Adaptation Strategies to Minimize Climate Risks inCompanies - Adaptation... · ¾Separation...

Valentino PianaIstanbul, 26th February 2010

Adaptation StrategiesAdaptation Strategiesto Minimize Climate Risksto Minimize Climate Risks

inin CompaniesCompanies

www.economicswebinstitute.orgCutting‐edge research & implementation consulting

Contents

2. The pervasive impact of climate change on physical assets,ecosystems, infrastructure, people and business

3. Long‐run certainty and short‐run risk: the costs of inaction

4. Other stressors on the assets put at risk by climate change

7. Conclusions

1. A simple scheme of climate change

5. Adaptation strategies for businesses

5.2. Sector‐specific challenges and options

5.4. Global business and the international diffusion of climate‐related innovations

5.3. Local adaptation plans: the role of business

5.5. Financial and business models for adaptation

5.1. Exclusive or inclusive adaptation?

6. Turkey’s National Adaptation Strategy


1. A simple scheme of climate change

Density/Value

Our adaption from Isoard,Grothmann and Zebisch, 2008.

Additional stressors


2. The pervasive impact of climate change on physical assets,ecosystems, infrastructure, people, and business

exacerbatesexacerbatesexisting problemsexisting problems

generates generates entirely new onesentirely new ones

Climate change

WaterCoastal line

Rivers, reservoirs and sweetwatersEnergy

Ecosystems and ecosystem servicesInfrastructure

Scarsity, degradation, disruption, costsfor the following assets:





Climate change

Seasonal diseases and illnesses

Vector‐borne diseases (e.g. dengue, malaria,..)

Consumer stress and budget diversion

Work absentees and lower productivity





Climate change

Input degradation and costs (water, energy, landscape,…)

Business premises at risk of extreme events, sea‐level rise, etc.

Conflict in use of scarse resources

Production processes negatively influenced by weather

Loss in competitiveness for certain products

Logistic disruptions


3. Long‐run certainty and short‐run risk: the costs of inaction (1)

0

40

80

120

160

180

240

280

2007 08 09 10 11 12 13 14 15 16

Climate change damage

Qua

litative scale

The science of climate is the same as the physics that

keep your plane flying and your mobile phone calling

the world.



the world.

The rise of temperature in agreenhouse is a confirmed result of an experiment youcan replicate. By adding CO2it becomes even warmer.



the world.

The rise of temperature in agreenhouse is a confirmed result of an experiment youcan replicate. By adding CO2it becomes even warmer.

Extreme weather events will increase in frequence and impact, albeit will remain unpredictable in exact

timing.



The time window of

opportunity to sell adaptation solutions will

be short.

0

40

80

120

160

180

240

280

2007 08 09 10 11 12 13 14 15 16


Qua

litat

ive

scal

e

Clients not awareClients not awareand not willing to payand not willing to pay

Too Too late late ‐‐limits to adaptationlimits to adaptation

Window ofWindow ofopportunityopportunity


0

40

80

120

160

180

240

280

2007 08 09 10 11 12 13 14 15 16


Qua

litat

ive

scal

e


To widen the window,it is necessary

to raise awareness in

advanceand to push for

strong mitigation actions

Clients awareClients awareAdaptationAdaptation in in

reasonable rangesreasonable rangesof costs andof costs andeffectivenesseffectivenessthanks to thanks to mitigationmitigation

Window ofWindow ofopportunityopportunity


4. Other stressors on the assets put at risk by climate change


Inadequate pipelines

Conflict for usefor agriculture,energy, population

Adaptationby protecting key assets

cannot distiguish the stressors

nor differentiate between

anthropogenic climate change

and climate in general.…


5. Adaptation strategies for businesses

Vision, new processes, new products

Push to market, push to policymakers

Restructuring the supply chain / value chain

1

2

3

4 Upgrade skill and core competences4


5.1. Exclusive or inclusive adaptation?

Isolation, closing borders, protection of key assetsOnly the rich and highly profitable human activities protectedNegative externalities on the rest of population and natural ecosystemsConflict

Isolation, closing borders, protection of key assetsOnly the rich and highly profitable human activities protectedNegative externalities on the rest of population and natural ecosystemsConflict

