Climate change and increased risk for the insurance sector: A global perspective and an assessment for the Netherlands.

Climate change is projected to increase the frequency and severity of extreme weather events. As a consequence, economic losses caused by natural catastrophes could increase significantly. This will have considerable consequences for the insurance sector. On the one hand, increased risk from weather extremes requires assessing expected changes in damage and including adequate climate change projections in risk management. On the other hand, climate change can also bring new business opportunities for insurers. This paper gives an overview of the consequences of climate change for the insurance sector and discusses several strategies to cope with and adapt to increased risks. The particular focus is on the Dutch insurance sector, as the Netherlands is extremely vulnerable to climate change, especially with regard to extreme precipitation and flooding. Current risk sharing arrangements for weather risks are examined while potential new business opportunities, adaptation strategies, and public-private partnerships are identified. © The Author(s) 2009

Priority for the Worse Off and the Social Cost of Carbon

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC

Prospect theory, mitigation and adaptation to climate change

Climate change is one of the most pressing challenges in current environmental policy. Appropriate policies intended to stimulate efficient adaptation and mitigation should not exclusively rely on the assumption of the homo oeconomicus, but take advantage of well-researched alternative behavioural patterns. Prospect theory provides a number of climate-relevant insights, such as the notion that evaluations of outcomes are reference dependent, and the relevance of perceived certainty of outcomes. This paper systematically reviews what prospect theory can offer to analyse mitigation and adaptation. It is shown that accounting for reference dependence and certainty effects contributes to a better understanding of some well-known puzzles in the climate debate, including (but not limited to) the different uptake of mitigation and adaptation amongst individuals and nations, the role of technical vs. financial adaptation, and the apparent preference for hard protection measures in coastal adaptation. Finally, concrete possibilities for empirical research on these effects are proposed

Recurrent governance challenges in the implementation and alignment of flood risk management strategies: a review

In Europe increasing flood risks challenge societies to diversify their Flood Risk Management Strategies (FRMSs). Such a diversification implies that actors not only focus on flood defence, but also and simultaneously on flood risk prevention, mitigation, preparation and recovery. There is much literature on the implementation of specific strategies and measures as well as on flood risk governance more generally. What is lacking, though, is a clear overview of the complex set of governance challenges which may result from a diversification and alignment of FRM strategies. This paper aims to address this knowledge gap. It elaborates on potential processes and mechanisms for coordinating the activities and capacities of actors that are involved on different levels and in different sectors of flood risk governance, both concerning the implementation of individual strategies and the coordination of the overall set of strategies. It identifies eight overall coordination mechanisms that have proven to be useful in this respect

The undebated issue of justice: silent discourses in Dutch flood risk management

Flood risk for all types of flooding is projected to increase based on climate change projections and increases in damage potential. These challenges are likely to aggravate issues of justice in flood risk management (henceforth FRM). Based on a discursive-institutionalist perspective, this paper explores justice in Dutch FRM: how do institutions allocate the responsibilities and costs for FRM for different types of flooding? What are the underlying conceptions of justice? What are the future challenges with regard to climate change? The research revealed that a dichotomy is visible in the Dutch approach to FRM: despite an abundance of rules, regulations and resources spent, flood risk or its management, are only marginally discussed in terms of justice. Despite that the current institutional arrangement has material outcomes that treat particular groups of citizens differently, depending on the type of flooding they are prone to, area they live in (unembanked/embanked) or category of user (e.g. household, industry, farmer). The paper argues that the debate on justice will (re)emerge, since the differences in distributional outcomes are likely to become increasingly uneven as a result of increasing flood risk. The Netherlands should be prepared for this debate by generating the relevant facts and figures. An inclusive debate on the distribution of burdens of FRM could contribute to more effective and legitimate FRM

The ability of societies to adapt to twenty-first-century sea-level rise

Against the background of potentially substantial sea-level rise, one important question is to what extent are coastal societies able to adapt? This question is often answered in the negative by referring to sinking islands and submerged megacities. Although these risks are real, the picture is incomplete because it lacks consideration of adaptation. This Perspective explores societies' abilities to adapt to twenty-first-century sea-level rise by integrating perspectives from coastal engineering, economics, finance and social sciences, and provides a comparative analysis of a set of cases that vary in terms of technological limits, economic and financial barriers to adaptation and social conflicts