Addressing Climate Change with Digital Public Infrastructure
By Jordan Sandman & Tim Wood
Climate change is one of the most urgent and complex challenges facing humanity today. All countries will need to engage to respond to the climate threat over the coming century with a focus on climate change adaptation (helping human populations and biomes cope with the effects of climate change), climate change mitigation (reducing carbon emissions), and the cross-cutting challenges around transparency and access to finance for these activities. Solutions to these climate challenges require innovation on a global scale.
Digital Public Infrastructure (DPI) provides essential national-scale services that can be utilized across a wide range of climate change adaptation and climate change mitigation use cases including the ability to 1) verify the unique identity of individuals; 2) enable seamless digital payments; and 3) register and share data across independent systems. These digital capabilities are essential for participation in society and access to markets. They are also built to solve last-mile challenges and to provide a common foundation on which to build secure and scalable solutions. For example, a national-scale digital payments infrastructure can be used to make welfare payments to disaster victims as well as to subsidize green agricultural practices. A national-scale digital identity system can be used to provide climate refugees with an ability to claim eligibility for lifesaving social assistance and also help them open a bank account or start a business.
The purpose of this note is to bridge the divide between the communities of strategists on climate and DPI and to elucidate how DPI can provide the building blocks to support the digital solutions that tackle climate change at scale for a broader audience. It was informed in part by a virtual workshop in June 2023 which included participants from Adelphi, AFD, BCG, Center for DPI, Co-Develop, DPGA, DIAL, GIZ, KfW, Linux Foundation, Norad, Patrick J. McGovern Foundation, Omidyar Network, Pula Advisors, Rockefeller Foundation, Societal Thinking, Unicef, UNDP, UNEP, University of Turku, USAID, Vaia Climate, and World Resources Institute.
DPI’s Role in Climate Change Use Cases
To date over 30 countries have deployed or are planning to deploy one of three fundamental components of DPI: identity, payments, and data exchange. Each of these categories of services has the potential to immediately impact climate programs and deliver benefits and services more effectively, equitably, and broadly. For example:
Legal, Verifiable Identity for Climate Refugees (Digital Identity)
The Opportunity: Refugees, especially those affected by climate change, are disproportionately represented among the 850 million people who lack access to a legal identity globally. The Institute for Economics and Peace predicts that there could be as many as 1.2 billion climate refugees by 2050. Many of these refugees are fleeing dangerous situations, and according to the Digital Impact Alliance, they often lose access to their legal identity during this process. Getting these refugees documentation can help them gain access to jobs, financial inclusion, and aid relief.
Current Shortcomings: Existing identity management regimes in many countries rely on paper-based, physical documentation. Refugees who are fleeing disaster may have had their documentation destroyed or may have had to leave it behind in haste, placing them in legal jeopardy that often leads to deportation, discrimination, or abuse.
How DPI Can Help: Digital IDs can replace ephemeral physical documents and allow for authentication of an individual’s identity even without papers, helping families access support after they have been displaced. One of the earliest use cases of digital IDs was to provide a verifiable means to identify stateless individuals in refugee camps in Cameroon, Kenya, and Uganda. Administration costs of digital ID can be far lower than paper forms, helping aid agencies ramp up their operations as the number of refugees globally increases dramatically. Digital ID can also validate eligibility of an individual or family for benefit services such as the Aadahar-enabled Direct Benefit Transfer and food distribution programs in India.
Advanced Distribution of Public Benefits (Digital Payments, Digital Identity)
The Opportunity: Many programs that seek to address the impact of climate-change-related adverse weather events rely on providing financial payments to individuals. These weather disasters are an important opportunity for aid distribution because the timing can affect individuals’ decisions such as whether or not to evacuate in the case of an impending storm. Humanitarian aid payments can also reduce refugee flows and provide critical life support to those who have been displaced.
Current Shortcomings: Existing manual social payments systems are often slow, taking up to hundreds of days to reach intended recipients, who have no recourse to access a financial safety net in the intervening period. The limited traceability of cash results in leakage from programs, reducing the amount received by recipients. Accepting and storing payments securely requires access to bank accounts that must establish identity with physical documentation, which displaced people often cannot produce. Storing savings without a digital option is very difficult and insecure, particularly for vulnerable groups such as women.
