Enterprise Explains: Mitigation vs. adaptation. Climate mitigation and adaptation are separate yet equally important issues in the battle against climate change. At the COP27 summit in Sharm El Sheikh, a narrative emerged in parts of the international press that pitted the two objectives against each other: Mitigation was seen as a greater concern among developed countries, while adaptation — and the money to finance it — was set up as the priority for developing nations. So what’s the difference between the two, and why does it matter?

First thing’s first: What are mitigation and adaptation? Mitigation consists of measures that seek to limit climate change by preventing or reducing the emission of greenhouse gases, according to the European Environment Agency. This can involve investing in renewable energy to replace traditional fuels, for example, or removing emissions from the atmosphere through methods like carbon capture and reforestation. Adaptation, on the other hand, refers to preventive measures to make our infrastructure and economy more resilient to the adverse effects of climate change. That could mean building defenses to protect against sea-level rise or securing water resources by modernizing irrigation systems.

The COP of adaptation: November’s climate summit was lauded for its achievements on pushing forward the adaptation agenda, from the landmark decision to establish a loss and damage fund — which will see developed countries pay to help vulnerable countries cope with climate disasters — to the ambitious adaptation agenda, which aims to mobilize USD 140-300 bn in public and private sector funding for adaptation and resilience by 2030. Meanwhile, some delegates — most vocally the EU — and climate experts bemoaned a lack of progress on mitigation pledges at COP, which were not strengthened beyond what was agreed last year at COP26.

Where does loss and damage fit into the conversation?: Loss and damage goes beyond adaptation to compensate countries in the global south for the climate damage they have already sustained. The idea is that wealthy nations should foot the bill because they have historically been responsible for the vast majority of harmful emissions. Despite its connection to adaptation, loss and damage is a separate issue that requires different evidence, funding, support, and technical work, Egypt’s UN high-level climate champion Mahmoud Mohieldin told Enterprise Climate recently. Loss and damage finally got the boost it needed at COP27 when it was included in the summit’s agenda this year. Countries managed to agree on a landmark fund to which developed countries can contribute to help the countries most affected by climate change.

Adaptation is pricey — but mitigation is around 20x more expensive: Annual adaptation needs for developing countries are estimated to reach USD 160-340 bn by 2030 and USD 315-565 bn by 2050, according to a United Nations Environment Program (UNEP) report (pdf). Current international adaptation finance flows to developing countries are 5-10x below estimated needs, the report tells us. On the mitigation side, McKinsey pegs the global cost of transitioning energy and other sectors to net-zero emissions by 2050 at USD 9.2 tn a year. That said, the more that climate change progresses, the higher the adaptation costs will rise — including for developed countries, whose adaptation costs aren’t included in the UNEP report.

The public sector cannot foot the bill on its own: The costs of addressing both mitigation and adaptation are much higher than can be borne by “limited public capital, whether domestic public budgets or international development cooperation finance,” concludes the Sharm El Sheikh Guidebook to Just Financing (pdf) launched by the International Cooperation Ministry at COP. The collective funds of multilateral development banks, if directed to climate action, would make up only 4% of what’s needed, the guide says.

“Private investment will be necessary” for both, according to the guidebook, which says that just 1.4% of the USD 410 tn in privately held global financial assets would be enough to bridge the current gap in global climate finance.

But not all climate projects are viewed as “investable”: The investability of climate projects depends largely on whether there is an addressable market and a supportive policy and regulatory environment, the climate finance guidebook notes. That’s the case for more mitigation projects (for example, renewables) than adaptation projects — which are mostly treated as a “public goods” and do not generate sufficient financial returns, the guidebook says.

Investors also find it difficult to measure adaptation: Another obstacle to investment is the “complexity of articulating, measuring and implementing good adaptation,” the CEO of the UK’s Environment Agency, Sir James Bevan, said in a speech during COP27. By contrast, mitigation targets for emissions are usually straightforward and can reap direct economic benefits, as well as helping to unlock access to tools and financial instruments like carbon credits.

As of this year, mitigation projects are still getting the lion’s share of international climate investments, with 94% of global investments this year going towards renewable energy and energy efficiency projects, according to an UNCTAD report (pdf).

That’s why for adaptation, debt + public finance need to come first — and private investment second: Adaptation projects — especially those in EMs — require more public investments to de-risk and to provide guarantees or first-loss capital to absorb the upfront risks associated with them, as we’ve previously noted. This should ideally come from grants, foreign direct investment, or concessional long-term financing.

Stay tuned for more details on the adaptation agreements made at COP: The Sharm El Sheikh Adaptation Agenda (pdf) will lay out a shared set of adaptation actions that are required by the end of this decade, with the goal of protecting “climate vulnerable” communities from “rising climate hazards.” The COP27 presidency will work on defining those priority actions and plans to report its progress in COP28. On the loss and damage side, a 24-member committee — with representatives from the current and incoming COP presidencies as well as both developing and advanced economies — is now working on identifying the scope of work, funding sources, and priorities for the fund, with a schedule due before the end of the year. The details of the fund should be unveiled in time for COP28 next year

Egypt is making strides on mitigation: COP27 was a huge catalyst for new renewable energy projects here, with Egypt signing initial agreements for some 29.5 GW worth of fresh wind power during the summit. Some of the financing pledged by the US and Europe for the projects was unlocked by a government pledge to speed up mitigation efforts and submit revised national emissions targets by next summer.

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