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Assessing and Managing Europe's current and future flood and drought risks Vulnerability and disaster risk mapping workshop EEA, Copenhagen, 2 July 2009.

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Presentation on theme: "Assessing and Managing Europe's current and future flood and drought risks Vulnerability and disaster risk mapping workshop EEA, Copenhagen, 2 July 2009."— Presentation transcript:

1 Assessing and Managing Europe's current and future flood and drought risks Vulnerability and disaster risk mapping workshop EEA, Copenhagen, 2 July 2009 Hochrainer Stefan International Institute for Applied System Analysis Laxenburg, Austria

2 Odra Flood, 1997: 5.0 billion Euro losses, 0.8 billion Euro insured losses 300.000 people evacuated Flooding, 2002: 14.4 billion Euro losses, 3.4 billion Euro insured losses 400.000 people evacuated Large Scale Events: * * Source: CRED, 2008 Point of Departure

3 Losses from weather extremes such as floods, droughts, and other climate-related events in Europe (and elsewhere) have escalated in recent decades The increase has been more rapid than population or economic growth can fully account for According to the IPCC Fourth Assessment Report, anthropogenic climate change is expected to lead to increases in intensity and frequency of weather extremes Point of Departure

4 Europe vulnerable to disasters already today, key focus for EU adaptation strategy (White paper) is on managing climate variability Large events: –2002 large-scale flooding over central Europe: losses > 15 billion Euro –2003 summer heat wave of unprecedented magnitude resulting in 80,000 additional deaths –led to agricultural losses exceeding 13 billion and a 30 per cent reduction in gross primary production of terrestrial ecosystems. Risk information (maps) exist in some EU member states, but ADAM provides the first comprehensive probabilistic maps of riverine flood and drought/heatwave risks across the EU on various scales, e.g. from the regional to the national level Potential applications –Risk based planning: e.g., flood protection –Identification and comparison of vulnerable and at risk countries –Financial and economic planning: Risk sharing Point of Departure

5 Methodological Approach Extremes are low probability -high consequence events. To assess and manage extreme risks probabilistic approaches have to be used to incorporate all possible future scenarios. Traditional risk measures are inadequate for decision making, e.g. averages will not give adequate representation of the risk. The fat-tails and the thickness (of distributions) are important instead. Traditional coping mechanisms do not work in the case of extremes, e.g. Law of large numbers not applicable; hence different risk management/adaptation strategies have to be considered for catastrophes. Distinctions between stock and flow effects are important.

6 Efficiency of risk management instruments dependent on the occurrence probability EU solidarity fund Market based insurance Flood protection Advantages of Risk based approaches Probability High probability Low probability

7 Flood

8 Risk based approach: Assessing direct risk Risk is a function of the Hazard, the Exposure and the Vulnerability. Approach used in ADAM:

9 Maximum annual average flood damage for European provinces and regions (NUTS 2 level) as a percentage of GDP for todays climate regime Risk based approach: Assessing direct flood risk Averages are based on loss distributions on the GRID level. New method developed to upscale losses to the national level, hybrid-convolution Method (Hochrainer, Lugeri)

10 Minimum and maximum average annual flood risk across European countries measured in percent of GDP Regions and countries in Eastern Europe are particularly flood risk hotspots Assessing direct flood risk: Results

11 Country A Country Z … losses Input: Loss distribution Sampling Threshold criteria EUSF payments Sampling Criteria for funding met Extreme value distribution estimated Managing flood risk on the European Scale: EUSF On average, every 7 years one can expect that the EUSF can not meet its obligations.

12 Source: Modified after Schick and Polackova Brixi, 2004 Managing current flood risk on the Country Scale Government is a key actor:

13 Cross-country sample of financing modalities of disaster losses by insurance, government assistance, and private sector and net loss (as a percentage of direct losses) Managing current flood risk on the Country Scale

14 Modeling Impacts and Adaptation: Country scale

15 Dynamic Indirect risk management Dynamic direct risk assessment Climate Change Global Change Hazard Sudden onset ExposurePhysical Vulnerability Direct Risk Economic Resilience Economic Vulnerability Economic Risk Adaptation and Risk Management Ex-post Ex-ante Dynamic Modeling of Impacts and Adaptation: Country scale