In addition to these issues with manual systems, existing social assistance schemes are often deployed in a fragmented, rather than interoperable, manner. Each program has its own registration, beneficiary management, and payments mechanism, duplicating delivery architecture and creating a patchwork of support systems that confuse and frustrate the victims of climate disaster in search of assistance.
How DPI Can Help: Financial payment platforms implemented as digital public infrastructure can improve the speed and targeting of welfare distribution to ensure it reaches intended populations with maximal impact while simultaneously lowering transaction and access costs for organizations distributing aid. An effort in Cambodia to use digital payments to unify social assistance delivery helped bring beneficiary management and registration under one umbrella, improving the user experience and efficiency of program delivery. In Malawi, poor households receive cash assistance when they are affected by severe droughts. Digital payments systems linked with early warning weather systems allowed a coalition that included the Government of Bangladesh, the United Nations, and local NGOs to provide preemptive cash transfers to those threatened by flood, leading to dramatic increases in food security among the population that had access to the benefit. Advanced social assistance can also help deliver protection for other climate-related issues, such as providing extreme heat microinsurance to factory workers who cannot earn a living in deadly heat wave conditions and farmers who have suffered crop losses due to weather-related disasters.
Open, Interoperable Data and Weather Systems (Data Registries and Exchange)
The Opportunity: As climate change increases the incidence of extreme weather events and begins to impact geographies and communities, weather data has become a crucial tool for future planning to drive adaptation efforts. Weather data can help countries understand which areas are at most severe risk of weather catastrophes like storms, floods, and heatwaves and provide early warning when those catastrophes are likely to occur to improve affected individuals’ decision making as well as resource allocation among responding organizations.
Current Shortcomings: Weather data access is not completely democratized. Data access can be limited for public, philanthropic, and academic uses, and there are disparities between countries in accessing weather data based on capacity. The organizations that do have access to a large amount of climate data must create complex data sharing agreements. Limits to data standardization diminish the usefulness of data that is shared.
How DPI Can Help: Data exchange systems, such as those deployed in Armenia, can facilitate real time sharing of weather data. Through implementing data standards and a mechanism to easily expose, request, and share data elements, data can be collected, shared, analyzed, and utilized by a wide range of actors. This weather data is not only useful for the field of climate adaptation - it can also be useful for related fields such as health and agriculture that can benefit from climate data and layered on top of geographic information services.
Carbon Market Trading (Data Registries and Exchange)
The Opportunity: Carbon trading uses levers of economics to incentivize organizations across a national economy to transition to green operations, allowing firms and individuals to reduce emissions in ways they consider to be most efficient. Companies can purchase carbon credits to compensate for their greenhouse gas emissions from entities like farmers who remove or reduce greenhouse gas emissions by making planting decisions that maximize carbon absorption.
Current Shortcomings: Administering successful carbon trading schemes is a challenging task in practice. The systems that facilitate carbon trading are often disjointed, leading to issues such as double-counting of GHG emission reductions. As a result, carbon trading regimes, particularly those that are voluntarily administered, lead to greenwashing – dampening the potential impact of this tool as a change agent for global greenhouse emissions reductions.
How DPI Can Help: DPI systems, such as those that provide unique identifiers and registries or facilitate data exchange, can infuse accountability into carbon trading markets by creating a common, verifiable mechanism for sharing and validating information about emissions reductions. These systems help honest parties demonstrate how the credits they purchase represent a unique, legitimate reduction in carbon emissions. UNDP in particular calls for transparent institutional and financial infrastructure to facilitate carbon market transactions. These markets will become increasingly powerful as countries increase taxes on carbon emissions and reductions, which are currently voluntary, become mandatory.
Green Financing and Traceability (Data Registries and Exchange, Payments)
The Opportunity: Green financing is the ability to channel investment and nonprofit capital toward activities that reduce carbon emissions. Institutions that finance sectors like manufacturing and agriculture can track and provide transition support for organizations and businesses to adopt less carbon-intensive practices both in their operations and down their supply chains. Implementing these improved practices across sectors and countries can contribute to a massive reduction in carbon emissions across the globe. It can also increase crop yields and channel income to smallholder farmers.
Current Shortcomings: Even committed green financing efforts face significant implementation challenges. One challenge is traceability, where existing systems are not set up to trace flows of materials and funds across the global economy. Multinational corporations with complex supply chains may not know where the inputs they buy come from, which creates a risk to not only their overall carbon footprint but also their record around labor abuse and terrorism financing. Another challenge is distributional efficiency. Incentivizing climate action through improved agricultural practices might involve providing small dollar payments or loans to millions of farmers. Doing so via traditional means such as cash might be cost prohibitive and subject to high amounts of fraud.
