CLIMATE CHANGE FUTURES: CONFRONTING RISKS,

EMERGING OPPORTUNITIES

A Report of: Climate Change Futures:

Health, Ecological and Economic Dimensions

DRAFT NOVEMBER 2004

A Project of: The Center of Health and the Global Environment

Harvard Medical School

Sponsored by: Swiss Reinsurance Company

United Nations Development Programme

Published by:

The Center of Health and the Global Environment, Harvard Medical School

Swiss Reinsurance Company United Nations Development Programme

November 2004

Edited by:

Paul R. Epstein

With contributions from: Evan Mills, Rob Weireter, Charles McNeill, Adrienne Atwell, Cynthia Rosenzweig, Ray Hayes, Frank Ackerman, Kris Ebi

Larry Kalkstein, Ray Hayes, Frank Ackerman, Earl Saxon, Jonathan Epstein

Science Reviewers: David Rind, James J. McCarthy

Full list of Project Participants Appended

Additional support for the Climate Change Futures project has been provided by

The John Merck Fund

2

Table of Contents

Page Executive Summary and Key Issues 4 The Problem 9

Climate is Changing, Fast The Oceans: Regulators of Climate Assessing Climate Stability: Confronting New Risks

Project Objectives 13 CCF Milestones

The Scoping Conference The Rüschlikon Conference and Executive Roundtable The Rüschlikon Compact

The Climate Scenarios 15 Methods 17

Trend Analyses: Extreme Events Trend Analysis: Costs Summaries of Case Studies Economic and Health Pathways

Financial Implications 34

Risk-spreading and the Role of Insurers Constructive roles for Insurers and Reinsurers Adopting a Phased-in Approach and a Mixed Strategy

Planning Ahead Next Steps 39

Developing a Communications Strategy Knowledge Building Public/Private Partnerships Governance

Conclusion List of Participants, Rüschlikon Executive Roundtable 41 Bibliography 45

3

Executive Summary Earth’s climate is now changing at rates previously projected to occur later in the 21st Century. The accelerating pace of change in atmospheric and ocean temperatures, in global ice cover and in the world water cycle are intensifying weather extremes; affecting the health of nations, the integrity of ecosystems and the sustainability of the global economy. The Climate Change Futures: Health, Ecological and Economic Dimensions (CCF) project, supported by Swiss Re and the United Nations Development Programme, is examining the health and physical risks of climate instability and, unlike other assessments with projections far off into the future, offers multi-dimensional projections and recommendations for the coming five to ten years.

The past will not resemble the future

This image is drawn from the Intergovernmental Panel on Climate Change 2001 Third Assessment Report. It represents the ways in which warming (a change in the mean temperature) can affect variability of weather. A change in the mean and the ‘shape of the curve’ (third figure in diagram) means more events occurring in both tails of the distribution; i.e., colder periods as well as hotter spells. In addition more prolonged droughts, heavy precipitation and flooding, and peak storm winds are projected to occur\r with continued global warming.

In tandem with these meteorological trends, diseases new to medicine have emerged in the past three decades at an alarming rate, and diseases once considered under control are resurging and undergoing redistribution on a global scale. Now infections and pest

4

infestations have begun to attack crops and forests, wildlife and livestock, and coastal marine life. The unique features of the CCF project include: the involvement of corporate “stakeholders” directly in the assessment process; the inclusion of human diseases and those of natural systems that can affect economies via losses of resources and ecological services (e.g., clean water); and climate scenarios with warming and enhanced volatility and potentially disruptive shifts and surprises. Climate change poses new risks in terms of property and casualty, and life and health. In addition, epidemics and damage to national infrastructures pose additional novel risks for investments via interruptions in business and trade, travel and tourism; the health and productivity of populations; the ‘climate’ and sustainability of investments; and the stability of global markets. The CCF project is designed to better inform the corporate community (especially financial services), policy-makers and the general public concerning the risks and new exposures and the business opportunities presented by a changing climate. The CCF project includes a multi-sectoral group of researchers (public health professionals, veterinarians, specialists in agriculture, marine biology and forestry, and climatologists), and representatives from the corporate, NGO and United Nations sectors to assess the emerging risks and offers recommendations for strategic responses to the growing challenge of global climate change. Policy Implications Examining a set of plausible climate futures (scenarios) and the associated costs can help generate a phased-in, mixed strategy that insures robust ‘defenses’ against losses. These include: Level I: Changes in products, premiums and deductibles; hedge funds, issuance of ‘cat bonds’ and new customers in need of insurance. Level II. Greenhouse gas reductions and use of climate forecasting and assessments of ‘hotspots’ to formulate early warning systems (e.g., for heat waves). Level III. Risk reduction, including measures to decrease vulnerability to extremes and disease (e.g., reforestation) and primary prevention: investments and insurance for clean energy technologies. Designing strategic measures that provide adaptation and mitigation (prevention) can help optimize the policies and measures adopted in the next few years.

A prime example of this approach is use of distributed generation of energy. DG – that affords greater security from grid failure and helps stimulate clean energy,

5

energy-efficient and ‘smart’ technologies -- might be fostered with lower premiums.

Mold -- encouraged by flooding and humidity (increased with climate change) – causes childhood respiratory illness. Lower premiums for increased home energy efficiency can allow insurance coverage for mold is an adaptive measure and helps prevent illness.

Measures related to water -- solar and wind power for purifying and pumping water, for irrigation and for cooking -- can have the most immediate public health benefits (clean water, food production and nutrition, and reduced in-door air pollution), as well stimulating the international markets and production of clean energy technologies.

In addition to products, practices and leverage via coverage, etc., there are communications strategies, such as public media campaigns, advocacy of political reforms that enable carbon markets and education of colleagues and peers. Constructive Roles for Insurers and Reinsurers The insurance industry can play a material role in decreasing the vulnerability to weather-related natural disasters, while simultaneously supporting its market-based objectives and those of sustainable development. Promising strategies involve establishing innovative insurance products and systems for delivering insurance, linked with technologies and practices that simultaneously reduce vulnerability to disaster-related insurance losses.

Coupling insurance for extreme weather events with strategies that contribute to public health and sustainable development would enhance disaster resilience, reduce the likely magnitude of losses, and thus help increase insurers’ willingness to establish, maintain, and expand a constructive presence in emerging markets. Case Studies Of the four case studies that follow one focuses directly on human health; one on marine systems; one on agricultural systems; the fourth on forest health. I. Human Diseases: Heatwave Case Study A surprisingly severe summer heatwave occurred in Europe in summer 2003, with high mortality, crop failures, wildfires and alpine glacial melt. Estimates of lives lost in five nations range from 21,000 to 35,000. Due to persistent high temperatures, childhood mortality was unusually high for heatwaves, in general. The event caused losses in terms of life and health, agriculture, timber and tourism. This “outlier” event (greater than two standard deviations from the mean) is being transposed to five U.S. urban centers. These analog studies, focusing on mortality, will be extended by the CCF project to project the potential economic impacts (for life and health, wildfires, crop failures and ‘blackouts’).

6

II. Marine diseases: Coral Reef Case Study

Coral reefs are in danger worldwide from warming-induced bleaching and emerging diseases. Approximately 27% of reefs worldwide have been severely affected by bleaching, while another 60% is vulnerable to bleaching, disease and overgrowth of algae. Continued ocean warming and pollution could cause a collapse of reefs, with potential loss of fisheries, disruption of shoreline barriers, salinization of ground-water (increasing hypertension and cutting agricultural production), damage to homes, hotels, roads and bridges, loss of tourism, and loss of livelihoods. Loss of reefs and sea level rise could generate environmental refugees from abandoned island states and low-lying coastal areas. III. Natural and Managed Systems: Agricultural Pests and Pathogens Diseases are emerging and resurging in all major food crops, and crop pests, pathogens and weeds are affecting food sources for humans and livestock. Warming expands the potential range of plant pests and pathogens, while extreme weather events lead to ‘explosions’ of pest and pathogen populations. Floods foster fungi, nematodes and rodent populations, while droughts encourage aphids, locust and whiteflies (that inject viruses into plants). The economic and social implications include crop losses, interrupted food trade, threats to food security and nutrition and international conflict. IV. Natural and Managed Systems: Bark Beetles, Forest Health and Wildfires

Bark beetles have infested and killed stands of pine from New Mexico and Arizona through British Columbia and Alaska. In British Columbia, nearly 22 million acres have been killed – destroying enough timber to build 3.3 million homes and supply the entire U.S. housing market for two years (The Economist 9 Aug 2004).

