Results from ECA study: Florida Lauren Toretta McKinsey Mark Way Swiss Re Mitigation is important, but it will take decades to achieve success Global greenhouse gas emissions: Gt COe per year Slide 75 70 65 60 55 50 45 40 5.5% 0 990 000 00 00 030 6 35 70-43% -67% SOURCE: McKinsey Global GHG Abatement Cost Curve v.0, 009; Den Elzen, M.G.J. and M. Meinshausen, 006: Multi-gas emission pathways for meeting the EU C climate target.; IEA World Economic Outlook 007; Project Catalyst analysis 3 Growth at current pace Growth with substantial mitigation efforts (400ppm path)
The ECA working group s aim: Help decision-makers assess and address total climate risk The project developed a methodology to quantify local total climate risks: today s climate risk, the economic development paths that might put greater population and value at risk the additional risks presented by climate change. The project determined and economically prioritized local adaptation by applying a comprehensive cost / benefit discipline. The project focus was on quantifying specific local climate risks in 8 case study locations and determined suitable adaptation (not global needs). Slide 4 under 3 climate scenarios High level of uncertainty around predicting hurricanes Many climate factors play a role in the development and strength of hurricanes Narrowed focus and scope to address only hurricane intensity and height of sea level rise Using expert input, three climate scenarios were developed Intensity forecasts based on the link between sea surface temperature and wind speed Sea level rise projections were based on projections across two ice flow outcomes Climate scenarios were later used to develop 3 hazard scenarios 030 scenarios Description Today s climate Current climate data used as the baseline for wind speed and sea level Frequency of hurricane events based on historical and is not varied Moderate Change Wind speed increase of 3% and sea level rise of 0.08m Uses an average of various wind speed to sea surface temperature relationships Storm surge increases due to sea level rise 3 High Change Wind speed increase of 5% and sea level rise of 0.4m Uses a maximum wind speed to sea level surface relationship Storm surge increases further Slide 5 SOURCE: IPCC, 007; S.Rahmstorf; K, Emanuel; J. Kurry; L. Bengtsson; T. Knutson
Case study methodology Where and from what is the State most at risk? What is the magnitude of the expected loss? What should be considered? How can be implemented? Input into adaptation strategy Slide 6 Map of areas at risk Identify most relevant hazard(s) in case location Identify areas that are most at-risk, by overlaying hazard(s) on: Population Economic value (GDP) Estimate of potential loss Hazard: Develop frequency and severity scenarios Value: Quantify assets and income value in area at risk Vulnerability: Determine vulnerability of assets and incomes to the hazard Set of adaptation Identify potential adaptation Determine societal costs and benefits and basic feasibility Interviews with experts Economic analysis Implementation assessment Assess current progress against the Understand requirements to implementation Determine actions required to implement Result: Losses by GDP impact Slide 8 3
Managing total climate risk requires a cost-effective adaptation portfolio Portfolio of Hazards Infrastructure and asset- based Total Climate Risk Vulnerability Technological and procedural optimization Systemic and behavioral Slide 9 Value Risk transfer and contingent financing Result: Expected losses by scenarios and by hazard Annual expected loss in 008 and 030 $ Billions, 008 dollars Rain Storm surge Wind 7 6 0 6 0 30 33 5 7 9 Slide 008 Moody s Scenarios Percent of 3 Counties GDP SOURCE: Swiss Re; team analysis 008 Today s Climate 030 Today s Climate 030 Moderate change 030 High change 8.5 8.4 9.4 0. 4
Result: Expected losses by contributing factors Expected loss from exposure to climate Moderate climate change scenario, USD billions Potential impact from economic growth 7 9 4 30 +76% Potential impact from change in climate 008, today s expected loss Incremental increase from economic growth; no climate change Incremental increase from climate change 030, total expected loss Slide Result: a locally specific adaptation cost / benefit curve Slide 3 Cost/benefit 0 9 8 7 6 5 4 Measures below 3.70 this line have net 3 economic benefits.54.75.56.96 0.08 0.35 0.80 0.93.47.54.5 0.99.09.30.54 0.98.0 0.05 0.3 0.69 0 0 0.0 0.03 0.03 0.04 0.08 0 0 3 4 5 6 7 8 9 0 3 4 5 6 7 8 9 Roof Levee & Floodwall Elevation, Beach Roof cover, cover, Sandbags Nourishment new Replacement undergrounding, trans. (50 ft) Beach Nourishment (00 ft) Roof truss, new ~40% of total expected loss can be averted costeffectively Opening protection, new Roof shape new Roof deck attachment, new Averted loss $ Billions Calculated in 008 dollars for the average climate scenario Temp. floodwalls Vegetation Mgmt Elevation new homes Targeting hardening, dist. Roof truss, Substation Backup generators Local levees Masonry, new Opening protection, Targeted hardening, transmission 7.54 6.93 0.6 $30 billion Annual expected loss Targeted undergrounding, trans. Top layer risk transfer Elevation, prioritized Deductibles - Replacement residential undergrounding, dist. Deductibles - Targeted undergrounding, commercial distribution Road elevation Engineering based FRT penetration 5
These respond to the full range of hurricanes Slide 4 Top adaptation identified Beach nourishment This measure is highly beneficial relative to cost. Successful in other States, (e.g. NC), and Florida uses this measure New home improvement Roof protection Vegetation management Barriers to water intrusion Top layer risk Many which fit into the new home improvement bucket and most of these can be achieved through building code establishment and enforcement. There is increased benefit from doing these at the time of building, both from a cost and overall systems perspective. Although it covers several, roof protection stood out as beneficial for individuals to pursue, whether its through new construction or. While cost beneficial, this measure also has the additional benefit of reducing windborne projectiles that can increase asset damage or business interruption Many different cost effective to address the hazard of flooding, and while the usages may be more specific (barrier to door or to entire community), some type of flood barrier should be part of a comprehensive adaptation strategy This is the only measure that addresses low frequency, high risk events. While it is not cost beneficial on our model, it offers a unique opportunity to address risk that can t be mitigated through any other mechanism Slide 5 6
Expected loss averted by initial portfolio of Slide 6 Key learnings Despite much uncertainty it is possible to provide the basis for decision making South Florida has many best in class approaches to manage hurricane risk The increase in annual expected losses by 030 is mainly driven by economic growth factors A range of existing adaptation can significantly reduce annual expected losses by 030 However, some 40% is unlikely averted currently Insurance play a key role in addressing lowfrequency, high-severity weather events Slide 7 7