Climate Risk Management

Journal: Climate Risk Management

Publisher

Elsevier

ISSN

2212-0963

Show all metadata

Search Results

Publications 1 - 10 of 11

A framework for building climate storylines based on downward counterfactuals: The case of the European Union Solidarity fund
Ciullo, Alessio; Martius, Olivia; Strobl, Eric; et al. (2021)
Climate Risk Management
Recent research introduced the concept of climate storylines as an alternative approach to estimate climate impact and better deal with uncertainties. A climate storyline is an event-based approach which aims at building “physically self-consistent unfolding of past events, or of plausible future events or pathways”. As such, climate storylines may profit from downward counterfactual thinking, which aims at analyzing how past events could have been worse. Notwithstanding the various applications of downward counterfactual thinking in the natural risk management literature, no study relates this with the climate storyline approach. The main goal of this paper is thus to introduce a framework that supports the development of climate storylines from downward counterfactuals. The framework is event-oriented, it focuses on impact, and it is designed to be applied in a participatory fashion. As a proof-of-concept application, we study the impact of tropical cyclone events on the European Union Solidarity Fund (EUSF) and do not conduct a participatory analysis. These events represent a serious threat to the European outermost regions, and their impact to the EUSF capital availability has never been studied. We find that payouts due to tropical cyclones can hamper a recovery of the fund if large payouts concurrently occur in mainland Europe. To avoid this also considering future changes, an increase in capitalization up to 90 % percent may be required.
Representing storylines with causal networks to support decision making: Framework and example
Kunimitsu, Taro; Baldissera Pacchetti, Marina; Ciullo, Alessio; et al. (2023)
Climate Risk Management
Physical climate storylines, which are physically self-consistent unfoldings of events or pathways, have been powerful tools in understanding regional climate impacts. We show how embedding physical climate storylines into a causal network framework allows user value judgments to be incorporated into the storyline in the form of probabilistic Bayesian priors, and can support decision making through inspection of the causal network outputs. We exemplify this through a specific storyline, namely a storyline on the impacts of tropical cyclones on the European Union Solidarity Fund. We outline how the constructed causal network can incorporate value judgments, particularly the prospects on climate change and its impact on cyclone intensity increase, and on economic growth. We also explore how the causal network responds to policy options chosen by the user. The resulting output from the network leads to individualized policy recommendations, allowing the causal network to be used as a possible interface for policy exploration in stakeholder engagements.
Digital technologies can enhance climate resilience of critical infrastructure
Argyroudis, Sotirios A.; Mitoulis, Stergios Aristoteles; Chatzi, Eleni; et al. (2022)
Climate Risk Management
Delivering infrastructure, resilient to multiple natural hazards and climate change, is fundamental to continued economic prosperity and social coherence. This is a strategic priority of the United Nations Sustainable Development Goals (SDGs), the World Bank, the Organisation for Economic Co-operation and Development (OECD), public policies and global initiatives. The operability and functionality of critical infrastructure are continuously challenged by multiple stressors, increasing demands and ageing, whilst their interconnectedness and dependencies pose additional challenges. Emerging and disruptive digital technologies have the potential to enhance climate resilience of critical infrastructure, by providing rapid and accurate assessment of asset condition and support decision-making and adaptation. In this pursuit, it is imperative to adopt multidisciplinary roadmaps and deploy computational, communication and other digital technologies, tools and monitoring systems. Nevertheless, the potential of these emerging technologies remains largely unexploited, as there is a lack of consensus, integrated approaches and legislation in support of their use. In this perspective paper, we discuss the main challenges and enablers of climate-resilient infrastructure and we identify how available roadmaps, tools and emerging digital technologies, e.g. Internet of Things, digital twins, point clouds, Artificial Intelligence, Building Information Modelling, can be placed at the service of a safer world. We show how digital technologies will lead to infrastructure of enhanced resilience, by delivering efficient and reliable decision-making, in a proactive and/or reactive manner, prior, during and after hazard occurrences. In this respect, we discuss how emerging technologies significantly reduce the uncertainties in all phases of infrastructure resilience evaluations. Thus, building climate-resilient infrastructure, aided by digital technologies, will underpin critical activities globally, contribute to Net Zero target and hence safeguard our societies and economies. To achieve this we set an agenda, which is aligned with the relevant SDGs and highlights the urgent need to deliver holistic and inclusive standards and legislation, supported by coordinated alliances, to fully utilise emerging digital technologies.
