Nous avanconsque la meilleure utilisation des fonds a court terme serait dans des activites de developpement douces ou moinstangibles, qui favorisent la capacite adaptive. Creer un minimum de capacite adaptive en tout lieu est essential a une adaptationefficace, reelle et equitable, et rapporte des benefices immediats, quel que soit le futur regime climatique. Nous abordons unnombre de defis operationnels dans la realisation de ce type dadaptation, y compris une preoccupation portant surladditionalite rendant lintegration entre adaptation et developpement plus difficile et une preference pour des projetsdadaptation concrets et plus facilement visibles. Nous laissons ouverte la question de savoir si et comment le regimedadaptation emergent des Accords de Cancun sera a meme dengendrer de bonnes decisions sur ladaptation, mais notreanalyse reconnat la necessite dun developpement institutionnel plus approfondi.</p><p>Mots cles: changement climatique et developpement; efficacite economique; financement de ladaptation</p><p>1. Introduction</p><p>The debate about climate change finance has so far been as much about trust (or, more accurately,</p><p>about the lack of trust) as it has been about finance. The protracted UN Framework Convention on</p><p>Climate Change (hereafter referred to as the Convention) negotiations under the Bali Action Plan</p><p>(agreed in December 2007) have devoted much time and energy to the discussion of process: how</p><p>funds should be raised, through which channels they should be disbursed, how spending decisions</p><p>n research article</p><p>n *Corresponding author. E-mail: s.fankhauser@lse.ac.uk</p><p>CLIMATE POLICY 11 (2011) 10371049</p><p>doi:10.1080/14693062.2011.582389 # 2011 Taylor &amp; Francis ISSN: 1469-3062 (print), 1752-7457 (online) www.climatepolicy.com</p><p>Dow</p><p>nloa</p><p>ded </p><p>by [</p><p>Uni</p><p>vers</p><p>ity o</p><p>f So</p><p>uthe</p><p>rn Q</p><p>ueen</p><p>slan</p><p>d] a</p><p>t 07:</p><p>54 1</p><p>0 O</p><p>ctob</p><p>er 2</p><p>014 </p></li><li><p>should be governed and how activities are to be monitored, reported and verified. This preoccupation</p><p>with monitoring and governance is a direct reflection of the low and apparently declining level of trust</p><p>among and between the Parties to the Convention. To what extent this decline in trust has been</p><p>reversed by the Cancun Agreements remains to be seen, but there appear to be grounds for some cau-</p><p>tious optimism. Among other factors, the origins of this lack of trust can be traced back to a string of</p><p>donor promises of financial support that have not been fully met or were long delayed, and to a lack</p><p>of confidence among donors in the reliability of some developing countries in managing funds.</p><p>The process questions are important. Adaptation to climate change will require substantial amounts</p><p>of money (UNFCCC, 2007; Fankhauser, 2010; World Bank, 2010a; Narain et al., 2011), and funding is</p><p>beginning to become available. The World Bank reckons that between US$2.2 billion and US$2.5</p><p>billion in adaptation finance has so far been committed (World Bank, 2010b). This could be topped</p><p>up with a portion of the US$30 billion in fast-start funding pledged in Copenhagen at the end of</p><p>2009 and a share of the annual $100 billion in climate finance promised by 2020 (AGF, 2010). In</p><p>light of these magnitudes, getting the process right is critical.</p><p>The decision at COP-16 to establish the Green Climate Fund under the guidance of the Conference</p><p>of the Parties (COP) is generally seen as a step in the right direction. The Board has 12 members from</p><p>developed countries and 12 from developing countries, the latter group including seats for the least</p><p>developed countries and small island developing states. A Transitional Committee with a developing</p><p>country majority will design the Green Climate Fund during 2011. The World Bank will act as interim</p><p>trustee, subject to review 3 years after the operationalization of the Fund. These encouraging develop-</p><p>ments leave open many questions about how the Fund, as well as other channels of investment in adap-</p><p>tation, will work to ensure successful adaptation.</p><p>There is a danger that, instead of getting on with the urgent tasks of adaptation, the Parties will</p><p>become increasingly embroiled in debates about governance, monitoring and additionality. It will be</p><p>unfortunate and counterproductive if these concerns are allowed to overwhelm equally or more impor-</p><p>tant questions relating to the efficient, effective and equitable use of funds. To a large extent, the</p><p>decision on adaptation priorities belongs to national governments. However, nothing is likely to under-</p><p>mine progress on adaptation in the developing countries more than evidence, or even suspicion, that</p><p>the funds are being diverted or used wastefully, and are not reaching those most in need of assistance.</p><p>In this article, the focus of the debate is moved away from process issues and back towards the sub-</p><p>stance of adaptation. We try to answer the question of what good adaptation in developing countries</p><p>might look like, and what kind of adaptation measures should therefore be financed as a priority.</p><p>Stern (2008, 2009) defines good adaptation as meeting three criteria. First, it is efficient in the sense</p><p>that it achieves results at the lowest possible cost. Second, it is effective in keeping down the negative</p><p>impacts of climate change. Third, it is equitable, targeting the countries and population groups most</p><p>worthy of assistance.1 Bird and Brown (2010) highlight the criteria of timeliness, appropriateness,</p><p>national ownership, and focus on the most vulnerable.