Lodge pole pines are the preferred target, but in the past four or five years, beetles are attacking whitebark pine stands that grow at about 8,000 feet elevation or higher. Global warming is increasing their range (latitude and altitude), overwintering populations and reproductive rates. In Alaska, spruce bark beetles have denuded four million acres in the Kenai Peninsula.

Meanwhile persistent drought in the U.S west (the worst in 500 years, with six consecutive years) dries the resin that drowns the beetles as the bore through the bark. Thus prolonged drought increases the vulnerability of the trees, while warming enhances the pests.

The dead stands fuel fires and wildfires harm humans, kill wildlife, destroy property and cause respiratory illness: the particles and toxins in wind-carried hazes cause heart and lung disease far away. There are significant costs in terms health, life, property, timber and watersheds.

7

In sum, warming and weather extremes are creating conditions conducive to disease emergence and spread, threatening the health of humans and the natural systems on which we depend. Moreover, climate instability increases the potential for a future where the risks may not be manageable. Understanding the potential risks and the business opportunities can help mobilize coordinated private and public responses to meet the challenges of climate change.

Key Issues THE CHANGING LANDSCAPE OF RISKS

The emergence, resurgence and redistribution of infectious diseases, affecting humans, other animals and plants

Diminished productivity of ecosystems from forest, agricultural and marine environments

Exacerbation of regional resource shortages, especially conflicts over water Changes in ambient air conditions and aeroallergens (pollen and mold) Synergies between air pollutants and climate change (e.g., heatwaves and

smog) The clustering of risks, such as heatwaves, droughts, wildfires and crop

failures Simultaneous emergence of risks in disparate parts of the globe Economic losses from business interruptions and constraints in travel, trade

and tourism Infrastructure damage in developed and developing nations Increased exposures for the insurance and reinsurance industries, via Life &

Health, Property & Casualty losses Threats to market stability and the long-term security of international

investments.

STRATEGIC RESPONSES

Managing risks with insurance pricing and exclusions Providing leadership and education for peers, the media and the public Reducing corporate greenhouse gas emissions Reducing the vulnerabilities of nations to disasters (e.g., via reforestation) Promoting policies that enable investments and insurance for clean and

sustainable development.

8

The Problem

Climate is Changing, Fast Climate is changing; humans are contributing; biological systems are responding; and extreme weather events are increasing in frequency and intensity. These are the four primary conclusions of the 2001 Intergovernmental Panel on Climate Change, Third Assessment Report. Since the publication of that report we have learned that: 1. Carbon dioxide is building up in the atmosphere at an accelerating rate; 2. The pace of warming is quickening; 3. The cryoshere (polar and alpine ice) is shrinking much faster than it was just several years ago; 4. The deep ocean under the North Pole is warming faster than previously measured (1oF over the past year); 5. Circumpolar (and cross ocean) winds are accelerating as polar ice shrinks (e.g., polar vortices are tightening); and 6. The pace of very extreme events is rising sharply. Extreme weather events are the primary way in which climate change affects our health, ecological systems and the economy. Increased weather volatility accompanying climate change also has implications for the sensitivity of the climate system to abrupt shifts, shocks and surprises. A changing “shape of the curve” in the distribution of weather extremes has implications for the financial services sector in terms of pricing of premiums, products, programs, practices and policies. Changes in the variance of weather associated with global warming (WMO 2004) can have greater impacts than warming itself. Over the last half century weather patterns have become more variable, with more frequent and more intense rainfall events (>2”/day or >95th percentile) (Karl et al.1995: Easterling et al. 2000), more very extreme precipitation events (>4”/day or >99th percentile) (Groisman et al. 2004), changes in the timing and location of precipitation (Houghton et al. 2001), and more frequent and more intense heatwaves and prolonged droughts. We are already experiencing events that are major “outliers,” i.e., lying far outside two standard deviations from the mean (Schar et al. 2004), and the frequency and intensity of extremes are projected to increase over this century (Houghton et al. 2001; Meehl and Tebaldi 2004). While warming expands the potential range of pests and disease-causing agents (pathogens), numerous adverse health conditions cluster in the face of severe weather. Intense heatwaves and droughts harm humans directly and can also harm wildlife and livestock, damage crops and sustain wildfires, while flooding can lead to water-, mosquito- and rodent-borne disease outbreaks (Epstein 1999).

9

CENTER FOR HEALTH AND THE GLOBAL ENVIRONMENT

HARVARD MEDICAL SCHOOL

This image shows the warming occurring in the tropical oceans. It also mirrors the patterns of projected precipitation: more rain over the tropics and subtropics; more drought over the mid latitudes (Kevin Trenberth, NCAR, personal communication). The Oceans: Regulators of Climate The oceans are the main drivers of weather and the stabilizers of the climate regime. The increase in heavy precipitation events now being observed is explained by the warming of the deep ocean, the increase rate of evapotranspiration over warmer seas and land surfaces, the melting of polar and alpine ice and the increase in water vapor in the atmosphere. Also a warmer atmosphere holds more water vapor, increasing warming (as water is a greenhouse gas) and generating heavier rain falling per unit time when condensation does occur. Since 1998, the Pacific Ocean has been in a state considered The perfect ocean for drought (Hoerling and Kumar 2003), with anomalously cold water to the east and very warm water near Asia. The Atlantic Ocean is also in an anomalous state, with freshening (from melting and thawing, plus rain falling at high latitudes) near the North Pole and increased salinity (from evaporation) near the tropics. The Indian Ocean is warmer than it has been in at any time in the past century and all of the World Ocean has warmed to two miles below the surface, half way down. It is now evident that the ocean is the repository for the global warming of the 20th Century. The tropics have become warmer (threatening coral reefs) and saltier (increasing evaporation); high latitudes are cooler and fresher on the surface, but heating deep below

10

the surface. Ocean changes are acceleration of the hydrological (water) cycle and these changes underlie the erratic and severe weather patterns now occurring. Assessing Climate Stability: Confronting New Risks How do we assess climate stability and judge if or when systems are prone to rapid changes in their state? Modelers have great difficulty treating the likelihood of nonlinear discontinuities in projections of future climate change. That we have or will soon reach thresholds in forcing factors (e.g., greenhouse gas concentrations and the globally averaged atmospheric temperature that could precipitate dramatic change) for certain climate impacts has been estimated (Albritton et al. 2001, Fig. 2). There is large uncertainty in where the thresholds actually lie, and relying on smooth projections of the amounts of change in temperature or greenhouse gas concentrations may not provide sufficient warning to prevent a sudden shift. Rapid transformations and reorganization of systems can occur out of proportion to the prevailing forcing factors, and hence assessing the stability of the climate system, itself, can generate additional information regarding the sensitivity to change. Thus, in addition to focusing on amounts of change, it is important to assess the first derivatives: the rates of change in forcing factors and in systemic responses (warming and weather patterns). To understand how systems are behaving one must also study variance as an outcome in itself – rather than merely a statistical “nuisance’ to be factored out with running multiyear averages. While variance (e.g., swings in weather to greater extremes), is certainly central to the assessment of the biological and economic consequences of climate change (Albritton et al. 2001), measuring variance as a property of the climate system, assessing how far oscillations in the system depart from prevailing norms, provides an indicator of stability.

