Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge?

The paper examines the emerging institutional architecture for adaptation finance and explores the feasibility of an 'adaptation market'. It concludes that commodifying adaptation benefits is unfeasible due to a lack of international demand and viable metrics, as adaptation primarily generates local and private benefits rather than global public goods. However, it identifies a nascent marketplace for 'adaptation finance credits'—where the commodity is the proof of expenditure—supported by a growing professional industry of project developers and consultants, though it lacks the allocative efficiency of carbon markets.

• The commodification of adaptation benefits is considered unfeasible because adaptation primarily produces local and private benefits rather than the global public goods that drive carbon markets.
• While a market for benefits is unlikely, a marketplace for 'adaptation finance credits' is emerging, where the commodity is the proof that a buyer has spent money on an adaptation project.
• A significant obstacle to a true adaptation market is the lack of standardised metrics; unlike the common unit of tCO2e in mitigation, adaptation outcomes are locally specific and multi-sectoral, making commensuration difficult.
• The current institutional architecture for adaptation finance is fragmented, consisting of various UNFCCC funds (such as the Adaptation Fund, LDCF, and SCCF) and non-UNFCCC channels like the World Bank's Pilot Program on Climate Resilience.
• There is a risk that the emerging professional industry for adaptation finance prioritizes budget spending over actual effectiveness, as current evaluations often focus on upstream fund operations rather than on-the-ground benefits.
• The Adaptation Fund's 'direct access' modality is a notable institutional shift, allowing national implementing entities to administer funds directly rather than relying on multilateral intermediaries.
• There is a substantial gap between the supply of identified projects and the estimated financial need; for example, 38 NAPAs identified projects totaling USD 1.5 billion, while global needs are estimated up to USD 100 billion per year by 2050.

APA

Persson, Å. (2011). Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge? Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate/Adaptation/sei-wp-2011-03-adaptation-commodification.pdf

Chicago

Persson, Åsa. Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge? Stockholm Environment Institute, 2011. https://www.sei.org/mediamanager/documents/Publications/Climate/Adaptation/sei-wp-2011-03-adaptation-commodification.pdf.

Wikipedia

{{cite report |last1=Persson |first1=Åsa |title=Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge? |publisher=Stockholm Environment Institute |date=November 2011 |url=https://www.sei.org/mediamanager/documents/Publications/Climate/Adaptation/sei-wp-2011-03-adaptation-commodification.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{persson2011institutionalising, author = {Persson, Åsa}, title = {{Institutionalising climate adaptation finance under the UNFCCC and beyond: Could an adaptation ‘market’ emerge?}}, institution = {Stockholm Environment Institute}, year = {2011}, month = nov, url = {https://www.sei.org/mediamanager/documents/Publications/Climate/Adaptation/sei-wp-2011-03-adaptation-commodification.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }