Topic: Carbon Finance for Climate Resilience: Market Design, Revenue Recycling, and Footprint-Informed Adaptation Pathways

Carbon finance has become central to climate mitigation policy and corporate sustainability strategies worldwide. However, financing for climate resilience remains insufficient to meet growing risks. This Special Issue proposes an integrated agenda to strategically mobilize carbon finance to strengthen resilience at scale, while safeguarding the scientific integrity of carbon and air pollutant footprint accounting.

A key reason for the financing gap is that mitigation and adaptation efforts have historically evolved along separate tracks. Climate mitigation policies and markets focus on well-defined targets and measured greenhouse gas emissions, enabling standardized monitoring and accounting. In contrast, climate resilience is more difficult to define and contract upon, as it depends on how ecosystems, cities, and industrial systems respond to shocks. Resilience is reflected in the continuity of essential services, the speed of recovery, and the adaptive capacity of systems to changing risks. These benefits - typically, avoided disruptions or improved reliability - rarely generate immediate cash flows. Consequently, investment in resilience remains limited and often occurs primarily after damaging events.

The case for resilience is increasingly compelling, as climate hazards occur more frequently and affect broader economic systems. Heat stress can reduce labor productivity and increase electricity demand. Floods and storms can disrupt transportation, power supply, and logistics, with cascading effects on production networks and public services. Droughts and wildfires can alter water availability and land use, with knock-on effects on emissions and air quality. Despite these risks, resilience finance still faces structural barriers: payoffs are long-term, benefits are shared across multiple stakeholders and jurisdictions, and performance indicators are often not comparable across projects. These challenges raise a critical policy and research question: can carbon finance be structured to support resilience without compromising the credibility of footprint accounting?

Carbon finance operates through mechanisms that generate price signals and cash flows linked to emissions outcomes. These include carbon taxes, emissions trading systems, and revenues generated through these instruments. It also includes carbon crediting and carbon markets, such as voluntary market activities and results-based payments. Carbon-linked finance, where debt, insurance, or project finance terms depend on verified emissions performance or carbon price exposure, is also part of this framework. Since these channels already operate at scale in many jurisdictions, they offer a practical basis for resilience funding when governance and measurement frameworks are appropriately designed.

Revenues from carbon pricing can be channeled into resilience measures such as urban cooling measures, heat-health actions, flood protection, resilient housing retrofits, and electricity grid upgrades. Carbon pricing and performance-linked contracts can reshape incentives, favoring investments in technologies and practices that simultaneously reduce emissions and improve reliability under hazardous conditions. Risk management tools, including insurance and other risk-transfer instruments, can reinforce these incentives by rewarding verified risk reduction rather than simply compensating for losses.

Careful design is essential because most carbon mechanisms were originally created to drive emissions abatement, and existing monitoring, reporting, and verification frameworks are not intended to capture resilience outcomes such as service continuity or recovery pathways. This misalignment can enable unsupported or weakly substantiated claims and obscure trade-offs. Some adaptation options may reduce vulnerability but increase near-term emissions due to embodied carbon or higher energy use. Others can achieve joint benefits but require strong governance and long-term maintenance. Equity considerations are also critical: poorly allocated carbon revenues can be regressive, and resilience investments may disproportionately benefit certain groups unless directed toward exposed, lower-income communities.

This Special Issue welcomes contributions linking carbon and air pollutant footprint accounting with the design and evaluation of carbon finance for resilience across ecosystems, urban areas, and industrial systems. Submissions may focus on developing decision-grade data and monitoring systems, assessing the impacts of carbon revenues and carbon markets on vulnerability and recovery, evaluating carbon-financed nature-based solutions with credible integrity safeguards, or analyzing carbon-linked debt and risk-transfer instruments that align verified footprint outcomes with resilience milestones. The objective is to provide evidence-based insights and design guidance for policies and financial arrangements that enable low-carbon resilience at scale.

Carbon finance, carbon markets, climate finance, climate resilience, resilience finance, low-carbon transitions, sustainable investment, nature-based solutions