1100 GGrreeeennllaanndd GGllaacciiaall MMeelltt

MMeetteerrss//

11

yyeeaarr

22000000 22000044

11

In assessing stability and sensitivity to abrupt change, rates of change are key. For example, Greenland is melting at 10 meters/year, up from just 1 meter/yr in 2000. Such non-linear, logarithmic change in the rate of melting means that sudden shifts and ice slippage are more probable than we considered just four years ago. The distinction between gradual change and shocks and surprises can aid policy makers in assessing the risks of climate change for health and well-being. The growing potential for abrupt change that would have wide-ranging impacts on ecological and social systems also increases the urgency of adopting policies aimed at climate stabilization. The CCF project uses case studies and three climate scenarios, all associated with ‘Business-As-Usual’ (i.e., the continued and accelerating build-up of greenhouse gases in the inner atmosphere) to analyze the health, ecological and economic risks of climate change in the present and near future. The health, ecological and economic consequences of an unstable climate have begun to affect many nations and have sent ripples through the global economy. Along with a changing climate, loss of habitat and species are altering long established relationships among organisms; together contributing to the emergence and spread of infectious diseases in humans, livestock, wildlife, forests, agricultural and marine coastal systems. Climate change, itself, along with the emerging set of public health problems constitute new risks for the health and stability of the global economy, especially for the financial services industry – the corporate sector with the longest time horizon. The New Risks include:

• The emergence, resurgence and redistribution of infectious diseases, affecting humans, other animals and plants

• Diminished productivity of ecosystems from forest, agricultural and marine environments

• Exacerbation of regional shortages and conflicts over water • Changes in ambient air conditions and aeroallergens (pollen and mold) • Synergies between air pollutants and climate change (e.g., heatwaves and smog) • The clustering of risks, such as heatwaves, droughts, wildfires and crop failures • Economic losses from business interruptions and constraints in travel, trade and

tourism • Infrastructure damage in developed and developing nations • Increased exposures for the insurance and reinsurance industries, via Life &

Health, • Property & Casualty losses • Threats to market stability and the long-term security of investments.

12

Project Objectives

Projections of economic losses from climate change for the financial service sector have focused on Property and Casualty losses. Now, Swiss Re, the United Nations Development Programme and The Center for Health and the Global Environment at Harvard Medical School have joined forces to engage in an international, multidisciplinary, multi-sectoral project to assess the impacts of current and projected climate futures (scenarios) with regard to the biological consequences. There are implications for Life and Health insurance and for the productivity of populations, for market stability and the ‘climate’ of investments worldwide. CCF participants are examining case studies of specific diseases and adverse climate events, analyzing the causal conditions and generating scenarios with which to develop a comprehensive methodology for assessing the costs of climate change to industries and to society, in general. The goal is to make this assessment of health, ecological and economic risks available to industries, to the public and to policy makers, in order to guide planning and development of an appropriate set of adaptive and preventive responses. There are three unique aspects about the CCF project:

1. The involvement of “stakeholders” directly in the assessment process, rather than as recipients and responders to foregone conclusions

2. The broadening of health concerns with the involvement of a wide range of researchers (in public health, veterinary medicine, agriculture, marine biology, forestry and climatology); including the implications of ecosystem health for the health of humans and diseases and pests of natural systems that can have profound economic effects through loss of resources (e.g., timber, food sources) and the services they provide

3. The use of climate scenarios that include greater variability and the potential for non-linear and abrupt change.

CCF Milestones The Scoping Conference

The Scoping Conferences for the CCF project was held at the UN in New York City in September 2003 and involved a wide range of participants drawn from the research, corporate, UN and NGO communities.

Through those deliberations and discussions held over the subsequent year a series of case studies were organized into four categories:

• Event-driven health problems (e.g., from floods or droughts)

13

• Disease-specific studies (e.g., malaria, West Nile virus) • Diseases affecting natural systems (forests, crops, coral reefs) • Regional or national case studies (Honduras, the Amazon, West Africa)

A set of plausible climate scenarios with which to project the potential impacts were arrived at through a series of workshops. The Rüschlikon Conference and Executive Roundtable

This conference occurred midway through the two-year CCF project. The objectives of the Conference and Executive roundtable were to significantly expand the reach of the project and deepen the involvement of representatives of the corporate, NGO and UN communities in: a) evaluating the risks of climate change for the global environment and the economy, and b) exploring institutional and cooperative solutions to adequately respond to the magnitude of the problems. The Executive Roundtable participants were charged with:

• Imagining a range of climate futures, given the most up-to-date scientific information

• Assessing trends in extreme events and the full range of costs associated with them

• Addressing the biological and economic consequences emerging from specific case studies, given the potential climate scenarios

• Assessing the significance of these risks for individual corporations, for business sectors and for the global economy

• Addressing the internal corporate practices that can help to reduce their contributions to climate change and vulnerability to the damages

• Developing public/private partnerships to facilitate, finance and insure new clean energy and “ecological footprint neutral” projects

• Project how the international community might respond, should a ‘climate shock’ (e.g., sudden slippage of a portion of the Greenland ice sheet) occur and catapult public sentiment regarding the magnitude of the threat to global systems and the level of the appropriate response.

14

The Rüschlikon Compact During the conference, a new concept emerged: the Rüschlikon Compact. The essential elements of the compact include:

I. Building a community of scientists, NGOs, UN agencies and the corporate

sector to address the health, ecological and economic impacts of climate change II. Expanding the knowledge base concerning the social, environmental and

economic consequences of climate change, and the risks associated with plausible future scenarios

III. Raising awareness among the corporate sector, especially finance, the public and policy-makers concerning the risks of climate change and the opportunities for energy and environmental solutions that also promote the global economy.

The Climate Scenarios

There are a wide range of scenarios used by the IPCC and other international assessments processes. Most are linear projections over this century of increases in temperatures and severe weather. Most do not reflect the degree of variance that appears to be evolving and few mention the potential (despite their depiction in ice core records) for sudden shifts and abrupt climate change. The following three plausible scenarios were developed through a series of workshops and conference calls involving project participants, following discussion of global conditions, underlying drivers, major uncertainties and prime movers.

The first scenario is the current trajectory: warming with increasing volatility and severity of weather patterns. This scenario will be used to project the health, ecological and economic consequences of climate change. The second scenario is abased on the observations of evolving fault lines, primarily in ice cover in the Arctic, in Greenland and in the Antarctic Peninsula and the West Antarctic Ice Sheet. This scenario will be used to project the potential impact of a dramatic event (slippage of land-based ice sheets, raising sea levels and generating storm surges) on public consciousness and political will. The third is “thinking the unthinkable” – an abrupt change of the climate regime (e.g., a change from medium and large size polar ice caps – where we have been for over 420,000 years -- to small ice caps). Both scenario I and II are used to stimulate planning for the potential need to accelerate the targets and timetable for solutions.

Scenario I.: Climate Instability: Continued warming with increasing variability

This scenario is the most probable in the near future and is used to project losses from continued consequences of climate change, such as from spread of diseases (e.g., malaria, West Nile virus) as well as the disease clusters that emerge in the aftermaths of flooding

15

and droughts. The diseases of natural systems have major implications for the industries and economies that depend upon intact and healthy natural resources.

Scenario II: Climate Shock: A significant climate surprise, that triggers a tipping point in popular perception and political opinion This scenario examines the possibility of a major surprise, such as a portion of the Greenland Ice Sheet breaking off. This scenario is intended to stimulate planning for major shifts in policies and mobilization of significant financial incentives aimed at rapidly reducing greenhouse gas emissions and stabilizing the atmospheric concentrations.

Scenario III: Abrupt Climate Change

Any type of abrupt change to a new climate regime could be truly disastrous for environmental and social stability.

