Key issues in planning
adaptation to climate change

Gordon Hughes
University of Edinburgh
16th December 2013
Context - different kinds of adaptation
Adaptation will occur – the question is how
Planned adaptation
Modify assets to al...
Climate proofing – the standard model
Core engineering approach
Project investment & O&M spending to 2050
Estimate increas...
What are the most important climate
stresses?
Roads & transport
Surface integrity – (max) pavement temperature
Flood damag...
Allowing for climate uncertainty
Substantial variation in key climate variables
across GCMs (climate scenarios)
How should...
99th pctile of daily maximum temperature (deg C)
32
34
36
38
40
42

Example 1: heat waves in Macedonia
(99th percentile of...
100

Maximum 3-day rainfall (mm)
120
140
160

180

Example 2: flood exposure in Macedonia
(max 3-day precipitation)

1980
...
The planning horizon: how far ahead
should we look?
Trade-off between initial cost and future O&M
Arises even under certai...
For the Balkans, a planning horizon less
than or equal to 20 years is adequate

Discount rate
A. All countries
0%
2%
5%
8%...
Using perfect foresight to identify priority
sectors and regions
Use distribution of the costs of adaptation
under perfect...
Cost of adaptation under perfect foresight
(Average over GCMs, % of baseline spending)

Country
Albania
Bulgaria
Bosnia
Gr...
Treating planned adaptation as an
investment decision
Return on investment via lower O&M,
upgrade and replacement costs
Ve...
Planned adaptation is justified in some sectors
(Average NPV in $ mln under perfect foresight)

13
Planned adaptation - country and discount rate
(NPV for all infrastructure, average over GCMs)

Country
Macedonia

Albania...
NPV of planned adaptation over GCMs
(Urban assets, $ mln under perfect foresight)

15
Robust strategies for adaptation
The optimal strategy depends on the degree
of risk aversion
Risk neutral -> lowest averag...
Macedonia payoff matrix – PV of adaption cost
(Lower is better, all infrastructure, $ mln for 2031-35)

Planning scenario
...
Identifying a robust strategy for non-transport
infrastructure

18
Analysis of extreme events: how much
protection?
Forget climate change for a while
Do we understand the distribution of ex...
Extreme events and climate change
The effects of climate change: intensity & frequency
Shifting the distributions of extre...
Analysis of extreme events: forms of
adaptation
Increasing resilience and/or reducing vulnerability
Land use and urban pla...
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Parte II - Key issues in planning adaptation to climate change

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Apresentação utilizada no workshop “Adaptação à Mudança do Clima no Brasil em 2040: cenários e alternativas”, aborda questões relevantes no planejamento da adaptação às alterações climáticas. Autor: Gordon Hughes.

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Parte II - Key issues in planning adaptation to climate change

