Climate change futures: health, ecological and economic dimensions

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Engagement of the insurance industry could increase the efficacy of sustainable development efforts, while increasing the insurability of risks, thus making new insurance markets more viable (less risky) for insurers. Emerging markets are especially prone to damages from extreme weather events, given their dependence on the agricultural sector, water availability and on intensive development in low-lying and coastal areas. They can be particularly affected by the spread of disease and degradation of biological systems and by the diversion of scarce resources for relief and recovery. These impacts can deter future investments by increasing the risks faced by foreign interests. CHANGING BANK LENDING GUIDELINES The financial sector, with long time horizons, can be the first sector to sense rising risks and growing instabilities. The financial sector can also change industrial practices through codes and credit lines. Lending guidelines are being revised by several banks, including JP Morgan Chase (Carlton 2005), Citigroup and the Bank of America. The Equator Principles have played a central role in providing guidelines for project financing with regard to greenhouse gas emissions and sustainable forestry. Changes in rules and guidelines by those who extend credit and insurance can ripple through industry, farming, housing and development in general. Certain measures that integrate climate change mitigation and adaptation can simultaneously support insurers’ solvency and profitability (Mills 2005). Promising strategies involve establishing innovative products and systems for delivering insurance and using new technologies and practices that both reduce vulnerability to disaster-related insurance losses and support sustainable development (including reducing greenhouse gas emissions). As one of many examples, curtailing deforestation reduces risks such as wildfire, malaria, mudslides and flooding, while reducing emissions of greenhouse gases. There are also many ways in which renewable energy and energy-efficient technologies reduce risks. For example, distributed power systems reduce the potential for business interruptions caused by damages to the power grid (Mills 2003). An aggressive energy efficiency campaign in California avoided 50 to 150 hours of rolling blackouts during the summer of 2001 (Goldman et al. 2002). Such integrated strategies call for a fundamental change in economic assessment. While adaptation strategies are typically thought of as having net costs, these strategies also yield mitigation and economic benefits. This is most readily visible in the case of adaptation measures that yield energy savings. For example, a US $1,000 roof treatment that reduces heat gain (and lowers the risk of mortality during heat catastrophes) may yield US $200/year in energy savings, resulting in positive cash flow after five years. Another case in point concerns indoor air quality, in particular aeroallergens such as mold. When the mold issue first arose, insurers, fearing catastrophic and unmanageble losses, excluded coverage (Chen and Vine 1998; 1999). In the interim, insurers have learned more about building science and ways to preempt problems through better building design and operation, with the result that the situation has begun to shift from a “problem” to an “opportunity” (Perry 2005). Coupling insurance for extreme weather events with strategies that contribute to public health and sustainable development would enhance disaster resilience, and reduce the likely magnitude of losses and, thus, help increase insurers’ willingness to establish, maintain, and expand a constructive presence in emerging markets. OPTIMIZING STRATEGIES FOR ADAPTATION AND MITIGATION There are numerous measures being addressed by the IPCC and others to adapt to a changing climate (Smit et al. 2001; Yohe and Tol 2002). The measures discussed under Specific Recommendations for ameliorating the impacts of heat waves can help adapt to climate change and stimulate the development of clean and energy-efficient technologies. Harmonizing measures that reduce vulnerabilities and help to stabilize the climate is a principle that can guide public policy, and guide private investment and insurance policies. There are other examples of strategic measures that provide adaptation and mitigation (primary prevention of climate change; Mills 2002; 2004a). 103 | FINANCIAL IMPLICATIONS
These include: Solar Photovoltaic Panels 104 | FINANCIAL IMPLICATIONS • Energy Efficiency and Renewable Energy: A host of energy efficient and renewable energy technologies have collateral benefits that enhance adaptive capacity to extreme weather events. Improving the thermal efficiency of the building envelope makes occupants less vulnerable to extreme heat catastrophes and roofs less vulnerable to ice damage. • Clean Water Distribution: Measures for homes, schools, small businesses and agriculture that employ solar and wind power for purifying and pumping water, irrigation, cooking, lighting, and powering small equipment (computers, sewing machines) can have immediate public health and economic benefits (potable water, nutrition, reduced indoor air pollution and a “climate” favorable to economic growth). Such measures can also stimulate internal and international markets in the production of clean energy technologies. • Distributed Energy Generation: Distributed generation (DG) of energy includes on-site generators in homes and institutions, utilizing renewable sources (harnessing solar, wind, tidal and geothermal power), plus fuel cells and combined cycle capture of heat. DG affords increased security from grid failure (for example, from storms and heat-wave-generated blackouts) and provides energy services more efficiently, with lower greenhouse gas emissions. DG can be fostered with lower insurance premiums or other inducements from the financial services sector to reflect the associated risk management value (Mills 2003). To support such initiatives, insurers would benefit from developing better “intelligence” about changing hazards. The current inability to adequately incorporate current and anticipated climate changes into insurance Image: PowerLight Corporation business practice traces from disparate efforts to (1) analyze historic trends in climate and extreme weather, (2) model future climates and their impacts and (3) utilize risk information in the insurance business. Practitioners associated with these efforts have divergent orientations and expectations. Loss models also need to do a better job of linking extreme weather events with specific types of insurance. There are some early examples of this type of innovation, which should be studied and expanded upon. 7 In a changing climate, insurers will no longer have the luxury of basing projections of future losses on past experience (ABI 2004). A central technical challenge is the inability of current models to adequately capture the effects of relevant hazards (see Dailey 2005 regarding winter storms). Another challenge is that interoperability across data sets, models, and sectors is largely lacking. The organizational challenge is that efforts to address the issue are fragmented. BENEFITS OF DISTRIBUTED ENERGY GENERATION The benefits of distributed generation (DG) to complement utility grids include: • Greater security from grid failure in the face of overload during heat waves or disruption from natural catastrophes. • Enhanced energy security. • Decreased cost of and dependence on imported sources of energy for developed and developing nations. • Helping to jump-start and sustain enterprises that manufacture, distribute and maintain clean energy, and energy-efficient, hybrid and ‘smart’ technologies (computerrun programs that optimize grid response to demand). 7 For example, AIR Worldwide Corp is linking catastrophe models to estimate insured losses to plate glass as a result of windstorms (Business Insurance 2005).