Climate change as a motivating factor for farm-adjustments: Rethinking the link
Tessema, Yibekal Abebe; Joerin, Jonas; Patt, Anthony (2019)
Climate Risk Management
In order to design effective adaptation policies for the agricultural sector, it is important to understand what adjustments farmers actually make in order to cope with climate change. Many studies have compiled lists of such adjustments, especially in the developing country context. There is reason to believe, however, that such studies have suffered from particularly two types of methodological flaws, with the result of over-attributing the importance of climate change, relative to other factors leading farmers to alter their behavior. Firstly, studies in the past often do not consider non-climatic drivers in their analysis and their style of enquiry is also prone to response bias, particularly social desirability bias. In this study, we introduced a new methodological approach that addresses these potential flaws. We applied this new method side-by-side with the more established ones, in a household survey undertaken in Ethiopia. Our new method reveals a list of climate adaptations that is somewhat shorter than previous studies have found. We found that in the study area, crop switching, crop diversification and changing planting date are the adjustments that are primarily motivated by climate change than other drivers. The commonly used approach in studies in the past, the direct enquiry method, identified fertilizer application as the most important adaptation response. Other methods including our suggested new approach, however, indicate that this and other farm-level adjustments, while compatible with climate change, have actually very little to do with it, and instead are primarily motivated by new market and technological opportunities. Our findings could allow for more effective and efficient sets of policies to help farmers best adjust to new threats and opportunities.
Climate impact storylines for assessing socio-economic responses to remote events
van den Hurk, Bart J.J.M.; Baldissera Pacchetti, Marina; Boere, Esther; et al. (2023)
Climate Risk Management
Quote: “What I hear, I forget. What I see, I remember. What I do, I understand.” (Xunzi, ∼300 BCE). Modelling complex interactions involving climatic features, socio-economic vulnerability or responses, and long impact transmissions is associated with substantial uncertainty. Physical climate storylines are proposed as an approach to explore complex impact transmission pathways and possible alternative unfoldings of event cascades under future climate conditions. These storylines are particularly useful for climate risk assessment for complex domains, including event cascades crossing multiple disciplinary or geographical borders. For an effective role in climate risks assessments, development guidelines are needed to consistently develop and interpret the storyline event analyses. This paper elaborates on the suitability of physical climate storyline approaches involving climate event induced shocks propagating into societal impacts. It proposes a set of common elements to construct the event storylines. In addition, criteria for their application for climate risk assessment are given, referring to the need for storylines to be physically plausible, relevant for the specific context, and risk-informative. Apart from an illustrative gallery of storyline examples found in literature, three examples of varying scope and complexity are presented in detail, all involving the potential impact on European socio-economic sectors induced by remote climate change features occurring far outside the geographical domain of the European mainland. The storyline examples illustrate the application of the proposed storyline components and evaluate the suitability of the criteria defined in this paper. It thereby contributes to a rigorous design and application of event-based climate storyline approaches.
Climate-resilient strategy planning using the SWOT methodology: A case study of the Japanese wind energy sector
Bachmann, Lisa; Lex, Ricarda; Regli, Florian; et al. (2024)
Climate Risk Management
