A methodological framework to operationalize Climate Risk Management: Managing sovereign climate-related extreme event risk in Austria

Despite considerable uncertainties regarding the exact contribution of anthropogenic climate change to disaster risk, rising losses from extreme events have highlighted the need to comprehensively address climate-related risk. This requires linking climate adaptation to disaster risk management (DRM), leading to what has been broadly referred to as climate risk management (CRM). While this concept has received attention in debate, important gaps remain in terms of operationalizing it with applicable methods and tools for specific risks and decision-contexts. By developing and applying a methodological approach to CRM in the decision context of sovereign risk (flooding) in Austria we test the usefulness of CRM, and based on these insights, inform applications in other decision contexts. Our methodological approach builds on multiple lines of evidence and methods. These comprise of a broad stakeholder engagement process, empirical analysis of public budgets, and risk-focused economic modelling. We find that a CRM framework is able to inform instrumental as well as reflexive and participatory debate in practice. Due to the complex interaction of social-ecological systems with climate risks, and taking into account the likelihood of future contingent climate-related fiscal liabilities increasing substantially as a result of socioeconomic developments and climate change, we identify the need for advanced learning processes and iterative updates of CRM management plans. We suggest that strategies comprising a portfolio of policy measures to reduce and manage climate-related risks are particularly effective if they tailor individual instruments to the specific requirements of different risk layers. (authors' abstract

Assessing current and future impacts of climate-related extreme events. The case of Bangladesh

Extreme events and options for managing these risks are receiving increasing attention in research and policy. In order to cost these extremes, a standard approach is to use Integrated Assessment Models with global or regional resolution and represent risk using add-on damage functions that are based on observed impacts and contingent on gradual temperature increase. Such assessments generally find that economic development and population growth are likely to be the major drivers of natural disaster risk in the future; yet, little is said about changes in vulnerability, generally considered a key component of risk. As well, risk is represented by an estimate of average observed impacts using the statistical expectation. Explicitly accounting for vulnerability and using a fuller risk-analytical framework embedded in a simpler economic model, we study the case of Bangladesh, the most flood prone country in the world, in order to critically examine the contribution of all drivers to risk. Specifically, we assess projected changes in riverine flood risk in Bangladesh up to the year 2050 and attempt to quantitatively assess the relative importance of climate change versus socio-economic change in current and future disaster risk. We find that, while flood frequency and intensity, based on regional climate downscaling, are expected to increase, vulnerability, based on observed behaviour in real events over the last 30 years, can be expected to decrease. Also, changes in vulnerability and hazard are roughly of similar magnitudes, while uncertainties are large. Overall, we interpret our findings to corroborate the need for taking a more risk-based approach when assessing extreme events impacts and adaptation - cognizant of the large associated uncertainties and methodological challenges -

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

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

National systems for managing the risks from climate extremes and disasters

This chapter assesses how countries are managing current and projected disaster risks, given knowledge of how risks are changing with observations and projections of weather and climate extremes, vulnerability and exposure, and impacts. It focuses on the design of national systems for managing such risks, the roles played by actors involved in the system, and the functions they perform, acknowledging that complementary actions to manage risks are also taken at local and international level

Approach for national scale earthquake risk assessment: Case study from Nepal

The paper presents the approach for earthquake hazard, exposure, vulnerability and risk assessment for Nepal. The approach amalgamates various scientific streams, which are structured and integrated on GIS platform. The exposure, vulnerability and risk assessment are carried out for primary sectors including population, housing, education, hospital, industry, power and roadways. The risk assessment is carried out in two ways targeting emergency management agencies. One aspect of risk assessment represents expected number of sector units falling in specific grade of damage and the second aspect covers expected loss and impact on GDP due to large magnitude earthquake (i.e., Bihar-Nepal Earthquake 1934). The earthquake risk for the size of the 1934 event may mean losses exceeding 15 billion USD, can lead to large fiscal and economic impacts. Based on these findings the paper recommends DRR interventions at the national scale to tackle gaps in risk reduction, risk financing and risk governance

Catalogue and Toolbox of Risk Assessment and Management Tools

The ENHANCE project is concerned with analysing and working towards improved public-private partnerships for managing risks from natural hazards. An important issue for such partnerships is the methods, tools and processes available for assessing risk and risk management options. Risk analysis has long provided useful input to decision-making. At the same time, the field of risk analysis is in motion and an enhanced framing of risk analysis and risk management is being embraced following an iterative cycle organized around notions of learning, innovation and transformation. This broadened vision on risk analysis is a key issue for the ENHANCE project as well, which takes many and different perspectives on analysing, understanding, communicating and managing risk. This report lays out the status quo at the outset of the project regarding risk analytical tools, methods and data that are currently used by project partners in ENHANCE. The task overall develops a catalogue of existing risk assessment and management tools and methods to describe the concepts of iterative risk management and further sets up a toolbox, containing individual models and tools to be used by the case studies in their analyses. While work in the cases study, including methodological development, is in process, we find that ENHANCE partners and cases employ a multitude of models, tools and data ranging from impact analysis, different risk modelling techniques to various decision-support methods. A number of tools that encapsulate these methods are also available with the consortium. We suggest the tools and methods in use can be useful starting points for working towards a broader vision of iterative risk management. While the work so far, and this deliverable, have focussed on populating the technical stages of the risk analytical cycle (visually identified as the inner circle), we suggest in the next phase of ENHANCE, additional efforts should be dispensed to better understand adaptive management aspects associated with using these methods and tools, such as learning, innovation and transformation, which we exhibit visually in an outer circle. This report proceeds as follows: We start with laying out key elements of risk analysis and management in section 2, which also describes the new framing organized around the iterative risk-management concept. Methods for assessing risk and evaluating risk management are discussed in section 3. Then we consider methods, models and datasets that are in use in the ENHANCE case studies at the moment (section 4), before section 5 concludes. Finally and importantly, the annex lists more information on cases studies, for which detailed information was received from the project partners