{"id":2260,"date":"2018-08-01T09:26:20","date_gmt":"2018-08-01T13:26:20","guid":{"rendered":"http:\/\/lifeaftercarbon.net\/?p=2260"},"modified":"2018-08-02T09:00:49","modified_gmt":"2018-08-02T13:00:49","slug":"climate-money-trap-so-many-adaptation-finance-innovations-but-what-do-they-add-up","status":"publish","type":"post","link":"https:\/\/in4c.net\/2018\/08\/climate-money-trap-so-many-adaptation-finance-innovations-but-what-do-they-add-up\/","title":{"rendered":"Climate Money Trap: So Many Adaptation Finance Innovations, But What Do They Add Up To?"},"content":{"rendered":"

Update for an INC project – Feedback welcome!<\/em><\/strong><\/p>\n

For the past few months. John and I have been working with partners at Meister Consultants Group and Ramboll to understand the challenges and opportunities facing cities trying to fund their climate adaptation plans. It’s no secret that finding money is proving to be a big barrier to advancing urban adaptation, as we discussed in Essential Capacities for Urban Climate Adaptation<\/a>. So it’s no surprise that lots of people–cities, NGOs, government policy makers, financial institutions, insurance companies, and others–are trying to do something about it. We’ve identified more than 30 innovations or revisions of current financial practice that are in the works, almost all of them at experimental scale. Now we’re thinking about what these add up to, how they contribute to the development of a system\u00a0for urban climate finance<\/strong>.<\/em> Below we provide a summary list of these various projects, divided into 6 categories based on what the goal is, and then some initial thoughts about what it looks like to shape these blooming flowers into a well tended garden. The categories:<\/p>\n