</p><p>It is hard to disagree with these high-level criteria, and indeed they are not unique to adaptation</p><p>spending. For example, similar criteria also form the core principles for the allocation of concessional</p><p>development assistance. Development agencies such as the World Bank use them to ensure that scarce</p><p>grant resources are spent wisely and fairly (e.g. IDA, 2007).2</p><p>However, in practice, the need for efficiency, effectiveness and equity poses some quite complex</p><p>operational challenges that adaptation institutions may find difficult to address. This article reviews</p><p>the most important of these. In concrete terms, they are concerned with the integration of adaptation</p><p>and development, the identification of adaptation priorities in the face of uncertainty, and the balance</p><p>between hard structural adaptation and soft behavioural measures. Aggravating them all is the sheer</p><p>scale and scope of the adaptation problem.</p><p>1038 Fankhauser and Burton</p><p>CLIMATE POLICY</p><p>Dow</p><p>nloa</p><p>ded </p><p>by [</p><p>Uni</p><p>vers</p><p>ity o</p><p>f So</p><p>uthe</p><p>rn Q</p><p>ueen</p><p>slan</p><p>d] a</p><p>t 07:</p><p>54 1</p><p>0 O</p><p>ctob</p><p>er 2</p><p>014 </p></li><li><p>The question of whether the adaptation regime that is emerging post-Cancun is able to address these</p><p>challenges and is, in this sense, fit for purpose is not addressed here. Other authors have written exten-</p><p>sively about the design of adaptation institutions (e.g. Muller and Gomez-Echeverri, 2009; Muller,</p><p>2010), but have not directly answered this particular question either. It is not easy to predict, with con-</p><p>fidence, the shape of the future regime and to assess how fit for purpose it will be in the face of multiple</p><p>forces and stresses.</p><p>It is noted, however, that the track record of existing adaptation institutions is not without blemish3,</p><p>and the emerging adaptation regime appears to be the result of institutional turf battles as much as</p><p>thoughtful design. It is clear, therefore, that the delivery arrangements for adaptation will be further</p><p>developed and revised and that these developments should be continually debated and scrutinized</p><p>both within and outside the Convention process. This article is a contribution to such debate and scru-</p><p>tiny. It is hoped that the characterization of good adaptation provided in this article, and of the oper-</p><p>ational challenges that follow from it, will be helpful in informing the process.</p><p>The article starts, in Section 2, with an exploration of generic priorities for wise adaptation. Setting</p><p>adaptation priorities has mainly been seen as a location-specific exercise that requires detailed know-</p><p>ledge of local circumstances and place-to-place variations in climate risk. Nevertheless, as will be seen</p><p>in Section 2, the literature on adaptation economics, decision-making under uncertainty, and adap-</p><p>tation and development can offer some broad pointers on adaptation priorities and measures that</p><p>are likely to be important, independently of local circumstances. There has been a move away from</p><p>a strictly place-based view of adaptation towards the recognition of the need for more programmatic,</p><p>strategic and even transformational approaches.</p><p>In Section 3, it is asked what operational challenges adaptation institutions may face in delivering on</p><p>those generic priorities. Section 4 concludes with suggestions about what this might mean for the</p><p>emerging adaptation regime.</p><p>2. Adaptation priorities</p><p>How to spend adaptation money wisely is at its core a classic economic problem of resource allocation.</p><p>There are well-established techniques that can be brought to bear on such problems, such as cost</p><p>benefit analysis, cost-effectiveness analysis and multi-criteria analysis. However, adaptation to</p><p>climate change is a much more complex issue than the typical resource allocation problem and</p><p>requires different approaches to the standard appraisal techniques.</p><p>Adaptation is a complex problem for many reasons, but three features in particular stand out</p><p>(Fankhauser et al., 1999; Ranger et al., 2010):</p><p>1. The intricate link between adaptation and other socio-economic trends, such as economic growth</p><p>and development (e.g. there is much debate about the difference between adaptation to climate</p><p>change and adaptation to multiple stressors).</p><p>2. The pervasiveness and temporal complexity of adaptation decisions (e.g. the need to harmonize or</p><p>integrate adaptation across spatial and temporal scales).</p><p>3. The high level of uncertainty about local climate outcomes (e.g. the uncertainty about the balance</p><p>between increased temperature and increased rainfall in terms of potential evapotranspiration in</p><p>specific localities).</p><p>The reasons why adaptation is complex contain lessons about what the immediate adaptation priori-</p><p>ties should be. These are considered in the rest of this section, with a focus on identifying generic</p><p>Spending adaptation money wisely 1039</p><p>CLIMATE POLICY</p><p>Dow</p><p>nloa</p><p>ded </p><p>by [</p><p>Uni</p><p>vers</p><p>ity o</p><p>f So</p><p>uthe</p><p>rn Q</p><p>ueen</p><p>slan</p><p>d] a</p><p>t 07:</p><p>54 1</p><p>0 O</p><p>ctob</p><p>er 2</p><p>014 </p></li><li><p>priority projects and programmes, while bearing in mind the localized nature of many adaptation</p><p>decisions (for country priorities, see Barr et al., 2010).</p><p>2.1. Ad...</p></li></ul>