The financing gap for climate adaptation is huge- it is estimated that developing countries need somewhere between US$70 to $100 billion per year through 2050 to meet current and future adaptation needs, and that’s on the low end! A more recent report from the United Nations Environment Programme – (UNEP) projects costs to be as high as US$250-500 billion per year until 2050. In 2012-2013 public sources for adaptation financing were a mere US$23-26 billion. Clearly there is a need to fill this gap.
Attracting climate finance from the private sector could be part of the solution; however unlike financing mitigation efforts it has proven to be much more difficult to encourage direct private sector investments in adaptation as it tends to be perceived as a public good with limited opportunities for profit.
One way in which the private sector can begin to support adaptation activities is through their corporate sustainability programs, which often include carbon offsetting as a means to meet their commitments to carbon neutrality. In 2013 the voluntary offset market generated approximately US$379 million from buyers who are choosing to offset their emissions. The carbon market offers a wide selection of projects to select from including geographic location; project type which may include renewable energy generation, landfill methane capture, reforestation and forest conservation.
Price can range from US$2.00 tCO2eq to $10 tCO2eq. Buyers who simply want to meet their carbon commitments may opt for lower priced projects, while those that are driven to combat climate change may be more attracted to projects that offer climate benefits and have strong co-benefits for communities and the environment, which can increase their resilience to climate change. However, these projects that tend to have a more appealing story to tell often come at a higher price, and so buyers are faced with the decision of purchasing what appears to be the same thing (tCO2eq) but at very different costs.
I recently traveled to northern Nicaragua to visit a carbon offset reforestation project that is supporting smallholder farmers to plant trees on degraded areas of land. Visiting the farmers’ fields the benefits beyond carbon mitigation become clear: the land that had been treeless is now growing a closed canopy; the biodiversity has increased; and the socio-economic conditions of the farmers have improved as one farmer explains how he has used the additional income generated from the sale of carbon credits to help pay for his son’s school tuition and to cover some unexpected hospital bills. The project generates new employment opportunities for the community, and in particular for women, since the famers now require assistance to prepare the seedlings in the tree nursery during the dry season and planting the trees during the wet season. This project is just one example of how carbon mitigation efforts can strengthen the resilience of communities and the environment to adapt to climate change through the diversification of income and enhancement of tree cover, biodiversity, soil and water restoration.
Organizations that are truly concerned and committed to the climate cause can use their corporate commitment to carbon neutrality to contribute to filling the adaptation financing gap by purchasing offsets in projects that strengthen the resilience of communities and the environment in developing countries to cope with climate change.
The Inter-American Development Bank (IDB) has been Carbon Neutral since 2007 and is committed to purchasing offsets from projects in Latin America and the Caribbean region. In 2014 the Bank purchased 24,000 tCO2eq from Taking Root’s CommuniTree carbon program, which generates carbon credits from a smallholder reforestation initiative in the northwest of Nicaragua. Aside from the mitigation benefits (256, 604 tCO2 eq reductions) the additional co-benefits include:
- Improved livelihoods for up to 305 smallholder families.
- New employment opportunities for men and women (799/207).
- $612,568 (equivalent to 557 annual salaries) has been paid to the community.
- Trees planted: 1,183,642 and number of species recorded 71.
- The future sale of timber will allow farmers to diversify their income.
- Enhanced watershed protection, biodiversity and soil restoration.
Photo: Aaron Escobar