COP28 crunch time, climate tipping points terror, and more

COP28 Adaptation Agenda in Jeopardy

We’re into the COP28 endgame, and pressure-cooker negotiations over the set of legal texts that will emerge from the summit are threatening to boil over, especially on the contentious issue of fossil fuel phaseouts. Head over to CarbonBrief’s comprehensive negotiating texts tracker to follow all the twists and turns as the conference hurtles to its denouement.

On the climate adaptation front, despite progress initializing the loss and damage fund, current negotiating texts lack specifics on the Global Goal on Adaptation (GAA), which is supposed to establish a way forward on adaptation support and financing for climate-vulnerable nations.  As of December 10, the GAA texts remain fuzzy on target setting and financing.

Beyond the wrangling over the summit’s legal texts, countries continue to make progress adding to the global kitty for adaptation finance. The Natural Resources Defense Council’s climate finance tracker shows that US$165m had been pledged to the UN’s Adaptation Fund as of December 9, with multimillion dollar contributions made by Germany, Sweden, and Denmark – which donated for the first time.

However, major polluting nations including the US, China, and the UK have yet to chip in this year. The European Commission is having trouble finding its wallet, too. As it stands, the fund is well short of its US$300m fundraising target for 2023. Even this stretch goal is far less than the US$215bn - US$387bn in adaptation financing per year that the United Nations Environment Programme (UNEP) believes is necessary for the developing world alone.

Of course, not all adaptation-focused financing is going into this specific Adaptation Fund. COP28 hosts the United Arab Emirates pledged US$30bn for a fund dedicated to various climate initiatives, with US$5 billion earmarked specifically for the Global South, reflecting a recognition of the disparate impact of climate change on less affluent nations. Eight donor governments — Belgium, Canada, France, Germany, Norway, Spain, Sweden, and the United Kingdom — also committed a collective US$174.2m to the UN’s Least Developed Countries Fund (LDCF) and Special Climate Change Fund (SCCF). These funds, managed by the Global Environment Facility (GEF), are used to help the most vulnerable countries combat climate impacts.

Movers and shakers in the private sector have also been pressing the economic case for greater investment in adaptation. Boston Consulting Group (BCG) and the Global Resilience Partnership (GRP) — a coalition of over 70 public and private entities — published a study that lays out why the private sector should invest in adaptation.

Among the highlights, the study suggests that for every dollar spent on adaptation measures, companies could see a return ranging from US$2-$15, and even up to US$53 in some cases. It also claims that businesses contributing to this sphere could experience valuations up to 9x their current revenues, with some even seeing valuations top 77x.

Of course, the study adds that to unlock this value for the private sector, governments have to provide the keys, in the form of “catalytic financial tools” and technical assistance. Many reports on promoting climate finance say the same — incentivizing the private sector to pay for adaptation (and mitigation) solutions first requires the public sector to lay the groundwork and provide some kind of guarantee over the long-term benefits or security of these investments. This is true even when such investments would benefit private entities directly, as in the case of adaptation solutions that safeguard their supply chains and physical infrastructure.  

This framing shifts responsibility for stimulating adaptation spending on governments, which in many cases may not have the data, expertise, resources, or time — given electoral pressures — that the private sector has to get the job done.

The Terror of “Tipping Points”

How to adapt to a world utterly transformed from the one we know today? That’s the challenge posed by the Global Tipping Points report, which landed last Wednesday.

The product of over 200 researchers from 26 countries, the report warns of the world’s nail-biting proximity to various planetary “tipping points” due to climate change. These points, once crossed, could lead to catastrophic and irreversible effects on the critical natural systems that underpin human well-being — and overturn society’s assumptions on adapting to climate impacts, too.

Twenty-six potential climate tipping points are highlighted in the report, emphasizing immediate risks to global coral reefs, ice sheets in Greenland and West Antarctica, and the Amazon rainforest, alongside other critical ecosystems — even at current warming levels. These changes could have far-reaching impacts, including sea-level rise and carbon release, exacerbating climate challenges.