Co‐planningSolidarity networkInsurance schemesConditional emergency planand fast broad mobilizationReciprocal guaranteesNobody left behindNational and internationalcohesion

Co‐planningSolidarity networkInsurance schemesConditional emergency planand fast broad mobilizationReciprocal guaranteesNobody left behindNational and internationalcohesion

Adaptation strategy based on separation

and exclusiveness

Adaptation strategy based on solidarity

and risk sharing



AgricultureFishery ForestryEnergy generation and distributionBuildingHVACR‐ Heating, Ventilation,Air Conditioning and RefrigerationCity managementTourism

Industry/manufacturingFood processingWater provision

TelecommunicationsPublic sectorHealthcareInsurance

RetailTransport infrastructure

Logistics/distribution



Agriculture and livestock

Soil degradation, erosion, landslidesPests, crop predators and diseasesWater stress and local droughtsGMOs and water‐resistant cropsFood vs. non‐food productionsOrganic agricultureCommunity rehabilitation of degradated land

Soil degradation, erosion, landslidesPests, crop predators and diseasesWater stress and local droughtsGMOs and water‐resistant cropsFood vs. non‐food productionsOrganic agricultureCommunity rehabilitation of degradated land

Fishery

Overall reduction in fish catchUnsustainable fisheryRisk of extintion of local speciesChanges in temperature and acidificationReef corals extintionEcosystem irreversible damageAquacultureLocal sustainable fishing

Overall reduction in fish catchUnsustainable fisheryRisk of extintion of local speciesChanges in temperature and acidificationReef corals extintionEcosystem irreversible damageAquacultureLocal sustainable fishing



ForestryShift in species over latitudes and mountain heightsAcid rains destroying forestsOriginal forest vs. plantationSustainable forest managementIndigenous knowledge‐led forestryNon‐wood income generation activities

Shift in species over latitudes and mountain heightsAcid rains destroying forestsOriginal forest vs. plantationSustainable forest managementIndigenous knowledge‐led forestryNon‐wood income generation activities

Energy generation and distribution

Shifts in energy demandChanges in temperatures and operational conditions Increased competition with other sectors for waterThreats to coastal plantsParadigm shift towards renewablesBusiness models for mini‐grids (e.g. solar+low‐energywater desalinization, etc.)

Shifts in energy demandChanges in temperatures and operational conditions Increased competition with other sectors for waterThreats to coastal plantsParadigm shift towards renewablesBusiness models for mini‐grids (e.g. solar+low‐energywater desalinization, etc.)



Building

Shelter function under stressDifficulties in maintaining proper micro‐climatic conditions and comfort levelsEnergy‐intensity under regulatory, economical and societal pressureIntegration buildings‐surroundings‐natureTop‐quality buildings as eco‐buildingsLocally appropriate materialsReduced water consumptionSeparation grey, black and white watersLocal recycling

Shelter function under stressDifficulties in maintaining proper micro‐climatic conditions and comfort levelsEnergy‐intensity under regulatory, economical and societal pressureIntegration buildings‐surroundings‐natureTop‐quality buildings as eco‐buildingsLocally appropriate materialsReduced water consumptionSeparation grey, black and white watersLocal recycling

HVAC

Low energy solutionsHeat pumpsMono‐ or multi‐renewable local sourcesNatural or forced ventilation

Low energy solutionsHeat pumpsMono‐ or multi‐renewable local sourcesNatural or forced ventilation



City management

Compound effect of athmospheric pollution from industry and cars, temperature and humidity oncomfort, asthma, and other stressors Green urban areasUrban unconventional greening (e.g. vertical or roof greening)Waste managementBiogasLocally viable alternative mobility systems

Compound effect of athmospheric pollution from industry and cars, temperature and humidity oncomfort, asthma, and other stressors Green urban areasUrban unconventional greening (e.g. vertical or roof greening)Waste managementBiogasLocally viable alternative mobility systems

Tourism

Entire localities under threat (sea‐level, lack of snow,etc.) and loosing attractivenessExtreme negative events Reduced resilienceArtificial snow and other artificial ways to recreate the tourist experienceSustainable tourism

Entire localities under threat (sea‐level, lack of snow,etc.) and loosing attractivenessExtreme negative events Reduced resilienceArtificial snow and other artificial ways to recreate the tourist experienceSustainable tourism



