Investing in Adaptation: Questions of Equity in Financing Climate Change Adaptation in Developing States IUCN Academy of Environmental Law September 2008 Kate Miles

Equity in Climate Change Adaptation  Developed state responsibility for anthropogenic climate change;  Provision of assistance to those developing states most vulnerable to climate change effects;  Shift away from concentrated focus on mitigation to encompass adaptation.

Equity in Financing Adaptation  Donor-based mechanisms  Private sector What does equity in climate change adaptation require of the private sector and its regulation? And what role is there for international environmental law?

Adaptation vs Mitigation Discourse  Adaptation only recently become a priority for the international community;  Division of adaptation and mitigation into two separate streams;  As climate change impacts become visible, political dynamics changing and more emphasis on adaptation – Adaptation Fund Board

Vulnerability & Equity  Developing states are the most vulnerable to climate change impacts; Physical exposure; Climate sensitive livelihoods; Reduced technical and financial capacity; Generic determinants of vulnerability (I. Feldman & J. Kahan)  Within developing states.

Role of the Private Sector  Identified as an important element in realising adaptation programmes and can increase the adaptive capacities of communities in developing states;  Investment in transport, water, flood protection, infrastructure;  Investment in decentralised renewable energy projects (H. Venema & I. Rehman)

Private Capital: Additional Issues  A need to harness private sector financing for sustainable development objectives;  No requirements for transnational financing to be supportive of SD  Equity in the climate finance discourse?  Market-driven finance can perpetuate inequities – so it needs to be channeled in the right direction;  Could a different approach assist with more equitable financing for adaptation?

Environmental Regulation as Treaty Violation  Indirect expropriation;  Discriminatory treatment;  Fair and equitable treatment. Azurix; Tecmed.

Investor-State Disputes  Investor protections given an expansive interpretation;  Tecmed no principle stating that regulatory administrative actions are per se excluded from the scope of the treaty, even if they are beneficial to society as a whole – such as environmental protection …

Fair and Equitable Treatment  Legitimate expectations of the investor;  Stable legal and business environment;  Tecmed Not affect the basic expectations in entering the investment; Consistency; Free from ambiguity; Transparency; Know all regulations that will govern the investment for the life of the investment.  Endorsed by Azurix.

Preconditions for Adaptation  Ensure promotion of FDI in climate adaptation via prerequisites; Extension of national treatment to pre-establishment phase;  Incentives for adaptation, advantageous measures for CDM projects, exclusion of carbon-intensive operations; ‘Like Circumstances’ Discriminatory Parkerings Award

Equitable Financing and Investment in Climate Change Adaptation?  Reorient approach of the financial sector;  Shift in approach to international regulation of the private sector;  Accountability of financiers and investors;  International environmental law – principles that could form the basis of international regulatory framework for transnational financing and investment;  Further innovative financing mechanisms;  Post-Kyoto instrument re adaptation

Conclusions and Immediate Steps  Progress towards realisation of equitable financing for climate change adaptation: Insertion of socially and environmentally responsible principles into BITs; Re-framing ‘fair and equitable treatment’; Domestic incentives to finance socially and environmentally beneficial projects; Support micro-finance; Equator Principles as basis for regulation; Domestic application of precaution and sustainability