IPCC_Managing Risks of Extreme Events.pdf - Climate Access

Chapter 4Changes in Impacts of Climate Extremes: Human Systems and Ecosystemsrehabilitation, and reconstruction), and finally the implementation ofadaptation measures (including transition costs) (Smit et al., 2001; alsosee the Glossary). The benefits of adaptation can generally be assessedas the value of avoided impacts and damages as well as the co-benefitsgenerated by the implementation of adaptation measures (Smit et al.,2001). The value of all avoidable damage can be taken as the gross (ortheoretically maximum) benefit of adaptation and risk management,which may be feasible to adapt to but not necessarily economically efficient(Pearce et al., 1996; Tol, 2001; Parry et al., 2009). The adaptation deficitis identified as the gap between current and optimal levels of adaptationto climate change (Burton and May, 2004). However, it is difficult toassess the optimal adaptation level due to the uncertainties inherent inclimate scenarios, the future patterns of exposure and vulnerability toclimate events, and debates over methodological issues such as discountrates. In addition, as social values and technologies change, what isconsidered avoidable also changes, adding additional uncertainty tofuture projections.4.5.2 Extreme Events, Impacts, and DevelopmentThe relationship between socioeconomic development and disasters,including those triggered by climatic events, has been explored by anumber of researchers over the last few years using statisticaltechniques and numerical modeling approaches. It has been suggestedthat natural disasters exert adverse impacts on the pace and nature ofeconomic development (Benson and Clay, 1998, 2003; Kellenberg andMobarak, 2008). (The ‘poverty trap’ created by disasters is discussed inChapter 8.) A growing literature has emerged that identifies theseimportant adverse macroeconomic and developmental impacts of naturaldisasters (Cuny, 1983; Otero and Marti, 1995; Benson and Clay, 1998,2000, 2003, 2004; Charveriat, 2000; Crowards, 2000; ECLAC, 2003;Mechler, 2004; Raddatz, 2009; Noy, 2009; Okuyama and Sahin, 2009;Cavallo and Noy, 2010). Yet, confidence in the adverse economicimpacts of natural disasters is only medium, as, although the bulk ofstudies identify negative effects of disasters on shorter-term economicgrowth (up to three years after an event), others find positive effects(Albala-Bertrand, 1993; Skidmore and Toya, 2002; Caselli and Malhotra,2004; see Section 4.2). Differences can be partly explained by the lackof a robust counterfactual in some studies (e.g., what would GDP havebeen if a disaster had not occurred?), failure to account for the informalsector, varying ways of accounting for insurance and aid flows, differentpatterns of impacts resulting from, for example, earthquakes versusfloods, and the fact that national accounting does not record thedestruction of assets, but reports relief and reconstruction as additionsto GDP (World Bank and UN, 2010). In terms of longer-run economicgrowth (beyond three years after events), there are mixed findings withthe exception of very severe disasters, which have been found to setback development (World Bank and UN, 2010).In terms of the nexus between development and disaster vulnerability,researchers argue that poorer developing countries and smallereconomies are more likely to suffer more from future disasters thandeveloped countries, especially in relation to extreme impacts(Hallegatte et al., 2007; Heger et al., 2008; Hallegatte and Dumas, 2009;Loayza et al., 2009; Raddatz, 2009). In general, the observed or modeledrelationship between development and disaster impacts indicates thata wealthier country is better equipped to manage the consequences ofextreme events by reducing the risk of impacts and by managing theimpacts when they occur. This is due (inter alia) to higher income levels,more governance capacity, higher levels of expertise, amassed climateproofinvestments, and improved insurance systems that can act totransfer costs in space and time (Wildavsky, 1988; Albala-Bertrand,1993; Burton et al., 1993; Tol and Leek, 1999; Mechler, 2004;Rasmussen, 2004; Brooks et al., 2005; Kahn, 2005; Toya and Skidmore,2007; Raschky, 2008; Noy, 2009). While the countries with highestincome account for most of the total economic and insured losses fromdisasters (Swiss Re, 2010), in developing countries there are higherfatality rates and the impacts consume a greater proportion of GDP. Thisin turn imposes a greater burden on governments and individuals indeveloping countries. For example, during the period from 1970 to 2008over 95% of deaths from natural disasters occurred in developingcountries (Cavallo and Noy, 2010; CRED, 2010). From 1975 to 2007,Organisation for Economic Co-operation and Development (OECD)countries accounted for 71.2% of global total economic losses fromtropical cyclones, but only suffered 0.13% of estimated annual loss ofGDP (UNISDR, 2009).There is general consensus that, as compared to developed countries,developing countries are more economically vulnerable to climateextremes largely because: (i) developing countries have less resilienteconomies that depend more on natural capital and climate-sensitiveactivities (cropping, fishing, etc.; Parry et al., 2007); (ii) they are oftenpoorly prepared to deal with the climate variability and physical hazardsthey currently face (World Bank, 2000); (iii) more damages are causedby maladaptation due to the absence of financing, information, andtechniques in risk management, as well as weak governance systems;(iv) there is generally little consideration of climate-proof investment inregions with a fast-growing population and asset stocks (such as in coastalareas) (IPCC, 2001; Nicholls et al., 2008); (v) there is an adaptation deficitresulting from the low level of economic development (World Bank,2007) and a lack of ability to transfer costs through insurance and fiscalmechanisms; and vi) they have large informal sectors. However, in somecases like Hurricane Katrina in New Orleans, United States, developedcountries also suffer severe disasters because of social vulnerability andinadequate disaster protection (Birch and Wachter, 2006; Cutter andFinch, 2008).While some literature has found that the relationship between incomeand some natural disaster consequences is nonlinear (Kellenberg andMobarak, 2008; Patt et al., 2010), much empirical evidence supports anegative relationship between the relative share of GDP and fatalities,with fatalities from hydrometeorological extreme events falling withrising level of income (Kahn, 2005; Toya and Skidmore, 2007; WorldBank and UN, 2010). Some emerging developing countries, such as China,India, and Thailand, are projected to face increased future exposure to265