A methodological framework to operationalize Climate Risk Management: Managing sovereign climate-related extreme event risk in Austria Thomas Schinko 1,2, Reinhard Mechler 1,3, Stefan Hochrainer-Stigler 1 1 International Institute for Applied Systems Analysis (IIASA) 2 Wegener Center for Climate and Global Change, University of Graz 3 Vienna University of Economics and Business Dieses Projekt wird aus Mitteln des Klima- und Energiefonds gefördert und im Rahmen des Programms ACRP durchgeführt. 1
Background & Objective Rising losses from extreme events comprehensively address climate-related risk Linking Adaptation & disaster risk management (DRM) climate risk management (CRM) Gaps remain in terms of operationalizing CRM with applicable methods and tools for specific risks and decision-contexts 2
Objective Identify key lessons in the literature on CRM Apply them in an empirical context to evaluate their usefulness for informing policy and practice Develop a methodological approach to CRM in the decision context of public sector climate-related risk Apply & test this approach for flood risk in Austria Based on these insights: generate a generic iterative framework that can be used for applying CRM in a wide range of decision contexts 3
Building blocks of sovereign CRM Shift towards pro-active policy to manage disaster risks Dealing with government risk in the balance sheets Risk in the climate change discourse: from burning embers towards calculated risk Managing risk and fostering learning for dealing with uncertainty 4
Methods for dealing with risk & uncertainty Consequences Probabilities Known Unknown Known Risk Ambiguity (subjective risk) Unknown Uncertainty Ignorance (deep uncertainty) Source: Schinko et al. (2016)
Research approach 1.) Short-term risk management - addressing the existing adaptation deficit 2.) Short to medium-term risk management addressing early trends and exacerbating & new risks Methods: Literature review on current risk management and adaptation practices Budget analysis Interviews with DRM and budget experts, policy makers Financial & economic risk-based analysis with IIASA s CATSIM framewirk Stakeholder Workshop (June, 2015; September, 2016) 6
1.) Short term risk management Coping with impacts of recent events Addressing the existing adaptation deficit 7
Interviews & Workshop Current DRM practice in Austria is mainly focusing on the existing adaptation deficit resulting from current climate variability and weather extremes Climate change considerations are not explicitly included in planning Lack of scientific evidence: CC extreme floods damages High uncertainties of regional climate models Constant integration of new information 8
European design guidelines Source: Madsen et al. (2014) 9
Payments by the disaster fund (million EUR) Budgetary implications of flooding in AUT 600 500 400 300 200 100 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Austrian disaster fund's basic endowment Extraordinary allocations Source: Schinko et al. (2016)
2.) Short to medium-term risk management Measures to manage future impacts Addressing early trends and exacerbating & new risks 11
Modelling disaster risk and fiscal stress testing Source: Schinko et al. (2016): Adapted from Hochrainer-Stigler et al. (2013). 12
Losses and deposits (million EUR 2015) Projection of flood risks vs. catastrophe fund reserves 600 500 400 300 200 100 0 2015 2030 2050 expected losses disaster fund deposits Source: Schinko et al. (2016)
Flood Risk for Austria 2015-2030 35 30 Fat tails : low probability, high impact 25 20 15 10 5 0 0.26 0.32 0.76 5 10 20 50 100 250 500 1000 AAL 2015 2030 14
ros 2015) Losses (bn Euros 2015) Iterative CRM and risk layering 40 35 30 Implementation Monitoring Continuation Climate risk analysis 25 Evaluation Transformation 20 Monitoring 15 Absorption Implementation Continuation Evaluation Climate risk analysis 10 Insurance Transformation - 5 Risk prevention 2015 2030 2050 100 250 500 1000 0.51 Source: Schinko et al. (2016) 0.35 0.32 0.37
Co-generating an Iterative CRM Framework Transforming Reframing - Climate signal - Hazards - Loss database - Instruments Reacting (1) Monitoring Building blocks - Risk prevention - Risk financing - Risk budgeting (4) Implementation (2) Climate risk analysis Climate risk modeling: New normal - new hazard & socioeconomic thresholds (3) Evaluation Fiscal stress testing according to risk layers Source: Schinko et al. (2016)
Conclusions DRM practice in Austria mainly focusing on current adaptation deficit Probabilistic modeling of future flood losses indicates potential fiscal stress Iterative CRM Periodically review & update climate change science, and act as new risks evolve Informing reflexive and participatory debate Informing instrumental debate Iterative CRM of relevance beyond Austria EUSF, Regional risk pools (Caribbean, Africa), Sendai Framework, Loss and Damage mechanism 18
Thank you for your attention. schinko@iiasa.ac.at Open Access publication in Mitigation and Adaptation Strategies for Global Change: http://link.springer.com/article/10.1007/s11027-016-9713-0 19