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A Proposal for an Adaptation-Development Fund Based on Ex-Post Macro Indicators

Stephane Hallegatte, Discussion Paper

jeudi 3 décembre 2009, par Stéphane Hallegatte



Climate change will require significant investments in the adaptation of economies and infrastructure. To be operational, however, it is useful distinguish between adaptation per se (e.g., upgrading of existing infrastructure) and adaptation deficit reduction (e.g., construction of new infrastructure needed to cope with climate variability and change). Obviously, poorer regions and communities need to focus first on adaptation deficit, while relatively richer locations need to focus on adaptation in a stricter sense. It is unlikely that a single instrument can answer to these two needs in an optimal manner.

First international agreements have led to the creation of the Adaptation Fund (AF), and it appears that the AF is more adequate to fund strict adaptation projects than to provide funding for reducing the adaptation deficit. This paper proposes the creation of a new fund – an Adaptation-Development Fund (ADF) – that would complement (and not replace) the AF. Unlike the AF, this new fund would be incentive-based : it would not assess projects and programs ex ante, but would be based on ex-post macro indicators of vulnerability reduction, which would be used to determine the appropriate level of funding. Examples of such indicators are the number of people without access to drinking water or sanitation, or the number of people exposed to the 100-year return period flood, or the number of people living in informal settlements. In such a scheme, the amount of funding depends only on the results of actions and measures, not on their cost, leaving the recipient country free to decide on the most cost-effective approach.

Such a scheme could answer in a constructive way to current needs for adaptation, namely (1) combining adaptation needs with development strategies ; (2) ensuring that adaptation policy is country-driven, context-specific and incentive-based, preserving the recipient-countries right to design their own development strategy, avoiding micro-management at the international level, and minimizing governance issues ; (3) the need to balance in an equitable and efficient manner adaptation projects and broader vulnerability-reducing projects ; (4) the need to enhance the leverage effect of public funding to involve private capital ; and (5) the need to balance actions targeting the most vulnerable populations and the most cost-efficient projects.