How should climate change adaptation funding be allocated? This paper argues that allocation decisions should focus on the concept of vulnerability. While recognising that expert judgment will always play a role in funding decisions, it recommends the adoption of an empirical approach to allocation in order to ensure transparency, efficiency, and equity. Indicators to guide the allocation of adaptation funding should relate to physical impact, adaptive capacity and implementation capacity.
Adaptation is a central part of the post-2012 climate change architecture. For least developed countries, which are hardest hit by the potential consequences, the adaptation debate is arguably more relevant than the question of emissions targets. It is widely agreed that developing countries will need financial and technical assistance from developed countries to help them implement appropriate adaptation strategies, with estimates of total costs rising into the hundreds of millions of dollars. But the exact mechanisms through which this assistance is to be provided are still a matter of debate.
The allocation question is complex and pits ethical considerations of entitlement and need against economic concerns like delivery and effectiveness. This paper argues that these benchmarks should be centred on the concept of vulnerability, while compensating for relative levels of effectiveness. Indicators to guide the allocation of adaptation funding should be focused around three key concepts:
- Physical impact: Exposure to, and sensitivity towards climatic change together decide the strength of an impact on a country or locality.
- Adaptive capacity: This is mainly determined by socio-economic factors, such as income, demographic trends, institutional capacity, political stability and the quality of education, water and health facilities.
- Implementation capacity: the ability to manage and use finance effectively is important for adaptation. Funding will be scarce and has to be used effectively. This is not to say that low implementation capacity should disqualify a country from receiving funds, but it should shape how funds are distributed.
Vulnerability is a dynamic concept and will evolve over time, as socio-economic characteristics change and climate change becomes more pronounced. Vulnerability assessments must be iterative, have defined time periods and be reassessed under an allotted timeframe. Lessons for the international community on adaptation financing include the following.
- Donors should adopt an empirical approach for three reasons: it can reduce transaction costs; it can support the results agenda; and it can support mutual accountability through transparency in allocations.
- Decisions, however, should not be based solely on mechanistic formulas. Wise spending decisions will take into account a range of considerations and require a considerable amount of judgement.
- The quality of indicators is affected by data gaps and imperfect information. More work is needed to improve the quality and availability of data and reduce the margin of error involved in aggregation.
- The true cost of adaptation is still unknown, but the multi-billion dollar estimates reinforce the need for funding to be delivered as transparently, efficiently, and effectively as possible.
