A Sustainable Circular Framework for Financing Infrastructure Climate Adaptation: Integrated Carbon Markets

Abstract: Climate physical risks pose an increasing threat to urban infrastructure, necessitating urgent climate adaptation measures to protect lives and assets. Implementing such measures, including the development of resilient infrastructure and retrofitting existing systems, demands substantial financial investment. Unfortunately, due to the unprofitability stemming from the long-term returns, uncertainty, and complexity of infrastructure adaptation projects and the short-term profit-seeking objectives of private capital, a massive financial gap remains. This study suggests incentivizing private capital to bridge financial gaps through integrated carbon markets. Specifically, the framework combines carbon taxes and carbon markets to involve infrastructure and individuals in the climate mitigation phase, using the funds collected for climate adaptation. Moreover, it integrates lifestyle reformation, environmental mitigation, and infrastructure adaptation to establish harmonized standards and provide circular positive feedback to sustain the markets. We further explore how integrated carbon markets can facilitate fund collection and discuss the challenges of incorporating them into infrastructure climate adaptation. This study aims to foster collaboration between private and public capital to enable a more scientific, rational, and actionable implementation of integrated carbon markets, thus supporting sustainable financial backing for infrastructure climate adaptation