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Before Investing Trillions to Help Developing Countries, We Need to Understand it Better

Developing countries at the recent Glasgow climate negotiations, COP26, made a strong plea for much more finance to help address the risks of climate change — extreme temperatures, more frequent and intense storms, coastal flooding, wildfires, droughts, and more. In the language of the climate change negotiations, the pleas were to finance “adaptation,” as opposed to finance actions to reduce greenhouse gas emissions, or “mitigation.” The moral argument for adaptation is compelling. The poorest countries have contributed the least to climate change yet are among the most at risk. Extreme weather events can set back development with lasting consequences for health, food security, and political stability. All of Africa is responsible for only a few percent of global greenhouse gas emissions, while the 46 Least Developed Countries, home to over 1 billion people and among the populations most vulnerable to climate change, collectively emit barely 1 percent. Yet most climate finance in these countries goes to mitigation projects and little information is available regarding how climate funds are being spent.

While a plea for much more adaptation finance was therefore to be expected at the COP, the discussion was almost entirely about the amount of funds to be made available. Rich developed nations did respond, pledging additional support although still far less than needed. In contrast, parties said very little about what needs to be done and how it can best be accomplished. As a summary of COP26 outcomes in the Financial Times stated, “There was little agreement how to spend the money, who should receive it, or how to make sure it is used effectively.”

One reason there has been much less funding for adaptation is that much of what has been done to date has not been very effective; simply spending large amounts of money is no guarantee of success. Just a few examples:

· Pumping sand on to beaches to protect coastal buildings from flooding is a popular if costly strategy for dealing with coastal erosion, especially in relatively affluent neighborhoods, and has been proposed as a strategy for the Maldives and other low-lying island states. Unfortunately, it is a very short-term solution as the sand is washed away by storms and rarely lasts longer than five years.

· Reforestation can achieve both carbon mitigation, through increased uptake of CO2, and adaptation, by blocking the spread of deserts and loss of farmland. But the results of such efforts have been very mixed; planting trees is relatively easy, ensuring their survival and rebuilding forests much more difficult. A tree-planting project to arrest desertification in Africa, dubbed the Great Green Wall, has to date achieved minimal results despite $100 million in climate finance and substantially more funding in the form of concessional loans. In the hope more funding is the answer, donors have pledged over $14 billion in new support.

· Most mitigation projects such as solar and wind power generate revenue attractive for commercial investors, particularly as their costs decline relative to those of fossil fuels. In contrast, most adaptation projects have not had similar commercial potential and depend on grants — although this may be changing (a possibility I address in my next blog).

· Insurance against natural disasters is another response to assisting victims of hurricanes and other extreme weather events and can be designed to promote investments that reduce vulnerability, such as raising buildings in coastal areas and using fire retardant materials in areas prone to wildfires. However, flood insurance administered poorly as in the U.S. can incentivize rebuilding in flood-prone areas, sometimes multiple times, increasing vulnerability.

· Modifying the design of large dams and other expensive long-lived infrastructure to account for expected climate change requires numerous difficult assumptions about how much the planet will warm and with what consequences. Consequently, project designs are in part dependent on still to be made decisions about reductions in GHG emissions. It’s also a moving target — planning for sea level rise will differ depending on whether plans are for 10, 20, or more years hence.

· The absence of good metrics for measuring improvements in resilience, reduced vulnerability to climate impacts, and the number of expected beneficiaries, is another challenge. As benefits are future harm avoided, estimation is inherently difficult. But almost every donor climate fund requires such measures to justify their approval.

· There are limits to adaptation, e.g., as sea levels rise coastal erosion in many locations will ultimately overwhelm barriers and necessitate costly relocation to higher land.

A recent scientific paper reviewed the subset of the many thousands of papers describing adaptation efforts that include some information on outcomes, almost 1700 articles. The adaptation projects reviewed in these articles encompass an impressively diverse range of strategies including behavioral changes such as migration and adoption of more drought resistant crops; public policies such as national adaptation plans; modifications of infrastructure; and small-scale, local and regional efforts like urban heat emergency plans. Reviewing this extensive documentation of experience, the authors conclude that there is “negligible evidence of risk reduction outcomes.” They further found “a lack of evidence that well-documented limits to adaptation are being challenged or overcome.” They conclude that this inability to confidently and systematically gauge the effectiveness of adaptation-related interventions “critically limits the ability to report on and galvanize adaptation globally.” I strongly agree.

These many challenges help explain why funding for adaptation has been so limited and lagging finance for mitigation. In Part 2 of this blog, I discuss some signs of progress that may help overcome these obstacles.

Alan Miller is a former climate change officer in the International Finance Corporation (2003–13) and climate change team leader, Global Environment Facility (1997–2003)