Quantifying Climate Impacts and Vulnerability Reduction: The Higher Ground Approach

Posted on May 2, 2012 by Karl

Economies are structured around certain climatic conditions, so it is not surprising that changes in climate have significant impact on economic activity.

Economic structures also determine the extent to which different populations are vulnerable to climate change. Research has shown that overall the poor in developing countries are the most vulnerable to climate change. And so the opportunity for vulnerability reduction should be large in developing countries. Yet there is a challenge: in financial terms poor communities do not have the level of assets of productivity that could be protected compared to richer communities.

Taken at face value, if projects are assessed and prioritized solely based on the level of monetized assets protected, then projects that reduce the vulnerability of asset- rich communities would be favoured over asset-poor communities with the same or higher levels of vulnerability. Furthermore, poorer communities generally lack the very assets that afford them higher levels of resiliency.

This would seem perverse when aggregate human needs such as shelter, food security, and health are much greater in developing countries. There is therefore a need to consider alternative methodologies for ‘asset’ valuation that can more suitably value social, economic and environmental assets in developing countries, enabling us to set meaningful ‘baseline’ valuations that underpin meaningful climate vulnerability and damage estimates.

ADJUSTING VRC ISSUANCES FOR DEVELOPMENT LEVELS: SUPPRESSED DEMAND AND MINIMUM SERVICE LEVELS

Suppressed Demand Baselines have particular relevance in developing countries, where basic needs are not being met. The idea of crediting future increases in demand, where it is currently being suppressed, has a basis in Clean Development Mechanism (CDM) emission reduction crediting rules and may be applied for vulnerability reduction credits VRCs™.

In the CDM, the minimum service level is a baseline of emissions where minimum human needs such as basic energy services (including lighting, cooking and drinking water supplies) are met. A Suppressed Demand Baseline is appropriate when basic energy services are below the “minimum service level” at the time of implementation of the CDM project activity.

We can borrow this “minimum service level” concept and apply it to climate adaptation if assets in developing countries, such as irrigation, storm drainage, or building standards, are below a minimum service level to withstand climate impacts. This effectively makes investment in vulnerable communities look more attractive, and by doing so, puts them on a more equal footing with countries (and communities) already operating at that minimum service level.

One way to define a minimum service level might be through gross national income. Other measures, such as the Human Development Index, may provide a broader perspective on a community’s resilience to climate change, but may be too involved, or expensive, to quantify at the community level for VRC project registration.

The adoption of a universal “minimum service level” factor for all vulnerable communities seeking VRC registration would serve as a baseline point from which to measure and compare the monetary benefit of a project. It allows us to compare the value of projects and issuance of VRCs in a fair way, by enabling us to quantify the ‘vulnerability reduction’ of projects. The minimum service level is therefore a major assumption – but a very useful one when it comes to measuring the climate vulnerability reduction from specific projects.

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Adaptation Finance: Making the case for obligation

Posted on November 14, 2011 by linus

In previous posts, it has been pointed out that “southern” (developing or least developed) countries will likely bear a disproportionate balance of the costs and damage from climate change, and this damage will be a largely delayed reaction from past emissions, due to the persistence of anthropogenic carbon dioxide in the atmosphere on a roughly hundred year scale as well as factors such as feedbacks and  the decreasing absorptive capacity of the oceans, which so far have acted as great buffering reservoirs of CO2.  In other words, past actions taken by “northern” countries in becoming industrialized will have ramifications now and in the future for many “southern” countries, which are doubly vulnerable due to geography and the climatic sensitivity characteristic of developing world economies.

So two questions come to mind: how can we get a handle on the magnitude of this “past climate debt”; and, once we have done so, how can we figure out an efficient and fair method of leveraging offsetting payments or damage mitigations?

Building the Climate Debt

The two following figures represent the amount and distribution of cumulative anthropogenic CO2 emissions from fossil fuel burning and land use change over the past few centuries.

Source: CDIAC;BP;USGS

Historic Emissions Distribution 1900-2005 (Source: http://cait.wri.org/

Overall, cumulative emissions due to fossil fuel burning and land use change from 1850 through 1990 were about 330 Bt Co2 equivalent,[1] more than half of which due to a few of the  wealthiest industrialized nations. Now compare this growth of emissions with data on GDP growth by region (adjusted for wealth parity and in constant dollars) over roughly the same period.

