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Symposium 2011

Proposal - Developing Countries are Most Affected by Climate Change and Need the Support of the Industrialized Countries to Adapt to the Unavoidable Risks

The Challenge

In policy discussions of climate change, mitigation has been the main focus to date but adaptation to climate change is moving up the policy agenda. Simulation models suggest that the negative effects ...

In policy discussions of climate change, mitigation has been the main focus to date but adaptation to climate change is moving up the policy agenda. Simulation models suggest that the negative effects of climate change disproportionately fall on the developing world. Some argue that such effects have already started to become visible in the form of agricultural damage, displacement of people by floods, etc.

The need to support developing countries

Global warming will increase the variability of weather and most likely result in more extreme weather events. The Munich Re NatCatSERVICE data on loss relevant natural disasters already show such a trend for the last 30 years. The Germanwatch Climate Risk Index, which ranks the countries according to their extreme weather risks, shows that all countries in the top ten of this index are developing countries, led by Bangladesh, Myanmar and Honduras. 95% of fatalities from natural disasters in the last 25 years occurred in developing countries. Furthermore, indices characterizing the expected range of future changes of climate like the Climate Change Index (Baettig et al., 2007) clearly show that in many developing countries these changes will be most pronounced. Taking into consideration that already today the climate conditions in many of these countries are on the edge of allowing a sustainable livelihood to the people, only small changes can put this at risk.
Developing countries do not have a history of large emissions of green house gases and thus have not contributed significantly to the causes of climate change. So it is in the responsibility of the industrialized countries, which have caused the problem, to support the people in the developing countries to mitigate climate risks and help them to adapt to the changes.

Insurance related solutions

Insurance approaches have been mentioned in the United Nations Framework Convention on Climate Change (UNFCCC) climate negotiations since the Convention was framed in the early 1990s. More recently, the issue has received renewed attention in the Kyoto Protocol, the Bali Action Plan and in the Cancun agreement on a “Loss and Damage” program.
In response to the growing realisation that insurance-related solutions can support the adaptation to climate change advocated in the Framework Convention the Munich Climate Insurance Initiative (MCII) was launched in 2005. This initiative brings together insurers, experts on climate change and adaptation, NGOs and policy researchers intent on finding solutions to the risks posed by climate change. MCII provides a forum and gathering point for insurance-related expertise on climate-change impact issues. MCII is a registered non-profit association concerned with international frameworks (UNFCCC, World Bank, international development goals, etc.) and public-private insurance mechanisms for those particularly affected by global climate change
MCII has made a submission to UNFCCC for a risk management module linking risk prevention and insurance of the unavoidable losses caused by increasing extreme weather events. The risk reduction pillar of the module is supposed to provide support for risk prevention like flood protection measures, more storm resistant building standards or relocation of people into less risky areas. The insurance pillar consists of two tiers, one supporting local and regional micro insurance systems to cover the smaller risks and one creating a global pool covering losses caused by extreme weather disasters. The estimated costs for such a risk management module are USD 10bn per year, USD 3 bn for the prevention pillar, USD 2bn for the lower insurance layer and USD 5bn for the global pool covering the extreme events. The funding for this module could be out of an adaptation fund like the Green Fund which has been agreed upon by the industrialized countries at the COP in Cancun. The Green Fund is supposed to reach an annual funding of USD 100 bn by 2020.
The MCII proposal has the potential to link insurance with incentives to prevent losses. It would deliver climate insurance solutions to benefit those most vulnerable to the adverse impacts of climate change and would support them in their efforts to adapt to the changes.

Business related solutions in the field of clean energy

Besides adaptation to the changes also ambitious green house gas emission reductions are necessary to avoid unmanageable conditions in the second half of this century. Renewable energies are the key to reductions of Carbondioxide. Many developing countries are rich in natural resources to produce renewable energies, especially solar radiation. In cooperation with industrialized countries these resources can be used providing sustainable clean energy for the developing countries themselves but also for export to industrialized countries and thus creating sustainable business opportunities. In order to organize such a clean energy partnership by realizing the Desertec concept the Dii company has been founded in 2009. The Dii is working on a regulatory and political framework to allow large investments into renewable energies in the North African desert in partnership with the countries in North Africa.

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