  1. 1. Key issues in planning adaptation to climate change Gordon Hughes University of Edinburgh 16th December 2013
  2. 2. Context - different kinds of adaptation Adaptation will occur – the question is how Planned adaptation Modify assets to allow for expected (but not certain) climate conditions Initial investment to reduce future O&M costs Responsive adaptation Build assets for current climate conditions Upgrade or replace them as the climate changes Higher future costs but less risk of mistakes 2
  3. 3. Climate proofing – the standard model Core engineering approach Project investment & O&M spending to 2050 Estimate increase in unit costs to protect assets against climate change over their life Calculate marginal cost of climate protection Questions to address How is the future climate defined? How far into the future should we look? What are the climate stress-response models? 3
  4. 4. What are the most important climate stresses? Roads & transport Surface integrity – (max) pavement temperature Flood damage – (max) 3-day precipitation Buildings Ventilation – moisture & humidity Roofs & structures – precipitation & wind speed Urban infrastructure Storm water – 3-day precipitation 4
  5. 5. Allowing for climate uncertainty Substantial variation in key climate variables across GCMs (climate scenarios) How should design standards be set? Average over all scenarios Worst outcome or 95th percentile of scenarios Robust scenario allowing for uncertainty Responsive adaptation may be viewed as a “wait and act” strategy 5
  6. 6. 99th pctile of daily maximum temperature (deg C) 32 34 36 38 40 42 Example 1: heat waves in Macedonia (99th percentile of daily max temp) 1980 2010 2030 2050 2070 2090 6
  7. 7. 100 Maximum 3-day rainfall (mm) 120 140 160 180 Example 2: flood exposure in Macedonia (max 3-day precipitation) 1980 2010 2030 2050 2070 2090 7
  8. 8. The planning horizon: how far ahead should we look? Trade-off between initial cost and future O&M Arises even under certainty (perfect foresight) Depends on (a) the cost curve for adaptation, and (b) rate of change in key climate variables Optimal planning horizon > 20 years is very unusual Higher discount rate -> shorter planning horizon More uncertainty -> shorter planning horizon 8
  9. 9. For the Balkans, a planning horizon less than or equal to 20 years is adequate Discount rate A. All countries 0% 2% 5% 8% 10% B. Macedonia 0% 2% 5% 8% 10% 0 Planning horizon (years) 10 20 30 40 0 0 11 51 82 3 11 38 37 6 82 77 39 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 3 8 0 1 2 5 0 7 7 6 0 0 1 0 0 0 0 0 0 0 0 0 9
  10. 10. Using perfect foresight to identify priority sectors and regions Use distribution of the costs of adaptation under perfect foresight to focus analysis Where, when & in which sectors are the costs of adaptation significant relative to base spending? How sensitive are the relative costs to variations across climate scenarios? What is the contribution of existing infrastructure to the costs of adaptation? This will decline over time but focuses attention on upgrading existing assets as well as building new ones 10
  11. 11. Cost of adaptation under perfect foresight (Average over GCMs, % of baseline spending) Country Albania Bulgaria Bosnia Greece Croatia Kosovo Macedonia Montenegro Romania Serbia Slovenia Power & phones 0.6% 0.6% 0.6% 0.8% 0.6% 0.6% 0.5% 0.6% 0.6% 0.6% 0.7% Water & sewers 0.2% 0.4% 0.3% 0.5% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% Roads 7.1% 3.2% 8.5% 22.6% 25.2% 21.4% 2.4% 22.3% 13.3% 4.0% 10.6% Other transport 3.7% 2.9% 5.4% 2.4% 5.3% 2.9% 2.4% 4.2% 4.5% 3.8% 4.6% Health & schools 0.9% 1.0% 1.0% 2.1% 1.0% 0.9% 0.9% 0.9% 1.0% 1.0% 1.1% Urban Housing 1.1% 1.1% 1.2% 2.3% 1.1% 1.1% 1.0% 1.0% 1.1% 1.1% 1.2% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 11
  12. 12. Treating planned adaptation as an investment decision Return on investment via lower O&M, upgrade and replacement costs Very sensitive to the discount rate Shorter upgrade/replacement cycles may be less costly than initial investment Flexibility rather than irreversible commitments However, getting land use right is crucial Avoid development in flood-affected zones Provide capacity for future upgrades 12
  13. 13. Planned adaptation is justified in some sectors (Average NPV in $ mln under perfect foresight) 13
  14. 14. Planned adaptation - country and discount rate (NPV for all infrastructure, average over GCMs) Country Macedonia Albania Kosovo Serbia Discount rate 2% 5% 8% 2% 5% 8% 2% 5% 8% 2% 5% 8% 2016-20 2021-25 2026-30 2031-35 2036-40 2041-45 2046-50 1 -15 -21 -63 -73 -74 10 -1 -6 -38 -95 -115 12 -10 -18 -60 -72 -75 17 3 -4 -13 -84 -110 22 -6 -17 -55 -72 -75 22 4 -3 12 -77 -109 36 -0 -15 -50 -71 -76 28 7 -2 45 -62 -104 46 4 -14 -44 -68 -75 34 10 -1 82 -47 -99 58 9 -12 -36 -63 -71 39 12 0 128 -26 -89 72 17 -6 -27 -57 -67 45 16 3 178 1 -72 14
  15. 15. NPV of planned adaptation over GCMs (Urban assets, $ mln under perfect foresight) 15
  16. 16. Robust strategies for adaptation The optimal strategy depends on the degree of risk aversion Risk neutral -> lowest average cost Extreme risk aversion -> lowest worst outcome Robust strategies focus on ‘good’ outcomes For example, in top quartile for most time periods and/or sectors, plus No very bad outcomes over all scenarios Macedonia excl transport – NCAR & IPSL scenarios 16
  17. 17. Macedonia payoff matrix – PV of adaption cost (Lower is better, all infrastructure, $ mln for 2031-35) Planning scenario Responsive BCCR BCM20 CSIRO MK30 MIROC 32 NCAR CCSM30 UKMO HADCM3 Outcome scenario BCCR CSIRO 29 10 34 33 39 34 39 35 37 34 55 54 MIROC 59 46 78 35 37 54 NCAR 42 41 56 35 34 54 UKMO 52 55 75 45 47 59 Lowest cost of adaptation Comparison under perfect foresight Responsive 29 10 Planned 34 34 NPV of investment -6 -24 Equal probabilities Mean Worst 38 59 42 55 56 78 38 45 38 47 55 59 38 59 35 24 42 34 8 52 59 -7 SD 19 9 20 4 5 2 45 38 39 -1 17
  18. 18. Identifying a robust strategy for non-transport infrastructure 18
  19. 19. Analysis of extreme events: how much protection? Forget climate change for a while Do we understand the distribution of extreme events today? If not, what information do we need to examine this? Will economic development increase or reduce vulnerability? What is an efficient level of protection against extreme events today or in future Planning for managing extreme events For Brazil: allowing for the role of El Niño Investment in infrastructure vs institutional responses Changes in the trade-offs between costs and risks 19
  20. 20. Extreme events and climate change The effects of climate change: intensity & frequency Shifting the distributions of extreme events Tropical cyclones: sea surface temperatures, other factors Flooding: cumulative vs transitional (run-off) Droughts: period without rain or probability that rain < evapotranspiration + run-off over extended period Example: Flooding in China Seasonal flooding in Yangtze Basin: driver is variability in monthly (or even longer) precipitation in upper & middle basin Storm-related floods caused by cyclones or similar events Changes in water management and urbanization which may alter/accelerate run-off: hydro-power vs flood management 20
  21. 21. Analysis of extreme events: forms of adaptation Increasing resilience and/or reducing vulnerability Land use and urban planning: don’t put assets in harm’s way But, attractions of flood plains and coastal zones Building codes, storm water drainage systems, etc Civil defense, evacuation plans, shelters, effective governance Investment in infrastructure Coastal and river flood defenses: always at risk unless they are built to very high standards (e.g. Netherlands) Diversion of flood waters: analogy to interruptible contracts for power, but what happens when the event occurs? How far ahead should we look and what levels of protection should be adopted? 21
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