16 Projected change in flood damages in 2071-2100 (% change with respect to 1961-1990 baseline) Climate models remain limited in their reproduction of local weather extremes due, inter alia, to inadequate (coarse) resolution Projections of changes in future extreme weather events remain highly uncertain and hinder us from robustly projecting future flood risk Land use changes very difficult to project Future Floods

17 Government fiscal deficits and hidden liabilities due to flood risk in flood prone European countries Managing current flood risk on the Country Scale Need for managing risk on the country level: Hidden government disaster liabilities

18 Austria case: Reserve Fund as a Risk instrument The Austrian Katastrophenfond (National Disaster Fund): The Fund became negative in 2002 and 2003 (flooding). To adjust the fund, investments more than 137 million in 2002 and more than 207 million Euros in 2003 were needed. * Source:Hyll et al., 2004 *

19 Stochastic trajectories of discretionary spending including disaster risk Fiscal space and disaster related reduction in Austria Time period of 10 years, 2009-2018 Fiscal space concept: Fiscal flexibility is decreased due to disaster events Austria case: Changes in fiscal space

20 Drought

21 A B C D Approach used:

22 Annualised monetary risk due to combined heatwave and drought stress for spring wheat calculated for the present period (1975-2005) Similar analyses for winter wheat, soybean and sunflower Losses in 2009 millions Current drought and heatwave risk

23 Changes in annualised drought and heatwave risks to spring wheat over a future period in 2030-2060 based on SRES A2 (=2 degree) compared to today (in millions) without adaptation with adaptation: advanced sowing with adaptation: longer cycle variety Change in 2009 millions Future drought and heatwave risk

24 With regard to drought and heat stress to agriculture, we find Southern Europe to be particularly vulnerable In a future climate with a north-south precipitation change gradient, and assuming adaptation, many agricultural regions in Europe would actually benefit from a warming climate However, some regions in Italy and Spain would not be able to benefit and adapt, and face continued stress and substantial associated risks Drought and heatwave stress operate as slower onset phenomena and are more strongly characterised by mean climate conditions: greater confidence in model projections Drought and heatwave:

25 Our study suggests that regions in Eastern Europe represent disaster hotspots for flood risk, and areas in Southern Europe for drought and heat stress to agriculture: case for increased cohesion funding? Flood hazards are likely to worsen over much of Europe, yet due to a lack of localised projections from climate models, we considered risk projections not robust In contrast, we feel more confident in projecting drought and heatwave risk as well as adaptation as a function of changes in broader-scale average climates Conclusions

26 Although drought and heatwaves are likely to worsen across much of Europe, effective adaptation interventions exist Yet regional heterogeneity in risk and response will continue, leading to climate change winners and losers. Irrespective of future changes, weather-related disasters today already pose substantial burdens for households, businesses, and governments Risk-based adaptation planning seems important: prevention better than the cure Conclusions

27 End of Presentation

28 Partners

29 Introduction: Country perspective: Austria The Austrian Katastrophenfond (National Disaster Fund): The Fund became negative in 2002 and 2003 (flooding). To adjust the fund, investments more than 137 million in 2002 and more than 207 million Euros in 2003 were needed. * Source:Hyll et al., 2004 *


31 Introduction: European perspective: Solidarity Fund Fund may be heavily exposed to one (large scale) event only, as experienced in 2002 with ¾ of the fund depleted due to flood events Year2002200320042005 Aid granted (mill. Euro)72810720204 Successful Applications4/46/101/1110/12 Nearly all (13/16) of the rejected applications were regional disaster events. Given the fact that a number of new member states are very hazard-prone and disaster losses are likely to rise, the Solidarity Fund is likely to be severely under-funded in the future Question: - How one could model disaster impacts (direct and indirect) on the Country or European scale - How to incorporate adaptation strategies

32 Modeling Impacts and Adaptation: Introduction Risk bearers (aggregate country level): - Public sector: Government: Infrastructure and Relief - Private sector: business and households. -property owners, -insurers, -reinsurers -and the capital market. Each stakeholder may implement a wide range of risk management and adaptation strategies, including - risk reduction: Structural or physical mitigation - risk preparedness: Loss absorption, e.g. via savings - and risk transfer: Risk spreading or financing Furthermore, one can distinguish between ex-post or after-the-fact approaches, and proactive (ex-ante) approaches.

