This article argues that cash transfers are likely to contribute to adaptive capacity by: (1) meeting basic needs; (2) helping the poor respond to climate-related shocks; (3) helping vulnerable households manage risk and consider investment innovations that increase their adaptive capacity; (4) transferring money for investment in long-term adaptive capacity development; and (5) facilitating mobility and livelihood transitions. While cash transfers cannot address all areas of adaptation, they may be necessary for further adaptation to be equitable and effective. Cash transfers are supported by a substantial evidence base, do not require much climate-related information, can be scaled up and are likely to gain local acceptance.
Comprehensive research has not yet been done, but there is emerging evidence that cash transfers can protect and increase adaptive capacity. They may contribute indirectly to addressing many adaptation challenges, while also increasing the possibility that other policies will achieve positive impacts. Cash transfers can support adaptive capacity by:
- Meeting existing needs: In particular, the role of cash transfers in bringing about better nutritional outcomes which in turn allow for better long-term educational, health and labour productivity has been largely evidenced. The people most vulnerable to climate change suffer frequently from nutritional deficits.
- Helping the poor to respond to shocks: Shocks can increase pressures on livelihoods that are already under strain, and access to income can be vital in these situations. In a changing and unpredictable climate, there is a strong case for social policy measures to be made available over an extended timeframe and to be in place before disasters occur.
- Helping the poor to manage risk: Cash transfers can give households the financial space to innovate, rather than being forced into extreme or low-return coping strategies.
- Giving the poor money to invest and increase their asset base: Cash transfers enable productive investment, allowing sustained improvement of adaptive capacity indicators.
- Facilitating mobility and livelihood transitions: Cash transfers could reduce the transaction costs of migration and provide some insurance to migrants and their dependants, thereby facilitating mobility and livelihood transitions.
However, cash transfers do not directly address the non-generic determinants of adaptive capacity, (such as institutions, knowledge, innovation or forward-thinking decision-making), and adaptive capacity alone does not guarantee effective adaptation. However, by offering a degree of capital and livelihood security, cash transfers could increase the likelihood of more ‘transformative’ changes.
How do cash transfers compare with other adaptation interventions?
- Cash transfers are a evidence-based policy that can be virtually guaranteed to increase the adaptive capacity of the people most vulnerable to climate change.
- Because they can be used to address both existing needs and multiple causes of vulnerability, cash transfers stand a high chance of being accepted at the local level.
- Cash transfers could offer an efficient way of increasing the adaptive capacity of large numbers of people in a relatively short amount of time.
The fact that many of those people most vulnerable to climate change also have the greatest need for social protection makes cash transfers a ‘no regrets’ use of adaptation finance. Further, cash transfers could allow the poor to have direct control over at least a portion of adaptation finance. There is a strong case for cash transfers to be considered a key part of the toolkit of policies to address adaptation needs in developing countries.