How DPI Can Help: Digital systems can provide more efficiency in the traceability and distribution of funds and materials necessary to incent climate action. Digital payments infrastructure, such as Pix in Brazil and UPI in India, offer governments and financial institutions the ability to make secure payments that directly reach the bank accounts of the target recipient at next-to-zero cost. Registries known as GeoID that uniquely identify land assets, land users, and track weather data can remotely assess deforestation through satellite imaging. Mapping technology is relevant for other use cases such as yield estimates and assessment of climate risk factors. Data exchange systems can help businesses provide a common template for identifying and verifying standards across their supply chains to improve business practices and meet real carbon emissions targets, not only those that are visible with legacy systems.
Fuel Subsidy Reduction (Digital Payments, Digital Identity)
The Opportunity: Advanced digital payments can support welfare distribution schemes that reduce reliance on fuel subsidies, which are a global driver of climate change. Many countries provide fuel subsidies to help low-income residents afford transportation expenses, but those programs disincentivize a green transition. The IMF estimates that raising fuel prices to their fully market efficient cost would reduce carbon emissions by 36%. But simply removing these subsidies would be politically and economically catastrophic as they are a lifeline to many low-income residents. Additional public benefits that help low income residents afford additional fuel prices can smooth the green transition.
Current Shortcomings: As discussed above, existing manual social assistance schemes often struggle to target those most in need and securely distribute benefits. Even in countries like the United States, social welfare schemes lead to the theft of tens of billions of dollars. Insecure, inefficient payments infrastructure prevents countries from providing social welfare. As such, transitioning from supply-side fuel subsidies to welfare payments that are provided directly to individuals may be seen as politically risky if benefits transfer infrastructure is not secure.
How DPI Can Help: Digital payments and digital identity infrastructure can help transfer cash directly to those in need in a targeted and secure way. As described above, digital identity and payments infrastructure in India facilitates Direct Benefits Transfer (DBT), a common benefits distribution mechanism that allows over 300 benefits programs to send money to individuals. DBT facilitated instant payments to over 200M women at the outset of the pandemic. Developing similar capabilities across many countries could help inspire new benefits programs to ease the transition away from fuel subsidies.
Smart Energy Grid Management (Data Registries and Exchange)
The Opportunity: Green energy sources are increasingly able to power entire energy grids, but they often struggle to adapt to dramatic shifts in energy demand in comparison to carbon-based energy sources. Smart energy grid management allows countries to smooth demand for energy consumption using energy data from across the economy that can help electricity providers get a more accurate depiction of the energy necessary to power the economy at different times of the day. Smart energy grids could help optimize energy distribution and usage to reduce greenhouse gas emissions and ensure green energy production can meet consistent fluctuations in demand.
Current Shortcomings: Many countries have no existing infrastructure available to share the data required to run a smart energy grid in an efficient manner. Meanwhile, energy companies are collecting this data on their own which can be analyzed to yield insights into personal behavior without safeguards on how that data is used.
How DPI Can Help: Data exchange systems, designed with safeguards, can increase access to data that allows companies and policymakers to design smart energy grids while protecting sensitive information that can be inferred from the data. Data exchange can facilitate standardized data sharing and collection of electricity supply and demand. Properly implemented, smart energy grids powered by data exchange can dramatically reduce overall power consumption and reliance on carbon intensive power sources.
Measurement, Reporting, and Verification of Carbon Emissions (Data Registries and Exchange)
The Opportunity: Digital technologies are incredibly helpful to collate the emissions data from the range of data sources necessary to create an accurate picture of national emissions. As a part of responsibilities set out in the Paris Climate Accord, countries must maintain a reliable greenhouse gas inventory and reporting mechanism to measure progress against their nationally determined contributions to carbon emissions reduction. Having this inventory will be a key component of any national carbon trading and mitigation strategy.
Current Shortcomings: Many countries are not taking advantage of digital solutions and are instead manually sharing emissions data in a way that is insecure and lacks transparency. Those that are using digital solutions often build their own software rather than adopting infrastructure based on best practices that have been implemented successfully elsewhere.
