Presentation of economic incentives related to adaptation to climate change

Our public infrastructure is proving to be less and less adequate for handling the already tangible consequences of climate change. Compounded with an uncertain economy, this reality highlights the need for communities to increase their resilience. Thus, a growing number of governments and local authorities are beginning to incorporate measures to enhance their communities’ adaptive capacity and to reduce their vulnerability to climate change into their adaptation strategies. However, these strategies address few economic incentives as levers for mobilizing the stakeholders of a territory, despite the fact that a number of initiatives, particularly at the municipal level, have made effective use of such incentives. This gap can be explained in part by an insufficient understanding of how incentives function.

Identify the economic incentive tools (e.g., taxes, subsidies, exchange mechanisms) that could be part of a climate change adaptation strategy, and understand their mechanisms of implementation.

• Identification of ten economic tools currently used in Canada or in OECD countries related to the fight against heat islands and the management of wetland and floodplain environments as well as storm water.

• Collection of data to document the functioning and performance of selected incentives.

• Performance evaluation of economic incentives according to three criteria: the effectiveness, economic efficiency and equity of incentives.

Unlike mitigation policies whose success can be determined with a measurable, global and unique indicator, such as the net reduction of greenhouse gas (GHG) emissions, adaptation to climate change presents very specific measurement challenges. The gains linked to adaptation are observable at the local level, based on a specific context, and in many cases with a delay. Given that context, 3 criteria were used to measure the performance of programs and incentives: efficiency (ability of an instrument to correct an existing market failure, or the absence of a market), economic efficiency (capacity of an instrument to achieve the greatest social benefit at the least cost) and fairness (distributional impacts of an instrument). These three criteria were adapted and broken down into indicators to better synthesize the available information. 

A cross-analysis of the performance of economic incentives was conducted in terms of the 3 criteria, and programs using these incentives were categorized according to a three-level ranking system for each of the criteria: low, medium, high (or negative, neutral, positive) as shown in Figure 1a and 1b. Figure 1a illustrates the performance gap between the programs. The ones involving the installation of green roofs were, overall, less performing in terms of efficiency and economic leverage than other programs concerning stormwater management or conservation. This is explained by the nature of the programs and their context of implementation. For example, the initial investment for the installation of a green roof is higher and also highly variable depending on the required modifications or renovations to the buildings. It is therefore difficult to determine a fixed amount that would be adequate and generate incentives at the same time.

Figure 1 : (a) performance of incentive programs according to effectiveness/efficiency; (b) performance according to the three criteria of effectiveness/efficiency/equity. The colours of the contours indicate the type of program: green roofs (green), stormwater management (blue), conservation and restoration of wetlands and floodplains (orange)

Figure 1b shows a homogeneity across the different programs in terms of equity. In other words, the programs resemble each other with regard to their mission to establish a fair and persistent (over time) environmental situation and to distribute the effort among stakeholders who benefit from the program.

The analysis allowed to draw lessons from these incentives and to issue recommendations. It appears that the level of success of the programs is closely linked to the economic and political context, as well as to the mode of governance. One of the limitations of voluntary programs is that their success is largely subject to the economic context. Thus, in a context of economic crisis and real estate crisis, incentives such as subsidies for new projects may prove insufficient for bringing about a change in behavior. The study of the different programs has also shown that the pooling of resources contributes to the success of the programs’ implementation. For example, it involves designing and implementing a local incentive program within and in perfect alignment with a regional approach (watershed or another level of government). Similarly, dialogue with stakeholders, from the very beginning, is a key element in the effectiveness of programs. Finally, good knowledge of the targeted parties contributes to understanding the social or cultural barriers.

The measures were not examined on the basis of annual quantitative objectives or assessed with monitoring indicators. However, the study allowed to assess the effectiveness and efficiency of the programs while encouraging the sharing of experiences among the actors. In addition, the study allowed to underscore the credibility of these programs before the political powers.