climate adaptation and development bali breakfast/development committee series april 13, 2008...

Climate Adaptation and DevelopmentBali Breakfast/Development Committee Series

April 13, 2008Washington, DC

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• Climate Risks and Development: The “Poor Countries’ Danger”

• Mitigation and Adaptation: What Policy Mix?

• Adaptation — Solutions for Development

• Implications for Finance and Development Ministers

• Post-2012 Considerations

• Key Messages and Areas for Further Work

Today’s discussion

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Climate Risks Are Higher for Poor Countries

Climate Risks and Development: The “Poor Countries’ Danger”

Source: World Bank staff.

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Six Climate ThreatsTop 12 Countries Most at Risk from Each


Drought Flood Storm Coastal 1m Coastal 5m Agriculture

Malawi Bangladesh PhilippinesAll low-lying Island States

All low-lying Island States

Sudan

Ethiopia China Bangladesh Vietnam Netherlands Senegal

Zimbabwe India Madagascar Egypt Japan Zimbabwe

India Cambodia Vietnam Tunisia Bangladesh Mali

Mozambique Mozambique Moldova Indonesia Philippines Zambia

Niger Laos Mongolia Mauritania Egypt Morocco

Mauritania Pakistan Haiti China Brazil Niger

Eritrea Sri Lanka Samoa Mexico Venezuela India

Sudan Thailand Tonga Myanmar Senegal Malawi

Chad Vietnam China Bangladesh Fiji Algeria

Kenya Benin Honduras Senegal Vietnam Ethiopia

Iran Rwanda Fiji Libya Denmark Pakistan

Middle IncomeLow Income High Income

Source: World Bank staff.

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It Will Get WorseLikely Impact of Sea Level Rise on Low Lying Lands:

BANGLADESH

If sea level rises 1.5 m:Total population affected: 17 million (15%)Total land area affected: 22,000 km2 (16%)


Source: UNEP/GRID Geneva; University of Decca; JRO Munich; The World Bank; World Resources Institute, Washington, D.C.

TodayTotal population: 112 millionTotal land area: 134,000 km2

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It Will Get Worse Potential Impact on Agriculture — Projected Percentage

Change in Agricultural Productivity in 2080

Note: Scenario: SRES A2.Source: Cline 2007.


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Likely Changes — Dependent on Mitigation

Mitigation and Adaptation: What Policy Mix?

Likely change already

“baked in”

Risk of catastrophic events increases with temperatureSource: Adapted from IPCC 2007.

Likely change with successful mitigation action

Likely change without significant

action on mitigation

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Need a Complementary Mix of PoliciesWith Appreciation of Different Focuses on Mitigation and

Adaptation

• The more mitigation undertaken, the less adaptation is needed.• However, without sufficient mitigation there is increased risk of catastrophic outcomes—a point at which the costs are unreasonably high or there is no way to adapt (e.g., the loss of West Antarctic ice sheet implies a 5–15 meter sea level rise).• Given increased temperatures “baked into the earth,” adaptation will be necessary.

Complements or Substitutes?

Global Action, Local Impact

• Yet mitigation and adaptation differ:– Mitigation requires global analysis and global collective action– Adaptation must be analyzed locally and addressed through local action.

• Developing countries need adaptation measures most urgently.


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Adaptation-Mitigation “Win-Win” Opportunities

are High in Developing Countries

• At the global level, the largest contributor to GHG emissions is the energy sector—and will be for years to come • Land use change, forestry and agriculture account for almost 50% of emissions in developing countries• Forestation, avoided deforestation and agriculture reduce emissions and also have significant adaptation benefits

Source: WRI / CAIT.


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Synergies…But Trade-offs• Planting mangroves sequesters carbon and

buffers the effects of storm surges on infrastructure near the coast.

• Forestation and avoided deforestation can improve the micro-climate, prevent soil erosion, etc.

