Policy Innovations Digital Magazine (2006-2016): Commentary: Principle vs. Practicality: A Closer Look at the Ethics of Climate Change Adaptation Finance

In "Adaptation Finance: How to Get Out from between a Rock and a Hard Place," Nancy Birdsall and Michele de Nevers set out a new proposal for financing climate change adaptation in developing countries. The authors hope their proposal will become a common focus among four influential groups: the "climate community" of environmental officials and advocates, the development community, civil society organizations oriented toward the UN, and the international financial institutions.

Birdsall and de Nevers make their case with great sensitivity to the complexities involved, and their proposal should be taken very seriously by everyone concerned with these difficult, urgent issues.

I believe their proposal would benefit from greater consideration of its philosophical bases. The authors write that adaptation finance should be "thought of as a financial transfer based on the 'causal responsibility' for the disproportionate costs to the poor of climate change associated with carbon emissions of the rich." They are correct in this emphasis, but causal responsibility is not the report's only basis for assessing the obligations of the rich.

In fact, the proposal uses two criteria for assessing obligations—causal responsibility and ability to pay. It's a hybrid account.

Here is the report's statement about obligations:

Regarding obligations, any and all countries over a certain income level and some combination of past and current per capita emissions (including eventually countries that are not now "developed" but whose per capita income and emissions reach some agreed threshold) should be obligated to provide adaptation funding.

Thus obligations track two different factors:

A) Causal contribution to climate change ("past and current per capita emissions"); and

B) Ability to pay for adaptation ("countries over a certain income level").

These two factors can point in different directions. Say there's a village where the runoff from everyone's property ends up back in the water supply. If the Joneses bankrupt themselves holding a series of wild parties, which also cause lots of contaminants to run into the water supply (suntan oil, gin), then they have an obligation based on a causal contribution principle, but no obligation based on an ability to pay principle. Meanwhile, if the biodynamic Smiths come into a sizeable inheritance while the Joneses are busy celebrating, then the Smiths will have an obligation based on ability to pay, but few obligations based on causal contribution.

The report also puts forward a hybrid account on the entitlement side:

All countries below a certain income threshold and with demonstrated negative climate impacts would have an entitlement to adaptation funding…. The allocation formula should reflect physical vulnerability and, as an indicator of lesser resilience, lower per capita income.

Thus entitlements also track two different factors:

C) Susceptibility to harm from climate change, independent of ability to pay ("physical vulnerability"); and

D) Ability to pay for one's own adaptation ("as an indicator of lesser resilience, lower per capita income").

These two factors can also point to different entitlements. Say the Taylor twins go to the water supply one day to discover how disgusting it's become since the Joneses went on their weekend binge. Tim has already spent his trust fund on tuition for medical school. Tom is saving his trust fund for retirement. If we consider only that Tim and Tom are equally likely to get sick drinking the village water (C), then they have equal entitlements to funds with which they can buy water filters. But if we also consider ability to pay (C + D), then Tim has a much larger claim than Tom. Tom, after all, is more resilient—he can pay for his own water filtration.

This first point of critique is a presentational one. The Birdsall and de Nevers report makes it sound as though their proposal is guided by a single principle, yet in fact it is guided by two principles on the obligation side, and two principles on the entitlement side.

My second point goes further, to ask whether a single-principle account would be preferable to a hybrid account, for both moral and political reasons.

If the report were going to adopt a single-principle account, one assumes that it would adopt the causal principle as its single principle. A single causal principle account would say that obligations should be proportional to causal contribution to climate change, and entitlements should be proportional to physical vulnerability to climate change.

Here's the moral reason for going for a single principle instead of a hybrid: It may seem fairer, on both the obligation and entitlement sides.

Obligation. Say Qatar has contributed almost nothing to climate change, but is well above the income threshold. China has contributed lots to climate change, but is below the income threshold. Within the hybrid account, the Qataris seem to have a legitimate complaint that they have to pay something, while the Chinese pay nothing. Could this be justified to the Qataris on the grounds of fairness?

Entitlement. Similarly, imagine that Uganda and Rwanda are physically equally susceptible to harm from climate change, but Uganda achieves a much higher per capita income because its new oil comes online. Then by the hybrid account, Rwanda gets a larger entitlement than Uganda. The Ugandans here seem to have an especially strong complaint. Why should they get less money from the outsiders who are harming them, just because they can counteract the harm that the outsiders are causing by using their own money? (Analogy: If one of the drunken Joneses hits both Tim and Tom with his car, should Tom have less of a right to compensation for hospital costs just because he can pay his own hospital costs?)

The political reason for going with the single causal principle is that it gives countries less to fight over. As the report says, "it will not be easy for countries that are likely to have funding obligations to agree among themselves on a particular formula for setting those obligations." Indeed, negotiations will be hard enough just using the single causal principle if, as the report plausibly suggests, the causal principle itself should be sensitive to "some combination of past and current per capita emissions."

Getting a consensus on the combination of past and present causation will be hard enough within the single causal principle framework. Adding to this difficult negotiation the second "hybridizing" principle—ability to pay—makes it even harder to get consensus. Whatever principles are on the table, one can be sure that countries will fight for the mix of principles that assigns them the least obligation and the largest entitlement. The more principles that are on the table, the wider spread we'll get of countries insisting on different hybrids of those principles.

So, there seem to be at least prima facie moral and political reasons to go for a single causal principle. Yet of course ability to pay can't be irrelevant for any feasible proposal.

The question then is whether ability to pay can come in not as a principle that is part of a hybrid theory, but rather as a practicality when applying the single principle causal theory. Moving a factor from "principle" to "practicality" is what the report does with the Wheeler 2011 proposal:

We would not incorporate governance nor implementation capability into the allocation formula itself, but would only include physical vulnerability and income. Governance and implementation capability instead should affect the choice of implementation modality.

Similarly, one might think of different ways to move ability to pay into the "practicalities." For instance, a country with high emissions-based obligations but low ability to pay could be deemed to owe a debt (plus interest) to the common pool for the amount it chooses not to pay until it gets richer. And a country with high physical vulnerability and high resilience can go ahead and use its own money for adaptation, instead of claiming its vulnerability-based entitlement from the common pool. For doing so, such a country would receive an interest-bearing bond equivalent to its current entitlement, which could be later drawn from the common pool.

Whether or not this specific proposal is taken up, combining a single causal principle with a practical means to adjust for per capita income might be worth further consideration. Those concerned with the challenges of adaptation finance will no doubt also wish to engage with other dimensions of this important report.