GDP growth of world regions, adjusted for wealth parity and in 1990 dollars/ Source:Angus Maddison-Groningen Growth and Development Centre

While it is true that some nations in the developing world, notably China and India, have overtaken or will overtake the established OECD economies in total emissions (but not – until  relatively far down the road  - in terms of emissions per capita) it is clear that until recently, both economic growth and the emissions from fossils fuels, which allowed that growth – have been skewed dramatically in the “north’s” favor.

Finally, take a look at some indications of damage due to climate change:

Additional Estimated Climate Change Deaths/ Source: Duke University

 

Projected change in Agricultural Outputs, 2050/ Sources: Miller and others, World bank, via http://peopleandresources.blogspot.com/2009/10/wdr-on-climate-change-and-ag.htm

For many measures of damage – additional mortality, losses to agriculture, loss of drinking water and land to ocean rise  – happening or likely to happen under even moderate climate change, the global “south”, which neither grew economically nor emitted greenhouse gases as much as  the developed world, comes out worse for the wear, and likely worse off than the “north”.

If this outcome seems a bit lopsided, well, someone once supposedly said that, “God watches over fools, children, and the United States of America”.   Aphoristic nonsense, to be sure, but at its heart there is a very cogent point. The industrialized nations –largely, the temperate latitudes nations – have been both lucky and not reluctant to capitalize on that luck.   For climatological reasons beyond anyone’s  control (the tropics and subtropics will be likelier to experience more severe climate issues, such as superdroughts or enhanced ENSO cycle flooding); for  reasons rooted in history and geography (the “Guns, Germs and Steel” hypothesis that certain Eurasian societies had a political and developmental edge over Africa, South Asia, and the Americas); and for reasons of recent history directly attributable to the rise of today’s nation states (colonialism and greenhouse emissions patterns from about 1850), the global south will continue to pay for the past, present and future enrichment of the north.

I’ll leave it at there for now, but in  future posts, we’ll discuss what has been proposed to address this debt, what is likely to be done in the near future (sadly, not a whole lot), and new ideas for how, possibly, needed investment for adaptation in the global south might be quickly and efficiently mobilized.

[1] www.Trillionthtonne.org

 

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What roles for the private sector in climate adaptation?

Posted on October 25, 2011 by Karl

The linked article outlines well the ways the private sector is already involved:

http://chimalaya.org/2011/10/25/climate-change-adaptation-–-finding-new-opportunities-for-private-sector-engagement/?utm_source=Daily+Updates&utm_campaign=1352e4cdd3-RSS_EMAIL_CAMPAIGN&utm_medium=email

It’s conclusion is apt, though: there needs to be incentives.  That’s where the VRC scheme that The Higher Ground Foundation plays a key role.

Regards,

Karl

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Introducing THE HIGHER GROUND FOUNDATION

Posted on September 19, 2011 by linus

In recent posts, Karl has had a bit to say about the gap between the need to address climate change-induced damage, particularly in developing nations with little or no track record of greenhouse gas emissions, and the low level of funding commitment forthcoming so far from developed nations. As a means of addressing this gap, he has proposed the Vulnerability Reduction Credit (VRC), a novel mechanism which is similar to various carbon credit schemes in that it creates a market for funding, or for trading credits for funding, adaptation measures based upon the costs of damage due to past and ongoing greenhouse gas emissions (see Karl’s previous post “Part 3: Creation of a market in climate vulnerability reduction”).

Well, in deference to the maxim that money talks and, um – something else walks, Karl, along with Roland Mader and Linus Adler, has been busy in spearheading an initiative to kick start the VRC:  meet THE HIGHER GROUND FOUNDATION.   As we busily try to get THE HIGHER GROUND off the ground in the upcoming months, we’ll be talking in much more depth about how it works and what we hope it will achieve, as well as sharing with you what will be needed to meet these goals.  And right now, aside from seed funding, what is probably needed most is ideas for projects.

