Editing IPCC:AR6/WGII/Cross-Chapter-Paper-2 (section)

=== CCP2.4.2 Finance ===

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Lack of financial resources is a key constraint affecting all coastal archetypes ( ''high confidence'' ; Table SMCCP2.2). Adaptation to coastal hazards is costly: the global costs of protecting coastal areas with levees (annual investment and maintenance costs) are estimated at USD 12–71 billion for 2100 with SLR up to 1.2 m ( [[#Hinkel--2014|Hinkel et al., 2014]] ). Broadly speaking, it is cost effective to contain coastal hazard risk in the short to medium term in densely populated wealthy localities by using protective works, but such measures are unaffordable in dispersed poorer coastal C&amp;S ( [[#Lincke--2018|Lincke and Hinkel, 2018]] ).

Archetypes with high adaptive capacity may currently have financial resources to meet adaptation needs, but such funding may be unsustainable in the long term. In Catalonia, while public funds are currently used to finance beach nourishment, these costs will increase with SLR and it is unclear whether public finance will remain a feasible source ( [[#Hinkel--2018|Hinkel et al., 2018]] ). Even in relatively richer municipalities, financing adaptation is constrained by other urban priorities ( [[#Bisaro--2018|Bisaro and Hinkel, 2018]] ). In Europe, shifting responsibilities from national governments to transnational and local actors has resulted in reduced national budgets for coastal adaptation investment and increased pressure on local authorities to raise public funds for adaptation without alienating electoral bases ( [[#Bisaro--2018|Bisaro and Hinkel, 2018]] ).

Locations in the Global South have limited public budgets allocated to coastal adaptation and may rely on international donor aid ( [[#Donner--2016|Donner et al., 2016]] ; [[#Araos--2017|Araos et al., 2017]] ). Such aid is often inconsistent and short term, which limits long-term maintenance of the knowledge, equipment and infrastructure needed to sustain adaptation measures beyond initial funding periods ( [[#Weiler--2018|Weiler et al., 2018]] ; [[#Thomas--2020|Thomas et al., 2020]] ), with resultant negative consequences in places as different as Kiribati ( [[#Donner--2014|Donner and Webber, 2014]] ) and Bangladesh ( [[#Hinkel--2018|Hinkel et al., 2018]] ). Donor-funded adaptation programs aimed at promoting behavioural change, for example through coastal planning or new decision-making systems, require enduring training and institutional capacity, which is difficult to upkeep after aid is depleted. Donor funding is often project based and there are few avenues available to fund the additional permanent and long-term staff needed to bolster climate change institutions. Without funding to support additional staff, existing institutions often lack the human capacity and resources needed for coastal adaptation ( [[#Ziervogel--2014|Ziervogel and Parnell, 2014]] ).

C&amp;S in the Global South also face financial challenges in addressing loss and damage due to climate-induced slow-onset and extreme events. Financial support to address both quantifiable damages and non-economic losses through measures such as climate-resilient reconstruction after extreme weather events as well as national and local-level emergency contingency funds are lacking, which has been an issue of contention in international policy arenas ( [[#Bahinipati--2017|Bahinipati et al., 2017]] ; [[#Wewerinke-Singh--2020|Wewerinke-Singh and Salili, 2020]] ; [[#Martyr-Koller--2021|Martyr-Koller et al., 2021]] ).

While coastal adaptation has largely been viewed as the responsibility of governments, private finance is increasingly recognised as necessary to help close the coastal adaptation funding gap ( [[#Ware--2020|Ware and Banhalmi-Zakar, 2020]] ). Financial arrangements for coastal adaptation measures that align public-actor and private-investor interests are suitable for a range of budgets, from USD 10,000 to 100 million ( [[#Bisaro--2018|Bisaro and Hinkel, 2018]] ). Private equity instruments that involve real estate development companies have already been successfully implemented and are most effective in urban areas with high-value real estate development ( [[#Chiang--2017|Chiang and Ling, 2017]] ). Public–private partnership equity instruments that engage construction and real estate developers have been successful for small- to medium-scale infrastructural projects. While public–private partnership bonds and public bonds have the potential to align public actors and private investors, such instruments require de-risking of coastal adaptation through enabling economic policy instruments, such as concessional loans ( [[#Bisaro--2018|Bisaro and Hinkel, 2018]] ).