The report also stresses the need to rethink climate adaptation in light of these looming threats. While it admits that some progress has been made on global adaptation efforts, it adds that there is still a long way to go, and tipping point risks have yet to be fully integrated into many adaptation plans. It also makes the alarming claim that in some regions the consequences of tipping point breaches could overwhelm even the best adaptation efforts.

The outlook may be gloomy, but it’s no reason to dispose of adaptation altogether. What it should prompt is a broadening of what adaptation means. For example, where realized tipping point impacts are the most severe, the planned relocation of infrastructure, assets, and entire communities will become increasingly necessary. Ahead of tipping points being breached, adaptation may also mean taking steps to increase the capacity of communities and ecosystems to withstand and bounce back from the expected shocks. There’s also a call in the report for an embrace of “response diversity” — put simply, the implementation of multiple fail-safe measures should preferred adaptation methods falter.

In the immediate term, the report recommends that existing risk assessments start factoring in potential tipping point impacts and calls for improved interdisciplinary and cross-regional collaborations on the topic.

It also urges action on “positive tipping points” of social, political, and economic origin that could accelerate climate action and lower the risk of certain negative tipping points being breached altogether. Governments and non-state actors are urged to find ways to enable these positive tipping points, for example by accelerating investments in renewable energy and promoting the adoption of electric vehicles.

War bonds for climate

Illinois senator Dick Durbin wants the US to start financing climate resilience like it’s fighting a war — literally. Last Wednesday, the veteran lawmaker reintroduced the Climate Change Resiliency Fund for America Act, an ambitious piece of legislation aimed at raising up to US$1bn a year for adaptation purposes.

The bill borrows from the national war bond program of World War II by proposing the issuance of tax-exempt “climate bonds” by the Department of Treasury. These bonds, with a potential annual issue ranging from US$200m to US$1bn depending on public demand, are designed to engage Americans in supporting climate resiliency initiatives.

The funds generated via the bond sales would be managed by the Department of Commerce, which would allocate the cash to a wide range of projects in infrastructure and planning. The focus is on enhancing resilience to various acute and chronic physical risks — particularly in low-income areas, and among communities of color, which are generally the most exposed and vulnerable to climate shocks. 

Durbin last tried to get this bill off the ground in 2021, when it died in Congress without a vote. An earlier attempt was made in 2019. With the Senate almost evenly divided and the House under Republican control, the chances of this go-around having a different ending are slim to none.

Still, it’s an indication that innovative thinking on climate adaptation financing is alive and well in the halls of Congress, and in particular that the concept of specialized bonds for environmental and social causes that are popular in the private sector (think green bonds and sustainability-linked bonds) can apply to the public sphere, too.

Nature as Infrastructure

Saturday was Nature, Land Use, and Ocean Day at COP28, which countries marked with a flood of new commitments and financing pledges on protecting and restoring our shared “natural assets.” 

Ending nature loss and restoring ravaged ecosystems should yield tangible climate mitigation and adaptation benefits. For example, mangrove forests are excellent natural defenses against coastal flooding. However, the prevailing economic imperative frames natural assets as resources to be exploited, rather than public goods to be preserved.

Certain organizations are rallying to change things. Earlier this month, the Asian Infrastructure Investment Bank (AIIB) promoted the concept of “Nature as Infrastructure” in a new report. This approach to natural ecosystems emphasizes how they provide tangible services to human society — such as water purification, flood protection, and climate regulation, while simultaneously enhancing climate adaptation and resilience. This makes space for the rational valuation of these services and promotes the case for treating nature as a valuable asset class in and of itself.

The question is how to mobilize the private sector to invest more in nature protection. The AIIB has some ideas, including policy incentives, public and private financial mechanisms, and cross-sector collaborations. On the financial side, the report underlines the need to better price nature services and support the development of fancy financial instruments like KPI-lined bonds and debt-for-nature swaps, and even whole new markets for biodiversity credits.

All of this depends on natural goods and services being properly accounted for by public and private entities. If the positive externalities provided by ecosystems were appropriately priced and companies were financially penalized for activities that eroded their value, then the rigors of balance sheet accounting could go a long way to moving capital about in a climate adaptation friendly way.

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