This is where we hope you can come in, if you’re interested in participating. On its website, THE HIGHER GROUND has posted a “Call for Project Concept Notes” The foundation is looking for projects based in developing countries that could be strong candidates to serve as the first pilots to generate climate related VRCs under a new voluntary market.

The post includes guidelines for project developers.  While THE HIGHER GROUND is open to a variety of different project types, strong candidates for a pilot project need to demonstrate that they have clear climate vulnerability baselines and quantifiably prove that if a project is executed according to plans, it will provide clear, quantifiable and verifiable vulnerability reductions.

Those involved in the selected pilot projects will be at the forefront of a climate adaptation market that could be much larger than today’s carbon market.  Their efforts promise to point the way for market-driven climate adaptation projects that could solve the dilemma that governments face in finding the means for sufficient sourcing, funding and executing climate adaptation projects in the world’s developing countries, those most vulnerable to climate change.

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Part 3: Creation of a market in climate vulnerability reduction

Posted on August 5, 2011 by Karl

I’ve already introduced some of the very serious issues that threaten to keep communities in developing countries ever more vulnerable to climate change.  The north has emitted most greenhouse gas emissions, and its actions so far show it prioritizes reducing emissions over helping poorer countries prepare and adapt to climate change.  Meanwhile, the debate on climate finance lacks coherency on how funds will be mobilized to meet adaptation costs for vulnerable developing countries, in spite of plenty of nice words such as “leveraging private finance.”  It’s now my aim to provide a constructive, concrete solution.

Carbon markets, while imperfect, have been pretty successful in stimulating the private sector to identify, develop, and finance projects that reduce emissions in developing countries.  Sure, not enough has been done in Africa, but solutions are being implemented “suppressed demand” for one thing, to ensure that emission reducing projects are supported in the poorest countries.  Part of the problem with carbon projects in poor countries is that emissions are low to begin with, so the “market” in emission reduction is small and projects very small scale.

Developing countries are where most people are the most vulnerable to climate change.  As such, and unlike emission reducing projects, vulnerability reduction should be a large “market” in these countries.  To be sure, the exposed asset value in financial terms is lower as assets are lower, but from the perspective of aggregate human needs: shelter, food security, health, etc., they are much greater.  If the value of these fundamental needs is accounted for in a like-for-like manner with values in countries where these needs are largely met, then the potential value involved in reducing vulnerability to climate change is enormous – much higher in fact than the enormous costs experts believe are entailed in either accounting for the economic impact of climate change in developing countries, or paying for adaptation measures.

How does the world pay?  A good question, and so far the public debate is lacking.  Cumulative emissions of industrialized countries serves as a solid basis for assigning responsibility, based on the premise that those countries that enriched themselves, in part, from economic activities emitting greenhouse gases.  Paying back for these emissions over the next century offers to be a fair, efficient, and do-able approach, and could be incorporated into existing international carbon markets without too many difficulties.

How do you assign credit for investments to reduce vulnerability?  A “vulnerability reduction credit” based on global costs of the impacts of climate change (caused by historical emissions) can result in a viable crediting approach.  Details of the approach may be found in my paper.

The advantages and opportunities are multiple.  Countries may delegate responsibility to emitters and link this to cap and trade platforms, giving these emitters another option to offset their emissions and meet their caps.  Rather than reducing the cause of climate change (emissions), they have the option, for the additional obligation required, of helping reduce the effect of climate change by incentivizing adaptation projects.  This is flexible, helps to result in the least cost vulnerability reduction, is bottom-up and can be community led rather than a top-down “central/government fund” approach, and is sustainable through system design: credits are only awarded over a period after vulnerability reduction is shown to be sustained.

There are plenty of issues and opportunities that need to be debated, but I hope you see the promise this option gives to overcome the “immaturity” and lack of coherence around “leveraging private finance” to help the poorest prepare for climate change.

 

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Part 2: Is “leverage private finance” just a buzzword?

Posted on July 27, 2011 by Karl

It is not surprising that governments, particularly those in industrialized countries that are on board with the Cancun Climate Agreements, are struggling come up with comprehensive, politically reasonable approaches to fund the much stated “$100 billion by 2020″ of climate finance.  It is also unsurprising that they may wish to speak of the importance of “private finance” as key in meeting the target.