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Climate Change Futures Health, Ecol
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Published by: The Center for Health
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PREAMBLE Hurricane Katrina 4 | PREA
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6 | EXECUTIVE SUMMARY With this in
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8 | EXECUTIVE SUMMARY Other non-lin
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THE CASE STUDIES IN BRIEF Floods in
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12 | EXECUTIVE SUMMARY THE CCF PROJ
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PART I: The Climate Context Today
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(see McCarthy et al. 2001). As glac
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Table 1.1 Extreme Weather Events an
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DISCONTINUITIES CLIVAR, Climate Var
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Figure 1.6 The Frequency of Weather
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Figure 1.7 Trends in Events, Losses
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• Thawing of permafrost (permanen
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CCF-II: GRADUAL WARMING WITH INCREA
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PART II: Case Studies
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CLIMATE CHANGE AND EMERGING INFECTI
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HEALTH IMPACTS Malaria is character
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Figure 2.5 Brazil N Brazil COLOMBIA
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estimates (over and above current a
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SPECIFIC RECOMMENDATIONS Preventing
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262 deaths in 2003; 7,470 cases and
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98% of the two-year life cycle take
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The rise in minimum temperature res
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While the role of allergen exposure
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AIR QUALITY AND CLIMATE CHANGE ISSU
Page 54 and 55: EXTREME WEATHER EVENTS 1984 and 199
Page 56 and 57: HEALTH AND ECOLOGICAL IMPACTS Heat
Page 58 and 59: Figure 2.20 Projected Excess Deaths
Page 60 and 61: THE ROLE OF CLIMATE Australia exper
Page 62 and 63: Service). Since 2002, severe floods
Page 64 and 65: Table 2.1 Economic Losses in Europe
Page 66 and 67: NATURAL AND MANAGED SYSTEMS adelgid
Page 68 and 69: created unstable conditions conduci
Page 70 and 71: Climate research has already identi
Page 72 and 73: LOSSES ASSOCIATED WITH 1993 HEAVY P
Page 74 and 75: Figure 2.28 Soybean Rust Introducti
Page 76 and 77: Table 2.3 Extreme Weather Events Ca
Page 78 and 79: General measures to reduce the impa
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Page 88 and 89: In 2001 the IPCC fully recognized t
Page 90 and 91: While seawater desalinization is cu
Page 92 and 93: PART III: Financial Implications, S
Page 94 and 95: Figure 3.1 Reinsurance Prices Are H
Page 96 and 97: RISK SPREADING IN DEVELOPED AND DEV
Page 98 and 99: THE LIMITS OF INSURABILITY Not all
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Page 106 and 107: Industry observers point out that p
Page 108 and 109: CONCLUSIONS AND RECOMMENDATIONS Jus
Page 110 and 111: FINANCIAL INSTRUMENTS Regulators an
Page 112 and 113: of carbon-risk hedging products, su
Page 114 and 115: Summary Table of Extreme Weather Ev
Page 116 and 117: Table B.1 Summer Percentage Frequen
Page 118 and 119: Climate sensitivity for small-scale
Page 120 and 121: diffuse and do not manifest in sing
Page 122 and 123: APPENDIX D. LIST OF PARTICIPANTS AT
Page 124: Carmenza Robledo Gruppe Oekologie E
Page 127 and 128: 126 | BIBLIOGRAPHY Bibliography AAA
Page 129 and 130: 128 | BIBLIOGRAPHY Chordas, L. Epid
Page 131 and 132: Ford, S.E. & Tripp, M.R. Diseases a
Page 133 and 134: 132 | BIBLIOGRAPHY Kalkstein, L. S.
Page 135 and 136: 134 | BIBLIOGRAPHY Mills, E. The in
Page 137 and 138: 136 | BIBLIOGRAPHY Rose, J. B., Eps
Page 139 and 140: 138 | BIBLIOGRAPHY Vandyk, J. K., B
Page 142: Infectious and Respiratory Diseases
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Climate change futures: health, ecological and economic dimensions

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