Disaster Loss Financing in Germany - The Case of the Elbe River Floods 2002

In August 2002, floods in central Europe caused damage of about Euro 15 billion; insured losses were about Euro 3.1 billion. According to Munich Reinsurance, this was the most expensive natural disaster of the year 2002. In Germany, heavy rains led to some of the worst flooding the Free State of Saxony has witnessed in more than a century. In Dresden, the Elbe River rose from a normal summer level of about two meters to 9.13 meters surpassing the historical flood mark of 8.77 meters seen in March 1845, to reach on August 17, 2002, a water level of 9.40 meters -- the highest level that has ever been recorded in Dresden. Shortly after the flood event, overall damage in Germany was estimated to be Euro 22 billion, which in December 2002 was revised to about Euro 9.1 billion of direct losses. Concerning the regional distribution of losses, Saxony was hit hardest. With direct damage of Euro 6.084 billion the federal state bears 67% of the total losses. About 14.9% (Euro 1.353 billion) of the overall damage is corresponding to the German government and 11.3% (Euro 1.029 billion) to the state of Saxony-Anhalt. The major share of about Euro 3.316 billion accrued to state and municipal infrastructure (36.6%), federal infrastructure losses were Euro 1.353 billion (14.9%); private households suffered about Euro 2.547 billion of losses (28.1%), followed by private companies with Euro 1.438 billion (15.9%). The compensation of the flood losses was mainly financed by a special disaster relief and reconstruction fund set up by both the National Government and the federal states of Germany. This so-called "Sonderfonds Aufbauhilfe" amounted to Euro 7.1 billion, or seventy-eight percent of total direct losses. Other sources of financing were the insurance (estimated to amount to Euro 1.8 billion), an European Union emergency fund (Euro 444 million), and public donations (Euro 243 million). Total financing available amounting to 9.6 billion Euro thus exceeds the direct losses incurred, which will only be financed. Considering that government compensation will be provided in terms of replacement costs rather than current value lost, still all direct losses could be compensated in theory. Compared to total compensation provided in other major events in developed countries, which on average amounted to 45% of total losses, this large financing provided is exceptional. This can be attributed to the following factors: the floods constituted the largest losses ever in Germany and were commonly considered an event with a return period of less than 1000 years ("Jahrtausendhochwasser", millennium floods); the floods mainly affected East Germany that is still struggling economically and where unemployment is high; some observers cite the "hot" election phase as federal elections were in their final stages of what was known to be a very close election. The provision of government funds to the affected private households and companies and municipalities was and is governed by a set of principles that were explicitly set out by the government in order to guarantee the efficient allocation of the funds, allow quick reconstruction and provide and keep incentives for ex-ante measures. These principles include: subsidiarity (the delegation of responsibilities to the lowest administrative level feasible), parallelity (reconstruction in the affected East German region was and is parallel and independent of "Aufbau Ost" (reconstruction in East Germany after reunification), provision of Incentives (inclusion of deductibles in order to maintain incentives for mitigation and insurance), efficiency (financing of direct losses only to primarily compensate those worst affected), and the ability to rebuild (loss financing was provided in terms of reconstruction costs rather than current values). Regarding financing on the municipal level, the Saxon cities of Dresden and Pirna were examined since both experienced large damages to their infrastructure and public assets: Dresden Euro 400 million, equaling forty-seven percent of the municipal budget of 2002, and Pirna Euro 22 million, or thirty-five percent as a fraction of the budget. The cities expect to be reimbursed ninety percent of their damages in the currently ongoing financing negotiations. Also, large losses were suffered by the private households and business, however, these will not be compensated by the local governments but by the "Sonderfonds Aufbauhilfe." Households can expect to receive eighty percent of their losses, businesses up to seventy-five percent

The impact of air pollutant and methane emission controls on tropospheric ozone and radiative forcing: CTM calculations for the period 1990-2030

