Can Climate Change Adaptation be Adequately Financed? William J. Cosgrove Content Coordinator World Water Development Report

Global “Crises”

Water and the Global Food Crisis Wheat and rice prices have risen sharply in recent years (Figure 1.9)

Water and the Financial Crisis “Budgetary spending on infrastructure is often cut during periods of financial tightening, although for governments that can afford it, investing in infrastructure can help counter an economic slowdown. “ WWDR3 p.17

Water and the Global Energy Crisis Historical and projected energy demand and oil prices show steadily rising demand and rapidly rising prices (Figure 1.8)

Infrastructure gap: access to electricity Energy use per person in Africa United States consumption – 12000kWh/capita/yr

Water for Sustainable Development

Messages Water is essential to sustainable development. Leaders in government, the private sector and civil society must learn to recognize water’s role in obtaining their objectives.

Challenges “The challenges are great, but the unsustainable management and inequitable access to water resources cannot continue – because the risks of inaction are even greater. Leaders inside and outside the water domain have critical, complementary roles.”

Lack of information and data at a time when we need it more than ever to deal with increasing complexity Distribution of Global Runoff Data Centre streamflow gauges (Figure 13.1)

Proof of Global Warming…

Pressures on the resource: Fundamental needs and rising living standards Average national water footprint per capita, (Map 7.3)

Climate change: processes, characteristics and threats (Figure 5.1) Mitigation deals with carbon, adaptation with water

Global warming will negatively affect most vulnerable countries

Water Shortages: A Driver of Conflicts? “Ten years ago – even five years ago – few people paid much attention to the arid regions of western Sudan. Not many noticed when fighting broke out between farmers and herders, after the rains failed and water became scarce.” “We can change the names in this sad story. Somalia. Chad. Israel. The occupied Palestinian territories. Nigeria. Sri Lanka. Haiti. Colombia. Kazakhstan. All are places where shortages of water contribute to poverty.” Ban Ki-moon, UN Secretary-General, 2008

Potential Impacts of Increased Climate Variability Example of Iran Probability of successive drought years increases dramatically

Why to adapt to CC/CV now if we continue reducing the emissions of greenhouse gases: climate changes over the next few decades do not depend on the choice of emission scenario !! Stott and Kettleborough, Nature, 2002

Sustainable development as the framework for water management US government investments in water infrastructure during yielded $6 in damages averted for each $1 invested (Figure 1.3)

Decreased number of people killed and missing due to the development of flood control infrastructure investment

Africa’s natural legacy: climate variability Extreme climate variability & associated landscape vulnerability mean very high costs to African economies, without major investments in water security, unaffordable to poor countries.

Climate Variability vs Economy GDP growth tracks rainfall variability in Ethiopia ( ) and Tanzania ( ) (Figure 5.2)

Climate impacts are greatest in poor countries The costs of disasters as a share of GDP are much higher in poor countries than rich countries (Figure 1.2)

10/97-02/98 floodinfrastructure damage$ 2.39 b 10/98-05/00 droughtcrop loss$ 0.24 b livestock loss$ 0.14 b reduc. HP production$ 0.64 b reduc. industr. production $ 1.39 b total$ 2.41 b 10/97-05/00cost of climate variability$ 4.8 b approx GDP($9b/yr)$ 22 b variability as GDP %(48%)22% BUT: Indirect costs?? Direct Cost of Extreme Events: ‘97-98 flood & ‘98-’00 drought in Kenya

-23% +44% Indirect Cost of Extreme Events: The case of Mozambique’s yr 2000 Floods

Messages "Aggressive government spending worldwide on infrastructure and other public projects is likely to be more effective than broad tax cuts in supporting global economic growth." Justin Lin, Chief Economist, World Bank. Business Times, Singapore. November 13, 2008.

Investing in water Water investment requires a holistic approach – links between pricing, financing and stakeholders (Figure 1.4)

Alternatives to infrastructure Traditional insurance contracts that insure against crop failure:  perverse incentives to allow crops to fail resulting in a situation where less productive farmers buy insurance, more productive farmers do not.  More payouts and higher premiums, making this type of insurance too expensive for farmers in poor countries. New type of insurance: contracts written against a rainfall index which depends on an established relationship between lack of rainfall and crop failure, ideally verified by long historical records of rainfall and yield. If rainfall is below an agreed trigger point, farmers receive payouts. Farmers still have the incentive to make the best productive choices, regardless of whether the insurance pays out. It is also cheaper to implement because the insurance company does not need to verify damage in the field.

Messages The donor community can incorporate water and adaptation into the broader frameworks of development aid and focus assistance on areas where it is needed most.

Messages Inaction is not an option It can be done. Others have done it. Leaders in the water domain and decision- makers outside it must act together now to address adaptation.