The possible types of abrupt change include:

1. A sudden jump to a much warmer state (e.g., from release of methane at high

latitudes due to thawing permafrost) (Stokstad 2004)

2. A “cold reversal” from a shift in Thermohaline Circulation (the ocean ‘conveyor belt’), dramatically altering conditions in the Northern Hemisphere

3. A shut-off of the Thermohaline Circulation; but, due to global warming (especially in the tropics) and minimal Northern high latitude ice remaining, this could result in ocean and air temperatures rapidly rising in the Northern Hemisphere

4. A rapid acceleration in the rise of sea level, from accelerated loss of Greenland

and/or Antarctic ice sheets.

5. A major shift in the Asian monsoon system.

Note: The fault lines underlying the above scenarios are all present. The UK's Tyndall Centre for Climate Change Research has identified 12 “hotspots,” or critical areas of instability. Thus there exists the potential for multiple concurrent shifts and feedbacks.

16

Methods The following are the analyses of trends in extreme weather events over the past Century and in the costs associated with the increase in them over the past several decades. The case studies illustrate the types of the events occurring along those trajectories. Trend Analysis: Weather–Related Losses

The baseline datasets for trend analyses draw from several sources. These include the IPCC 2001 Third Assessment Report, a report to USAID (Author: Evan Mills) and a Compilation of Extreme Weather Events and Impacts, 1991-2004, developed by the CCF project.

17

Sources: OFDA / Center for Research in the Epidemiology of Disasters (CRED) "Natural.xls" Intl database of Disasters (http://www.cred.be/emdat/intro.html) and U.S. Census Bureau's International Database (http://www.census.gov/ipc/www/idbagg.html). From analysis completed by Padco's Climate Change Solutions Group for USAID's Global Climate Change Team. "Population Impacted" includes those persons that have either been killed, injured, left homeless, or otherwise adversely affected.

The Frequency of Weather-Related Disasters Has Risen in Less-Developed Countries: 1950-2001

0

200

400

600

800

1000

1200

1400

1600

1800

Number of Events

Wind storm 59 121 121 207 300Wild fire 0 4 11 25 54Wave/surge 2 5 2 3 12Slide 11 15 34 63 114Insect infestation 0 1 6 43 13Flood 50 110 170 276 489Famine 0 2 4 11 45Extreme temp 4 10 9 19 70Epidemic 0 31 44 86 317Drought 0 52 120 177 195

1950-59 1960-69 1970-79 1980-89 1990-2001

Change in Max Five-day Precipitation Totals

--IPCC TAR, 2001 Trend Analysis: Costs The graph below depicts the exponential growth in costs over the past two decades due to ‘natural’ catastrophes, primarily weather-related. An expansion of property development and populations near coasts, plus rising property values, account for some of the increases observed. But these demographic and economic factors are compounded by the increasing number and severity of events.

--IPCC TAR, 2001 These figures are primarily Property and Casualty losses and do not include the Life and Health costs, business interruptions, restrictions on trade, travel and tourism, and potential market instability resulting from the health and ecological consequences of severe weather. In the 1990s U.S. Federal Emergency Management Agency (FEMA) payouts for extreme weather events quadrupled. The losses are projected to reach $150 billion annually within this decade if current trends continue (UNEP and INNOVEST). The upward trend continued as the 21 Century began. Financial losses for 2002 were $55 billion; those for 2003 were $60 billion ($15 billion insured). It is notable that losses continue to rise despite substantial effort and resources devoted to disaster preparedness and recovery. Caveats also apply regarding the non-homogeneity of these data, as observing systems, data collection methods, definitions, and the like have varied over time. Designing strategic measures that provide both adaptation and mitigation (prevention) provides a guiding principle through which to harmonize the policies and measures adopted in the next few years. A prime example of this approach is the wide dissemination of means for distributed generation. The aspect of greater security with distributed generation might be fostered with lower premiums for such corporate practices that include installation of fuel cells,

20

solar panels, wind and use of tidal power. This approach affords greater security from grid failure in the face overload during heatwaves or disruption from storms and helps jump-start and sustain enterprises that manufacture, distribute and maintain clean energy, energy-efficient and ‘smart’ technologies (e.g., those that optimize grid response to demand). Another such measure is energy efficiency in homes, for it decreases mold formation. Mold is encouraged by flooding and increased humidity (increased with climate change) and has implications for health (childhood respiratory illness). Incentives (lower premiums) for increased home energy efficiency can thus allow insurance coverage for mold, while increasing adaptation to climate change and the prevention of illness and life and health losses.

In many nations, measures related to water -- solar and wind power for purifying and pumping water, for irrigation and for cooking -- can have the most immediate public health benefits (clean water, food production and nutrition, and reduced in-door air pollution), as well stimulating the international markets and production of clean energy technologies.

21

Summaries of Case Studies

The following list of case studies is inclusive, but those indicated by * are candidates to be the focus for in-depth economic analysis. Direct, Event-Driven Case Studies

*Heatwaves A surprisingly severe summer heatwave occurred in Europe in summer 2003, with high mortality, crop failures, wildfires and alpine glacial melt. The event caused losses in terms of life and health, agriculture, timber and tourism. This experience can be transposed on to the Northeast

of the U.S. to project the health and economic impacts of an event of similar magnitude (analog studies for five US cities, in progress).

CENTER FOR HEALTH AND THE GLOBAL ENVIRONMENT

HARVARD MEDICAL SCHOOL Source: NASASource: NASA2003 Summer Temperatures 10oC (18oF) >30year average

SUMMER 2003 HEATWAVESUMMER 2003 HEATWAVEFRANCE, GERMANY, ITALY,

SPAIN, PORTUGAL21-35, 000 deaths

WILDFIRESWILDFIRES CROP FAILURESCROP FAILURESSURPRISESSURPRISES

Summary of Impacts of Summer 2003 Heatwave

• Health costs: hospital treatment, ambulance • Life: number of deaths, insurance payments • Monitoring/preparations in subsequent years: estimate $500 m • Fires: timber losses (acreage), property damages, lives lost in fires and insured losses • Drought and forest pests → loss of timber → wildfire spread • Crop failures; crop pests related to drought • Chickens and other livestock killed • Respiratory illness: from fires and particulates; ozone levels increase with heat • Tourism losses: airlines, hotels, restaurants, auto rentals • Business interruptions: conferences, trade losses • Losses from “Named perils policies” and “All perils policies” • Hydrological cycle, energy sector (especially Portugal: 70% energy from hydropower) • Pollen from ragweed growth in fields after fires (and CO2 fertilization)

• Soil molds and dust in drought (and CO2 fertilization) • Economic and environmental costs of pesticide use • Glacial melt in Alps: estimate 10% of total mass lost in 2003

Sensitivity to future flooding Vulnerability of water sources Impacts on tourism, especially for the skiing industry

Benefits of public health early warning systems (Ebi et al. 2004) Analogs for this type of anomalous event for five U.S. cities (Philadelphia, Chicago, St. Louis, New York, and Washington, D.C.) will be carried out (with support from the USEPA). These studies, focusing on mortality, will be available to the CCF project for interpretation and extension as to the potential economic impacts of such events in the U.S. The methodology involves converting each day during the European heat wave into an air mass type, and then transposing the temperature

differences within the air mass types to the U.S. cities. The Synoptic Climatology Laboratory at the University of Delaware has specialized in developing procedures to place each day into an air mass type (Kalkstein et al., 1996; Sheridan, 2002). Numerous studies have indicated that there is an excellent relationship between air mass type and human mortality (WHO/WMO/UNEP, 1996). Since air masses take into account many more meteorological variables than temperature (e.g., humidity, wind, cloud cover), this permits the analog heat wave to be extended beyond a simple thermal comparison.

