Without climate change, GDP in South Asia would most likely increase by four or ﬁve times above current levels by 2050. However, climate change will lead to loss and damage that is likely to limit the increase to only two or three times. Some of this loss and damage is unavoidable, but in other cases, there are many adaptation actions that can limit the problem. Some of these actions can be taken by the private sector, including farmers and businesses as well as individuals. Others are the responsibility of national and subnational governments.
Many governments have prepared strategies and plans that list key climate change actions and are using these to guide proposals for obtaining ﬁnance from core budgets and climate funds. But the challenge facing governments is that most adaptation actions are primarily standard development actions that provide strong beneﬁts before climate change is taken into consideration. Many of these actions become even more important and cost eﬀective when you take climate change into account. To address future problems more directly, climate change impact assessment (CCIA) assesses the extent to which actions will become beneﬁcial when climate change is taken into consideration.
Assessing climate change relevance
CCIA assesses the climate change relevance (CC%) of an action by comparing the beneﬁts of an action when climate change is taken into account with the beneﬁts when it is not. For adaptation actions, the diﬀerence is the reduction in loss and damage. For mitigation actions, the diﬀerence is the reduction in greenhouse gas emissions. The climate change relevance tells you the percentage of added beneﬁts related to climate change. This can be used to allocate additional funding for climate actions, and to monitor the use and eﬀectiveness of funds for climate action (see example below).
Adopting a standard deﬁnition for CC% helps to promote objectivity and build credibility amongst funders, including budget departments and climate funds. The aim is to help guide marginal shifts in resources towards climate change-sensitive actions with the highest set of beneﬁts.
Estimating climate change relevance
Beneﬁts and CC% can be estimated using cost–beneﬁt analysis (CBA). However, CBA places heavy demands on scarce economic skills and should be reserved for major investment projects. In most cases, beneﬁts can be estimated more quickly, relying on expert opinion and/or community participation, informed by whatever quantitative evidence is easily available.
For example, let’s consider a project that promotes community forestry and forest conservation. There are numerous beneﬁts provided–income from sustainable logging, ecotourism, biodiversity protection, conservation of genetic resources, and reduced soil erosion and ﬂooding from protecting certain areas under forest cover. When you take into account climate change, there are additional beneﬁts derived from the carbon sequestered in growing trees, and from the reduction in ﬂooding that occurs as extreme storms become more frequent.
The table below presents the net present value of the beneﬁt estimates from a CCIA analysis.
The CC% of 25% is illustrated below as the extracted portions of the pie chart.
International experience with estimating CC% has provided some standard default ranges that can be used to crosscheck estimates. Examples of these ranges are shown in the table below.
Using CCIA to reﬁne programme design
Although estimating beneﬁts is relatively simple, using expert opinion, CCIA does require programme designers to understand the risks of climate change, and how each of their programme beneﬁts is aﬀected by these risks over time. Hence, it promotes programme design that is sensitive to climate change. This is the most important role of CCIA.
Using CCIA to promote funding
Using CCIA to estimate the relative importance of additional climate beneﬁts should strengthen applications for funding, both from government budgets and from climate funds.
Initially, budget departments can be sceptical about climate change, because they receive many claims from inter-sectoral interest groups. These are often qualitative claims about the objectives of programmes that are diﬃcult to evaluate. But budget departments may be persuaded to use CCIA because projections allow departments to more eﬃciently target climate related expenditure towards activities with the largest climate change relevance. Budget departments are also impressed by any proposals that are supported by rigorous and objective policy analysis.
The signiﬁcance of CCIA in applications for climate funds is still evolving. Most climate funds require applications to include an assessment of ‘co-beneﬁts’ which provides a rough indication of the relative importance of climate change and development beneﬁts. The implicit assumption is that applications should have strong climate change beneﬁts, but also good development beneﬁts. CCIA provides an objective tool for making that assessment.
Integrating CCIA into planning and budgets
CCIA is being used in climate change ﬁnancing frameworks (CCFFs) in a variety of countries in South and Southeast Asia, including Cambodia, India, Indonesia, Nepal, Pakistan and Thailand. To date, this work provides policy context that shows the beneﬁts of climate change-related expenditure, but generally it has not yet become embedded in planning and budget procedures. Thailand, however, is beginning to integrate CCIA into budget procedures.
ACT is supporting the use of CCIA through a sample of actions in Maharashtra and as part of CCFF-related work in four Indian states, and in Afghanistan, Nepal and Pakistan. Elements of CCIA are already included in the support that ACT provides to help governments access climate funds; ACT aims to strengthen the consistency of this work.
This CCIA support is part of ACT’s broader role of working with government partners to help them develop their own response to climate change.
(Header photo credit: sta)