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Mechler r 20150709_1730_upmc_jussieu_-_amphi_24

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Mechler r 20150709_1730_upmc_jussieu_-_amphi_24

  1. 1. Operationalizing the Loss and Damage Mechanism: A principled approach for financing climate risk management Reinhard Mechler, Thomas Schinko (IIASA) Session Climate finance at scale: emerging opportunities? Our Common Future Under Climate Change Paris, 9.7.2015
  2. 2. • Establishment of the “Warsaw international mechanism for loss and damage:” to deal with support for residual climate-related damages after adaptation • “3rd pillar of the work under the UNFCCC in addition to mitigation and adaptation” • Contested terrain – ‘Southern countries’ at risk (such as AOSIS) demand climate justice – OECD negotiators willing to support good risk management, but liability and compensation considered red lines • Workprogramme adopted Fall 2014: Balancing the two perspectives Loss & Damage Mechanism: a contested terrain…
  3. 3. Climate risk Hazard Intensities, duration and frequencies of some hazards changing (IPCC 2012&14) Extreme event attribution in early stages (James et al., 2014; Trenberth et al., 2015) Exposure Dominating Factor - currently (IPCC, 2012&14) Vulnerability Key driver, knowledge gaps, significant adaptation deficit (IPCC, 2012) Images: IPCC, 2014
  4. 4. Lack of finance for pre-disaster risk management Disaster–related financing 1991-2010 Prevent: 13% Kellet and Caravani, 2013
  5. 5. Political principles Needs: coping capacity Liabilities & rights Policy & Implementation Rights & Needs- based Climate Risk Management Time horizon Short to medium term Medium to long term Ethical principles Distributional justice Compensatory justice A principled approach
  6. 6. Principles • Principle of strict liability cannot yet be applied to climate risk • Argue for a pragmatic policy approach to the L&D: balance between consequentialist and non- consequentialist ethics (see also Dellink et al., 2009) • Supporting climate risk management as early adaptation: national to local • Integrate evidence from attribution studies
  7. 7. Methodological elements – needs based perspective • Identify country-level risk • Identify country level adaptive capacity: stress-testing • Risk layering principle: – risk reduction for more frequent risks – Risk financing and assistance for infrequent risks • Support from national to local
  8. 8. Country-level risk GAR-Global Assessment Report, 2015
  9. 9. Risk coping Layering risk management to identify entry points Mechler et al., 2014 Support for risk beyond national capacity
  10. 10. Country-level financial stress testing IIASA CATSIM model
  11. 11. Country-level financial stress testing Financial gaps Williges et al., 2015 for GAR 15
  12. 12. Global costs to cover gaps 0 3 6 9 12 15 18 21 24 27 [10 to 50] [50 to 100] [100 to 250] [10 to 500] WorldwideAnnualCosts(billions2012USD) Risk Layers Covered (in terms of year events) Maximum (No cap) Baseline (25 bn cap) Minimum (5 bn cap) For example: 50-100 year layer: ~ $ 4.5 billion [2.7-6.7] /a necessary for absorbing risk beyond adaptive capacity
  13. 13. Country perspective: how to effectively disburse financing? • Regional and national: Risk pooling and financing- Sovereign insurance and regional pools:  Caribbean, Pacific, Africa • National to community level: Public-private partnerships for risk reduction • National funds to bolster community-level risk management partnerships (Peru)
  14. 14. Example Peru • Devolution: National-local • $ 100 M Fund to support disaster risk management • Strong-community-led partnerships emerging (Zurich Flood Resilience Alliance)
  15. 15. Discussion points • Adaptation vs. Loss&Damage: can approach help to overcome the red lines? • Climate risk management as early adaptation • Capacity to absorb finance: Innovative partnerships

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