Innovative financing can catalyze community responses to climate change

Reactive responses to environmental disasters are costly for state, local and tribal governments. The approach to respond after a devastating event compromises the safety of residents and communities and risks compounding threats that can easily overwhelm response systems. 

In Texas, for example, extreme weather and a subsequent multi-system infrastructure failure left 33,000 residents without power and nearly 9 million residents without access to clean water. 

Local, tribal, state and federal governments need to be proactive in their response to climate change and they need consistent funding in order to anticipate and manage risks. The estimated costs of climate change impacts are beyond what any single entity can afford. From Mertarvik, Alaska, to Miami to Mumbai, communities world-wide face mounting costs if they delay adaptive and preventive responses to a rapidly changing environment and its cascading impacts. Climate change in Alaska threatens to cause over $5 billion in infrastructure damage by 2099. In Miami, studies suggest that it will cost $128 million to keep a three-mile section of road dry in 2045.

We need innovative climate financing to build proactive climate responses in local communities. Creating what I call a Climate Response Fund (CRF) can draw from diverse funding sources and use a collaborative governance structure to finance innovative, equitable, community-led climate mitigation and adaptation projects. The CRF framework could be applied in many different situations and bring together governments and entities across scales. Local, state or federal governments, which are highly susceptible to the rollercoaster of changing political interests and actions, should not administer a CRF. A CRF led by a coalition of community linked organizations would smooth out an otherwise bumpy financial landscape and focus on the goal of supporting local community response. 

A key strength of a CRF is the ability to blend together funding from many sources, for example: public institutions, private equity firms, nonprofits and carbon markets. This provides an opportunity to reduce risk and leverage existing and emerging programs to support climate response in communities. As profits, investments and other contributions flow to the CRF, that capital would be deployed in communities for their climate response projects and reinvested for future gains. Another important feature of a CRF is a collaborative or shared governance structure based on pooling resources, working across existing or perceived boundaries and integrating issues that intersect with climate change. This combined system of funding and shared governance with communities is a unique opportunity to invest in the innovative ideas generated by and for communities. 

Here is how this type of system could work. Existing carbon offset or removal markets generate revenue. Another revenue source likely in our future is a national carbon price that puts a cost on carbon pollution. While these and other individual funding sources can be powerful mechanisms for change, a CRF would amplify that impact by blending different funding sources, focusing on community investment and governance of the CRF and targeting on-the-ground adaptation and mitigation actions. A CRF in Texas could have supported transparency, education and community action to drive the necessary policy changes to create a more robust energy grid. 

Carbon offset markets and carbon pricing systems can raise some concerns. Some argue that these systems put a needed cost on carbon pollution but allow corporations to buy allowances from other companies that have reduced their greenhouse gas (GHG) emissions or purchase carbon offsets. These actions may prevent an individual company from reducing their emissions, which should be the main goal. The Yurok Tribe was one of the first participants in the California carbon cap-and-trade program and this has enabled their own land restoration management of over 47,500 acres on and near the Yurok Reservation. This demonstrates that carbon offset markets can be successful with thoughtful consideration of how values align with potential partners and with strategic efforts to redirect high-carbon pollution generated revenue to zero-carbon climate solutions that are community-driven. 

A CRF would have the flexibility to change the portfolio of funding sources. Right now one of those funding sources might be carbon offset markets and later maybe it is carbon pricing or venture capital investment. The opportunity is the ability to bring together all the various funding sources that are out there. There are some key questions that need to be answered in order to create and implement a CRF. Is a fund something that communities, tribes or regions would want or benefit from? What kinds of climate-related projects, planning or efforts would communities want or need funded? How to shape a shared governance structure so communities have a seat at the table to direct funds collected by the CRF? Is a fund feasible and what is the potential return on investment? What is the best way to allow for different revenue streams to capitalize the fund? 

Stable and reliable funding — bridging inconsistent state or federal government efforts — to support climate resilience is a long-term need and a large piece of the complicated climate puzzle. Developing a CRF and providing capital to local communities, including those most impacted by climate change, will support community-led innovation and response in climate adaptation and mitigation. 

Nikoosh Carlo, Ph.D., is Koyukon Athabascan, the CEO and founder of CNC North Consulting and a Public Voices fellow of the Op-Ed Project and the Yale Program on Climate Change Communications. She previously served as climate advisor for former Alaskan Gov. Bill Walker (R). Follow her organization on Twitter @CNCnorth.