Description
Regulatory and policy barriers are elements of the enabling environment that disincentivize investments in climate adaptation. They include:
Absence of climate resilience mandate: Efforts aimed at protection and/or restoration of damaged or diminished habitats can run in conflict with individual or community economic pursuits. A wildlife preserve might encroach on productive farmland or forest. Similarly, communities that earn income selling firewood (or burning wood for their own energy) could be opposed to efforts to limit harvesting. Diverse incentives need to be aligned.
Lack of enabling environment: Inadequate risk-adjusted returns where returns do not compensate investors in developing countries for the additional risk associated with unfavorable regulations and policies, including foreign investment restrictions.
Lack of regulatory incentives: Lack of regulatory incentives for climate-smart agriculture in terms of priority lending and malincentives in regulatory environments with subsidies for non-adaptive crops.
Lack of subnational fiscal autonomy: In some instances across Africa, investment in infrastructure has been tied to negative social impacts including an increased number of fatalities during construction and increased gender-based and political violence. Safeguards are especially necessary in the transport sector to reduce these risks.
Misaligned incentives for upgrading infrastructure: Climate risks widely vary across different locations and sizes, between genders, ages, and income groups. However, because data on disaster losses are aggregated at the national or regional scales, these differences are usually obscured. Moreover, the impacts of smaller everyday hazards such as heatwaves, localized flooding, and infectious diseases that routinely affect the urban poor are not well understood.
Mixed public vs. private incentives: Deployment of infrastructure upgrades to build resilience is limited by high upfront costs, uncertain returns from investments, and misaligned stakeholder incentives.
Need to balance ecosystem restoration with community needs for economic development: Adaptation projects often involve municipal or other subnational implementers. When those implementers have limited implementation capacity (to pursue finance, structure an adaptation project, or access climate analytics, etc.) project implementation and especially more complex financial approaches become difficult.
Risk attitudes of decision-makers: Multi-stakeholder solutions can create complexity for channeling funding: Developing and implementing solutions in land use and forestry involves numerous actors (e.g., communities, local governments, businesses, etc.) and flows across sectors (e.g., agriculture, watersheds, etc.). The need for coordination across these sectors, communities, and other stakeholders can make the design and implementation of funding solutions quite complex, as there will be a need to agree on and appoint or create a new single entity to be responsible for fiduciary, technical, and legal oversight.
