Page - 103 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

4 TheRiskandPolicySpace forLossandDamage… 103 Fig.4.10 Understanding riskand risk layering for the caseofflood risk in Bangladesh.NoteThe different colours represent acceptable, tolerableand intolerable risk layers ranging fromhigh probability, lowimpact events (1year) to low probability, high impact events (100years).Source Adapted fromMechler et al. (2014) 0 5 10 15 20 25 100 year 1 year Risk Today 2020 2050 carriedoutwiththeIIASACATSIMmodel(seeHochrainer-Stigleretal.2014)builds onhydrologicalandsocio-economicmodellingandestimatesincreasingfloodriskfor 1to100yeareventsforpresent,2020to2050periods.A100yearevent todaywould costaboutUSD4.7billion,andincreasein2050tomorethanUSD20billionabsent additionalriskmanagementmeasures.Muchoftheburden(infrastructurelossesand support for households and business) generallymay end upwith the public sector andwefindfiscal risk tolerance,determinedbythecountry’scapacity toabsorbrisk bynationalmeans and international assistance, is already todayexceededat events with a return period of less than 25 years (the area shaded in red). This fiscal risk threshold is expected tomovedown toeven lower returnperiodsover timeand the costsareestimatedtostronglyincrease,forwhichnational(theplannedcompensation fund)andinternational fundingwillberequired topickuptheburden.Risk layering thusnot onlyhelps to identify appropriatemeasures for tacklingdifferent layers of climate-related risk, but alsoprovides anopportunity to investigate howrisk layers willchangeinthefutureandwhatportionsofriskmayeventuallybecomeintolerable. Thelogicof risk layeringcanbeexpandedtoglobalanalysis,whichmaybeused to identifycountries that are inneedof international support for transformativeand curativeCRMmeasures.Figure4.11showsresultsfromsuchanexerciseidentifying fiscalrisktoleranceasthegapreturnperiodinfinancialresourcesavailable.Countries shadedinredfacesuchinstancesoffiscalintoleranceatparticularlylowreturnperiod events. Thefiscalriskevaluationmethodology,whileonlycoveringcertainaspectsof the problem,enablesanalyststodetermineglobalfundingarrangementstosupportcoun- tries that face risksbeyond theirfinancial toleranceandmayassist the international community in prioritising investment decisions with regard to transformative and curativeCRMmeasures.Sucha fundmaybuildonavailable sovereign riskpooling arrangements in theCaribbean, Pacific,Africa and the Indian oceans (see chapters byLinnerooth-Bayer et al. 2018andSchaefer et al. 2018).