Equity and cost-effectiveness of multilateral adaptation finance: are they friends or foes?

Abstract

This paper analyses potential criteria to allocate international funding for adaptation to climate change, as a response to one of the main governance challenges of international adaptation funding -the prioritization of project proposals given scarce funding. Based on the review of the equity and cost-effectiveness literature and relevant policy documents, we identify three indicators for equity (vulnerability level, poverty, number of beneficiaries), and three indicators for cost-effectiveness (economic savings in absolute and relative terms, human lives saved). Applying these simple indicators to information provided in 16 project documents considered by the Adaptation Fund Board (AFB) in 2011, we find that projects approved by the AFB rank high according to one cost-effectiveness indicator (absolute economic savings), while they rather rank low according to all equity and further costeffectiveness indicators. Furthermore, we analyse whether 'equity' and 'cost-effectiveness' are two contradicting principles, or if ways can be found to reconcile both principles in multilateral adaptation finance. We conclude from both theory and the 16 analysed projects that a pure economic definition of cost-effectiveness is in contradiction with equity but tradeoffs between equity and cost-effectiveness can be limited if relative wealth savings, and other indicators, e.g. human health, are used as indicator for cost-effectiveness.

Allocation of aid for adaptation to climate change: Do vulnerable countries receive more support?

“…Persson and Remling 2014;Remling and Persson 2015;Stadelmann et al 2014;Betzold 2015), we find that vulnerability is an important predictor for the allocation of adaptation aid. Countries that are more vulnerable to climate change Ð as measured by different vulnerability indicators Ð receive more adaptation aid.…”

“…Several studies examine funding decisions of the multilateral Adaptation Fund; they conclude that the Adaptation Fund does not accord priority to vulnerable countries (Persson and Remling 2014;Remling and Persson 2015;Stadelmann et al 2014). Robertsen et al (2015) focus on bilateral aid from seven donors to sub-Saharan Africa.…”

Limiting costs or correcting market failures? Finance ministries and frame alignment in UN climate finance negotiations

“…The third issue concerns principles for the allocation of climate finance, of which the most pertinent for this paper are efficiency and equity (see e.g. Persson and Remling 2014;Stadelmann et al 2014). Efficiency refers to the ''allocation of public resources such that net social benefits are maximised'' (Persson and Remling 2014: 489).…”

Special issue: managing fragmentation and complexity in the emerging system of international climate finance

“…Besides general assessments of overall financial flows (Buchner et al 2014) and patterns of allocation (e.g. Abadie et al 2013;Halimanjaya 2015), much research focuses on discrete institutions such as the Adaptation Fund (Persson and Remling 2014;Stadelmann et al 2014) or the GCF (Abbott and Gartner 2011) or on specific funding sources (e.g. Hepburn and Müller 2010;Hourcade et al 2012;Romani and Stern 2013;Aglietta et al 2015).…”