Analog in Australia If New South Wales (NSW) were to experience a heat wave with the variations from norm that France experienced in Summer 2003, given an annual mortality rate for urban NSW of 591.0 deaths per 100,000 (pop. approximately

5,200,000), an overall excess of 647 deaths is estimated over and above the 1176 deaths otherwise expected in urban NSW during a 14-day period.

Floods in Mozambique Extensive flooding in Feb/Mar 2000, with three tropical storms occurring over six weeks, resulted in a four to five fold increase in malaria, as well as increases in cholera and other gastroenteritides. Malaria affects productivity

and the ‘climate’ for investment and conditions for tourism. Floods of this magnitude are projected to increase with climate change.

Figure 1: Malaria Cases and Maputo Precipitation, 1999-2001

0 200 400 600 800

1000

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139 145 151weeks (Jan99-Dec01)

mal

aria

cas

es

0 0.5 1 1.5 2 2.5 3 3.5

prec

ipita

tion

(inch

es)

malaria casesmaputo precip

-- A. Milne, 2004

23

Floods in Europe

Floods are the most common natural disaster in Europe. During the past two decades, several extreme floods have occurred in Central European Rivers – including the Rhine, Meuse, Po, Odra, and the Wisla, culminating in the disastrous August 2002 flood in the Elbe River basin and parts of the Danube basin. Rough cost estimates for the Elbe 2002 flood alone are ~$3 billion in the Czech Republic and over $9 billion in Germany. Flood damages of this magnitude have never before occurred in Europe and the August 2002 Elbe flood exceeded levels seen since the 13th Century, reaching a peak water level of 9.4 meters.

According to the Foresight Report on Future Flooding commissioned by the UK government, the annual damages from floods in the United Kingdom could rise to about $48 billion – 20 times the current figure – in the coming decades due to climate change, development in flood-prone areas, and the increased value of threatened properties.

*Drought and bark beetles: Wildfires, personal injury and respiratory disease in the U.S. Damages from severe wildfires in the U.S. West have increased markedly over the past decade, and 2004 represents the sixth consecutive year of drought in that region. Drought and water stress encourage beetle infestations by drying out the resin that drowns the beetles, while warming encourages their overwintering, reproduction and migration to new heights and latitudes. Beetle-infested trees die within a year. The dead stands contribute to wildfires, with losses of life and health; property and timber; harm to watersheds and water quality; and increased risk of avalanches (e.g., California, fall 2003). Mountain bark beetles attack Douglass fir, ponderosa, lodgepole, sugar and western white pines by laying galleries of eggs inside the bark, which spawn larvae and adults, killing trees within a year. Fossil records indicate that beetles are exquisitely sensitive to climate, their ranges

changing rapidly when conditions warm (or cool), faster than grasses, shrubs, trees and bears. Bark beetles have infested and killed stands of pine from New Mexico and Arizona, up through the west to British Columbia and into Alaska. In British Columbia, nearly 22 million acres are infested – enough timber to build 3.3 million homes and supply the entire U.S. housing market for two years (The Economist 9 Aug 2004). Lodge pole pines are the preferred target, but in the past four or five years, the bugs are attacking whitebark pine stands that grow at about 8,000 feet elevation or higher. Global warming is increasing the range (latitude and altitude), the overwintering and reproductive rates. Populations can now quadruple in a year -- outpacing the woodpeckers and nuthatches that help keep their legions in check. Since 1994,

24

The dead stands fuel fires. Combined with drought conditions, the resulting wildfires harm humans, kill wildlife, destroy property and cause respiratory illness: the particles and toxins in wind-carried hazes cause heart and lung disease far away.

mild winters have cut winter mortality of larvae in Wyoming from 80% per annum to less than 10%. In Alaska, spruce bark beetles have denuded four million acres in the Kenai Peninsula by sneaking in an extra generation a year. In addition persistent drought in the U.S west (the worst in 500 years; now in its sixth consecutive year) dries the resin that drowns the beetles as the bore through the bark. Thus prolonged drought increases the vulnerability of the trees, while warming enhances the pests.

There are significant costs in terms:

Health Life Property Timber Watersheds and aquifers.

Bark beetles Dying Stands of Pines Wildfires

Drought and Health in Northeast Brazil

Drought, leading to crop failures, malnutrition and increased infant mortality, can also increase vector-borne disease in some regions by driving populations out of the drought-plagued regions and into areas with high transmission of malaria

and visceral leishmaniasis (Kala-azar). The populations of rodents, carrying diseases and acting as agricultural pests, can also rise or shift location during droughts.

Indirect Impacts

Carbon Dioxide and Aeroallergens

25

Allergic diseases are the sixth leading cause of chronic illness in the U.S., affecting roughly 17% of the population, 6.3 million children. There were 4,487 deaths in 2000 due to asthma and the asthma cost the health care system about $18 billion annually. Ragweed pollen production is stimulated by carbon dioxide and the early arrival of spring with climate change has advanced the allergy season. This is a global problem, severest in

0

10

20

30

40

50

60

70

CO2 350ppm

CO2 700ppm

HeightSeed MassPollenBiomass

Ragweed and CO2 stimulation -Wayne et al., 2002

inner cities, where high levels of CO2 under domes accompanying the “heat island effect” boost pollen and mold production. As CO2 levels continue to rise, this problem can only increase. In addition, high levels of ground-level ozone (photochemical smog) damage the lung sacs and

cause asthma, and more smog is formed from tailpipe emissions during heatwaves. Diesel particles, which help deliver aeroallergens deep into the lungs and present them to sensitized immune cells, add to the allergic phenomena and respiratory illness related to burning fossil fuels.

Emerging Infectious Diseases: Human Malaria Malaria is highly sensitive to climatic factors. Higher temperatures can affect the range of transmission primarily by increasing biting rates and the maturation of parasites inside mosquitoes. Meanwhile heavy rains (and drought indirectly – see above) can create new breeding sites. This case study reviews the General Circulation (dynamic climate) Models and dynamic models of malaria transmission that

form the basis for climate scenario projections. Projected changes include an expansion in latitude and altitude, and, in some regions, a longer season during which malaria transmission can occur. Such changes could dramatically increase the number of people at risk for malaria. A case study of malaria transmission in the highlands of Zimbabwe is included.

Zoonotic Emerging Infectious Diseases: Wildlife, Livestock and Humans West Nile virus Warm winters, spring droughts and summer heatwaves amplify the bird-mosquito cycle of WNV. The disease has spread to 230 species of animals (including horses) and 138 spp. of birds in the U.S., and WNV is spreading in the Americas. Lives have been lost,

neurological sequelae are common and the blood supply has been affected. Mortality of birds of prey could have ecological ripples, contributing to rodent-borne diseases, and reduction in bird populations can affect mosquito predation, pollination, agriculture and can affect tourism.

Nipah virus Nipah – a newly emerging virus – is carried by fruit bats. Extensive fires in Southeast Asia accompanying the El Nino-associated drought in 1997/98 removed food sources for bats, which led to their displacement onto pig farms. Over 100 people died and the pig industry was devastated. Nipah virus re-emerged in Bangladesh in 2003 and 2004. Rodent-borne diseases Rodents are vectors and reservoirs of disease -- hantaviruses, arenaviruses, Lyme-infected ticks, babesioisis, leptospirosis, toxoplasmosis and plague. They are associated with most emerging infectious viruses and hemorrhagic

disorders. Rodents are also prolific consumers of growing and stored grains. Their populations respond to a complex set of ecological dynamics, but droughts followed by floods often boost their populations and drive

26

them from underground burrows. The economic implications of rodents as agricultural pests are well documented in the U.S. and they cause

extensive losses and disease in Southern Africa and South America.

