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Addressing Climate Change Impacts in the Sahel Using Vulnerability Reduction Credits

This chapter summarizes the structure and utility of Vulnerability Reduction Credits and shows how VRCs are created and integrated into adaptations to heterogeneous climate risks.
VRC Case Study Niger

Summary

Adaptation projects may be difficult to prioritize and finance, as the results of projects are difficult to quantifiably measure and compare across project types, and no singular “unit” for adaptation outcomes exists. The Higher Ground Foundation is developing the Vulnerability Reduction Credit (VRC™), which incorporates cost/benefit analysis and per capita vulnerability equalization tools to measure the outputs of climate adaptation projects. The VRC quantifies in a singular unit measures to reduce vulnerability to climate change.

This chapter* summarizes the structure and utility of VRCs and shows through a case study from Talle, Niger, how VRCs are created and integrated into Sahelian community adaptations to heterogeneous climate risks such as flooding and droughts. VRC analysis and crediting may serve as a monitoring and evaluation tool and as an instrument to help secure project finance while supporting sustained adaptation. The chapter further considers the potential benefits to governments, donors and economies. VRC financing has advantages over standard development assistance models, particularly for project risk management, project preparation, enhanced transparency of adaptation spend, and scaling of successful pilot projects throughout an economy.

*Download the full text from the right-hand column. Summaries of the key sections are provided below. This is a chapter form the book “Renewing Local Planning to Face Climate Change in the Tropics“, edited by Maurizio Tiepolo, Alessandro Pezzoli and Vieri Tarchiani.

The VRC Standard Framework is open for Public Review until February 28, 2018. Find out more here: https://collaborase.com/vrc-framework-public-consultation

Introduction

Sub-Saharan Africa is both particularly vulnerable to climate change and lacking sufficient adaptive capacity to address many of the impacts on agriculture, the built environment, health, and other sectors. The economic impact of climate change will be considerable.

In the context of planning processes, research has shown few examples of climate information being integrated into the planning of long-term development.

While overseas development assistance is considerable, the traditional approach (as typified by the Paris Climate Agreement) for financing climate adaptation in developing countries is to set a global monetary target, rather than focus on vulnerability reduction as the measure of results.

The role of the private sector is often taken as critical in securing sufficient finance to meet the global adaptation investment requirements. However, a major challenge for getting the private sector involved is finding sufficient justification to undertake adaptation.

The nature of much climate vulnerability is that, while economic returns from adaptation measures (that may be represented variously through avoided damage to buildings, etc.) are usually possible, financial returns (represented in direct project-level revenue streams) are much more difficult to achieve. And so the challenge can be seen as identifying and deploying mechanisms that can convert economic need into financial investment.

When resources are allocated to adaptation, there is the risk that they may be ineffective or inefficiently invested, owing to a lack of understanding of adaptation’s benefits. In part, this risk is created because of the lack of a recognized, general approach to evaluate and compare projects undertaken to reduce vulnerabilities to climate change.

For more details see section 17.1, pages 344-345 of the full text.

Methods and Tools

Without a mechanism that can allow projects to be compared, and potentially incentivized, that is free from local or other political considerations, many of the great adaptation challenges facing Africa will persist. With such a mechanism, in particular one that is fungible, has a single metric, and can be certified as a quantity of recognized “vulnerability reduction”, it is possible to:

  • Better prioritize projects (thus bringing in efficiencies that increase the potential for effectively using limited resources),

  • Serve as a means for leveraging finance from the revenue streams created, by setting a price on a quantified level of vulnerability reduction,

  • Allow for more transparent, “bottom-up” decision-making in adaptation investment, as communities, private and public adaptation technology and service providers, and project developers have a fair chance at gaining credits,

  • Serve as a positive feedback mechanism as the “market” for adaptation technologies and effective project investment and operations improves through the incentive to optimize project vulnerability reduction.

