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Adaptation Strategies to Minimize Climate Risks in Companies
Adaptation Strategies to Minimize Climate Risks in Companies Valentino Piana Istanbul, 26th February 2010 Contents 1. A simple scheme of climate change 2. The pervasive impact of climate change on physical assets, ecosystems, infrastructure, people and business 3. Long‐run certainty and short‐run risk: the costs of inaction 4. Other stressors on the assets put at risk by climate change 5. Adaptation strategies for businesses 5.1. Exclusive or inclusive adaptation? 5.2. Sector‐specific challenges and options 5.3. Local adaptation plans: the role of business 5.4. Global business and the international diffusion of climate‐related innovations 5.5. Financial and business models for adaptation 6. Turkey’s National Adaptation Strategy 7. Conclusions www.economicswebinstitute.org Cutting‐edge research & implementation consulting 1. A simple scheme of climate change Density/Value www.economicswebinstitute.org Cutting‐edge research & implementation consulting Additional stressors Our adaption from Isoard, Grothmann and Zebisch, 2008. 2. The pervasive impact of climate change on physical assets, ecosystems, infrastructure, people, and business exacerbates existing problems Climate change generates entirely new ones Scarsity, degradation, disruption, costs for the following assets: Water Coastal line Rivers, reservoirs and sweetwaters Energy Ecosystems and ecosystem services Infrastructure www.economicswebinstitute.org Cutting‐edge research & implementation consulting 2. The pervasive impact of climate change on physical assets, ecosystems, infrastructure, people, and business exacerbates existing problems Climate change generates entirely new ones Vector‐borne diseases (e.g. dengue, malaria,..) Seasonal diseases and illnesses Consumer stress and budget diversion Work absentees and lower productivity www.economicswebinstitute.org Cutting‐edge research & implementation consulting 2. The pervasive impact of climate change on physical assets, ecosystems, infrastructure, people, and business exacerbates existing problems Climate change generates entirely new ones Business premises at risk of extreme events, sea‐level rise, etc. Production processes negatively influenced by weather Input degradation and costs (water, energy, landscape,…) Conflict in use of scarse resources Loss in competitiveness for certain products Logistic disruptions www.economicswebinstitute.org Cutting‐edge research & implementation consulting 3. Long‐run certainty and short‐run risk: the costs of inaction (1) The rise of temperature in a greenhouse is a confirmed result of an experiment you can replicate. By adding CO2 it becomes even warmer. Extreme weather events will increase in frequence and impact, albeit will remain unpredictable in exact timing. 280 240 Qualitative scale The The science science of climate is the of climate is the same as the physics that same as the physics that keep your plane keep your plane flying flying and and your your mobile mobile phone calling phone calling the world. the world. 180 160 Climate change damage 120 80 40 0 2007 08 09 10 11 12 13 14 15 16 www.economicswebinstitute.org Cutting‐edge research & implementation consulting 3. Long‐run certainty and short‐run risk: the costs of inaction (2) Clients not aware and not willing to pay Too late ‐ limits to adaptation The time window of opportunity to sell adaptation solutions will be short. Qualitative scale 280 240 180 160 Climate change damage 120 80 40 0 2007 08 09 10 11 12 13 14 15 16 Window of opportunity www.economicswebinstitute.org Cutting‐edge research & implementation consulting 3. Long‐run certainty and short‐run risk: the costs of inaction (3) Adaptation in reasonable ranges of costs and effectiveness thanks to mitigation Clients aware 280 Qualitative scale To widen the window, it is necessary to raise awareness in advance and to push for strong mitigation actions 240 180 160 Climate change damage 120 80 40 0 2007 08 09 10 11 12 13 14 15 16 Window of opportunity www.economicswebinstitute.org Cutting‐edge research & implementation consulting 4. Other stressors on the assets put at risk by climate change Climate change damage Inadequate pipelines Conflict for use for agriculture, energy, population … www.economicswebinstitute.org Cutting‐edge research & implementation consulting Adaptation by protecting key assets cannot distiguish the stressors nor differentiate between anthropogenic climate change and climate in general. 