1. 1 WWW.VU.EDU.AU ESTIMATING RISK PROBABILITIES Roger Jones February 26 2009 CENTRE FOR STRATEGIC ECONOMIC STUDIES BUSINESS AND LAW

2. 2 Structure of talk The problem with prediction Estimating risk probabilities Hedging adaptation and mitigation How much climate change do we need to adapt to by when?

3. 3 Scales of approach Dessai and Hulme 2005

4. 4 Characterising uncertainty in AR4

5. 5 The likelihood of prediction

6. 6 The likelihood of risk

7. 7 Framing climate change risk

8. 8 25 cm 50 cm 75 cm

9. 9 The new global growth path Global growth has accelerated in the past decade, driven by the developing countries, especially China and India This growth is energy and coal intensive, and likely to continue Realistic projections of energy use and CO 2 emissions to 2030 are above the SRES marker scenarios, including A1FI

10. 10 Implications for GHG emissions and atmospheric concentrations The implications this new growth path are explored by: developing a reference case projections of CO 2 emissions from fuel combustion to 2030 assuming that other emissions grow in a similar manner developing policy emissions paths (minimum emissions paths) explore CO 2 -e concentrations and temperatures in a simple climate model Minimum emissions paths (MEPs) from 2010 to 2030 were explored in Sheehan et al. GEC 2007 The 2030 MEP resembles the SRES A1B “on steroids” Current growth to 2100 under reference conditions resembles SRES A1FI “on steroids”

11. 11 Minimum emissions paths 2010–2030

12. 12 Likelihood of exceedance – range of reference and policy scenarios

13. 13 Framing adaptation Goal setting Where do we want to go? (aspirational goals) How do we want to get there? What are the risks? What are the barriers? (e.g., lack of adaptive capacity)

14. 14 Planning horizons

15. 15 Operational pathways and aspirational goals

16. 16 How much climate change needs to be adapted to by when Types of climate information required: Climate variability (daily to decadal) Ongoing rate of change Past and near term commitments to climate change Climate sensitivity Regional climate change projections Greenhouse gas emission policies (Mitigation)

17. 17 Reference and policy scenarios for hedging adaptation and mitigation Warming rate Past and near- term commitments Climate sensitivity Emission scenarios

18. 18 Hedging adaptation and mitigation – reference and policy scenarios Adaptation benefits AD-MIT Mitigation benefits MIT-AD

19. 19 Hedging strategies between reference and policy scenarios with high policy uncertainty

20. 20 Whole of climate approach Links current climate and adaptive responses with future possibilities Ongoing variability and extremes are the main drivers of current adaptation to climate, links between variability and longer-term change give these experiences a future dimension. Long-term fluctuations in natural climate variability may be affecting some regions Not all change is anthropogenic

21. 21 Whole of climate approach An understanding of the dynamics of climate variability is needed to: Diagnose fluctuations, shifts or trends as temporary, persistent or permanent. If the dynamics of the change are not understood, statistical or other methods can be used to explore “what if” questions based on understandings of climate model and historical behaviour.

22. 22 Regional example of climate changes – Melbourne, Australia The Melbourne Region has experienced many step changes rather than trends For a 1 by 1 degree area over greater Melbourne: Annual rainfall :statistically significant downward shift in 1996 in rainfall from just over 900 mm to 750 mm, -17%. Max temp: Statistically significant upward step change 1998 of 0.6°C. About half of this can be explained by the decrease in rainfall (due to a decrease in cloud cover). About half (0.3°C) is added warming Analysis of annual frequency of days >35°C and >40°C not significant All days under 30°C have become significantly warmer During summer (DJF) almost 1°C warmer

23. 23 Regional example of impacts – south- eastern Australia Streamflow: 60% up to 80% across western Victoria, 25–60% in eastern Victoria. Extreme fire weather index (temperature, lower humidity and higher winds): 100 on Black Friday in 1939, 115 on Ash Wednesday in 1983 150–200 on Black Saturday, February 2000 Viticulture: harvest 4–6 weeks earlier, crop losses, smoke damage Horticulture, dairy: under stress in irrigation regions Snow: reduced snow cover Human health (heat stress): hundreds(?) dead from heat stress, 220+ from fires, event trauma, drought stress in rural regions Environment: woodland birds decline, tree die-back accelerated, tree planting failures, icon wetlands critical, frequent hot fires

24. 24 Exploring decision analysis

25. 25 Choosing climate information Understand risk and risk management options – how is climate information used in decision-making for specific risks? What is my planning horizon and operational pathway? E.g., up front, incremental, wait and see What’s my climate baseline? Choose global scenarios based on sensitivity, risk tolerance and hedging strategies – choose scenarios that are 50% likely to be exceeded to Determine local scaling and down-scaling needs for key climate variables Undertake assessment e.g., modelling, expert analysis

26. 26 Thresholds and key vulnerabilities Determine critical limits. E.g., sea level rise, storm severity or surge protection, flooding, public health limits, water quality and supply Diagnose specific climate conditions leading to critical limits Establish plausible combinations of change in mean and variability, natural and anthropogenic, leading to critical thresholds Determine likelihood that such conditions may be exceeded within planning horizons. For cities, many of these horizons will be long-term

27. 27 Caveats and working principles All probabilities are subjective – test different plausible assumptions to test whether outcomes (decisions on risk management) are sensitive to assumptions What information is required to make a specific decision? The less important climate is compared to other risk factors, the less precision will be required A 1°C warming in 2030 (from 1990) is as likely as not. From 2040+, considerable hedging between adaptation and mitigation is required. Without solid emissions policy, hedging for >3°C warming by 2100 needs to be contemplated. Sea level rise estimates need to consider outcomes not quantified in the AR4, including Greenland and perhaps West Antarctica

28. 28 ROGER N JONES BUSINESS AND LAW CENTRE FOR STRATEGIC ECONOMIC STUDIES PHONE +61 3 9919 1992 FAX +61 3 9919 1350 EMAILroger.jones@vu.edu.au WWW.VU.EDU.AU CONTACT DETAILS