• Water storage can be beneficial for flood risk reduction, drought response and clean energy generation (hydro).

… but trade-offs can occur

There are adaptation-mitigation win-wins…

• Tree species that are best for carbon sequestration may not be best for livelihoods (e.g., eucalyptus plantation).

• Forestation in high watersheds in some cases reduces water availability downstream.

• Urban development—high density good for mitigation, but can increase climate related risks (coastal zones, heat waves).


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Key Questions about Adaptation

• Adaptation depends on country specific risks. Need better analyses at national-local level.

Adaptation — Solutions for Development

What?

The Good News

• In a very real sense development is the best adaptation: strong institutions, education, health, infrastructure, and a diversified economy strengthen resilience.

Why? • Adaptation is necessary for development. Climate risks undermine growth and hurt the poor.

When? • Need to start now to adapt to current climate variability in a cost effective way and prepare for the future.

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• Weather data collection and forecasts (for farmers, insurers, etc.)• Technical assistance (i.e., extension services on new crop varieties, strengthening capacity of health systems to address new diseases)• Knowledge development and dissemination on adaptation-mitigation options in land use change, forestry and agriculture• Risk and vulnerability assessments• Investment prioritization through improved understanding of options and costs

• Drought and saline resistant crops • Efficient irrigation techniques• Water-reuse technologies• Tree species with high mitigation-adaptation potential• Improved farming systems• More competitive and versatile desalination

• Multi-purpose water storage (for water supply, irrigation, river regulation, and hydropower) • Rainwater harvesting• Improved drainage• “Climate proofed” transport systems

Infrastructure

Technology

Knowledge and Capacity

Areas for Action

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• Eliminate counterproductive incentives (e.g., subsidies for water- intensive crops)• Create appropriate incentive framework for private sector action (including private insurance)• Improve land security and social protection mechanisms• Improve integrated river-basin and ecosystems-based planning

• Strengthen key institutions in various sectors (e.g. water, agriculture, infrastructure)• Increase inter-sectoral coordination (i.e., for disaster risk management)• Improve participatory processes and community involvement in decisions• Strengthen disasters preparedness and safety net for disaster-hit households• Provide key public services (e.g., hydro-meteorological services, early warning systems)

Policies

Areas for Action (continued)

Institutions

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Public Sector

Private Sector

Donors

PPP

Insurance pools the burden of climate risks

Insuring Against Risks• Support increase in insurance penetration and competitive insurance markets

• Introduce mandatory insurance in hazard-prone areas, improve land use regulations, building codes

• Develop data to monitor loss trends, improve catastrophe modeling

• Develop public/private risk transfer programs, e.g., Mongolia Index-Based Livestock Insurance, Mexico Catastrophe Bond, Caribbean Catastrophe Risk Insurance Facility

• Create derivatives and transfer risk to international markets, e.g., through re-insurance

• World Food Program weather derivative based on precipitation level (e.g., Ethiopia)

• World Bank Catastrophe Insurance Pool in Turkey

• Global Index Reinsurance Facility 17

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How Much Does Adaptation Cost?There Are Some Estimates, but the Ranges Are Wide and

Uncertain

Developing Countries — Estimated Cost of Adaptation by 2030

Implications for Finance and Development Ministers

• The implied change in temperature is 1.5º C for 2030

• Cost estimates based on expert opinion

• Wide range of possible infrastructure costs due to information gaps

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Good Adaptation is Cost-Effective

Investment in physical infrastructure

• Sea level rise likely to carry high costs

• Adaptation (dark green) buys a large reduction in climate change costs (light green)

Source: European Environment Agency.

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Investment in information and knowledge: each 100 Euros spent in meteorological systems yields at least 200 Euros in avoided damages

Good Adaptation is Cost-Effective (continued)

Source: World Bank.


