Using a Dedicated Adaptation Financing Process to Close Subnational Adaptation Finance Gaps in Europe

There is a large finance gap between what countries and regions need for climate change adaptation and what is being supplied. Meeting regional adaptation needs is likely to require significant reform to subnational financing arrangements. In this context, institutions are developing new approaches, but these remain underexplored in the literature. In the mainstream climate finance discourse, the development of Adaptation Investment Planning (AIP) processes is emerging as a key focus for national governments – with methods emerging to translate high level ambitions into programmatic sets of bankable projects. Yet despite the importance of subnational governments in implementing adaptation, there has been little attention given to developing similar approaches at this level.

In the face of accelerating climate change risks, Europe is fostering new and innovative solutions to mobilise resources. To date, European subnational adaptive management cycles have had limited focus on addressing financing barriers. We highlight that by employing a welfare economics lens, it is possible to identify barriers to adaptation financing, and design dedicated AIP processes to address these. Drawing on the results of the Pathways2Resilience project and building on a review of 14 adaptation planning processes, we have developed a subnational Adaptation Investment Cycle and are currently testing this with 100 regions in Europe. The cycle links adaptation planning and decision-making with public financial management, investment management and development planning. We argue that this will enable subnational governments to build pipelines of adaptation investments and strengthen enabling environments, whilst also improving governance and facilitating wider financial reform. We conclude by evaluating limitations and recommending areas for further research.