Equity and cost-effectiveness of multilateral adaptation finance - are they friends or foes?

Abstract

This paper analyses potential criteria to allocate international funding for adaptation to climate change, as a response to one of the main governance challenges of international adaptation funding - the prioritization of project proposals given scarce funding. Based on the review of the equity and cost-effectiveness literature and relevant policy documents, we identify three indicators for equity (vulnerability level, poverty, number of beneficiaries), and three indicators for cost-effectiveness (economic savings in absolute and relative terms, human lives saved). Applying these simple indicators to information provided in 16 project documents considered by the Adaptation Fund Board (AFB) in 2011, we find that projects approved by the AFB rank high according to one costeffectiveness indicator (absoluteeconomic savings), while they rather rank low according to all equity and further costeffectiveness indicators. Furthermore, we analyse whether ‘equity’ and ‘cost-effectiveness’ are two contradicting principles, or if ways can be found to reconcile both principles in multilateral adaptation finance. We conclude from both theory and the 16 analysed projects that a pure economic definition of cost-effectiveness is in contradiction with equity but tradeoffs between equity and cost-effectiveness can be limited if relative wealth savings, and other indicators, e.g. human health, are used as indicator for cost-effectiveness