Explicitly identifying the benefits, or goods and services, that are provided by coastal adaptation is critical to supplement limited government funds and engage a broader set of financial tools and actors ( [[#Woodruff--2020|Woodruff et al., 2020]] ). Matching goods and services provided by particular adaptation strategies to specific beneficiaries helps to identify the range of fair and equitable financial tools. In the Netherlands, public fundings through state, regional and local entities have independent tax revenue systems to provide the funding needed to maintain flooding infrastructure ( [[#Hinkel--2018|Hinkel et al., 2018]] ).

Given the high costs of coastal adaptation, benefit-to-cost ratios (BCR) are often used to determine the value of investing in adaptation. BCR are high for urbanised coastal areas with high concentrations of assets (13% of the world’s coastline), covering 90% of the global coastal floodplain population and 96% of assets in the global coastal floodplain ( [[#Lincke--2018|Lincke and Hinkel, 2018]] ). A global assessment shows a BCR for investing in flood protection of up to ~120 ( [[#Tiggeloven--2020|Tiggeloven et al., 2020]] ). For Europe, at least 83% of flood damages could be avoided by elevating dikes along ~23–32% of Europe’s coastline and BCR vary from 8.3 to 14.9, with higher ratios for higher concentration pathways ( [[IPCC:Wg2:Chapter:Chapter-13#13.2|Section 13.2]] ; [[#Vousdoukas--2020a|Vousdoukas et al., 2020a]] ). Globally, 40% of damages can be reduced with levees of 1 m and costs lower than avoided damage ( [[#Tamura--2019|Tamura et al., 2019]] ). For a mix of expensive storm surge barriers, nature-based solutions and flood-proofing measures for New York City, [[#Aerts--2014|Aerts et al. (2014)]] found BCRs &lt;1 for the current situation, but &gt;2 for a SLR scenario of +1 m.

However, BCR values may be low and adaptation investment may not be financially viable for small coastal settlements, less densely populated poorer coasts or isolated communities ''(medium confidence).'' Considering BCRs of protection and coastal migration across a range of SLR and Shared Socioeconomic Pathways (SSP) scenarios for the 21st century, a higher BCR was found for protection of only 3% of the global coastline protecting 78% of the coastal population and 92% of global coastal floodplain assets, while for the remaining coasts, coastal migration was estimated to be optimal in terms of economic costs ( [[#Lincke--2021|Lincke and Hinkel, 2021]] ). Considering coastal migration as part of the solution space could lower global costs in investment and maintenance for SLR protection by a factor of 2–4 in the 21st century, but would result in large land losses and high levels of migration for South and Southeast Asia in particular, and in relative terms, small island nations would suffer most. The need to consider place attachment, community relationships, livelihoods and the spiritual and cultural significance of settlements limits the application of BCR as a tool for coastal adaptation decisions in these contexts ( [[#Thomas--2020|Thomas and Benjamin, 2020]] ). Moreover, there is limited knowledge on trade-offs, including BCR, of alternative adaptation options and pathways at a global to regional scale, in particular over the long term (beyond 2100).

Even where BCR is high, finance may be inaccessible, as it is challenging to convert the long-term benefits of adaptation into the revenue streams that may be needed to initially finance adaptation investments ( [[#Hinkel--2018|Hinkel et al., 2018]] ). For example, in Ho Chi Minh City, Vietnam, despite high BCR, high costs of flood protection (USD 1.4–2.6 billion) have prevented such adaptation measures from being implemented ( [[#Hinkel--2018|Hinkel et al., 2018]] ; [[#Cao--2021|Cao et al., 2021]] ). Moreover, drawing from places as distinct as small communities in Fiji ( [[#Neef--2018|Neef et al., 2018]] ) and Belize ( [[#Karlsson--2015|Karlsson and Hovelsrud, 2015]] ), and megacities like New York City and Shanghai ( [[#Oppenheimer--2019|Oppenheimer et al., 2019]] ), BCR provides only a limited view and consideration of feasibility, effectiveness, efficiency, equity, culture, politics and power, and attachment to place has a greater chance of fostering CRD ( ''high confidence'' ).

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