Designing a funding framework for the slow-onset impacts of climate change

Jonathan Boston, Architesh Panda and Swenja Surminski suggest a series of principles to guide pre-emptive, fair and effective funding systems for planned relocation in response to slow-onset climate change impacts.

Photo (right): A deserted temple on the eastern Indian coast in the state of Odisha after villagers were relocated in 2016 due to impacts of coastal erosion over the last few decades. Photo: Architesh Panda

Financial preparedness is often considered to be important in minimising the negative social and economic consequences of disasters and for building back quickly and effectively. This is exemplified by the current unintended consequences of the COVID-19 crisis: with a lack of preemptive funding mechanisms in place at the global as well as national levels, decision-makers have largely responded reactively to finance recovery from the impacts.

In the sphere of climate change policies, it is no different. Funding and action are often directed towards recovery from the impacts of rapid-onset disasters such as cyclones, reducing the attention given to the impacts from slow-onset climate change events such as coastal erosion, desertification and sea level rise. Yet these slow-onset impacts are significantly increasing, having a detrimental effect on vulnerable populations. In some places the result is the need to completely relocate communities and assets to other locations.

The need for such relocation can be foreseen and planned in advance. Indeed, ‘planned relocation’ is already taking place and has been recognised as an important policy response to deal with the impacts of climate change. However, the need for a funding framework to enable this response has been under-emphasised.  

Here, and in our new working paper, we look at the need and current funding for planned relocation, before proposing a framework of principles to guide funding.

Planned relocation is inevitable but current funding is inadequate

Planned relocation has emerged as an important and necessary climate change adaptation response, particularly to the increased risks of coastal flooding and erosion. As part of the process, ‘managed retreat’ or ‘planned relocation’ is a deliberate intervention, usually made by public authorities, to relocate assets and people out of harm’s way. This requires significant community buy-in, acceptance and planning. Planned relocation may represent the only credible response for low-lying atoll states and other vulnerable islands to deal with such slow-onset events. However, the majority of existing laws and funding mechanisms for planned relocation are focused on sudden-onset disasters, rather than pre-emptively addressing risks and responding before damage is done.

Financing for planned relocation currently comes from a variety of mechanisms and sources, including public taxes, contingency funds, insurance instruments and international aid. However, in the majority of cases, planned relocation has been funded from the national and federal level – for example, in the US via the Federal Emergency Management Agency (FEMA) or in Vietnam via the Living with Floods programme. Low- and middle-income countries often rely on international aid and development assistance – such as the Philippines, which relied largely on international aid for disaster recovery after Typhoon Haiyan. Sub-national governments sometimes play a role, as seen in the relocation of 700 households away from the coast in the state of Odisha in India, funded by the state government (see photo). Recently, there have been cases of planned relocation that have been financed through new funding sources such as green bonds, trust funds and mitigation credits.

However, the actual implementation of planned relocation tends to be more decentralised and so there is a disconnect between funding sources and implementation. This disconnect is a key challenge in ensuring an effective flow of financing, with the typical ‘short-term view’ funding approaches still being the most prominent – responding directly to disasters via ex-post spending, rather than pre-emptive investments.

Suggested principles for a fair and effective funding system for planned relocation

We propose five high-level principles to guide the funding of planned relocation and suggest implications for policymakers regarding each principle:

1. Minimising long-term societal costs by implementing policy measures to minimise moral hazard, for example through imposing stringent restrictions on residential development in at-risk coastal areas or on flood plains (e.g. via zoning), ensuring that vulnerable communities are relocated prior to serious coastal erosion or flooding and avoiding multiple retreats by choosing safe locations for resettlements.
2. Ensuring intergenerational and intra-generational equity by recognising that recent generations are largely responsible for the adaptation costs that future generations will bear, and that current generations should contribute to these future costs. An obvious way to implement this principle would be for nations to establish sovereign wealth funds with part or all of their income drawn from taxing greenhouse gas emissions or selling emissions credits (where trading schemes exist). In this way, part of the cost of planned relocation, as well as other adaptation measures, could be pre-funded.
3. Enabling those directly affected to get on with their lives with minimal disruption and uncertainty, through well-designed planning processes and effective coordination and cooperation across different levels of government. Citizens need to be fully informed about their entitlements to public assistance, and long-term stability, certainty and longevity of funds to support relocation are important.
4. Integrating the funding for planned relocation with national strategies for sustainable development and societal resilience by integrating planned relocation into each country’s long-term development goals. In so doing, planned relocation should be reconceptualised as ‘a set of tools used to achieve societal goals’, such as greater fairness, sustainability, resilience, and community revitalisation.
5. Ensuring a high degree of transparency and accountability for the allocation of public funds to build public trust, confidence and willingness to relocate. This requires careful monitoring, accurate and reliable reporting, and flexibility on behalf of policymakers to adapt and improve arrangements as circumstances change or knowledge evolves.

Some of the costs of planned relocation should indeed be met by private sources, but public funding is essential to develop cost-effective, equitable and politically sustainable funding solutions for planned relocation. There needs to be cohesion across all levels of governance (international, national, and sub-national) to undertake relocations in a planned, proactive and equitable manner. It is imperative to focus on these slow-onset impacts of climate change, and to act on relocation before climate change causes irreversible damage to vulnerable people, assets and communities.

Read the authors’ working paper here.