To explore the relationship between tropospheric ozone and radiative forcing with changing emissions, we compiled two sets of global scenarios for the emissions of the ozone precursors methane (CH₄), carbon monoxide (CO), non-methane volatile organic compounds (NMVOC) and nitrogen oxides (NO_x) up to the year 2030 and implemented them in two global Chemistry Transport Models. The 'Current Legislation' (CLE) scenario reflects the current perspectives of individual countries on future economic development and takes the anticipated effects of presently decided emission control legislation in the individual countries into account. In addition, we developed a 'Maximum technically Feasible Reduction' (MFR) scenario that outlines the scope for emission reductions offered by full implementation of the presently available emission control technologies, while maintaining the projected levels of anthropogenic activities. Whereas the resulting projections of methane emissions lie within the range suggested by other greenhouse gas projections, the recent pollution control legislation of many Asian countries, requiring introduction of catalytic converters for vehicles, leads to significantly lower growth in emissions of the air pollutants NO_x, NMVOC and CO than was suggested by the widely used and more pessimistic IPCC (Intergovernmental Panel on Climate Change) SRES (Special Report on Emission Scenarios) scenarios (Nakicenovic et al., 2000), which made Business-as-Usual assumptions regarding emission control technology. With the TM3 and STOCHEM models we performed several long-term integrations (1990-2030) to assess global, hemispheric and regional changes in CH₄, CO, hydroxyl radicals, ozone and the radiative climate forcings resulting from these two emission scenarios. Both models reproduce broadly the observed trends in CO, and CH₄ concentrations from 1990 to 2002. <P style='line-height: 20px;'> For the 'current legislation' case, both models indicate an increase of the annual average ozone levels in the Northern Hemisphere by 5ppbv, and up to 15ppbv over the Indian sub-continent, comparing the 2020s (2020-2030) with the 1990s (1990-2000). The corresponding higher ozone and methane burdens in the atmosphere increase radiative forcing by approximately 0.2 Wm^-2. Full application of today's emissions control technologies, however, would bring down ozone below the levels experienced in the 1990s and would reduce the radiative forcing of ozone and methane to approximately -0.1 Wm^-2. This can be compared to the 0.14-0.47 Wm^-2 increase of methane and ozone radiative forcings associated with the SRES scenarios. While methane reductions lead to lower ozone burdens and to less radiative forcing, further reductions of the air pollutants NO_x and NMVOC result in lower ozone, but at the same time increase the lifetime of methane. Control of methane emissions appears an efficient option to reduce tropospheric ozone as well as radiative forcing

Mechanisms for financing the costs of disasters

This paper provides an overview of disaster risk financing mechanisms, both traditional instruments that share the costs of disastrous events after they happen and ex ante instruments, some innovative, that contractually transfer risks before the events occur. The focus is on developing countries and the most vulnerable within those countries. As recent novel instruments, we describe index-based insurance for farmers and herders, national insurance programs, sovereign instruments for governments and regional risk insurance pools. We present evidence on their benefits, costs and risks, and, finally, address the question: What financial-protection actions could be taken in the next ten years that might reduce the negative impact of disasters occurring up to 2040

Changes in impacts of climate extremes: Human systems and ecosystems

In this chapter, two different types of impacts on human and ecological systems are examined: (i) impacts of extreme weather and climate events; and (ii) extreme impacts triggered by less-than-extreme weather or climate events (in combination with non-climatic factors, such as high exposure and/or vulnerability). Where data are available, impacts are examined from sectoral and regional perspectives