33 Standard Approach: Four basic components Hazard : Characterization of risk Inventory: The elements at risk Vulnerability: Susceptibility to damage Loss: Direct or indirect Structure: Model output: - Hazard maps - Exceedance Probability (EP) curves - Probable maximum loss (PML) - Distribution of losses. Modeling Impacts and Adaptation: Direct Risk

34 Exceedance probability curveLoss frequency distribution Direct Risk Modeling Impacts and Adaptation: Direct Risk

35 Modeling Impacts and Adaptation: Indirect Risks Possible indirect effects on the macro-level Economic vulnerability, e.g. the ability to finance the losses, is time dependent It is important to incorporate indirect effects within a risk management framework Risk management/ adaptation strategies on the country level, have to incorporate indirect risks as well in their decision strategy.

36 Modeling Impacts and Adaptation: Resilience Public sector ex-post and ex-ante financing sources TypeSourceModel Ex-post sources Decreasing government expendituresDiversion from budgetyes Raising government revenuesTaxation- Deficit financing Domestic Central Bank credit- Foreign reserves- Domestic bonds and credityes Deficit financing External International borrowingyes Outside support,yes Ex-ante sources Insuranceyes Reserve fundyes Contingent credityes

37 Catastrophe Reserve FundReinsurance Catastrophe Contingent Credit Mitigation Modeling Impacts and Adaptation: Ex-ante Options

38 Modeling Impacts and Adaptation: Summary Direct Risk: Probability of Asset losses (in monetary terms) Economic Vulnerability: Ability to finance the losses Economic Vulnerability is a function of - Economic resilience: Loss Financing Instruments - Direct Risk Possible risk measures: Financing gap approach e.g., shortfall between losses and financing possibilities Indirect Risk: Probabilistic impacts and economic vulnerability lead ultimately to macroeconomic effects. Adaptation Strategies: Increase the economic resilience or will decrease the direct risk.

39 Possible Hotspots in the European Union: Flood Use direct risk (annual average losses) and debt indicators as first proxies for economic vulnerability of the given country: This approach would lead to the following countries as possible Hotspots: Bulgaria, Romania, Croatia, Hungary, Czech Republic, Slovakia, and Poland

40 Possible Hotspots in the European Union: Flood Solidarity Fund: 0.4 billion Euros needed each year with a standard deviation of around 0.3 billion (large scale events not incorporated)

41 Country Perspective: Austria Flooding Direct Risk: Economic Resilience: 2.5 percent of the direct losses of the public sector are financed from outside assistance, namely the European Solidarity fund for losses higher than 3 billion Euros or 0.6 percent of GDP. The disaster fund is set to 30 million Euros each year. The credit buffer, e.g. the maximum amount of credit from abroad the government can or may use is set to 5 billion Euro.

42 Country Perspective: Austria Flooding Fiscal consequences due to flooding in the next 10 years Risk Time Ability to start new projects

43 Standard Approach: Modeling Impacts and Adaptation: Direct Risk

44 Einführung in die Problematik: Effekte auf Landesebene Oben: Mögliche Entwicklungslinien nach einer Katastrophe Links: Durchschnittliche Wachstumsraten nach einer Katastrophe Source: Hochrainer, 2006.

45 I: Operationalisation of economic vulnerability Element DescriptionOperationalisation in model Financial vulnerability Ability to share risksFinancial vulnerability algorithm for determining internal and external savings for reconstruction, relief and recovery given direct disaster losses Economic redundancy Ability to pool risks: geographic and economic diversification CES function specification: input factors are not perfectly substitutable (not fully implemented )

46 I: Public sector ex post and ex ante financing sources for relief and reconstruction Type SourceConsidered in model Ex-post sources Decreasing government expenditures Diversion from budgetyes Raising government revenues Taxation- Deficit financing Domestic Central Bank credit- Foreign reserves- Domestic bonds and credityes Deficit financing External International borrowingyes Outside support, e.g. from EU solidarity funds yes Ex-ante sources Insuranceyes Reserve fundyes Contingent credityes

47 CatSim: Software und Algorithmusstruktur

48 Financial vulnerability

49 Indirect risk Probabilistic fiscal and Macroeconomic impacts Risk Management/ Adaptation Development of risk management strategies Hazard Floods, Droughts Exposure Capital stock, population Physical Vulnerability Susceptibility to physical damage Direct Risk Probabilistic asset losses Economic resilience Financial resilience Economic redundancy Economic vulnerability Ability to recover and refinance from disaster events

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