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Q&A: Åsa Persson on the feasibility of adaptation finance ‘markets’

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Written by Marion Davis

Monday, 07 November 2011 16:55

drought-resistant-slide
Adaptation in agriculture: drought- and flood-tolerant crops in Bangladesh. FLICKR / OneWorld UK

Carbon markets have been a major source of private-sector funds for climate mitigation. But could the same occur with adaptation? SEI research fellow Åsa Persson discusses her new paper on this question.

Q: What led you to write this paper? Are people considering adaptation ‘markets’?
A: They are, indeed, looking at the possible role of market mechanisms for raising and distributing adaptation finance, to meet the challenging goals set in the Copenhagen Accord. This paper evaluates whether adaptation so far has been ‘commodified’ as carbon effectively has been, with emission trading systems and voluntary offset markets.

Q: You conclude that adaptation benefits don’t easily lend themselves to this purpose. Why not?
A: I argue that adaptation cannot be seen as a ‘commodity’ – as of yet, anyway – because there is no effective demand for adaptation credits. We don’t have an international allocation of ‘national adaptation quotas’ in the same way as Kyoto Protocol emission targets, which would have to be the basic rationale of a crediting scheme.

Woman-water-USAID
WOMAN COLLECTING WATER / FLICKR-US AID

Q: You mention another option, getting credits for adaptation investments made. Could that be viable?
A: That seems to be a better description of what is taking place. With the pressure of reporting fast-start climate finance, the need to find adaptation projects to spend money on has increased. The obvious risks are that funds are spent with too little concern for the benefits they generate or who the beneficiaries are, and that there’s not enough time to ensure high-quality projects with effective monitoring and evaluation. But at the same time, there is an urgent need for adaptation investments in many places.

Q: Are there other viable ways to attract private-sector financing for adaptation?
A: One idea is that firms participating in emission trading schemes could, in addition to buying emission reduction credits to stay within their allocation, also buy adaptation credits or vulnerability credits. This is a very new idea and merits discussion.

Q: What kinds of issues would have to be resolved to do that?
A: The first question is, how would we arrive at uniform measurement and metrics for ‘adaptation units’ or ‘vulnerability reduction units’? My paper explains that most of the adaptation literature suggests that it is a very location-specific phenomenon, and beneficiaries could value the outcomes differently (e.g. health, ecosystem and financial benefits). In contrast, mitigation investments generate global benefits, and uniform metrics exist and are less disputed.

Second, the benefits of adaptation investments may not materialize in the short term, which creates attribution problems. And third, there are quality concerns: how to ensure incentives for long-term results as opposed to short-term revenue opportunities for project developers.

Q: What is the take-away from your paper?
A: I think it raises important issues on the political economy of adaptation finance: how to balance efficiency and equity concerns to generate the greatest benefits but not compromise the need for basic levels of adaptation for all and how to better monitor and evaluate adaptation projects in a way that makes sense for the local communities and beneficiaries involved.

Learn more and download the working paper
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