  • Create incentives for sustainable projects, as credits are issued only if projects can prove that vulnerability reduction has been ensured for a (past) period of time.

The challenges to creating such an instrument that may result in these benefits, include ensuring that it transparently, efficiently, and flexibly provides quantifiable and verifiable incentives, resulting in real and additional climate vulnerability reduction for poor communities.

The proposed instrument, designed to meet the above requirements, is the climate Vulnerability Reduction Credit (VRC™). A VRC represents avoided impact cost, normalized with an income equalization factor.

As discussed previously, this formulation is analogous to the IPCC’ s definition of climate change vulnerability as a function of Exposure (of a system to climate change), Sensitivity (of the exposed system to climate change) and the Adaptive Capacity of the system.

In generating VRCs, a project employs a cascading chain of results projection.

  • For more details on challenges see section 17.2, page 345-346 of the full text.
  • For more details on the VRC instrument see section 17.3, pages 346-348 of the full text.
  • For more details on generating see section 17.4, pages 348-350 of the full text.

Applying VRCs to Local Climate Vulnerabilities

VRCs may be used to address a number of challenges that Sahelian communities may face as they attempt to adapt to climate changes. These can be broadly divided into aiding the processes of adaptation planning and methodology development, project finance, and monitoring and evaluation.

  • For more details see section 17.5, pages 350-351 of the full text.

Outcomes and Impacts

The benefits of undergoing the above process can be considerable, and possibly transformational for the vulnerable community. By itself, of course, going through the rigor of establishing a clear and quantified vulnerability baseline, understanding how a project may reduce these vulnerabilities, and setting in place a clear monitoring framework will take time and possibly considerable expense. However, both the knowledge gained and made transparent, and the potential for VRC generation may provide a vulnerable community with:

  • Enhanced Adaptive Capacity: A much better understanding of the community’s climate adaptation needs, and improved community decisions on the technologies, practices and timing for investment, and

  • A way for the community to secure project finance that is aligned with its interests in sustained vulnerability reduction.

The vulnerable community (along with possible development partners) are able to understand and then articulate their needs through developing a VRC baseline and being able to assess the expected results (in terms of VRCs, and by extension of vulnerability reduction) of different project alternatives. As such, the community can use this clear and quantifiable understanding of its vulnerabilities as both a decision-making tool and to articulate their needs and justify donor funding. Donors will then be able to engage with the community and its adaptation partners, with the community able to describe and justify its proposed interventions.

What is perhaps the most innovative result that VRCs can offer, once a community and its partners have registered their project, is that they can then “sell” the potential vulnerability reduction to a government or donor. The vulnerability, and its reduction, transitions into being an asset for the community in its engagement with funders, and, most critically, it can offer funders a clear and relatively de-risked means of offering contingency-based finance.

There are a variety of possible financing structures that VRC generating projects could lend themselves to, with perhaps the simplest being a conventional project finance model.

Finally, the process of undertaking a VRC generating project can result in greater adaptive capacity as the community has tools and more immediate incentives to improve its “climate resilience”.

  • For more details see sections 17.8, pages 360-362 of the full text

Lessons Learnt

Climate Vulnerability Reduction Credits (VRCs™) offer communities, donors, and governments in the Sahel and around the world with a process that can help overcome a number challenges related to effective climate adaptation. As the case study shows, VRCs offer to provide a needed source of funds and expertise to local communities, while helping donors and governments deliver scalable, transparent and capacity growing vulnerability reduction where it is needed most. There is considerable work required, however, to encourage adoption of the VRC.

Suggested Citation

Schultz, K. and Adler, L. (2017) Addressing Climate Change Impacts in the Sahel Using Vulnerability Reduction Credits. In: M. Tiepolo et al. (eds.), Renewing Local Planning to Face Climate Change in the Tropics, Green Energy and Technology, Springer International Publishing AG.

DOI: 10.1007/978-3-319-59096-7_17. Online ISBN: 978-3-319-59096-7

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