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1. Specialized funds• Adaptation Fund (2% tax on CDM and voluntary contributions): forecasted

US$80–300 million per year between 2008–2012• GEF adaptation programs: US$279 million• Global Facility for Disaster Risk Reduction (multi-donor): US$15–20 million

per year

2. Mainstreaming platforms• IDA• Regional Development Banks• Bilateral financing (e.g., EU climate partnership)

3. Mitigation financing with adaptation benefits• Pilot carbon funds (e.g., Forest Carbon Partnership Facility)• Bilateral financing

4. Sustainable development financing with adaptation benefits• GEF (e.g., Land Degradation Operational Program)• Financing ecosystems and sustainable land management (IDA, MDBs)

Sources of FinanceFiscal

Revenues

1. Increase financial flows to governments—eliminate counterproductive subsidies (e.g., energy and water)

2. Reduce reliance on government budget• Country risk insurance such as catastrophe bonds (e.g., Mexico) or risk

insurance facilities (e.g., Caribbean)• Development of private insurance markets

International Financing

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Be Ahead of the Game

Use improved climate data, climate risk analysis, adaptation needs assessments

Encourage a shift towards climate-resilient growth across all sectors of the economy Provide budget allocation for: • Climate resistant public infrastructure (e.g., roads, dams) • Preparedness and emergency response to extreme events• Information to help citizens in their everyday decisions (e.g., early warning systems, seasonal forecasts)• R&D and extension services in agriculture• Preparedness of the health sector for new diseases

Provision for unforeseen events; create contingency funds, sign contingent loans, and/or buy insurance for emergency responses to climatic disasters

The MINISTRIES OF FINANCE and DEVELOPMENT can:

Understand risks and priorities

Design policies

Support line ministries

Plan ahead with contingency

funds


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Scaling Up — Post-2012 Considerations

Post-2012 Considerations

• The Bali Action Plan includes adaptation in the scope for future agreement.

• The focus is shifting from reducing emissions to reducing damages through adaptation and mitigation.

• Effective adaptation will require significant financial support to affected countries.

• Important to explore how to encourage win-win adaptation-mitigation efforts.

• Nevertheless, large mitigation potential doesn’t overlap well with large adaptation needs.

Can adaptation be an effective part of a post-

2012 agreement?

• Adaptation Fund — financed at a 2 percent CDM tax — is an important first step.

• Additional sources of finance?

What are the options for sustainable adaptation

finance?

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Key Messages• For developing countries, climate change is today’s crisis, not

tomorrow’s risk: adaptation matters for development and has to start now.

• Adaptation and mitigation must go hand in hand, although one is based on local knowledge and action, and the other must be addressed globally.

• There are mitigation-adaptation synergies, especially in low income countries (e.g., land management, forestation, agriculture).

• Good adaptation is cost-effective.

• Actions to achieve adaptation include risk management, knowledge and capacity building, technology, infrastructure investment, and strengthening governance, policies, and institutions.

• Adaptation requires expanding the availability and access to financial resources.

• Existing international financing sources help bear the costs—but more is needed.

Key Messages and Areas for Further Work

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Areas for Further Work• Improving estimates of adaptation costs and benefits by sector,

type of risk, and at different levels• Developing tools for:

– Rapid assessment of vulnerabilities and priorities– Decision making under uncertainty (or ignorance)– Technical best practice toolkits for water management, housing and

city planning, transport, etc.• Identifying incentives and building local capacity for

mainstreaming adaptation in development • Supporting technological solutions for climate resilient

investments• Advancing instruments for financing adaptation:

– Insurance for different risks and customers, notably the poor– Understanding and designing incentives for private sector

investments– Adaptation-mitigation win-wins supported by mitigation finance– Mix of instruments to meet financing needs in a country-specific

context

Key Messages and Areas for Further Work

climate adaptation and development bali breakfast/development committee series april 13, 2008...

Documents

climate adaptation

adaptation solutions

adaptation measures

poor countries dangersource

poor countriesclimate

development ministerspost

dcclimate risks

eachclimate risks