Diseases of Natural Systems

*Agricultural Pests and Pathogens Soybean rust and others

Diseases are emerging and resurging in all major food crops, while crop pests, pathogens and weeds are affecting food sources for humans and livestock. Warming expands the potential range of plant pests and pathogens; floods foster fungal growth, nematodes and rodent population explosions; and droughts encourage aphids, locust and whiteflies that inject viruses.

Warming and extreme weather events, plus the associated pests, pathogens and weeds, are projected to take an increasing toll on agriculture. The economic and social implications include crop losses, trade in foodstuffs, food security and international conflict

. Expansion of Soybean Rust in North America Crop Pests Generations/Year

Potato Blight This study from the Consultative Group on International Agricultural Research in Peru uses climate models and projects significant losses from potato blight (Phytophthora, the fungus that caused the Irish potato famine) with warming and increased climate variability. Overall, climate change is expected to reduce potato yield by around 20 percent and to increase the severity of pests and diseases: which will require additional use of pesticides. These losses can affect nutritional status, human health and mortality, plus food security, primarily in developing countries. The economic and social implications include:

Crop losses Food trade Food security Nutrition International conflict.

27

Habitat: Terrestrial

Forest Pests and Pathogens: Sudden Oak Death; Woolly adelgid

Phytophthora molds are now a serious problem for trees in California. Multiple stresses weaken the trees allowing these opportunistic agents can gain a foothold. This disease could spread via nursery plants to other states. Other pests and pathogens threatening forests include the bark beetles in the U.S. west and the Woolly adelgid, an aphid-like bug infesting Eastern hemlock pines in New England; moving northward with each warm

winter. Continued stresses from warming and weather extremes have enormous implications for timber, water supplies and quality, and the risks of fires and mudslides.

Woolly adelgid

Water quality

and availability

Water quality and quantity is a function of withdrawals, aquifer supplies and changes in the hydrological cycle. This analysis examines climate models for its impacts on snowpack and precipitation regimes, and the potential effects of climate change on water resources, with case

studies from the

U.S., and den.

During the prolonged drought in the U.S. West (1998-2004) snowpack was markedly reduced and aquifers were not being recharged.

PeruSwe

of reefs worldwide have been severely affected by bleaching, while another 60% is deemed vulnerable to bleaching, disease and overgrowth of macroalgae.

use a collapse of the reefs entirely.

coastal waters.

*Habitat: Marine Coral reefs

Threats to coral reefs constitute the gravest sign and symptom of global climate change. Coral reefs are in danger worldwide from warming-induced bleaching and multiple emerging diseases. Approximately 27%

This level of impacts – with continued ocean warming and pollution – could caReefs are also becoming reservoirs for microbial pathogens that can contaminate the food chain, and are associated with human health risks from direct contact with microbe-laden

28

The Final Report will examine the costs associated with

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 990 1

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Mill

ions

of B

ushe

ls

Public

Private

Millions of B

ushels

Year

VIRGINIA MARKET OYSTER LANDINGS1931-2001

Mortality from H. nelsoni(MSX) begins

P. marinus(Dermo) intensifies

degradation of reefs. These include the economic

Loss of fisheries for which they are nurseries

Salt wat and salinization of

ns;

ted

structures (including shoreline hotels)

Loss of for consumption and

Disruptireefs an el rise could generate

ther marine i ivalve (e.g., oyster) diseases g their filtering role; brown tides and losses of

ivalves

ay oysters have been decimated by o parasitic diseases – Dermo and MSX – and

r more harmful algal blooms (red tides) and the ssociated seafood biotoxins. The economic

livelihoods for communities that fishimpacts:

export. on of island life from loss of d sea lev

environmental refugees from abandoned island states and low-lying coastal areas.

ssues: b

Disruption of reefs as shoreline barriers er intrusion

ground-water (increasing hypertension and cutting agricultural production) Losses of homes, roads and bridges Loss of reefs as tourist attractio

O(affectin seagrass beds; mangrove loss from sea level rise (SLR); beach erosion from SLR and storm surges; harmful algal blooms and seafood safety.

damage to tourist-rela

B fo

aChesapeake Bimplications include loss of a food source; emerging algal biotoxins; impacts on fisheries; losses of livelihoods, fisheries, tourism and allied (food) industries.

twthe diseases have spread northward to New York and New England with warm winters. Bivalves are filter feeders, thus cleansers of estuaries and bays of excess nutrients and algae. Thus, reduced bivalve population enhances eutrophication (via decreased filtering of nutrients) and set the stage

Regional case studies

Honduras

Hurricane Mitch in October/November 1998 was devastating for Honduras. There were over 10,000 deaths related to the flooding and landslides, followed by a cluster of mosquito-, water-, and rodent-borne diseases: including malaria (>30,000 cases), dengue fever (>1,000), cholera (>30,000), and leptospirosis. Honduras lost 41% of its GDP and the impacts on development persist to this day.

SW Amazon Network for monitoring the impacts of climate change, deforestation and road building in the western Amazon. IN-DEPTH Network: Malaria in Africa This is a research agenda for monitoring the impacts of climate change on disease incidence and prevalence in West Africa.

30

Economic and Health Pathways Health and ecological changes can affect economies via multiple pathways. Some of the pests and pathogens and the ecological ripples (e.g., reduced predators and competitors) can have direct impacts on specific industries and sectors. Epidemics affecting humans, food stuff can affect the global economy via business and trade interruptions, and via the security and stability of investments. Epidemics can affect the economy via:

• Health Care Costs • Lives and Life Insurance Policies • Loss of Productivity • Loss of Essential Business and Government Personnel • Lost School Attendance • Decreased Agricultural Yields • Business Interruptions • Trade disruptions • Travel Restrictions • Tourism Losses • Political Instability • Stimulation of Internal Conflict • Political Instability • “Climate” and Security of Investments • Insurance Industry Exposures:

Life & Health Property and Casualty Market Stability

The CCF project has identified a broad range of economic impacts, spanning healthcare, productivity, infrastructure disruptions (e.g., power outages), disruptions to trade and tourism, and costs associated with adapting to and recovering from climate-related natural disasters and associated disease emergence. These costs are distributed among individuals, firms, governments, the aid community, and insurers. Related health impacts range from morbidity and mortality, to consequences for mental health and nutrition. In addition, physical consequences of climate change can adversely impact health infrastructure or disruption of medical supply chains. The risks and costs can take unexpected forms. For example, according to Swiss Re (Sigma 6/2003) SARS cost $200-300 million in travel insurance claims in Taiwan alone.

31

Estimated costs for selected infectious diseases (not all-climate-related). Bio-ERA.

Financial Implications

Risk-Spreading and the Role of Insurers The economic costs of recovering from and adapting to weather-related risks are spread among governments (domestically and via international aid), insurers, individuals and business entities. The insurance sector is playing an increasing role in this equation (larger today than that of international aid), and is the only segment with a clearly increasing tendency to pay for growing losses. There is an intrinsic logic for fostering greater insurance involvement in climate change risk management, as loss-prevention and recovery are already integral to their business.

Most major forms of insurance experience some degree of vulnerability to the impacts of climate change, including property, marine, health/life, business interruption, crop loss, environmental liability, and even political risk insurance.

The global insurance market represented $2.6 trillion in premiums in 2002, or approximately 8 percent of global GDP. To put this in perspective, the insurance industry’s revenues make it equivalent to the fourth largest country in the world (by GDP). Total premiums in the emerging markets represented approximately $270 billion/year or 10 percent of that market, with growth rates often dramatically higher than those in the industrial world (twice as high, on average, over the 1980-2000 time period), and often exceeding national GDP growth rates. At current growth rates, emerging markets will represent half of world insurance premiums by the middle of this century. Approximately 40 percent of current-day premiums are non-life (property-casualty insurance), with the balance life-health. The insured share of total losses from natural disasters has risen from a negligible level in the 1950s to approximately 20% of the total today (and up to 50% in some years). Insurance market conditions vary regionally.

