Climate risk

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Climate risk refers to risk assessments based on formal analysis of the consequences, likelihoods and responses to the impacts of climate change and how societal constraints shape adaptation options.[1][2] Common approaches to risk assessment and risk management strategies based on natural hazards have been applied to climate change impacts although there are distinct differences. Based on a climate system that is no longer staying within a stationary range of extremes,[3] climate change impacts are anticipated to increase for the coming decades despite mitigation efforts.[4] Ongoing changes in the climate system complicates assessing risks. Applying current knowledge to understand climate risk is further complicated due to substantial differences in regional climate projections, expanding numbers of climate model results, and the need to select a useful set of future climate scenarios in their assessments.[5]

One of primary roles of the Intergovernmental Panel on Climate Change (IPCC), which was created by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988, is to evaluate climate risks and explore strategies for their prevention and publish this knowledge each year in a series of comprehensive reports.[6] International and research communities have been working on various approaches to climate risk management including climate risk insurance.

Types

Natural disasters and diseases

According to the IPCC Fifth Assessment Report: "Impacts from recent climate-related extremes, such as heat waves, droughts, floods, cyclones, and wildfires, reveal significant vulnerability and exposure of some ecosystems and many human systems to current climate variability".[7]

The following future impacts can be expected:

Economic downfall

While affecting all economic sectors, effects on single continents will vary. Beside these direct physical climate risks there are also indirect risks:

  • Physical risks: Direct risks of climate change negatively impact agriculture, fisheries, forestry, health care, real estate and tourism. For example, storms and flooding damages buildings and infrastructure, and droughts lead to crop failure.
  • Regulation risks: Governmental endeavors to reduce climate costs have direct effects on the economy. For example, Kyoto-Protocol emissions targets could be realized by implementing emissions trading, requiring the cost of emissions to be quantified monetarily.[needs update] These costs would be used by companies to evaluate investment decisions. Factoring in emissions costs will cause prices to rise therefore impacting consumer demand. The insecurity of legislation leads to indefinite postponement of projects and investments.
  • Litigation risks: Similar to the tobacco industry, industries producing excessive greenhouse gases (GHG) are exposed to the risk of an increasing number of lawsuits if damages can be correlated to emissions.[11]
  • Competitive risks: If companies do not take measures to reduce climate risks they are competitively disadvantaged.[how?] This might lead to increasing production costs caused by obsolete technologies and therefore to decreasing profits.[citation needed]
  • Production risks: Production shortfalls can result from direct or indirect climate risks, i.e., hurricanes damaging oil production facilities can lead to supply disruption and increased prices. Also the price for energy will rise,[citation needed] as heatwaves cause water scarcity, impacting the supply of power plant cooling water.
  • Reputational risks: Companies publicly criticized for their environmental policies or high emissions might lose customers because of negative reputation.[12]
  • Financial risks[13]

Vulnerability

This section is an excerpt from Climate change vulnerability.[edit]

Climate change vulnerability is a concept that describes how strongly people or ecosystems are likely to be affected by climate change. Its formal definition is the "propensity or predisposition to be adversely affected" by climate change. It can apply to humans and also to natural systems (or ecosystems).[14]: 12  Issues around the capacity to cope and adapt are also part of this concept.[14]: 5  Vulnerability is a component of climate risk. Vulnerability differs within communities and also across societies, regions, and countries. It can increase or decrease over time.[14]: 12 

Vulnerability is higher in some locations than in others. Certain regional factors increase vulnerability, namely poverty, bad governance and violent conflict. Also, some livelihoods are particularly climate-sensitive, and therefore are more vulnerable than others. Examples for climate-sensitive livelihoods are smallholder farmers, pastoralists and fishing communities.[14]: 12  In general, drivers for vulnerability of people and ecosystems are "unsustainable ocean and land use, inequity, marginalization, historical and ongoing patterns of inequity such as colonialism, and governance".[14]: 12 

Management

Climate risk management

This section is an excerpt from Climate risk management.[edit]
Climate risk management (CRM) is a term describing the strategies involved in reducing climate risk, through the work of various fields including climate change adaptation, disaster management and sustainable development. Major international conferences and workshops include: United Nations Framework Convention on Climate Change, World Meteorological Organization - Living With Climate.

Climate risk insurance

This section is an excerpt from Climate risk insurance.[edit]
Part of a series on
Climate change and
society
Effects · Risk
Economics · Finance
Social issues · Ethics
Communication
Politics

Climate risk insurance is a type of insurance designed to mitigate the financial and other risk associated with climate change, especially phenomena like extreme weather.[15][16] [17] The insurance is often treated as a type of insurance needed for improving the climate resilience of poor and developing communities.[18][19][20] It provides post-disaster liquidity for relief and reconstruction measures while also preparing for the future measures in order to reduce climate change vulnerability. Insurance is considered an important climate change adaptation measure.

