From public to private climate change adaptation finance: Adapting finance or financing adaptation?

Abstract

Private financing is the latest mark of the privatisation of global governance. The implementation of international agreements in the fields of environment, climate change and development has always been supported by public finance from developed countries. This tradition is broken by a transmutation towards private financing. This started in 2009 with the Copenhagen Accord of the UN climate negotiations and is also visible in, among others, the 2012 United Nations Conference on Sustainable Development and the Sustainable Development Goals (SDGs) that were agreed upon at the 2015 Sustainable Development Summit. In the Copenhagen Accord, developed countries pledged to mobilise US$ 100 billion of climate finance annually by 2020, and included the private sector as a source of finance. However, the potential of private financing remains unclear. This dissertation studies the conditions under which private finance can effectively address climate change adaptation in developing countries. Research is based on participant observation; the analysis of international agreements, other negotiation outcomes, policy documents and business cases; and in-depth semi-structured interviews. This dissertation demonstrates that the private sector is currently not held accountable for adaptation finance or adaptation expenditure. It also demonstrates that there is little evidence that mobilised private adaptation finance leads to desired adaptation outcomes; and that the current institutional design is ineffective in mobilising substantial private adaptation finance that contributes to the US$ 100 billion target. Finally, this dissertation concludes that the allocation of private finance does not meet the criteria of the UNFCCC: it is neither balanced between adaptation and mitigation nor does it prioritise the most vulnerable developing countries. If its aim of the mobilisation of private finance is to reach the US$ 100 billion target, the transmutation towards private financing is ineffective in the field of adaptation. The institutional design of the climate finance regime would need to become more static and integrated. An alternative aim would be to focus on ‘adaptation output’ through private sector engagement. This dissertation proposes to maximise the mobilisation of private investments in resilience and reducing vulnerability, regardless of whether these could constitute climate finance or not. Public finance from industrialised countries could then be prioritised towards the countries that are most vulnerable to climate change.