Integrated Climate Change Impact Assessment and an Adaptation Financing Mechanism for Infrastructure Facilities

Abstract. This paper addresses the planning and management aspects of adaptation measures for mitigating the adverse impacts of climate change on economic infrastructure facilities. We navigate through the complexities of risk assessment in the face of climate change uncertainties. The integrated assessment of infrastructure facilities using climate forecast maps and facilities vulnerability maps is structurally described. An approach is proposed to form a portfolio of infrastructure facilities. They are selected in two stages as follows. In the first stage, a preliminary portfolio of facilities is formed using integrated assessment. In the second stage, investment resources are sequentially allocated to preliminary portfolio’s facilities in descending order of their specific risk assessment. Due to a limited investment fund, the second stage yields the final portfolio of facilities for implementing adaptation measures. We present an incentive mechanism for adaptation measures under the Principal’s incomplete information. This mechanism is optimal and provides reliable data from the facilities to the Principal (possesses strategy-proofness).

Keywords: climate change, adaptation, integrated risk assessment, selection of infrastructure facilities, allocation of investment funds, costs, financing mechanisms, incentives.