13.3.3.8 Adaptation

The element of adaptation in international climate agreements has been far less explored to date than mitigation.^[44] While most authors agree that adaptation is a vital part of a future agreement (although Schipper (2006) suggests that it was not a key focus of the initial UNFCCC negotiators), there is little mention in climate change literature of concrete proposals detailing the actions or obligations that should be undertaken by countries. Most proposals focus on leveraging funding for adaptation activities with an additional set of proposals addressing more specifically the links between adaptation, vulnerability and development agendas (see, for example, Najam et al., 2003).

Parry et al. (2005) develop an assessment of how adaptation may be incorporated into a future climate change architecture. They begin by noting that much of the adaptive response is likely to be local and, consequently, it is less conducive to a common international approach. Instead, they argue that a key need will be for efforts to incorporate adaptation into development policies and practices, including local, sectoral and national decision-making – a process they refer to as ‘climate-proofing’. At the local level, this would incorporate strategies for municipal planning, including developing and maintaining seed banks, emergency preparedness services and community social services. At the sectoral level, it would include efforts to build climate into infrastructure design and maintenance codes and standards. At the national level, it would include integration into national planning and budget processes – for example, by examining whether planned expenditures will increase exposure to the impacts of climate change – and by doing so, minimize the financial risk, promote macro-economic stability and set aside sufficient funds to manage the consequences of climate shocks. Finally, at the international level, they suggest that key opportunities exist for integrating adaptation into the Millennium Development Goals and into lending practices of international institutions and bilateral aid agencies.

Three funds have been created under the UNFCCC and the Kyoto Protocol to manage adaptation issues: the Least Developed Countries Fund, the Special Climate Change Fund (both under the UNFCCC) and the Adaptation Fund (under the Protocol). In addition, the GEF has been requested to consider adopting more flexible approaches to funding adaptation (though this may not happen with core GEF funds, but with new money from these other funds that would be disbursed by the GEF).

Corfee-Morlot et al. (2002) suggest that it would be unrealistic to expect the GEF to cover the full cost of adaptation as such expenses would quickly exhaust their resources. Huq and Burton (2003) propose integrating adaptation into the mainstream work of development agencies, thereby allowing for more cost-effective and wider ranging support. However, as noted by Huq and Reid (2004), doing so runs the risk of diluting other existing aid efforts – which often have considerably higher priorities in-country than climate change adaptation.

The potential role for private (and public) insurance has also been suggested as a possible mechanism to pay for adaptation (e.g. Bals et al., 2005). Parry et al. (2005) list possible insurance schemes and risk transfer instruments, including:

• An international insurance pool (a collective loss-sharing fund to compensate victims of climate change damages);
• Public-private insurance partnerships (where the insurer is the government, but policies are developed and managed by the private sector);
• Regional catastrophic insurance schemes (regional cash reserves are pooled through mandatory contributions from member governments, and reserves are used for weather-related catastrophes);
• Micro-insurance (risk pooling for low-income individuals affected by specific risks);
• Catastrophe bonds (giving private insurers protection against extreme events; capital is provided by large institutional investors);
• Weather derivatives (financial mechanisms to hedge financial risk from catastrophic weather events)
• Weather hedges (providing protection for farmers; currently sold by banks, farm cooperatives and micro-finance institutions).