The economic costs of weather-related events are already high; from 1980 through 2003, the costs totaled $1 trillion globally, averaging over $22 billion annually each for industrialized and developing countries, respectively, with significant upward trends in recent decades, far more so for weather-related losses than other loss categories. Insurance payments associated with these losses are four-times that of international aid. Over this period, insurance covered 4% of total costs in low-income countries, and 40% in high-income countries. A disproportionate amount of insurance

Ten Percent of $2.6T Global Insurance Market is in Developing Countries and Economies in Transition

Mature Markets($2,627 B)

EmergingMarkets($268 B) Central/Eastern Europe

($25 B)Latin America and Carribean ($40 B)

South & East Asia ($167 B)

Middle East/Central Asia ($11 B)Africa ($24 B)

Source: Swiss Re, Economic Research & Consulting, Wigma No. 8/2003 [Swiss Re (2003a)]l. Includes property/casualty and life/health insurance.

33

payouts arise from storm events, owing in large part to the tendency of flood risks (another major risk) to be insured by governments rather than the private sector. The potential for new patterns of average as well as extreme events—whether due to natural variability or human-induced climate change—stands to raise demand for insurance, while increasing uncertainty and challenging the industry’s ability and willingness to assume or reasonably price these new risks. Sustainable development can contribute to managing and maintaining the insurability of these risks and thereby reduce the need for individuals and domestic governments to absorb the costs. By pooling financial reserves to pay for weather-related damages to property, morbidity, and mortality, the global insurance market provides considerable adaptive capacity. Moreover, the economic consequences of extreme weather events are becoming increasingly globalized, largely due to the multi-national structure of the insurance and reinsurance markets, which pools and integrates the costs of risk across many countries and regions. Foreign insurer’s premium growth in emerging markets averaged over 20 percent per year through the nineties. In the late 1990s, the U.S. alone was collecting approximately $40 billion in premiums for policies placed in other countries.

Constructive Roles for Insurers and Reinsurers

The insurance industry can play a material role in decreasing the vulnerability to weather-related natural disasters, while simultaneously supporting its market-based objectives and those of sustainable development. Promising strategies involve establishing innovative insurance products and systems for delivering insurance to the poor, linked with technologies and practices that simultaneously reduce vulnerability to disaster-related insurance losses while supporting sustainable development and reductions of greenhouse gases.

Designing strategic measures that provide both adaptation and mitigation (prevention) provides a guiding principle through which to harmonize the policies and measures adopted in the next few years. A prime example of this approach is the wide dissemination of means for distributed generation: with fuel cells, solar panels, wind and tidal power. This approach affords greater security from grid failure in the face overload during heatwaves or disruption from storms and helps jump-start and sustain enterprises that manufacture, distribute and maintain clean energy, energy-efficient and ‘smart’ technologies (e.g., those that optimize grid response to demand). The aspect of greater security with distributed generation might be fostered with lower premiums for such corporate practices.

Another such measure id energy efficiency in homes, for it decreases mold formation. Mold is encouraged by flooding and increased humidity (increased with climate change) and has implications for health (childhood respiratory illness). Incentives (lower premiums) for increased home energy efficiency can thus allow insurance coverage for mold, while increasing adaptation to climate change and the prevention of illness and life and health losses.

In many nations, measures related to water -- solar and wind power for purifying and pumping water, for irrigation and for cooking -- can have the most immediate public health benefits (clean

34

water, food production and nutrition, and reduced in-door air pollution), as well stimulating the international markets and production of clean energy technologies.

Strategies exist to contribute to public health and sustainable development by cost-effectively mitigating the damage from (and thus costs of) natural disasters. As one of many examples, curtailing deforestation reduces risks such as wildfire, malaria, mudslides, and flooding, while reducing emissions of greenhouse gases. Such integrated strategies call for a fundamental change in economic assessment because, while adaptation strategies are typically thought of as having net costs, in cases where these strategies also yield mitigation benefits comparable economic benefits may also accrue. This is most readily visible in the case of adaptation measures that yield energy savings. For example, a $1000 roof treatment that reduces heat gain (and lowers the risk of mortality during heat catastrophes) may yield $200/year in energy savings, resulting in positive cash-flow in year-6.

Coupling insurance for extreme weather events with strategies that contribute to public health and sustainable development would enhance disaster resilience, reduce the likely magnitude of losses, and thus help increase insurers’ willingness to establish, maintain, and expand a constructive presence in emerging markets.

Summary

I. Climate change is an opportunity for proactive risk management by the insurance

industry • Create conditionality or new products that increase incentives for behavioral change by

business • Lobby for regulatory change necessary to reduce risks • The insurance industry was responsible for the first building and fire codes in the US • Show industry leadership by taking climate change risks seriously (as Swiss Re has

done). II. However, climate change may also lead insurers to attempt to avoid risks by excluding

specific events or regions from coverage • Those who are emitting C02 are not those who are most effected by its results – so

currently difficult to directly link behavior and premium • New climate risks in health, agriculture, forests and economy are not yet sufficiently

understood to provide specific coverage for it – so instead it may create incentive for insurers to exit particularly risky markets

• No longer able to predict future risk based on the past, with increasingly unpredictable weather events and weather patterns

III. Multi-faceted risks posed by climate change are a barrier to action, making it

challenging to separate and quantify its unique impact on human health • Process of climate change and its impact on human health are interactive and complex,

leading to multiple direct and indirect effects for insurers and other businesses • Increased uncertainty is of particular concern to insurers • Spread of disease, natural disasters, drought, flooding and deforestation are all increasing

35

• Social and economic factors in developing countries both increase vulnerability to climate change and reduce ability of poor employ adaptation strategies to climate change

III. And there are some risks that will not affect the bottom line of insurers for the

foreseeable future but that have a huge impact on millions of people and the quality of life worldwide

• Many of the groups most affected by the growing rate of tropical diseases like malaria

(i.e. the poor in developing countries) are not likely to be insurance clients in the near future

• Similarly, some of the regions most prone to extreme weather events and environmental degradation are in the developing world – and currently have little or no access to insurance

IV. Ultimately, to grow their business in an increasingly globalized economy, insurers

(particularly reinsurance companies) will need to proactively consider climate change risk in all of their global markets (developed and developing countries)

• Risk exclusion strategy will shrink existing markets, and reduce insurer ability to pursue high growth emerging markets, making it an unattractive strategy

• Emerging markets for insurance are growing at twice the rate of the mature markets in developing countries

• Insurers may not have the option of pulling out of markets because of government regulations

• Deductibles are being raised in Florida in the wake of the severe 2004 hurricane season • There may be opportunities to collaborate with international aid agencies to provide

insurance in developing countries • Government can play the role of insurer of last resort • Governments can also provide incentives to for insurers to enter new markets

V. As a result of this uncertain environment, society is increasingly vulnerable to new risks that are not currently covered by insurers.

36

Adopting a Phased-in Approach to a Mixed Strategy

The following are measures now being undertaken or being considered by corporations and institutions, especially financial service companies and large investors. • Building awareness of new risks and exposures • Assessment of climate-related business risks • Commitment to new principles (e.g., CERES) • Responding to shareholder resolutions • Changing internal practices: increasing energy-efficiency and reducing greenhouse gas

emissions • Redirecting investments towards renewables (e.g., CalPERS in California) • Divestment from polluting industries • Leverage of Directors and Officers, and Errors and Omissions Insurance Policies (issued

by reinsurance companies) • Financing and insuring new programs and projects • Engaging in public/private partnerships • Developing innovative financing mechanisms.