Critics of the insurance, say that such insurance places the bulk of the economic burden on communities responsible for the least amount of carbon emissions.[19] For low-income countries, these insurance programmes can be expensive due to the high start-up costs and infrastructure requirements for the data collection.[21] It is theorised that high-premiums in high risk areas experiencing increased climate threats, would discourage settlement in those areas.[15] These programmes are also usually timely and financially inadequate, which could be an uncertainty to national budgets.[21] A considerable problem on a micro-level is that weather-related disasters usually affect whole regions or communities at the same time, resulting in a large number of claims simultaneously.[22] This means that it is needed to be sold on a very large, diversified scale.[22] However a well-designed climate risk insurance can act as a safety net for countries while improving resilience.[20][23]

References

  1. ^ Adger WN, Brown I, Surminski S (June 2018). "Advances in risk assessment for climate change adaptation policy". Philosophical Transactions. Series A, Mathematical, Physical, and Engineering Sciences. 376 (2121): 20180106. Bibcode:2018RSPTA.37680106A. doi:10.1098/rsta.2018.0106. PMC 5938640. PMID 29712800.
  2. ^ Eckstein D, Hutfils ML, Winges M (December 2018). Global Climate Risk Index 2019; Who Suffers Most From Extreme Weather Events? Weather-related Loss Events in 2017 and 1998 to 2017 (PDF) (14th ed.). Bonn: Germanwatch e.V. p. 35. ISBN 978-3-943704-70-9. Retrieved 7 December 2019.
  3. ^ IPCC (2018). Global Warming of 1.5°C. An IPCC Special Report. Summary for Policymakers (PDF). Intergovernmental Panel on Climate Change. p. 5.
  4. ^ Chen X (2011-09-01). "Why do people misunderstand climate change? Heuristics, mental models and ontological assumptions". Climatic Change. 108 (1): 31–46. Bibcode:2011ClCh..108...31C. doi:10.1007/s10584-010-0013-5. S2CID 154308472.
  5. ^ Whetton P, Hennessy K, Clarke J, McInnes K, Kent D (2012-12-01). "Use of Representative Climate Futures in impact and adaptation assessment". Climatic Change. 115 (3): 433–442. Bibcode:2012ClCh..115..433W. doi:10.1007/s10584-012-0471-z. S2CID 153833090.
  6. ^ "About — IPCC". Retrieved 2020-11-30.
  7. ^ IPCC Working Group II. "Assessing and Managing the Risks of Climate Change" (PDF). Intergovernmental Panel on Climate Change (IPCC). Archived (PDF) from the original on 2019-05-11.
  8. ^ [1][dead link]
  9. ^ Bannister-Tyrrell, Melanie; Harley, David; McMichael, Tony (2017-07-31), "Detection and Attribution of Climate Change Effects on Infectious Diseases", Health of People, Places and Planet: Reflections based on Tony McMichael’s four decades of contribution to epidemiological understanding, ANU Press, doi:10.22459/hppp.07.2015.25, ISBN 978-1-925022-41-4
  10. ^ Schepper, Stijn De; Head, Martin J.; Groeneveld, Jeroen (2009). "North Atlantic Current variability through marine isotope stage M2 (circa 3.3 Ma) during the mid-Pliocene". Paleoceanography. 24 (4): PA4206. Bibcode:2009PalOc..24.4206D. doi:10.1029/2008PA001725. ISSN 1944-9186.
  11. ^ Setzer J, Byrnes R (July 2019). "Global trends in climate change litigation: 2019 snapshot" (PDF). London School of Economics.
  12. ^ "Transition risk framework: Managing the impacts of the low carbon transition on infrastructure investments" (PDF). University of Cambridge Institute for Sustainability Leadership (CISL). Cambridge University. 2019.
  13. ^ Colas J, Khaykin I, Pyanet A. "Climate Change: Managing a New Financial Risk" (PDF). International Association of Credit Portfolio Managers (IACPM). Oliver Wyman.
  14. ^ a b c d e IPCC, 2022: Summary for Policymakers Archived 2023-01-22 at the Wayback Machine [H.-O. Pörtner, D.C. Roberts, E.S. Poloczanska, K. Mintenbeck, M. Tignor, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem (eds.)]. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change Archived 2022-03-18 at the Wayback Machine [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 3–33, doi:10.1017/9781009325844.001
  15. ^ a b "7 things you need to know about climate risk insurance - Institute for Environment and Human Security". ehs.unu.edu. Retrieved 2020-11-08.
  16. ^ Kousky, Carolyn (5 October 2019). "The Role of Natural Disaster Insurance in Recovery and Risk Reduction". Annual Review of Resource Economics. 11 (1): 399–418. doi:10.1146/annurev-resource-100518-094028. ISSN 1941-1340. S2CID 159178389.
  17. ^ Hermann, Alexandra; Koferl, Peter; Mairhofer, Jan Phillip (September 2016). Climate Risk Insurance: New Approaches and Schemes (PDF). Allianz.
  18. ^ MAKING CLIMATE RISK INSURANCE WORK FOR THE MOST VULNERABLE: SEVEN GUIDING PRINCIPLES (PDF) (Report). MUNICH CLIMATE INSURANCE INITIATIVE. 2016.
  19. ^ a b Welle (www.dw.com), Deutsche. "Climate risk: Insuring against the inevitable | DW | 07.12.2018". DW.COM. Retrieved 2020-11-08.
  20. ^ a b Surminski, Swenja; Bouwer, Laurens M.; Linnerooth-Bayer, Joanne (April 2016). "How insurance can support climate resilience". Nature Climate Change. 6 (4): 333–334. Bibcode:2016NatCC...6..333S. doi:10.1038/nclimate2979. ISSN 1758-6798.
  21. ^ a b Warner, Koko. Innovative Insurance Solutions for Climate Change How to integrate climate risk insurance into a comprehensive climate risk management approach. OCLC 950715797.
  22. ^ a b Hermann, Alexandra (September 2016). "Climate Risk Insurance: New Approaches and Schemes" (PDF). Archived (PDF) from the original on 2020-11-13.
  23. ^ Kreft, Soenke (November 2017). "Climate Risk Insurance for Resilience: Assessing Countries' Implementation Plans" (PDF). Archived (PDF) from the original on 2019-12-20.

External Links

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