Industry/manufacturing

Temporary or definitive lack or degradation of inputsHigher costs for water and energyDisruption in operationsRisk to production facilities located near the sea and inflood‐prone areasReduced consumer willingness to purchase

Temporary or definitive lack or degradation of inputsHigher costs for water and energyDisruption in operationsRisk to production facilities located near the sea and inflood‐prone areasReduced consumer willingness to purchase

Foodprocessing

Difficulties with inputsWeather‐dependent productionsDifficulties in exports and importsSanitary provisionsHealth of employees

Difficulties with inputsWeather‐dependent productionsDifficulties in exports and importsSanitary provisionsHealth of employees



Water provision

Reduced average rainfallShifting and unpredictable rainfall patternsDifferent locations for heavy rainsEmpty damsFurther stresses on river‐related ecosystemsAcidification of rainsLow‐energy treatement of waterPrices and availability of waterConflicts for waterRain harversting and treatments

Reduced average rainfallShifting and unpredictable rainfall patternsDifferent locations for heavy rainsEmpty damsFurther stresses on river‐related ecosystemsAcidification of rainsLow‐energy treatement of waterPrices and availability of waterConflicts for waterRain harversting and treatments

Telecommunica‐tions

Disruptions in infrastructuresEarly warning systemsAwareness raising systemsSmart grid

Disruptions in infrastructuresEarly warning systemsAwareness raising systemsSmart grid



Insurance

Higher insurance payouts resultingfrom damage to infrastructure byextreme weather eventsGreater uncertainty of risk assessmentsRe‐insurance at higher ratesFinancial stress

Higher insurance payouts resultingfrom damage to infrastructure byextreme weather eventsGreater uncertainty of risk assessmentsRe‐insurance at higher ratesFinancial stress

RetailDisruption in supply chains and transport infrastructureChanging consumption patternsLocations at risks

Disruption in supply chains and transport infrastructureChanging consumption patternsLocations at risks



Public sectorHigher expectations in the population for protectionNew regulationsPlanning skillsImplicit insurance Financial stressDifficulties in mediation of conflicts

Higher expectations in the population for protectionNew regulationsPlanning skillsImplicit insurance Financial stressDifficulties in mediation of conflicts

Healthcare

Shift in spatial and temporal distribution of diseasesHeat wave deaths in cities and other areasChange in distribution of vectors of infectionsWider range of stress‐related illnessesCarrying capacity of hospitals in case of extreme weather events

Shift in spatial and temporal distribution of diseasesHeat wave deaths in cities and other areasChange in distribution of vectors of infectionsWider range of stress‐related illnessesCarrying capacity of hospitals in case of extreme weather events



Insurance

Higher insurance payouts resultingfrom damage to infrastructure by extreme weather eventsGreater uncertainty of risk assessmentsRe‐insurance at higher ratesFinancial stress

Higher insurance payouts resultingfrom damage to infrastructure by extreme weather eventsGreater uncertainty of risk assessmentsRe‐insurance at higher ratesFinancial stress

RetailDisruption in supply chains and transport infrastructureChanging consumption patternsLocations at risks

Disruption in supply chains and transport infrastructureChanging consumption patternsLocations at risks



Transportinfrastructure

Roads and railways localised near the sea or in flood‐prone areasTemporary or definitive damage and disruptionIsolation of villages and other locationsBridges under threat of stronger winds and waves

Roads and railways localised near the sea or in flood‐prone areasTemporary or definitive damage and disruptionIsolation of villages and other locationsBridges under threat of stronger winds and waves

Logistics/distribution

Disruption of ground and marine transportation systems as a result of severe weather patternsInundation of transport routes

Disruption of ground and marine transportation systems as a result of severe weather patternsInundation of transport routes