Most of these governments, following the bank bail-outs and quantitative easing of the past few years, and subsequent trends towards budget cutting (without much in the lines of revenue increasing) are not in a good position for their treasuries to fund the entire amount.

There is even legislation making its way through the U.S. Congress that would cut the U.S.’ part of the much smaller share of “fast start” finance (a global total of$10 billion/year) pledged at Copenhagen in 2009.  This is even though the U.S.’ commitment is much smaller than the average, as a share of GDP.  Many reports even indicate some fast start funding is a redirection of resources from other development assistance, calling into question how serious governments are with their pledges.  I could go on in this vein, but hopefully you get my point.

What is being funded?  As noted in the previous section, it seems like most is going to climate mitigation projects – renewables, energy efficiency, etc.  Good stuff.  A “balance” between mitigation and adaptation is language in the agreement, however.  Could this mean $50 billion/year by 2020 for adaptation?  Even ramping up mitigation spending from today’s levels is ambitious.

What is a little surprising is that governments have been successful in “leveraging private finance” in the mitigation space.  Both industrialized countries and emerging markets (notably Brazil, China and India) have fairly successfully enacted “feed in tariffs”, clean energy loan guarantees, carbon taxes and carbon finance via cap and trade markets.

What is not surprising, perhaps, is that while much of the thought around future “leveraging private finance” is related to mitigation, the coverage of adaptation is much less focussed.  Perhaps carbon markets and other public incentives that have resulted in tens of billions, if not more, in private investment are easier for energy sector initiatives, whether supply or demand side.  For one thing, there is a second revenue stream or cost savings in most of these: energy.

Climate adaptation continues to be a discussion, for the most part, around how public funds are disbursed, to whom, and for what.  To be sure, there is some hope that the private sector may play significant roles, but these tend to be as technology providers, or insurers.  Not so much as the engine of direct project development, investment, and implementation.

The debate is led by the development community, with the most vulnerable countries, often the poorest, advocating for as much direct public funding as possible.  They are not to blame, as few alternatives exist, and the adaptation needs will be both great and often a matter of life or death.

Do you see the problem, though?  Anticipated climate impact or adaptation costs for developing countries are projected to reach the multiple $ hundreds of billions, per year, by mid-century.  And the Annex I – rich – countries are collectively struggling to fund less than $2 billion of adaptation, per year, without reallocating from Overseas Development Assistance.  Even if we expect only $50 billion/year for adaptation by 2020, we don’t have many options being championed that result in a clear source of funds (outside of government treasuries), that also will be able to identify, define, engineer, finance, construct or otherwise implement, and sustain adaptation investments at that scale, down to the community level in villages and urban neighborhoods, forests and farms of Africa, Asia, Latin America, and the Pacific.

Next time, I hope to offer some useful thoughts on how this could be accomplished.  In the meantime, let me know what you think, and what ideas you think could get us beyond the cognitive dissonance that exists today.

 

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The debate on climate adaptation finance seems very immature. Part 1: North and South are poles apart

Posted on April 13, 2011 by Karl

Hello all,

I promised Geoff Stiles more information on Climate Adaptation Work’s concept of a “vulnerability reduction credit”, and do intend to get a discussion going on this subject.  But first, I believe it’s necessary to provide a little background on why I think such an approach is important before getting into the details.

Climate finance is obviously a major issue.  But the debate on what and how it should be deployed is not yet, in my opinion, very well connected.

The North and the South have different priorities.  Of course, this is a generalization, but if you look at the rhetoric, overall the North seems intent, and often considers “climate finance” to be almost synonymous with “low carbon finance” (meaning, reducing emissions).

On the other hand, the South seems to be much more concerned about how climate change is, and will to ever greater extents, impact development and the fabric of its society.  Climate finance means supporting efforts to reduce vulnerabilities to climate change.  To financing adaptation efforts or paying for the costs of climatic impacts (which is in effect adaptation.)

