AnAn Adaptation Mosaic A SAMPLE OF THE EMERGING WORLD BANK WORK IN CLIMATE CHANGE ADAPTATION FINAL DRAFT Ajay Mathur, Ian Burton, and Maarten van Aalst, eds. February 2004 World Bank Global Climate Change Team THE WORLD BANK An Adaptation Mosaic A sample of the emerging World Bank work in climate change adaptation Ajay Mathur, Ian Burton and Maarten van Aalst, eds. 2004 World Bank Global Climate Change Team MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC -ii- MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC Table of Contents Acknowledgements Introduction – an Adaptation Mosaic page 1 Ajay Mathur, Ian Burton, and Maarten van Aalst 1. The Socio-economic Costs of Disasters page 5 Margaret Arnold and Alcira Kreimer 2. Vulnerability and Adapation in Pacific Island Countries page 15 Maarten van Aalst and Sofia Bettencourt 3. Vulnerability and Adaptation in Bank work: Progess and Prospects page 41 Ian Burton and Maarten van Aalst 4. Climate Influence on World Bank Agriculture Portfolio in Brazil and India page 53 Rama Chandra Reddy, Ariel Dinar and Robert Mendelsohn 5. Climate Variability in Kenya: Impacts and Responses page 71 Hezron Mogaka, Sam Gichere, James Richard Davis and Rafik Hirji 6. Climate Change and Agriculture - Impacts and Adaptations page 83 Pradeep Kurukulasuriya 7. Weather Indexes for Developing Countries page 99 Panos Varangis, Jerry Skees, and Barry Barnett 8. Building Effective Catastrophe Insurance Programs at the Country Level: a Risk Management Perspective page 119 Eugene Gurenko -iii- MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC -iv- MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC Acknowledgements The editors wish to thank all the participants of the climate change training course held during ESSD week on March 13/14, 2003; in particular the session chairs Bob Watson, Ajay Mathur, and Ariel Dinar, and presenters Alcira Kreimer, Bob Mendelsohn, Maarten van Aalst, Rama Chandra Reddy, Ian Burton, James Richard Davis, Pradeep Kurukulasuriya, Panos Varangis, and Eugene Gurenko. -v- MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC -vi- MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC Introduction – an Adaptation Mosaic Ajay Mathur1, Ian Burton2 and Maarten van Aalst3 1 Ajay Mathur ([email protected]) is team leader of the World Bank Global Climate Change Team 2 Ian Burton ([email protected]) is emeritus professor of the University of Toronto and independent scholar and consultant 3 Maarten van Aalst ([email protected]) is a climate change specialist at Utrecht University - 1 - MATHUR, BURTON AND VAN AALST INTRODUCTION An Adaptation Mosaic The papers in this collection were presented at a climate change training seminar held at the World Bank during ESSD week 2003. They were selected to provide a sample of current Bank work relating to adaptation to climate change, and to facilitate an exchange of ideas about the emerging agenda for Bank work in this area. What is presented here are fragments of an incomplete mosaic. The complete picture has yet to be drawn, but its pieces already provides an indications of the pattern of work that is now developing. The collection serves as a companion paper to Look Before You Leap, a strategic paper prepared for the Climate Change Team by Ian Burton and Maarten van Aalst, which proposes future directions for the Bank's work in this area. In the past few years, adaptation to climate change has emerged onto the climate agenda to stand next to the reduction of greenhouse gas concentrations in the atmosphere as an essential part of the response to the risks of climate change. Poor countries, and poor people in all countries, are likely to be hit hardest by the negative consequences of climate change. Climate change thus directly affects the World Bank’s mission of reducing poverty4. The Bank’s clients clearly need assistance in developing their own approach to climate risks and their own adaptation priorities. At the same time, the Bank has to ensure that its own investments are not exposed to unacceptable risk. In some cases, new adaptation funding opportunities under the United Nations Framework Convention on Climate Change (UNFCCC) might be used for these tasks5. It is widely accepted that the Bank's main efforts in climate change adaptation should be focused on the integration of climate risk management in policies and projects in client countries, where appropriate. While this process is urgent, it is not trivial how it should be shaped. The papers in this Mosaic collection exemplify the experiments and the valuable lessons from the "learning by doing" that characterises Bank experiences in this area so far. While anthropogenic climate change is a new item on the global environment and development agenda, climate variability and extreme weather events have always been a concern. The main capability in the Bank for dealing with these issues rests with the Disaster Management Facility and it is in that direction that we can look for lessons from the experience of dealing with climate 4 See the recent interagency paper on Poverty and Climate