5. Adaptation strategies for businesses 1 Vision, new processes, new products 2 Push to market, push to policymakers 3 Restructuring the supply chain / value chain 44 Upgrade skill and core competences www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.1. Exclusive or inclusive adaptation? Adaptation strategy based on separation and exclusiveness ¾¾Isolation, closing borders, Isolation, closing borders, protection of key assets protection of key assets ¾¾Only the rich and highly profitable Only the rich and highly profitable human activities protected human activities protected ¾¾Negative externalities on the rest Negative externalities on the rest of population and natural of population and natural ecosystems ecosystems ¾¾Conflict Conflict Adaptation strategy based on solidarity and risk sharing ¾¾Co‐planning Co‐planning ¾¾Solidarity Solidaritynetwork network ¾¾Insurance schemes Insurance schemes ¾¾Conditional emergency Conditional emergencyplan plan and andfast broad mobilization fast broad mobilization ¾¾Reciprocal guarantees Reciprocal guarantees ¾¾Nobody left behind Nobody left behind ¾¾National and international National and international cohesion cohesion www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Agriculture Fishery Forestry Energy generation and distribution Building HVACR‐ Heating, Ventilation, Air Conditioning and Refrigeration City management Tourism Industry/manufacturing Food processing Water provision Telecommunications Public sector Healthcare Insurance Retail Transport infrastructure Logistics/distribution www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Agriculture and livestock Fishery ¾Soil degradation, ¾Soil degradation,erosion, erosion,landslides landslides ¾Pests, ¾Pests,crop predators and diseases crop predators and diseases ¾Water stress ¾Water stressand local droughts and local droughts ¾GMOs and ¾GMOs andwater‐resistant crops water‐resistant crops ¾¾Food Foodvs. non‐food vs. non‐foodproductions productions ¾Organic agriculture ¾Organic agriculture ¾Community rehabilitation of degradated land ¾Community rehabilitation of degradated land ¾Overall reduction ¾Overall reductionin infish fishcatch catch ¾Unsustainable fishery ¾Unsustainable fishery ¾Risk of extintion of local species ¾Risk of extintion of local species ¾Changes ¾Changesin temperature in temperatureand acidification and acidification ¾Reef corals extintion ¾Reef corals extintion ¾Ecosystem irreversible damage ¾Ecosystem irreversible damage ¾Aquaculture ¾Aquaculture ¾Local sustainable fishing ¾Local sustainable fishing www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Forestry Energy generation and distribution ¾Shift ¾Shiftininspecies speciesover overlatitudes and mountain heights latitudes and mountain heights ¾Acid rains destroying forests ¾Acid rains destroying forests ¾Original forest vs. ¾Original forest vs.plantation plantation ¾Sustainable forest ¾Sustainable forestmanagement management ¾Indigenous knowledge‐led forestry ¾Indigenous knowledge‐led forestry ¾Non‐wood income generation activities ¾Non‐wood income generation activities ¾Shifts ¾Shiftsininenergy demand energy demand ¾Changes ¾Changesinintemperatures and operational conditions temperatures and operational conditions ¾Increased competition with other sectors for ¾Increased competition with other sectors forwater water ¾Threats to coastal plants ¾Threats to coastal plants ¾Paradigm shift towards renewables ¾Paradigm shift towards renewables ¾Business ¾Businessmodels for models formini‐grids mini‐grids(e.g. (e.g.solar+low‐energy solar+low‐energy water desalinization, water desalinization,etc.) etc.) www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Building HVAC ¾Shelter function ¾Shelter functionunder stress under stress ¾Difficulties ¾Difficultiesininmaintaining proper micro‐climatic maintaining proper micro‐climatic conditions and conditions andcomfort comfortlevels levels ¾Energy‐intensity ¾Energy‐intensityunder underregulatory, regulatory,economical and economical and societal pressure societal pressure ¾Integration buildings‐surroundings‐nature ¾Integration buildings‐surroundings‐nature ¾Top‐quality buildings as ¾Top‐quality buildings aseco‐buildings eco‐buildings ¾Locally ¾Locallyappropriate appropriatematerials materials ¾Reduced ¾Reducedwater waterconsumption consumption ¾Separation grey, ¾Separation grey,black and white waters black and white waters ¾Local recycling ¾Local recycling ¾Low energy solutions ¾Low energy solutions ¾Heat pumps ¾Heat pumps ¾Mono‐ ¾Mono‐or multi‐renewable local sources or multi‐renewable local sources ¾Natural ¾Naturalor orforced ventilation forced ventilation www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options City management Tourism ¾Compound effect of athmospheric pollution from ¾Compound effect of athmospheric pollution from industry and cars, temperature industry and cars, temperatureand humidity on and humidity on comfort, comfort,asthma, asthma,and other stressors and other stressors ¾Green urban areas ¾Green urban areas ¾Urban unconventional greening ¾Urban unconventional greening(e.g. (e.g.vertical verticalor orroof roof greening) greening) ¾Waste ¾Wastemanagement management ¾Biogas ¾Biogas ¾Locally viable alternative mobility systems ¾Locally viable alternative mobility systems ¾Entire localities ¾Entire localitiesunder underthreat threat(sea‐level, (sea‐level,lack of snow, lack of snow, etc.) etc.)and loosing attractiveness and loosing attractiveness ¾Extreme ¾Extremenegative negativeevents events ¾Reduced resilience ¾Reduced resilience ¾Artificial snow and other artificial ways to recreate the ¾Artificial snow and other artificial ways to recreate the tourist experience tourist experience ¾Sustainable tourism ¾Sustainable tourism www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Industry/ manufacturing Food processing ¾Temporary ¾Temporaryor definitive or definitivelack lackor ordegradation of inputs degradation of inputs ¾Higher costs for ¾Higher costs forwater waterand energy and energy ¾Disruption ¾Disruptionininoperations operations ¾Risk to production facilities located near the sea and ¾Risk to production facilities located near the sea andinin flood‐prone flood‐proneareas areas ¾Reduced consumer willingness to purchase ¾Reduced consumer willingness to purchase ¾Difficulties with inputs ¾Difficulties with inputs ¾Weather‐dependent productions ¾Weather‐dependent productions ¾Difficulties ¾Difficultiesininexports and imports exports and imports ¾Sanitary provisions ¾Sanitary provisions ¾Health of employees ¾Health of employees www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Water provision Telecommunica ‐tions ¾Reduced average rainfall ¾Reduced average rainfall ¾Shifting and unpredictable rainfall patterns ¾Shifting and unpredictable rainfall patterns ¾Different locations for heavy rains ¾Different locations for heavy rains ¾Empty dams ¾Empty dams ¾Further stresses on river‐related ecosystems ¾Further stresses on river‐related ecosystems ¾Acidification of rains ¾Acidification of rains ¾Low‐energy treatement of ¾Low‐energy treatement ofwater water ¾Prices and availability of ¾Prices and availability ofwater water ¾Conflicts for ¾Conflicts forwater water ¾Rain harversting and treatments ¾Rain harversting and treatments ¾Disruptions ¾Disruptionsin ininfrastructures infrastructures ¾Early warning systems ¾Early warning systems ¾Awareness raising systems ¾Awareness raising systems ¾Smart ¾Smartgrid grid www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Insurance Retail ¾Higher insurance payouts resulting ¾Higher insurance payouts resulting from damage to infrastructure from damage to infrastructureby by extreme weather events extreme weather events ¾Greater uncertainty of risk assessments ¾Greater uncertainty of risk assessments ¾¾Re‐insurance at higher rates Re‐insurance at higher rates ¾¾Financial Financialstress stress ¾Disruption ¾Disruptionininsupply chains and transport infrastructure supply chains and transport infrastructure ¾Changing consumption patterns ¾Changing consumption patterns ¾Locations at risks ¾Locations at risks www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Public sector Healthcare ¾Higher expectations ¾Higher expectationsininthe population for protection the population for protection ¾New ¾Newregulations regulations ¾Planning skills ¾Planning skills ¾Implicit insurance ¾Implicit insurance ¾Financial ¾Financialstress stress ¾Difficulties ¾Difficultiesininmediation of conflicts mediation of conflicts ¾Shift ¾Shiftininspatial and temporal distribution of diseases spatial and temporal distribution of diseases ¾Heat wave deaths ¾Heat wave deathsinincities and other areas cities and other areas ¾Change ¾Changein distribution of vectors of infections in distribution of vectors of infections ¾Wider range of ¾Wider range ofstress‐related illnesses stress‐related illnesses ¾Carrying capacity of hospitals ¾Carrying capacity of hospitalsin case in caseof extreme of extreme weather events weather events www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Insurance Retail ¾Higher insurance payouts resulting ¾Higher insurance payouts resulting from from damage damage to to infrastructure infrastructure by by extreme extreme weather weather events events ¾Greater uncertainty of risk assessments ¾Greater uncertainty of risk assessments ¾¾Re‐insurance at higher rates Re‐insurance at higher rates ¾¾Financial Financialstress stress ¾Disruption ¾Disruptionininsupply chains and transport infrastructure supply chains and transport infrastructure ¾Changing consumption patterns ¾Changing consumption patterns ¾Locations at risks ¾Locations at risks www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.2. Sector‐specific challenges and options Transport infrastructure Logistics/ distribution ¾Roads and railways localised near the sea ¾Roads and railways localised near the seaor in or inflood‐ flood‐ prone proneareas areas ¾Temporary ¾Temporaryor definitive or definitivedamage and disruption damage and disruption ¾Isolation of villages and other locations ¾Isolation of villages and other locations ¾Bridges ¾Bridgesunder underthreat of stronger winds and waves threat of stronger winds and waves ¾Disruption of ground and ¾Disruption of ground andmarine marinetransportation transportation systems as systems asaaresult of result ofsevere severeweather weatherpatterns patterns ¾Inundation of transport routes ¾Inundation of transport routes www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.3. Local adaptation plans: the process Area and Area and its its surroundings surroundings List of List of existing existing problems problems Exacerbation Exacerbation of existing of existing problems problems Interrogation Interrogation of climate of climate models models Implementa tion Brain‐ Brain‐ storming storming on totally on totally new new problems problems Shift from Shift from other areas other areas Timing Responsibilities www.economicswebinstitute.org Cutting‐edge research & implementation consulting Risks maps, Risks maps, adaptation adaptation options options Cost Cost analysis, analysis, business business models, models, criteria criteria for for choices choices Local Adaptation Plan 5.3. Local adaptation plans: the role of business Area and Area and its its surroundings surroundings List of List of existing existing problems problems Exacerbation Exacerbation of existing of existing problems problems Interrogation Interrogation of climate of climate models models Skills accumulation Participation to audits Support to adaptation option evaluation Technical support Your organization Implementa tion Brain‐ Brain‐ storming storming on totally on totally new new problems problems Shift from Shift from other areas other areas Timing Responsibilities www.economicswebinstitute.org Cutting‐edge research & implementation consulting Risks maps, Risks maps, adaptation adaptation options options Cost Cost analysis, analysis, business business models, models, criteria criteria for for choices choices Local Adaptation Plan 5.4. Global business and the international diffusion of climate‐related innovations Globalization, the UNFCCC process, including the Bali Action Plan, the Copenhagen Accord (art. 11) all indicate that the international dimension of technology development and deployment has a crucial role for both mitigation and adaptation. Innovation economics suggests two alternative pattern of international diffusion. Option 1 ¾Diffusion based on ¾Diffusion based on product productlife lifecycle cycle Option 2 ¾Diffusion based on ¾Diffusion based on emerging countries’ emerging countries’bootstrap bootstrap www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.4. Global business and the international diffusion of climate‐related innovations (Option 1) Sales Pioneers Early diffusion Take‐off Maturity Decline 4Dominant 4Cost‐oriented 4Simplification design process innovation Focus 4Commercial 4Many versions prototype (product innovation and imitation) Core competence 4Formal and 4Creative imitation 4Marketing 4Cheap labour 4Fully amortized 4Distribution 4Economies of informal capital scale R&D Typical features of country 4High‐tech 4Top university 4Wide middle‐class 4Core 4High education country widespread 4Emerging country 4Previous localizations www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.4. Global