Analyzing the coordinated impacts of climate policies for financing adaptation and development actions

Climate change might be seen as a remote issue compared with more urgent problems, as poverty, disease and economic stagnation. However, it can directly affect the efficiency of resource investments and eventually hinder the achievement of many development objectives. There is therefore a need to link climate change considerations with development priorities. Considerable research has already been done on climate change mitigation but much less attention has been paid to make development strategies more resilient to climate change impacts. Lack of awareness of climate change within the development community and limitations on resources to implement response measures are the most frequently cited explanations. Mainstreaming climate policies could also prove difficult to carry out because of direct trade-offs between development priorities and the actions required to deal with climate change. Governments and donors confronting pressing challenges, such as poverty and inadequate infrastructure, have few incentives to divert scarce resources to investments that are perceived as not paying off until climate change impacts fully manifest themselves To finance climate change adaptation investments in Least Developed Countries, official flows (as grants and loans) are significant, but a low fraction of them addresses adaptation directly. Moreover, tight budgetary constraints in many countries could hinder donors’ commitment to fight climate change and to foster development. Using a CGE model, this paper focuses on the need for financing adaptation actions in a framework of development for LDCs, considering a particular climate change impact –sea level rise. Here, we evaluate the use of a coordinated climate policy as an instrument to raise revenues, and recycle them both to finance domestic adaptation actions in developed countries and to pool them into an “adaptation fund” to finance investment against SLR in LDCs.