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Climate Action 2009-2010

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BUSINESS AND FINANCE © IRRI Images/Flickr How should developing countries adapt to climate change and how much will it cost? Typhoon Ondoy (locally known as Ketsana) caused floods in low-lying areas near the Laguna bay area around 60kms south of Manila. The extreme weather brought a month’s worth of rain in a short span of six hour’s causing flash floods and overflowing lakes. CLIMATE INVESTMENT FUNDS 78 Sergio MarguliS Lead environmentaL economist, environment department, the WorLd Bank Even with drastic reductions in global emissions of greenhouse gases in the coming years, the global annual average temperature is expected to be two degrees Celsius above pre-industrial levels by 2050. Such a rise in temperature will bring about a world warmer by two degrees Celsius will experience more intense rainfall, and more frequent and intense droughts, floods, heat waves, and extreme weather events. Countries will need to adapt, and access to necessary financing will be critical in helping them implement measures that will make their populations better adapt to climate impacts. A clear understanding of these costs is necessary for policy-makers to better allocate resources. Previous studies on adaptation costs provide a wide range of estimates, from $4 billion to $109 billion a year. Similarly, National Adaptation Programs of Action (prepared by Least Developed Countries under the United Nations Framework Convention on Climate Change, (UNFCCC)) identify and provide costing only for urgent and immediate adaptation needs. To better understand adaptation costs and to inform international negotiations in Copenhagen, the World Bank initiated the Economics of Adaptation to Climate Change (EACC) study, which is funded by the governments of The Netherlands, Switzerland, and the United Kingdom. The objectives of the study are to develop an estimate of adaptation costs for all developing countries, to help these countries understand and assess the risks posed by climate change, and to design better strategies to adapt to climate change. The initial study report launched in September 2009, focused on the first objective and estimated the costs of adapting to climate change for developing countries in the range of $75- 100 billion per year from 2010–2050. A second report, due out in early 2010, will focus on the second objective and will be based on case studies in the following seven countries: Bangladesh, Plurinational State of Bolivia, Ethiopia, Ghana, Mozambique, Vietnam and Samoa. INNOVATIVE RESEARCH APPROACHES Although the estimate involves considerable uncertainty, the study gives policy-makers – for the first time – a carefully calculated number to work with that uses a unique approach to estimate the costs of adapting to climate change. This involves comparing a future world where there is no climate change and one where climate has affected daily life. The difference between these two worlds entails a series of actions to adapt to the new world conditions and the costs of these additional actions are the costs of adapting to climate change. V I SIT: WWW.CLIMATEACTIONPROGRAMME.ORG

BUSINESS AND FINANCE This study estimates the costs for major economic sectors under two alternative future climate scenarios – one wet, one dry. This is why there is such a range in the costs – $75 billion under the drier scenario and $100 billion under a wetter scenario. The costs were calculated across six regions – East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, South Asia and Sub-Saharan Africa – and eight economic sectors – infrastructure, coastal zones, water supply, agriculture, forestry, fisheries, health, and extreme weather events. One of many elderly people queuing for relief rice from an organization in Quang Nam Province – Vietnam, after Ketsana typhoon or “typhoon #9” in Vietnamese. “ Estimated costs of adapting to climate change for developing countries in the range of $75-100 billion per year from 2010 – 2050 “ PUTTING A PRICE TAG ON ADAPTATION Three sectors – coastal zones, infrastructure, and water supply – face the highest adaptation costs. Costs of adaptation in the coastal zones vary from $29.6 billion per year under the drier climate scenario to $30.1 billion per year under the wet scenario. Costs in the infrastructure sector vary between $13.7 billion and $29.5 billion per year, and in the water supply sector between $18.8 billion to $13.7 billion. The highest adaptation costs are found in the East Asia and Pacific region and the lowest in the Middle East and North Africa. Latin America and the Caribbean and Sub- Saharan Africa closely follow East Asia and the Pacific. The highest costs for East Asia and the Pacific are in the infrastructure and coastal zones; for Sub-Saharan Africa, water supply and flood protection and agriculture; for Latin America and the Caribbean, water supply and flood protection and coastal zones; and for South Asia, infrastructure and agriculture. The study’s analysis shows that the costs of adapting to climate change will increase over time, but will reduce as a percentage of a country’s GDP. This suggests that countries become less vulnerable to climate change as their economies grow and they develop. However, adaptation costs as a percentage of GDP are higher in Sub-Saharan Africa due to the lower GDPs in this region. PUTTING THE FINDINGS IN CONTEXT Estimates from the EACC study are in the upper end of estimates provided by the UNFCCC study published in 2007, which is closest in approach to the EACC study. One of the reasons for this is that there is a significant six-fold increase in the cost of coastal zone management in the EACC study. This increase is due to the improvement in cost estimates, including maintenance costs, and the inclusion of the costs of upgrading ports and risks from both sea-level rise and storm surges. The costs of water supply adaptation are also higher in the EACC study, which is in turn due to the inclusion of riverine flood protection costs. The EACC’s analysis of the infrastructure sector has been more detailed than previous studies, taking into account costs of services such as energy, transport, water and sanitation, communications and urban and social infrastructure. It also entails a detailed analysis of climate proofing including adjustments to design standards and maintenance costs. “ Adaptation to a two degrees Celsius warmer world will be costly and is in the same order of magnitude as the foreign aid that developed countries now give developing countries each year “ Calculating the global cost of adaptation is a complex problem that requires projections of climate change, economic growth, structural change, human behaviour and government investments 40 years in the future. The EACC study has tried to establish a new benchmark for this type of research as it adopted a consistent approach across country sectors and over time. But in the process it had to make important assumptions and simplifications, to a degree biasing the estimates. © linh.ngân/Flickr CLIMATE INVESTMENT FUNDS 79 V I SIT: WWW.CLIMATEACTIONPROGRAMME.ORG