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No. 459: Possible financing models of climate adaptation projects

Panduro, T.E. 2021. Mulige finansieringsmodeller af klimatilpasningsprojekter. Aarhus Universitet, DCE – Nationalt Center for Miljø og Energi, 27 s. – Videnskabelig rapport nr. 459. http://dce2.au.dk/pub/SR459.pdf

Summary

An obstacle for the implementation of climate adaptation projects is access to cheap financing. In this report, we review various solutions, all of which have their advantages and disadvantages. The described financing models can be combined into hybrids that are adapted to the specific context.

The current financial conditions make it possible to take out very inexpensive loans. A prerequisite for the loans for climate adaptation projects to be affordable is that the borrowers are assessed to have a high credit rating. In this connection, municipalities and the state will ensure high creditworthiness by guaranteeing the loans. To the extent that municipalities and the utility company take responsibility for climate adaptation projects, the current financing option through KommuneKredit is attractive.

The report reviews two foreign financing examples. We show that financing models in Germany, Canada, and Denmark are very different. For example, coastal protection in Germany is locked into dike solutions as the federal and local state funds up to 90 % of sea wall construction. In Canada, municipalities - and similar administrative entities - can apply for co-financing in funds paid for by the federal and local governments. Both the German and the Canadian solutions can serve as an inspiration and as a warning in relation to the development of new financing models in Denmark.