Europe warned to prepare for a warmer world

The European commission has launched a major debate on how the EU should adapt to climate change. Rebecca Foges investigates its promise to integrate adaptation into all EU policies
The global community is waking up to the realities of climate change. Over the past century, Europe has warmed by almost 1°C – more than the global average. Even if emissions halted today, climate change would still occur, scientists advise.
This is the logic behind a debate now under way about how Europe can adapt to inevitable climate change, how much it will cost and where the burden will fall. The European commission addressed all these themes in a green paper on adaptation published on 29 June.
“The need to adapt to climate change will have a massive impact on almost all areas of EU policy,” said commissioner Stavros Dimas at a stakeholder conference held in Brussels on 3 July to discuss the green paper.
“It is simply not possible for European politicians to ignore this and I am convinced that the next years will see climate adaptation running like a thread through all of our policies”.

The commission’s green paper proposes a four-pronged approach to adapting to climate change:
Early action and ‘climate proofing’ of community funding within affected European areas.
Incorporating adaptation into foreign policy, in particular targeting aid to developing countries likely to be hardest hit.
Stepped-up research to improve predictions of impacts and relative costs of inaction and adaptation.
More stakeholder involvement, to strengthen coordinated adaptation strategies.
Addressing adaptation in an integrated way is vital, the commission argues. Some actions may reduce emissions but do not help adaptation and vice versa. For example, large hydropower plants are renewable energy sources but may not be sustainable in areas expecting less future rainfall.
On the other hand, there are many policies that both mitigate climate change and encourage adaptation. Insulation for example can save energy on heating or air conditioning and help people cope with extreme temperature fluctuations.
One reason the commission has drafted the green paper is that anticipating the impact of climate change is more cost efficient than waiting until it happens (see figure 1).
Market forces alone are unlikely to lead to efficient adaptation, according to last year’s influential Stern report on the economics of climate change.
Uncertain estimates of climate change impacts and their costs make businesses hesitant to invest in adaptation measures. Earlier this year, the European commission’s climate change working group identified many economic approaches that could promote adaptation in various sectors, singling out such policies as water pricing based on the ‘user pays’ principle encouraging efficiency.

Impact on business
All sectors will need to adapt, the commission insists. Industries more directly dependent on the weather and natural resources are likely to be hardest hit and must adapt the most. Transport, water, agriculture and insurance are among the sectors most exposed.
Urban and transport infrastructure is designed to last for decades and climate change should be factored into project plans to reduce the risk of damage down the line. The Stern report estimates that $15-150 billion each year may have to be spent in OECD countries to ‘climate proof’ buildings and infrastructure.
Changing precipitation patterns are already forcing the water sector to adapt. Daniel Villessot, president of European water sector association Eureau, told ENDS that several years of ongoing drought in some European countries have led to the creation of communal water deficiency management systems.
The green paper recommends integrating adaptation at the water framework directive’s implementation stage, as the law does not explicitly address climate change. But Mr Villessot wants to go further. He believes “it is necessary that the water framework directive directly takes on board climate change”.
One important recommendation is that every sector should diversify to reduce dependence on a single source of income. The green paper stresses the need to ensure a wide range of energy sources because future climate volatility will change their relative suitability. This is also true of the water sector.
“We have to better assess the economic feasibility of alternative [water] sources to know when and where the available sources can be used, when necessary. We need to assess the environmental and financial impacts of each source,” says Mr Villessot.
Agreeing with the green paper, he believes efficiency should be the primary water adaptation strategy. “Only once we have increased efficiency of our current sources should we move onto alternatives,” he says.
Peter Kendall, vice-president of European farm lobby Copa-Cogeca, highlighted the importance of irrigation for agricultural adaptation strategies. “One of the enormous issues is how we manage water: winter storage, increasing efficiency, choosing the less water-intensive crops.”
Agriculture, forestry and ecosystem management have large roles to play in the commission’s adaptation policies according to the green paper. Stable ecosystems are more able to naturally adapt to climate change.

In the end, the insurance industry will bear much of the financial risk associated with climate change. The green paper says financial services and insurance markets must become innovative in dealing with climate change. If they do, they could reap huge profits (see figure 2). After all, adaptation can also mean exploiting the potential benefits of climate change.
Climate change has already led to new insurance products. For example, catastrophe bonds are financial contracts that pay out not on proof of loss but on the fulfilment of a trigger condition such as an extreme flood. These kinds of insurance policies also provide an incentive for individuals and businesses to minimise their own climate risk, a concept promoted in the green paper.
Munich Re was one of the first insurance companies to address climate change in its policies. Ernst Rauch, head of windstorm, weather and climate risks at the company told ENDS he expects huge growth in climate-related insurance.
“Increasing frequency and intensity of extreme weather events will create increased demand for traditional catastrophe insurance,” he says (see figure 3).
“There will also be growth in insurance for new technologies, in particular renewable energies and carbon capture and storage.” Agricultural insurance against climate risks is another area Mr Rauch predicts will increase, though it is currently not common.
Mr Kendall agrees with that prediction. “Right now, insurance can be incredibly expensive and often prohibitive to many farmers. It may cost up to 10-15 per cent of their gross output to pay for insurance,” he explains.
“However, if we are going to see more volatile markets in the future, which I think we are, then it may become more cost effective.”
Nevertheless, EU and national disaster funds will still be needed to support those who cannot afford insurance. These funds will feel growing pressure as extreme events increase. One way they can better adapt to climate change is through public and private partnerships with the insurance industry.
“There are opportunities for these partnerships in areas where private insurance does not traditionally provide cover, where there are extremely exposed risks so premiums would be too high to be socially affordable,” Mr Rauch explains.
The industry says these partnerships, where high-risk businesses and individuals take out government-subsidised insurance, will allow more efficient payments than catastrophe relief. The Netherlands government already has such a scheme in place to insure farmers’ crops against extreme precipitation events.

The commission has said it intends to integrate adaptation into existing legislation, such as the flood management directive proposed earlier this year. New legislation to address climate change adaptation specifically is not foreseen.
The fourth prong of the green paper states the possible creation of a European advisory group for adaptation. The commission proposes the group begins work in November.
An online public consultation is expected to open shortly and remain active until November 2008. Four more stakeholder conferences will be held in Helsinki, London, Lisbon and Budapest in the autumn, with viewpoints to be incorporated into a communication on adaptation next year.
The green paper’s goal of “coordinated and comprehensive” adaptation strategies will only be achieved if each stakeholder group is active in the debate. By adapting together in a coherent way, the commission hopes Europe will be able to avoid climate change’s worst impacts.

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