Pan-European Assessment of Fiscal Consequence of Climate Extremes

While it remains debatable whether extreme hazard events can be attributable to climate change, disaster events at the European and global scales have already begun to impose significant costs on the public and private sectors. In light of these concerns, work package 5 of the ECONADAPT project comprises a case study of climate risk management, providing comparative analysis of adaptation and disaster risk management for EU member countries. The present analysis focuses on both short- to longer-term changes in the frequency, severity and duration of extreme weather events resulting from climate change. Building on the recommendations outlined in D 5.1, the aim of report D5.2 is to provide further analytical bases for climate risk analysis, within an iterative risk management framework. In particular, this study focuses on the domain of public finance and fiscal planning, and illustrates how climate risk concerns could be ‘mainstreamed’ into decision-making processes. Through the pan-European assessment of the fiscal consequences of extreme weather events in the EU, this deliverable (1) quantifies extreme event risks (in terms of potential capital stock losses) across an illustrative range of climate scenarios (with a time horizon of 2030 in the short-term and 2050 in the long-term); (2) identifies the fiscal repercussions in terms of public debt trajectories and, (3) identifies options for better stochastic planning to reduce and finance fiscal risks. Two distinct approaches - fiscal risk scorecard and stochastic debt-assessment- are used to gain both a broader understanding of fiscal and climate risks facing the EU28 member states and a more-in-depth understanding of Austria (the focus of our case study). The results of our analysis (which focuses on increased flood risk), indicate that the economic risk of climate extremes (relative to the size of economic and public finance resources) are estimated to be high in countries such as Hungary, Slovenia Latvia, Lithuania and Slovakia. Furthermore, these countries also have significant need for fiscal consolidation in the medium to long-term, thus proactive fiscal risk management is especially important. The fact that many EU member states are still in the early stages of designing and implementing their climate change adaptation strategies means that there are ample opportunities to consider an iterative risk management process, where state-of-the art scientific information on risk (hazard, exposure and vulnerability) is mainstreamed into economic and fiscal decision-making. Looking ahead, while EU member states strive for fiscal consolidation, sustainable growth and climate risk management, the mainstreaming of climate risk into fiscal planning will become all the more important. The new methodologies developed and presented in this deliverable will be useful in informing these discussions

Brief communication: Sendai framework for disaster risk reduction – success or warning sign for Paris?

In March 2015, a new international blueprint for disaster risk reduction (DRR) has been adopted in Sendai, Japan, at the end of the Third UN World Conference on Disaster Risk Reduction (WCDRR, 14–18 March 2015). We review and discuss the agreed commitments and targets, as well as the negotiation leading to the Sendai Framework for DRR (SFDRR) and discuss briefly its implication for the later UN-led negotiations on sustainable development goals and climate change

System Analysis in International Development: From Concept to Application in Flood Prone Communities

Disasters pose a growing threat to sustainable development. Disaster risk management efforts have largely failed to arrest key drivers of uncontrolled urbanization and proliferation of assets in high risk areas. Systems analysis provides a unique interpretation of this failure, and a new pathway for remedy. Increasing “buzz” around the concept of disaster “resilience” (fundamentally a systems concept) has opened the door for the application of systems analysis in the complex arena of the social-ecological foundations of risk and development; yet it has been vaguely conceptualized, not offering a concrete approach to operationalization. We propose a conceptualization of disaster resilience built on system thinking. This conceptualization is centered on wellbeing (healthy system functioning) and explicitly draws attention to system interactions over the long term. We then present a systems analysis conceptual framework for exploring the real-world interconnections between disasters and development. Finally we outline how this framework has been applied with stakeholders in Peru, and present key lessons pertinent for researchers applying systems thinking in complex, socio-ecological governance settings

If Numbers Can Speak, Who Listens? Creating Engagement and Learning for Effective Uptake of DRR Investment in Developing Countries

Introduction: With a renewed emphasis on evidence-based risk sensitive investment promoted under the Sendai Framework for Disaster Risk Reduction 2015-2030, technical demands for analytical tools such as probabilistic cost-benefit analysis (CBA) will likely increase in the foreseeable future. This begs a number of pragmatic questions such as whether or not sophisticated quantitative appraisal tools are effective in raising policy awareness and what alternatives are available. Method: This article briefly reviews current practices of analytical tools such as probabilistic cost-benefit analysis and identifies issues associated with its applications in small scale community based DRR interventions. Results: The article illustrate that while best scientific knowledge should inform policy and practice in principle, it should not create an unrealistic expectation that the state-of-the art methods must be used in all cases, especially for small scale DRR interventions in developing countries, where data and resource limitations and uncertainty are high, and complex interaction and feedback may exist between DRR investment, community response and longer-term development outcome. Discussion: Alternative and more participatory approaches for DRR appraisals are suggested which includes participatory serious games that are increasingly being used to raise awareness and identify pragmatic strategies for change that are needed to bring about successful uptake of DRR investment and implementation of DRR mainstreaming