As climate change leads to more frequent and intense extreme weather events, industry stakeholders and policymakers must assess their business strategies, practices, and entire sector policies under these uncertain conditions. Much recent research has integrated quantitative climate risk modeling into frameworks to engage policymakers and inform adaptation decisions in a general way, but relatively little attention has been devoted to extending this to strategic business and investment decisions. This falls short of identifying economic opportunities and threats in a wider socio-economic context, such as the development of new technologies or evolving political and regulatory environments. Here, a methodology is developed to integrate quantitative climate risk modeling with SWOT analysis (strengths, weaknesses, opportunities, and threats) which is commonly used in business and investment strategic planning. This moves the focus from avoidance of negative outcomes to prospective planning in an evolving environment. This methodology is illustrated with a case study of the Japanese wind energy sector, using open-access data and the open-source climate risk-assessment platform CLIMADA. This Climate risk assessment indicates threats from increasing damages to the wind energy infrastructure, as well as the profitability of typhoon-resistant wind turbines under present and future climate. Expert interviews and extensive literature research on opportunities and threats, however, also show that the transition towards renewable energies faces restrictive market dynamics, political and social hurdles, which set external conditions surpassing physically-informed dimensions. Beyond this illustrative case study, the methodology developed here bridges established concepts in climate risk modeling and strategic management and thus can be used to identify industry-centric ways forward for climate-resilient planning across a wide range of economic sectors.
Weather insurance in European crop and horticulture production
Bucheli, Janic; Conrad, Nina; Wimmer, Stefan; et al. (2023)
Climate Risk Management
Weather risks threaten food production and put farms’ profitability at risk. Insurance solutions can compensate for the resulting financial losses and thereby serves as important risk management tool. While insurance providers in Europe have recently largely expanded the number and scope of offered weather insurance solutions, this remained undocumented in scientific literature. We here provide a structured assessment of agricultural insurance products that are on the market to cover weather risks in crop and horticulture production in dynamic European insurance markets, focusing on Austria, France, Germany, Italy, Spain and Switzerland. We systematically collect information on supplied insurance products (N = 107) and find large diversity in market concentrations, offered products, insured weather risks, and political market interventions. We find that for most economically relevant weather risks (especially for hail), insurance solutions are available to farmers, but we identify certain insurance protection gaps (e.g., flood in Germany). Additionally, drought and heat risks seem underrepresented in current insurance products, especially given their economic relevance. Indemnity insurance (where payouts are based on assessed losses) is offered most frequently, but weather index insurance (where payouts depend on the realization of an index, such as cumulative precipitation) is also increasingly available in Europe. Most of current weather index insurance solutions have a unique design, indicating a preference to stand out from the competition, and we observe little knowledge spillovers between markets. There are different levels of political market intervention and in particular a trend to introduce premium subsidies and towards a convergence of premium subsidy levels between markets. We highlight the need to align any political market intervention to other policy goals and to the transition to a more sustainable agriculture. Finally, we underline the important role of research in improving current insurance systems.
The hazard components of representative key risks The physical climate perspective
Tebaldi, Claudia; Aðalgeirsdóttir, Guðfinna; Drijfhout, Sybren; et al. (2023)
Climate Risk Management
The framework of Representative Key Risks (RKRs) has been adopted by the Intergovernmental Panel on Climate Change Working Group II (WGII) to categorize, assess and communicate a wide range of regional and sectoral key risks from climate change. These are risks expected to become severe due to the potentially detrimental convergence of changing climate conditions with the exposure and vulnerability of human and natural systems. Other papers in this special issue treat each of eight RKRs holistically by assessing their current status and future evolution as a result of this convergence. However, in these papers, such assessment cannot always be organized according to a systematic gradation of climatic changes. Often the big-picture evolution of risk has to be extrapolated from either qualitative effects of “low”, “medium” and “high” warming, or limited/focused analysis of the consequences of particular mitigation choices (e.g., benefits of limiting warming to 1.5 or 2C), together with consideration of the socio-economic context and possible adaptation choices. In this study we offer a representation – as