Change at www.climatevarg.org 5 As discussed in Look Before You Leap (Burton and Van Aalst, 2003), the UNFCCC-related funding mechanisms do not necessarily match the World Bank mandate to mainstream adaptation in the context of poverty reduction and sustainble development. In contrast to greenhouse gas mitigation, adaptation has no clear quantitative measures of success like atmospheric concentrations or emission levels. Adaptation is a place-based phenomenon and the benefits fall largely where the adaptation policies and measures are adopted. In the absence of global yardsticks the adaptation process lacks coherence, and seems to be evolving on two different tracks. One track, in the context of the UNFCCC and its funding mechanisms, aims at strictly climate change related adaptation activities. The other track focuses on adaptation as part of mainstream economic and sustainable development, and sees climate change as just one element in a complex development process, which should not be isolated. The World Bank’s mission relates more to the latter. At the same time, there are good opportunities to combine adaptation measures and UNFCCC- related funding with the Bank's development work, both at the national level and in the project cycle. Such Bank activities would benefit from, and could also contribute to, a harmonization of the two tracks. MATHUR, BURTON AND VAN AALST, EDS. AN ADAPTATION MOSAIC impacts. The first paper in the set (by Margaret Arnold and Alcira Kreimer) therefore describes the impacts of disasters. The story is not reassuring. Despite considerable efforts the toll of disaster losses continues to rise in both developed and developing countries, although there has been considerable success in reducing the motality and morbidity associated with disasters. This experience shows that adapting to climate change variability and extremes is not a straightfoward task and easy and quick successes are not to be expected. The subsequent papers in this set focus on the assessment of the additional risk that climate impacts place on development; emerging examples of how adaptation options to mitigate this risk can be integrated into the Bank’s operations; and innovative illustrations of how the „irreducible risk“ can be spread and shared . The experience related to risk assessment comes from countries that are particularly vulnerable to climate change. Among them are many small island states, especially in the Pacific Ocean. Already vulnerable to tropical cyclones, droughts and floods, they now also face climate change and incremental sea level rise. The second paper (by Maarten van Aalst and Sofia Bettencourt) describes two World Bank activities in the Pacific Region: a study on the potential economic implications of climate change, and an ongoing project to mainstream adaptation into economic planning in Kiribati, a particularly vulnerable atoll country. In addition to the Pacific islands study, the World Bank has been involved in similar activities to explore vulnerabilities to climate change and adaptation options in Bangladesh and the Caribbean islands - both also areas of high vulnerability and relatively low adaptation capacity. The third paper (by Ian Burton and Maarten van Aalst) draws lessons from these three studies, on the basis of recent project reviews. Carrying out special studies on climate impacts, vulnerability and adaptation is one element of addressing the new risks, but in many ways it represents the easy part of the task. More difficult is the incorporation of adaptation and climate risk management into Bank operations. The Kiribati project (discussed in the second paper) aims to integrate climate risk management in the economic planning of a client country. Other steps towards the integration of climate risk management in operational work include an analysis of agriculture and irigation projects in Brazil and India (by Rama Chandra Reddy, Ariel Dinar, and Robert Mendelsohn), and of water resoures management and climate variability in Kenya (by Hezron Mogaka, Sam Gichere, James Richard Davis, and Rafik Hirji). Another sectoral approach is the review of impacts and adaptation options for agriculture (by Pradeep Kurukulasuriya). The last two papers in the set deal not directly with adaptation measures and policies themselves, but with ways of risk sharing and spreading through insurance. Again the experience comes not from climate change work but from the field of natural disasters. Panos Varangis, Jerry Skees, and Barry Barnett describe the use of weather derivatives as an approach to dealing with catastrophic risk and Eugene Gurenko describes the Bank’s work in helping to establish a pool or a fund for earthquake insurance in Turkey. - 3 - MATHUR, BURTON AND VAN AALST INTRODUCTION Special studies of climate risk, vulnerability and adaptation; lessons from natural disaster experience including new insurance initiatives; and the beginnings of the incorporation of climate risks into Bank operational work are three ways in which progress is being made in the development of a Bank approach to climate change adaptation.