Four Considerations When Building a Climate Resilient Economy

The notion of a climate resilient economy—an economy that can come back from shocks or stresses prompted by extreme weather events, sea level rise, and shifting ecosystems—is a central concern for this era of public policy analysts and planners. Building economic resilience in cities and municipalities in the face of climate change involves a multifaceted approach that integrates sustainability, adaptability, and innovation. And it requires considerable planning, preparation, and calculated action to minimize climate change’s costs and dangers while also taking advantage of any potential benefits from the transition to a low-carbon economy.

Local economies have a critical role to play in this process because of their ability to respond and adapt to situations quicker than larger entities. Cities that have embraced such adaptation goals have accrued benefits. For example, in a case study focused on cities in the southeast of America, conducted by the National Environmental Modeling and Analysis Center (NEMAC) reported that benefits in loss avoidance were as much as $4.7 million. These benefits were from investments made by the NOAA OAR Climate Program Office (CPO). Loss avoidance refers to savings from proactive strategies employed by cities to prevent or minimize potential climate losses before they occur. This approach involves identifying potential risks and implementing measures to avoid these risks, thereby protecting assets, investments, or other valuable resources. The concept is grounded in the principle of foresight and preparedness, where actions are taken in advance to mitigate adverse outcomes.

There are multiple factors policymakers need to consider when building a resilient economy; here are four:

Assessing Risks

Conducting thorough risk assessments is essential for identifying vulnerabilities and developing effective strategies for climate adaptation and mitigation. Understanding the potential impacts of climate change on infrastructure, communities, and ecosystems enables policymakers and civic leaders to prioritize investments and allocate resources strategically.

ESI’s thought leadership team has been working to develop a climate resilience index focused on nine cities across the United States, representing different sized communities and various challenges they face. The soon to be released index is based on ESI’s existing database of indices and metrics designed to evaluate and achieve their quest for climate resilience.

Funding Interventions

Many times, a lack of financial resources can be the most significant barrier to a locality initiating efforts that mitigate the effects of climate change. Three opportunities include:

Value Capture: A type of public financing that recovers some or all the value that public infrastructure generates for private landowners. Value capture financing methods are often used by local governments but have had limited application to green infrastructure to date but have the opportunity for broader applicability. For example, Cincinnati, Ohio implemented a citywide tax increase to fund climate action through PACE in 2018.

Carbon markets: This concept is beginning to gain widespread acceptance on a global scale. At COP 28 there were talks about private market participation and opportunities for evolving the current financial system, perhaps thinking about setting up exchanges. Carbon markets operate on the principle of putting a price on carbon emissions. By placing a monetary value on carbon pollution, carbon pricing mechanisms such as cap-and-trade systems or carbon taxes create economic incentives for businesses to reduce their emissions. The revenue generated from selling carbon permits or through carbon tax collection can be used to fund climate-resilient initiatives

Green Bonds: Cities and governments can also issue green bonds to finance projects that have positive environmental and climate benefits. Investors purchase these bonds to support sustainability projects while earning a return on their investment. For example, since 2015, San Francisco has effectively employed green bonds to support Local Climate Resilience (LCR) initiatives. The Public Utilities Commission launched a green bond issuance to finance needed upgrades to the Mountain Tunnel, which, at 90 years old, was part of a significant rehabilitation effort. This tunnel provides a steady supply of drinking water to approximately 2.7 million residents in the Bay Area.

Equity Considerations

Addressing equity concerns is fundamental to building a truly resilient economy. Vulnerable communities often bear the brunt of climate change impacts, yet they may have limited access to resources and decision-making processes. Ensuring equitable access to benefits, resources, and opportunities in climate resilience efforts is essential for building inclusive and sustainable communities.

In a separate Present Value article written by Kendra Hills; we explore this notion. She states in her argument that, “With climate change strategies, we must be wary of not perpetuating the same inequities that climate change has already exacerbated. Understanding what is required of those who bear the responsibility of climate resiliency, and equipping them with agency, autonomy, and resources will help communities better prepare and withstand the shocks and disruptions of climate change.” This could not be more true from my perspective.

Measuring the Outcomes

Establishing robust metrics for measuring the effectiveness of climate resilience initiatives is crucial. Our economic impact study of the Philly Tree Plan is one example of quantifying such initiatives. Tools like ESI’s forthcoming Climate Resilience Index also provide valuable frameworks for evaluating and addressing climate risks and enabling cities to track progress, identify areas for improvement, and make informed decisions.

The top-ranked cities for climate resilience in the United States show diversity in regional and climatic characteristics, which demonstrates that resilience strategies are adaptable across a range of contexts. While lower populations and higher elevations may confer certain advantages such as more effective resource management and reduced exposure to coastal flooding, innovative approaches are key. These encompass a mix of strategies, including investment in green infrastructure, adoption of renewable energy technologies, implementation of smart city solutions, and community engagement initiatives. Collaboration and knowledge sharing among municipalities and other stakeholders plays a crucial role in fostering resilience and promoting the exchange of best practices.

In the Greater Philadelphia region, the Delaware Valley Regional Planning Commission (DVRPC) has embarked on projects including the Pennsylvania Coastal Resiliency Map. With funding from the Pennsylvania Department of Environmental Protection, DVRPC is assisting communities in the Delaware Estuary Coastal Zone to build capacity to plan for and respond to future floods, including flooding from storm surge, stormwater, and high tides.

Building a climate resilient economy requires proactive planning, innovative solutions, and concerted efforts across sectors. By prioritizing financing mechanisms, conducting comprehensive risk assessments, measuring outcomes effectively, and addressing equity considerations, cities and municipalities can enhance their resilience to climate change and create more sustainable, equitable, and prosperous futures.

 

This content is part of Econsult Solutions’ thought leadership initiative, ESI Center for the Future of Cities, which brings together experts in urban economics, policy, and strategy to craft new evidence-based research on the most important issues facing cities around the world, and to provide consulting services for public and private sector organizations working in urban settings.

 

Odinaka (N.K.) Ezeobele, Director | [email protected]

N.K. Ezeobele is an associate director at ESI. She is passionate about building cross-sector partnerships to enable clients to make sound investment decisions with sustainable outcomes. N.K. applies strategic and systems thinking to help teams understand the market context, ensuring design solutions are market-ready, financially viable, and sustainable. Before joining the firm, N.K. worked for PwC in Nigeria, with experience spanning from transaction advisory, assurance, formulation and planning to business transformation and project management. She has also consulted for the International Finance Corporation, the World Bank, the Norwegian Investment Fund for Developing Countries, and the French Development Agency.

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