USA - A radical idea to fund climate adaptation globally
A lawsuit brought by a smallholder Peruvian farmer holding the biggest polluter in Europe responsible for its historic greenhouse gas emissions is currently making its way through the German court system — and with it brings a potential paradigm shift in the way that the private sector approaches climate change.
For the first time, if successful the lawsuit would hold the high-emitting German utility RWE liable for damages to this farmer, Saul Luciano Lliuya’s, property proportionate to its historical emissions (melting snow and ice from a nearby mountain summit threaten to overflow the lake in his small town). It could also have to pay for the required adaptation response, such as covering the cost of a much bigger dam and/or a pumping system at the glacial lake.
It’s not just Lliuya and his neighbors — around the world, those facing disproportionate amounts of climate change impacts are in low-income and developing countries in the Global South that are historically least responsible for the emissions causing these climate changes. But they lack the resources to fund adaptation projects that will help them survive these impacts. In fact, controversially, financing long promised by the Global North has never materialized.
As courts reckon with legal issues of responsibility for climate change, we need another force to step in and help with these issues: global capital markets. While companies are turning to markets to deal with renewable energy credits and carbon sequestration credits, they’re ignoring funding urgently needed climate adaptation — which they have contributed to the need for.
We need a new system that gives companies the opportunity to privately fund climate adaptation measures, in order to recompense their historical emissions and the damage that these emissions have caused. This market-based mechanism would help companies be shielded from lawsuits like this one, as well as voluntarily opt in to new corporate environmental social and governance (ESG) efforts.
An adaptation credits marketplace would function similarly to carbon marketplaces. One adaptation credit would be equivalent to a carbon credit valued at the social cost of carbon: $51/ton (the latest estimate from the Biden administration). Companies could buy credits for various projects; for example, a corn farmer in India, who would need to invest $10,000 for a 5-acre farm to reduce his vulnerability to climate impacts via investing in drip irrigation, drought-resistant seeds, etc., would need about 200 credits. Credits for hundreds of corn farmers could be pooled by the local co-operative and listed on the adaptation marketplace, where corporate buyers such as Microsoft, Shell, and others can participate. Shell as an example contributed nearly 32 billion tons of carbon dioxide equivalent of emissions between 1750 and 2018 — it could buy up to 32 million adaptation credits globally, helping fund a plethora of projects (the actual number may vary depending on the number of carbon offsets bought by Shell already). This would unlock up to $1.6 billion into adaptation funding from Shell alone for adaptation in developing economies.
A climate adaptation credits marketplace would be a tangible way for companies to make amends for historic emissions in the communities they have most affected, even if those are across the world from headquarters. The Googles of the world could provide funding for drought-resistant seeds for the drought-ridden smallholder farmers in the Horn of Africa; the Microsofts of the world could finance coastal restoration measures in Pacific Island nations facing sea-level rise.