Page - 8 - in options, Volume winter 2015/2016

science into policyiiasa research 8 www.iiasa.ac.atoptions + winter 2015/2016 Climate risk management Tackling the impacts of climate-related disasters using a risk layering approach T he climate is changing, and we are facing the consequences. Over 80% of all disaster events are now climate-related, the United Nations Office for Disaster Risk Reduction has estimated, and climate change is modifying the intensity, frequency, and duration of many extreme  events. The  economic losses in the aftermath can devastate entire economies, and a clear strategy on risk management is needed. How  can we ensure that a family, community, or country can reduce the risks before a disaster, and bounce back afterwards? Disaster risk is complex, as it lumps together frequent events with minor impacts and infrequent but devastating catastrophes. Not all disaster risk can be eliminated, and we need to know which risks should be reduced, which insured against, and which will require governmental or international aid efforts. To help decision makers tackle these challenges, researchers from the IIASA Risk, Policy and Vulnerability Program are adapting the concept of “risk  layering” to develop a comprehensive approach to climate-related disaster risk management. In the lower risk layer, where events occur frequently but have a low impact, risk reduction is often the most cost-efficient strategy (shown in blue in the figure). This is important because it illustrates that climate-related and other risks are not inevitable “accidents.” Preparations, such as improving flood protection, can even be extended to addressing the underlying drivers of risk—by  better building regulations and land use planning in flood-prone areas, for example. In the medium risk layer (shown in green), where risk reduction possibilities are limited, insurance is a suitable strategy. However, it is at the upper end of this scale (red)—which includes rare and catastrophic events for which government or international aid might be required and even exceeded—where new financing mechanisms may be needed. At regional scales, groups of countries have been creating their own funds to buffer themselves against these impacts, and “risk  pools” now exist in Africa, the Caribbean, and the Pacific. However, as illustrated by IIASA analysis of flood risk in Bangladesh the risks are expected to increase substantially as climate and socioeconomic change progresses. An initial response to this issue was the Green Climate Fund. Financed by industrialized and emerging economies, it was established in 2010 to assist developing economies in addressing climate change adaptation and mitigation. Building on this, and focusing on severe impacts for which adaptation is not an option, the Warsaw  Loss  and Damage Mechanism was agreed in 2013. The  mechanism is intended to address climate change-related loss and damage in developing countries that are the most severely affected. The IIASA climate risk management approach uses risk layering to provide policymakers with a practical, clear method for moving forward. Not only can it reveal suitable risk management options, it  can also help identify risks that are “beyond adaptation.” DB Further info Mechler R, Bouwer L (2014). Understanding trends and projections  of disaster losses and climate change: Is vulnerability the missing link? Climatic  Change [doi:10.1007/s10584-014-1141-0]. § Mechler R, Bouwer LM, Linnerooth-Bayer J, Hochrainer-Stigler S, Aerts JCJH, Surminski S, Williges K (2014). Managing unnatural disaster risk from climate extremes. Nature Climate Change 4(4):235–237 [doi:10.1038/nclimate2137]. § Hochrainer S, Mechler R, Pflug G (2009). Assessing Current and Future Impacts of Climate-related Extreme Events. The Case of Bangladesh. IIASA Interim Report IR-09-030. Reinhard Mechler mechler@iiasa.ac.at RISK LAYERING FOR FLOODING IN BANGLADESH Risk layers are shown from high to low frequency of floods, up to a 100-year “return period,” i.e. floods of this scale are only estimated to occur every 100 years. High frequency/low impact Low frequency/high impact Very high risk layer High risk layer Medium risk layer Low risk layer Risk reduction is frequently the most cost-efficient response Risk financing may be the most appropriate response if risk reduction is not cost-efficient Public and donor post-disaster assistance necessary; insurers are reluctant to cover risks Compensation beyond the limits of adaptation 0 5 10 15 20 25 Today 2020 2050 100 year 1 year Risk