If you look at the public funds allocated to “climate finance,” you can see where the money is going.  And its not to climate adaptation.  If you visit Climate Funds Update (a great site, highly recommended: http://www.climatefundsupdate.org/graphs-statistics/areas-of-focus), you find that as of April 5, only 13.2% of funding is going to adaptation projects!

This is not to say mitigation is not important.  And a stitch in time does save nine.  But once a shirt has been unjustly, perhaps thoughtlessly, ripped off of a poor person’s back, one can’t say that the perpetrator can walk away without paying for the offence.

In my next post, I’ll try to describe how the “climate finance debate” seems simply off-mark, when it comes to considering how to “leverage private investment.”  After this, I should be ready to discuss how the debate might grow up.

Kind regards,

Karl

 

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Why Adaptation?

Posted on March 29, 2011 by Karl

It seems unfortunate, but it may be not, that discussions around climate change seem to converge around the following issues, at least in circles I follow:

1. The climate negotiations, while thrown/throwing themselves a lifeline in Cancun owing to a “consensus” and a renewed perspective on what “consensus” means, are at risk or/maybe/inevitably will fail to result in global to national to local policies limiting emissions to “safe” levels.

2. Instead, we may see average warming of between 3.5 degrees or more by the end of the century if the Cancun (non-binding) targets are met.  This is a very serious, civilization-challenging level of warming.

3. Climate adaptation is a growing priority, as more countries are already witnessing some severe weather events that can be increasingly attributed (based on probabilities) to climate change.  The UK floods of 2000 are a case in point. [See http://www.nature.com/nature/journal/v470/n7334/full/nature09762.html ]

4. Finance is key.  Targets (again, non-binding) of $100 billion/year by 2020 are needed to tackle climate change.  Of course, that figure is not the most scientific, but it sounds good.

5. Commitments to date have been well below this target.  A more modest $10 billion/year for these years has been met, many argue, by putting new names on money already committed.

5. Adaptation costs are likely to exceed even the $100 billion figure/year, but this is difficult to estimate as one needs to pre-judge impacts (many of which we may not even envision) and how people and eco-systems shall respond.  [See: http://www.iied.org/climate-change/key-issues/economics-and-equity-adaptation/costs-adapting-climate-change-significantly-under-estimated ]

So all of this leads me to conclude that for now, there is an urgent need for more work on climate adaptation, in order in particular to reduce the vulnerability of the poor and other groups who may already be suffering from the impacts of climate change.

This is not a call to be complacent on pushing for stringent targets to reduce emissions; emission reductions are a smart investment that is more than that.  They are essential if we are to avoid run-away climate change (a subject worthy of future discussions).

While on a project to cost the impacts of climate change in the Himalayan country of Bhutan, an American tourist seemed a bit surprised that I was trying to figure out how climate change was costing Bhutan and its vulnerable communities.  I suspect he had always thought of climate change as something that “hasn’t happened” yet.  By opening ourselves to adaptation and directly working on it, we are telling the world how urgent climate change policies and finance are for both mitigation and adaptation.  Focusing on adaptation as a response to the poor progress the international community has had in mitigating emissions may be the best signal to the world that emissions must go down, urgently.

Future blogs will focus on my work conceptualizing how we can fund and mobilize resources for climate adaptation.  In the meantime, I’m interested in any comments on “why adaptation?”

 

 

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Welcome to “Climate Adaptation Words”

Posted on March 23, 2011 by Karl

Dear colleagues,

If you are here, probably you have an interest in the challenges the world faces, and will increasingly face, in addressing the impacts of climate change.

Our blog, “Climate Adaptation Words” is here to stimulate debate and constructive deliberation in this field, with particular emphasis on creating frameworks and measures.

We will try and provoke debate by introducing some new ideas, and interpreting and disseminating news on existing concepts in new ways.  Our aim is not to prove we always have the answers, but rather to jointly come up with approaches that can work in practice.  These approaches can span the worlds of policy, commercial opportunities, analytical, methodological, and technical measures and project options.

We encourage robust and frank engagement.  Please join us if you too wish to work together to more effectively face the challenges climate change forces on the world.

Kind regards,

Karl Schultz, Founder, Climate Adaptation Works

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