Funding rules that promote equity in climate adaptation outcomes

Many climate policies adopt improving equity as a key objective. A key challenge is that policies often conceive of equity in terms of individuals but introduce strategies that focus on spatially coarse administrative areas. For example, the Justice40 Initiative in the United States requires 518 diverse federal programs to prioritize funds for "disadvantaged" census tracts. This strategy is largely untested and contrasts with the federal government's definition of equity as the "consistent and systematic fair, just and impartial treatment of all individuals (Executive Office of the President, Federal Register, 2021)." How well does the Justice40 approach improve equity in climate adaptation outcomes across individuals? We analyze this question using a case study of a municipality that faces repetitive flooding and struggles to effectively manage these risks due to limited resources and public investment. We find that the way the Federal Emergency Management Agency implements the Justice40 Initiative can be an obstacle to promoting equity in household flood-risk outcomes. For example, in this case study, ensuring the majority of benefits accrue in "Justice40 Communities" does not reduce risk for the most burdened households, does not reduce risk-burden inequality, and produces net costs. In contrast, we design simple funding rules based on household risk burden that cost-effectively target the most burdened households, reduce risk-burden inequality, and accrue large net benefits. Our findings suggest that "disadvantaged community" indicators defined at coarse spatial scales face the risk of poorly capturing many climate risks and can be ineffective for meeting equity promises about climate-related investments.