‘Test Driving’ a Financing Instrument for Climate Adaptation: Analyzing Institutional Dilemmas using Simulation Gaming

Abstract

Urban physical public infrastructure is a frontline defense mechanism to manage and mitigate climate-related impacts. Market instruments are often cited as possible means to spread risk and reduce financial burdens on the public sector. The authors argue that existing research tends to focus on the technical issues of instruments and neglects considering institutional dynamics that may enable or constrain local market-based financing mechanisms. In this article, three core dilemmas (values uncertainty, planning horizon, and indirect benefits) are used to analyze the responses of practitioners to a possible financing instrument. The findings indicate that the practitioner’s responses to tax increment financing were largely shaped by the adaptation dilemmas and not the characteristics of the instrument per se. By mapping the dilemmas onto whether they would recommend it, participants imposed a financial barrier on climate adaptation investments. The authors conclude that a key imperative in the design of policy instruments is to pay attention to the congruency of informal institutions at the ‘street level’ in order to be in-step with the current sociopolitical conditions. The findings also point to four key attributes that a local market-based instrument would need to be aligned and responsive to the Dutch planning and development context.

Keywords:

• Climate adaptation
• finance
• neighborhood planning
• public infrastructure
• simulation gaming

Funding

This work was supported by the Climate Proof Cities/Knowledge for Climate Research Program.

Notes

1. See research a website hosted by the National Office for Entrepreneurial Netherlands called the Financial Structure Toolbox. and reports by consultancies and research institutes VROM, C. (2010), ECORYS (2010), Ministry, o. I. A., VNG & NEPROM (2009), Planbureau (2014), Planbureau and Urhahn (2012), and Heijkers et al. (2012).

2. According to Lukosch and Bekebrede, psychological fidelity relates to the degree to which a game matches the emotional and cognitive perceptions of the players, which includes, the play process and flow of the game (2014).

3. ‘Dutch water boards (Dutch: waterschappen) are regional government bodies charged with managing water barriers, waterways, water levels, water quality and sewage treatment in their respective regions.’ Source: http://en.wikipedia.org/wiki/Water_board_%28Netherlands%29

4. All quotes have been translated from Dutch to English.