A. Generating Public Revenues<\/p>\n

B. Managing Financial Risk<\/p>\n

C. Balancing Burdens and Benefits<\/p>\n

D. Aligning Public Policies<\/p>\n

E. Leveraging\/Catalyzing Private Capital<\/p>\n

F. Revising Government Jurisdictions<\/p>\n\n\n\n\n\n\n\n\n\n\n
A1<\/td>\nImprove cost-benefit analysis (CBA) to make the case for public return on resilience-project and plan investments, including valuation of environmental services. In addition, CBA could be modified to include other value for a city: GHG emissions reduction, improved social and economic equity, safety, and others.<\/td>\n<\/tr>\n
A2<\/td>\nRequire that city infrastructure projects and capital budgets incorporate climate risk and vulnerability analysis and adaptation plans\u2014a way to ensure that future spending that must occur anyway contributes to resilience.<\/td>\n<\/tr>\n
A3<\/td>\nUse targeted federal Disaster Recovery funds (already in state government hands) for pre-disaster planning in eligible communities.<\/td>\n<\/tr>\n
A4<\/td>\nDevelop ways to monetize some of the long-term value that resilience creates:\u00a0 environmental and social benefits, future loss avoidance (insurance); and future cost avoidance (public and mental health).<\/td>\n<\/tr>\n
A5<\/td>\nUse district-level financing mechanisms (property tax or user fee surcharges or incremental property tax value capture) to fund district-specific resilience projects.<\/td>\n<\/tr>\n
A6<\/td>\nIssue \u201cresilience bonds\u201d that generate risk-reduction rebates from a city\u2019s catastrophe insurance premiums to pay for resilience projects.<\/td>\n<\/tr>\n
A7<\/td>\nCreate local stormwater markets and credit trading.<\/td>\n<\/tr>\n
A8<\/td>\nCreate new state government revenues (e.g., surcharges on property insurance premiums or carbon taxes) to fund risk-reduction interventions.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n
B1<\/td>\nDevelop metrics and disclosures that enable financial markets to incorporate risk more accurately into asset values and interest rates<\/td>\n<\/tr>\n
B2<\/td>\nPackage bonds for city adaptation projects with climate-risk insurance to strengthen debt repayment likelihood.<\/td>\n<\/tr>\n
B3<\/td>\nUse \u201cpay for performance\u201d design in Environmental Impact Bonds, which make the amount of payments to lenders contingent on performance of the adaptation measures, such as green infrastructure.<\/td>\n<\/tr>\n
B4<\/td>\nRequire the purchase of extreme weather insurance tied to mortgages.<\/td>\n<\/tr>\n
B5<\/td>\nPrepare accurate flood-risk maps for cities and making them available to the public<\/td>\n<\/tr>\n
B6<\/td>\nPrepare city resilience plans and flood-risk maps based on insurance loss data from the insurance sector, which enables insurers to show reinsurers the city had reduced risks by taking due to adaptation strategies and this resulted in favorable reinsurance contracts<\/td>\n<\/tr>\n
B7<\/td>\nSupport bond-rating agencies to build the technical capacity to assess cities\u2019 climate risks and adaptation plans.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n
C1<\/td>\nDesign city adaptation investment plans to combine citywide revenues, district-scale revenues, and incentives for private investment in ways that are fair and equitable<\/td>\n<\/tr>\n
C2<\/td>\nUse community-based organizations and financial institutions to develop and finance projects that advance economic and social equity in the city.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n
D1<\/td>\nReplace National Flood Insurance Program with lower-cost state program. (Where participants in NFIP have paid more than benefits received, potential is to replace NFIP with a state-controlled model.)<\/u><\/td>\n<\/tr>\n
D2<\/td>\nIncrease participation in FEMA Community Rating System in which municipalities earn credits (discounted NFIP premiums up to 45%) for different flood-reduction activities. All buildings receive same discount. Only 5% of 22,000 eligible NFIP communities participate; FEMA looking to expand and use structure-based pricing system.<\/td>\n<\/tr>\n
D3<\/td>\nUse FEMA to facilitate a market for cities or groups of cities to obtain pooled low-cost disaster insurance coverage.<\/td>\n<\/tr>\n
D4<\/td>\nUse risk-adjusted insurance premiums and longer-term property insurance policies, which typically run for only a year.<\/td>\n<\/tr>\n
D5<\/td>\nRequire climate-risk disclosure for properties for sale.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n\n
E1<\/td>\nIssue municipal \u201cgreen bonds\u201d to attract capital to bundles of resilience projects.<\/td>\n<\/tr>\n
E2<\/td>\nEstablish public-private partnerships to bring private expertise and capital to the design, financing, construction, operation and\/or maintenance of a publicly owned asset, with contracted payments based on project revenues.<\/td>\n<\/tr>\n
E3<\/td>\nProvide government credit enhancement for private investment\u2014e.g., loan reserves and guarantees, first-loss position.<\/td>\n<\/tr>\n
E4<\/td>\nUse Green Bank loan programs to property owners to increase resilience.<\/td>\n<\/tr>\n
E5<\/td>\nExpand city \u201clinkage payment\u201d system for parcel-level development to obtain private funding for resilience projects.<\/td>\n<\/tr>\n
E6<\/td>\nUse density bonuses and other development incentives to induce investment in resilience strengthening.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n\n\n\n\n\n\n\n
F1<\/td>\nJointly plan and finance infrastructure investments across municipal and utility jurisdictions, including the creation of single entities, such as flood and resilience districts to conduct this integrated work.<\/td>\n<\/tr>\n
F2<\/td>\nCreate special-purpose resilience and\/or flood districts.<\/td>\n<\/tr>\n
F3<\/td>\nDevelop coastal master plans that cover numerous communities.<\/td>\n<\/tr>\n
F4<\/td>\nDevelop alternative business models for infrastructure sectors, including utilities, which need to finance substantial adaptation infrastructure.<\/td>\n<\/tr>\n
F5<\/td>\nStrengthen the capacity for district-scale planning, financing, and operations in a city, including the ability to align and coordinate with the city and negotiate with property owners and residents in the district.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Accelerating and expanding the development of an urban climate-financing system could follow several approaches:<\/p>\n