systematic as possible given current literature and assessments – of the future evolution of the hazard components of RKRs. We identify the relevant hazards for each RKR, based upon the WGII authors’ assessment, and we report on their current state and expected future changes in magnitude, intensity and/or frequency, linking these changes to Global Warming Levels (GWLs) to the extent possible. We draw on the assessment of changes in climatic impact-drivers relevant to RKRs described in the 6th Assessment Report by Working Group I supplemented when needed by more recent literature. For some of these quantities - like regional trends in oceanic and atmospheric temperature and precipitation, some heat and precipitation extremes, permafrost thaw and Northern Hemisphere snow cover - a strong and quantitative relationship with increasing GWLs has been identified. For others - like frequency and intensity of tropical cyclones and extra-tropical storms, and fire weather - that link can only be described qualitatively. For some processes - like the behavior of ice sheets, or changes in circulation dynamics - large uncertainties about the effects of different GWLs remain, and for a few others - like ocean pH and air pollution - the composition of the scenario of anthropogenic emissions is most relevant, rather than the warming reached. In almost all cases, however, the basic message remains that every small increment in CO2 concentration in the atmosphere and associated warming will bring changes in climate phenomena that will contribute to increasing risk of impacts on human and natural systems, in the absence of compensating changes in these systems’ exposure and vulnerability, and in the absence of effective adaptation. Our picture of the evolution of RKR-relevant climatic impact-drivers complements and enriches the treatment of RKRs in the other papers in at least two ways: by filling in their often only cursory or limited representation of the physical climate aspects driving impacts, and by providing a fuller representation of their future potential evolution, an important component – if never the only one – of the future evolution of risk severity.
Flexible weather index-based insurance design
Conradt, Sarah; Finger, Robert; Spörri, Martina (2015)
Climate Risk Management
This study investigates the performance of a flexible index design for weather index-based insurances using farm-level panel data on wheat production from Kazakhstan. The proposed flexible design is a generic framework that uses Growing Degree Days to determine annual variable start and end dates for the insured period. This approach reflects the progress of phenological plant growth phases more accurately than fixed periods and hence is expected to reduce the basis risk of the index insurance. In addition, we develop an economic framework that focuses on the role of downside risks and apply Quantile Regression to tailor optimal insurance specifications. This framework is then used to compare the downside risks associated with the use of flexible and fixed insurance periods. The results show that the introduction of flexibility in the index design leads to a reduction in farmers’ downside risk exposure and to a more efficient contract design.
Revisiting the diversification and insurance relationship: Differences between on- and off-farm strategies
Knapp, Ladina; Wüpper, David Johannes; Dalhaus, Tobias; et al. (2021)
Climate Risk Management
Crop insurance is an important instrument for farmers to cope with climate risks. Yet, also, diversification plays a crucial role. The use of crop insurance and diversification is interrelated. For example, an increasing support and uptake of insurance solutions may discourage farmers to take diversification measures on the farm, given that they now have an insurance dealing with risks. This may have unintended consequences, such as biodiversity decline. We examine the relationships between seven different kinds of income diversification and the uptake of crop insurance. Theoretically, both substitutive and complementary relationships are possible. The reason is that, depending on their preferences and constraints, farmers choose income bundles that optimally balance profits and risks. Here we provide the first systematic empirical examination of this issue. Our analysis is based on our own survey data from 1176 Swiss fruit growers. We consider on- and off-farm diversification strategies, namely inter-varietal diversity, agro-tourism, processing and direct marketing of products, creation of financial reserves for bad times, forestry work, off-farm investment, off-farm income and their association with insurance uptake. In line with our theoretical reasoning, we do indeed find both substitutive and complementary relationships. In general, on-farm diversification is associated with positive insurance demand, whereas off-farm diversification has a negative association.

Publications 1 - 10 of 11

Journal: Climate Risk Management

Abbreviation

Publisher

Journal Volumes

ISSN

Description

Filters

Search Results