5.3. Local adaptation plans: the process

Area andits

surroundings

Area andits

surroundings

List ofexisting problems


Exacerbation of existing problems


Interrogationof climatemodels


Brain‐stormingon totally

newproblems


newproblems

Shift fromother areasShift fromother areas

Implementation

TimingResponsibilities

Risks maps,adaptation options


Local Adaptation

Plan

Cost analysis,businessmodels,criteria

forchoices


forchoices


5.3. Local adaptation plans: the role of business

Area andits

surroundings

Area andits

surroundings








newproblems


newproblems

Shift fromother areasShift fromother areas



Local Adaptation

PlanImplementa

tion


forchoices


forchoices

TimingResponsibilitiesYour

organization

Skills accumulationSkills accumulationParticipation to auditsParticipation to auditsSupport to adaptation Support to adaptation

option evaluationoption evaluationTechnical support Technical support


5.4. Global business and the international diffusion of climate‐related innovations

Diffusion based on product life cycleDiffusion based on product life cycle

Diffusion based on emerging countries’ bootstrapDiffusion based on emerging countries’ bootstrap

Option 1 Option 2

Globalization, the UNFCCC process, including the Bali Action Plan, the Copenhagen Accord (art. 11) all indicate that the international dimension of technology development and deployment has a crucial role for both mitigation and adaptation.

Innovation economics suggests two alternative pattern of international diffusion.


5.4. Global business and the international diffusion of climate‐related innovations (Option 1)

Pioneers

Focus 4Commercialprototype

4Many versions(product innovation and imitation)

4Dominant design

4Cost‐oriented processinnovation

4Simplification

Early diffusion

Take‐off Maturity Decline

Core competence

4Formal andinformal R&D

4Creative imitation4Distribution

4Marketing 4Cheap labour4Economies of

scale

4Fully amortized capital

Typicalfeatures ofcountry

4High‐tech4Top

university

4Wide middle‐class4High education

widespread

4Core country

4Emerging country4Previous localizations

Sales



Domestic production

Domestic market

Domestic production

Domestic market

Domestic production

Domestic market + Exports

Domestic production

Domestic market + Exports

Domestic and

FDI production

Worldwide market

Domestic and

FDI production

Worldwide market

Totally internatio‐nalizedbusiness

Totally internatio‐nalizedbusiness

Transplantedsupplier

Localsupplier

Globalsupplier

Localsub‐contractor

Importer

A firmperspective



Large and amortizedInvested capital Small, to be repaid

Old industrialized country

Newly industrialized country

Stable or decliningFuture demand Strong growth potential

Defensive, pessimistMental framework Challenger, optimist

Vested interestsPolitical system Freedom at the frontier


5.5. Financial and business models for adaptation

Clients aware and willing to pay

Public mandate

Public support and asset swaps

1

2

3

4 Ad‐hoc taxation on polluters (domestically and internationally)4

4International funds ‐ the experience of NAPAs

and the Adaptation Fund5



In December 2009, Turkey has drafted the National Climate Change Strategy, soon to be followed by more detailed Action Plans.

In terms of adaptation, a selection of lines of activities is the following:

Short run (2010) 4Agricultural Drough Action Plan4Improving water quality4Livestock and crop sector

capacity to combat diseasesand pests

4Public health




4Watershed Master Plans development4River Basin Management Plans4New agricultural practices4Vulnerable ecosystems, urban biotopes, bio‐diversity4Minimize impact, including through early warning systems, for floods, avalanches,landslides4Financial assistance4Risk management and risk maps

Medium term(2010‐2012)



4Watershed Master Plans finalized4River Basin Management Plans4Studies on volume‐based water pricing4Food production and processing export and imports 4Multi‐optional insurance systems4Public access to risk maps4Environmental impact assessment processes linked with legal regulation and plans4Use of architecture and construction materials appropriate for local climate 4Rainwater accumulation, utilization, recycling4Waste water efficiency for urban green areas

Long term(2012‐2020)



7. Conclusions

Climate change is devastating the future scenarios of development. Mitigation is an immediate priority and

a good investment for survival.

Adaptation will have an exponential growth, quickly passing from marginality to relevance

to dominance, until limits to adaptation are reached and the environment is so

degradated that we would need a Planet B.

But...


7. Conclusions

Since

Business has a crucial role in bringing timely and adequate technical and economic expertise to adaptationand mitigation planning and implementation before it is too late.


References

Isoard, S., Grothmann, T., and Zebisch, M. (2008). Climate Change Impacts, Vulnerability and Adaptation: Theory and Concepts. Paper presented at the Workshop ‘Climate Change Impacts and Adaptation in the European Alps: Focus Water’, UBA Vienna

T.R. Ministry of Environment and Forestry ‐ National Climate Change Strategy

World Business Council for Sustainable Development

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