Fuel tankers, which were used to carry fuel for NATO forces in Afghanistan, are seen parked in a compound on July 10, 2012 in Karachi, Pakistan. (Photo by Daniel Berehulak/Getty Images)
The Asian Development Bank (ADB) recently called for “climate proofing” – to borrow a term used by Preety Bhandari, who heads ADB’s Climate Change and Disaster Risk Management Unit – low-lying or coastal cities in Asia requiring the trifecta of sound integrated planning, adequate resources and political commitment. “The battle against climate change is likely to be won or lost in Asia’s expanding megacities”, the ADB warns while noting further that “Asian cities are poised to contribute more than half the rise in global greenhouse gas emissions over the next 20 years if no action is taken.” The ADB infographic below underscores the aforementioned warning and depicts the high vulnerability of major urban areas in the region to stress from climate change.
Source: ADB
The ADB expects about 1.2 billion Asians to migrate from rural areas to cities – the centers of future economic activity and thus prosperity – over the next 35 years. Most importantly, the ADB estimates that “[m]ore than half of the world’s slum dwellers – an estimated 522.6 million people in mid-2012 – live in Asia”, and delaying action may only increase this number to 1 billion by 2050. Vijay Padmanabhan, technical adviser on water and urban issues at ADB, brings it down to the human level: “The poorest communities in cities often live in the most vulnerable, least safe neighborhoods in low-lying areas on coasts or riverbanks so homes, services, and livelihoods of those families are hit hardest by climate change-related events.”
Source: ADB
Consequently, two overarching trends – demographics and climate change – are poised to collide at the same time in the same neighborhood while affecting the most vulnerable segments of society.
Climate Change Resilience via Integrated Urban Planning as envisioned by ADB
Source: ADB
All this will not bode well for political stability and continuous sustainable economic development prospects of the Asian countries in question. Moreover, the demographic trend is likely to only exacerbate the financial costs as well as the risks from impending climate change impacts thereby raising the stakes for policymakers tremendously. Nevertheless, hopefully this can prompt significant investment into urban development projects to cope with the anticipated migration wave on top of the additional stress from climate change in urban settings. What that means, the ADB elaborates, is “installing sanitation infrastructure that is able to cope with higher-than-anticipated rainfall, water systems that work even during droughts, electricity pylons that can withstand high winds, and roads that don’t crack during heat waves.”
In this context, just last week two stories were especially newsworthy. First, in what has to be deemed a very unusual move the leaders of India and China – Prime Minister Narendra Modi and Chinese president Xi Jinping – issued a joint statement urging developed countries to “raise their pre-2020 emission reduction targets and honour their commitment to provide US$100bn per year by 2020 to developing countries”, as reported by Ed King for RTCC.
Whether a coincidence or not, German Chancellor Angela Merkel speaking days later in Berlin at the so-called “Petersberg Climate Dialogue VI – ‘Reaching for the Paris outcome’” – an event where climate change experts and government officials from 35 countries alike gathered for informal talks on how to tackle climate change effectively – stressed, according to a Deutsche Welle (DW) report, that “she would use the next G7 summit at Elmau Castle in Bavaria in June to remind her Western partners that from 2020, they have pledged $100 billion (89 billion euros) annually to fight climate change at the global level.” This so-called Green Climate Fund is meant to provide the substantial financial as well as technological assistance to developing countries.
But as is often the case, the devil is in the details. What, however, is certain is that the terms of climate finance are contentious and thus will be a central question at COP21. Note, for developed countries to live up to their pledges, they will have to scale up their ‘climate finance’ contributions, which will have to include public funds. Obviously, developing countries want commitments to include finance for climate adaption in any global agreement struck in Paris later this year. Yet, it is doubtful that there is a consensus on this question among developed countries. Consider the following excerpt from the negotiating text addressing “adaptation” prepared by the “Ad Hoc Working Group on the Durban Platform for Enhanced Action” – held in Geneva (Switzerland) earlier this year (8–13 February 2015) – and which includes all options (in brackets) proposed by all countries:
“E. [[Adaptation and loss and damage]
[Adaptation]
[Long-term and global aspects of adaptation]
- [Option 1: All Parties in accordance with the principles and provisions of the Convention, its Article 4 and their common but differentiated responsibilities, and previous decisions of the Conference of the Parties (COP) to commit to cooperate to adapt to the adverse effects of climate change, ensure resilience and protect citizens and ecosystems in the context of the long-term temperature limit and to achieve sustainable development [in the context of poverty reduction and maintaining food security], while recognizing the local, national and transboundary dimensions of adaptation:
Option 2: [Developed country Parties][Annex X Parties][all countries in a position to do so] commit to enhance support to [developing country Parties][Parties not included in annex X] in terms of finance, technology, and capacity-building, and to enable [developing countries][Parties not included in annex X] to enhance their adaptation actions so as to ensure their resilience [and reduce vulnerability];
It is highly unlikely that “Section E; Option 2” will ever make it into the final document. Even if it does, at most it will likely be a watered-down version starting with “all countries in a position to do so”.
So, we will have to wait and see what actually comes out of the June G7 summit in Germany on the climate finance front. Interestingly, German Chancellor Merkel’s cabinet member Environment Minister Barbara Hendricks wants the G7 to consider “insurance policies as an alternative to traditional development aid”, according to a report in EurActiv in April.
Prima facie, the idea of a ‘climate change’ insurance may seem to make sense because it recognizes that more people are vulnerable in developing countries with the hardest hit populations also being the world’s poorest. However, while this underscores what ADB suggested above, it still appears to be a misguided approach because somebody will have to pay the premiums for those populations. Ask hurricane Sandy-hit homeowner along the flood-prone Jersey Shore what happened to their insurance premiums after Sandy hit or homeowners in earthquake-prone California.
One can only wonder what kind of premiums, for example, Western insurance companies would charge in Bangladesh, a country already exposed to a plethora of climate risk ranging from more severe or frequent floods, monsoon rain, or cyclones. With the following graphic Munich RE tries to make the point that low-income population groups need access to climate change insurance because they “cannot adapt to weather patterns that are changing over the medium and long term, in particular the increase in weather extremes.”
While this is true to a certain degree, the graphic, more importantly, bears out that weather-related events globally (from 1990 to 2014) hit low-income economies disproportionately hard in terms of fatalities – 62 percent of the global total over that time period. By the same token, population groups in these economies appear chronically ‘underinsured’ with only 1 percent (equivalent to less than US$ 7bn) of the losses insured vis-à-vis 93 percent in high-income economies.
Source: Munich RE
No real surprise there, given that those populations are poor and their most prized possession is their health and/or life. So yes, there is a business opportunity for the insurance industry because the insurance payout would be disproportionately low. But this proposal clouds the real problem, which is to provide substantial financial and technological assistance to allow for effective climate adaptation of critical infrastructure in climate risk-prone areas before the full effects of climate change materialize in developing countries.
Consequently, instead of looking for financial instruments to clean up after natural disasters, it may be a better idea to keep the promise made by developed to developing countries and put up the money for their adaptation measures to prevent loss and damage as much as possible. As the ADB rightly noted above Asia-Pacific’s collaboration is indispensable on the climate change front: “The battle against climate change is likely to be won or lost in Asia’s expanding megacities.” And always remember, the developed world’s favorite products and gadgets depend on global supply chains, many of which originate in the Asia-Pacific region.