business and the international diffusion of climate‐related innovations (Option 1) Domestic Domestic production production Domestic Domestic market market Domestic Domestic production production Domestic Domestic market + market + Exports Exports Importer A firm perspective Domestic Domestic and and FDI production FDI production Worldwide Worldwide market market Transplanted supplier Local supplier Local sub‐contractor www.economicswebinstitute.org Cutting‐edge research & implementation consulting Totally Totally internatio‐ internatio‐ nalized nalized business business Global supplier 5.4. Global business and the international diffusion of climate‐related innovations (Option 2) Old industrialized country Newly industrialized country Invested capital Large and amortized Small, to be repaid Future demand Stable or declining Strong growth potential Mental framework Defensive, pessimist Challenger, optimist Political system Vested interests Freedom at the frontier www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.4. Global business and the international diffusion of climate‐related innovations (Option 2) www.economicswebinstitute.org Cutting‐edge research & implementation consulting 5.5. Financial and business models for adaptation 1 2 Clients aware and willing to pay Public mandate 3 Public support and asset swaps 44 Ad‐hoc taxation on polluters (domestically and internationally) 45 International funds ‐ the experience of NAPAs and the Adaptation Fund www.economicswebinstitute.org Cutting‐edge research & implementation consulting 6. Turkey’s National Adaptation Strategy In December 2009, Turkey has drafted the National Climate Change Strategy, soon to be followed by more detailed Action Plans. In terms of adaptation, a selection of lines of activities is the following: Short run (2010) 4Agricultural Drough Action Plan 4Improving water quality 4Livestock and crop sector capacity to combat diseases and pests 4Public health www.economicswebinstitute.org Cutting‐edge research & implementation consulting 6. Turkey’s National Adaptation Strategy In terms of adaptation, a selection of lines of activities is the following: Medium term (2010‐2012) 4Watershed Master Plans development 4River Basin Management Plans 4New agricultural practices 4Vulnerable ecosystems, urban biotopes, bio‐diversity 4Minimize impact, including through early warning systems, for floods, avalanches, landslides 4Financial assistance 4Risk management and risk maps www.economicswebinstitute.org Cutting‐edge research & implementation consulting 6. Turkey’s National Adaptation Strategy In terms of adaptation, a selection of lines of activities is the following: Long term (2012‐2020) 4Watershed Master Plans finalized 4River Basin Management Plans 4Studies on volume‐based water pricing 4Food production and processing export and imports 4Multi‐optional insurance systems 4Public access to risk maps 4Environmental impact assessment processes linked with legal regulation and plans 4Use of architecture and construction materials appropriate for local climate 4Rainwater accumulation, utilization, recycling 4Waste water efficiency for urban green areas www.economicswebinstitute.org Cutting‐edge research & implementation consulting 7. Conclusions Climate change is devastating the future scenarios of development. Mitigation is an immediate priority and a good investment for survival. Adaptation will have an exponential growth, quickly passing from marginality to relevance to dominance, until limits to adaptation are reached and the environment is so degradated that we would need a Planet B. But... www.economicswebinstitute.org Cutting‐edge research & implementation consulting 7. Conclusions Since Business has a crucial role in bringing timely and adequate technical and economic expertise to adaptation and mitigation planning and implementation before it is too late. www.economicswebinstitute.org Cutting‐edge research & implementation consulting References Isoard, S., Grothmann, T., and Zebisch, M. (2008). Climate Change Impacts, Vulnerability and Adaptation: Theory and Concepts. Paper presented at the Workshop ‘Climate Change Impacts and Adaptation in the European Alps: Focus Water’, UBA Vienna T.R. Ministry of Environment and Forestry ‐ National Climate Change Strategy World Business Council for Sustainable Development www.economicswebinstitute.org Cutting‐edge research & implementation consulting
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