Planning Ahead Getting to the last phases in this sequence may require a widely perceived climate crisis. The purpose of this CCF scenario exercise is to “imagine the unimaginable”-- a future ‘climate shock’ that precipitates the need for accelerated targets and time timetables and a cooperative set of bold responses. The latter phases in this phased-in strategy would involve restructuring and reprogramming the financial architecture to enable corporations to move rapidly into new modes of production, with assured markets and insurance policies for new technologies. Such a transformation could include: Changes in products, such as higher premiums and hedge funds, plus new customers in need of insurance

• Changes in internal practices and development of new programs to reduce liability and financial risks and reposition the industry

• Public/private partnerships to finance and insure projects to stimulate new enterprises aimed at diminishing risks (e.g., Ecological Footprint projects, innovative financing).

• Convening a global dialogue aimed at establishing the enabling economic architecture for sustainable development.

Next Steps

Developing a Communications Strategy Communication will form a vital part of the CCF project’s future, with the efforts aimed at improving understanding of risks or the business (especially finance) sector. One strategy will be to try to get greater coverage of climate change on the financial pages of the media. Another will be to provide briefings to executive, boards and staff of corporations to advance understanding of the biological and economic risks, and of the economic opportunities and value of climate-stabilizing solutions. Another phase could be the development of a consistently updated Communiqué with an editorial board drawn from CCF project participants to be circulated within the business community. In addition, the tools developed can become part of a strategy to better communicate the issue of climate change and its impacts to governments, with tailoring of communications to specific regions and interests. Knowledge Building Historical trends are very important, and the CCF project brings together the emerging trends for key physical, biological issues and economic costs. Project participants have access to vital sources of data for creating such a knowledge base, and, by coupling different modeling systems in new ways, can compare their results and observations. This knowledge building process needs to be ongoing in order to inform the communications. Public/Private Partnerships Public/private partnerships can help leverage public support to build the infrastructure and for stimulating markets and favorable business practices. This can be achieved via specific programs, via sets of programs (e.g., “footprint neutral” initiatives) and writ large, i.e., via public incentives and funds. Governance The final step is the discussion of international governance architecture that can enable companies, academies and NGOs to move forward under the guidance of the UN, to build a healthier, more equitable and sustainable form of development. Conclusion Disease incidence, prevalence and distribution are influenced by warming and weather extremes and the in-depth study of key diseases can help elucidate the biological consequences of climate change that can profoundly impact economic integrity and viability. New risks are emerging, clustering and occurring simultaneously in multiple parts of the globe, threatening even diversified investment portfolios. Diseases of natural systems have, themselves, become drivers of global change, affecting the composition, structure and functioning of ecosystems, and can

38

alter the supply of resources and the services (clean air, water and food) that natural systems provide. But the assessment of the trends and projections of possible climate futures can also help plan measures for adapting to and preventing future risks. The financial sector and large investors can play key roles in the process of social change to a clean energy and sustainable future through their practices, innovative programs, public/private partnerships and impacts on national and international policies. The latter phases in a phased-in strategy may take a major climate crisis. Truly reducing risks by achieving healthy, clean and more equitable development will undoubtedly involve reprogramming the financial architecture, creating the infrastructure (e.g., for the hydrogen economy) and providing incentives to enable corporations to move rapidly into new modes of production. By engaging with multiple researchers, NGOs, UN agencies and corporate representatives to broaden the assessment of on-going and potential danger to the global economy the reinsurance industry can play a central role in planning ahead and convening discussions for the potential ‘climate shocks’ that would accelerate the transition. The clean energy transition and climate stabilization can be the first and necessary step towards achieving sustainable development.

--END--

39

LIST OF PARTICIPANTS ATTENDING THE SWISS RE/ RÜSCHLIKON MEETING, SWITZERLAND

JUNE 2-4, 2004 Frank Ackerman Tufts University Juan Almendares Professor MD MS Medical School UNAH Michael Anthony Spokesperson Allianz Group Guillermo Baigorria Meteorologist, Natural Resource Mmgt Division International Potato Center (CIP) Antonella Bernasconi Documentalist Banca Intesa S.p.A. Aaron Bernstein Research Associate Harvard Medical School Jutta Bopp Senior Economist Swiss Re Richard Boyd DFID England Peter Bridgewater Secretary General Convention on Wetlands Urs Brodmann Partner Factor Consulting + Management Diarmid Campbell-Lendrum World Health Organization

Laurent F. Carrel Head Strategic Leadership Training Swiss Government Douglas Causey Senior Biologist Harvard University Manuel Cesario OASCA-UFAC Annie Coleman Director of Marketing Goldmann Sachs James Congram Marketing Manager Rüschlikon Swiss Re John R. Coomber CEO Swiss Re Amy Davidsen Director of Environmental Affairs JP Morgan Chase&Co. Jean-Philippe de Schrevel Partner BlueOrchard Finance SA Stephen K. Dishart Head Corporate Communications Swiss Re America Holding Peter Duerig Marketing Manager Rüschlikon Swiss Re Balz Duerst Bundeskanzlei Strategirche Fuhrungsaus

Jonathan Ebi Senior Program Officer Consortium for Conservation Medicine Kristie Ebi Senior Managing Scientist Exponent Paul Epstein Associate Director Harvard Medical School Megan Falvey Chief Technical Advisor,FNV Gov UNDP Kathleen Frith Director of Communications Harvard Medical School Stephan Gaschen Head Accumutation Insurance Risk Assessment Winterthur Insurance Pascal Girot Environmental Risk Advisor UNDP-BDP Jorge Gomez Consultant Raymond L. Hayes Professor Emeritus Howard University Pamela Heck Swiss Re Daniel Hillel Senior Research Scientist Columbia University Ilyse Hogue Global Finance Campaign Director Rainforest Action Network

Steve Howard CEO The Climate Group Chris Hunter Johnson & Johnson Sonila Jacobs UNDP William Karesh Director,Field Veterinary program Wildlife Conservation Society Thomas Krafft National Committee on Climate Change Research Elisabet Lindgren Department of Systems Ecology Stockholm University Mindy Lubber Executive Director CERES Sue Mainka Director IUCN Species Programme Pim Martens International Centre for Interpative Studies Jeffrey A. McNeely Chief Scientist IUCN The World Conservation Union Charles McNeill Team Manager UNDP Evan Mills Staff Scientist Lawrence Berkgey National Laboratory

41

Irving Mintzer Global Business Network Norman Myers Professor University of Oxford Jennifer Orme-Zavaleta Associate Director for Science EPA Konrad Otto-Zimmermann Secretary General ICLEI Local Governmants for Sustainability Nikkita Patel Program Officer Consortium for Conservation Medicine Mathew Petersen President & CEO Global Green USA Hugh Pitcher Staff Scientist Joint Global Change Research Institute Olga Pllifosova UNFCCC Programme Officer UNFCCC Roberto Quiroz Natural Resource Management Division International Potato Center Kilaparti Ramakrishna Deputy Director Woods Hole Research Center Carmenza Robledo Gruppe Oekologie EMPA

Cynthia Rosenzweig Senior Research Scientist Goddard Institute for Space Studies Philippe Rossignol Professor Oregon State University Chris Roythorne Vice President Health BP Plc. Earl Saxon Director The Nature conservancy Worldwide Office Markus Schneemann Medical Officer Swiss Re Kurt Schneiter Member of the Board Federal Office of Private Insurance Roland Schulze Professor University of Kwazulu-Natal Joel Schwartz Professor of Environmental Health Harvard School of Public Health Jeffrey Shaman Professor Harvard University Richard L. Shanks Managing Director AON Rowena Smith Consultant

42

Nicole St. Clair CERES Thomas Stocker Universität Bern Michael Stopford Head of Global Public Affairs Syngenta International AG Rick Thomas Head of Research Partner Reinsurance Co. Michael Totten Senior Director Center for Environmental Leadership Ursula Ulrich Voegtlin Swiss Federal Office of Public Health Henk van Schaik Managing Director Dialogue on water and climate Jan Von Overbeck Head Medical Services Swiss Re Mathis Wackernagel Global Footprint Network

Christopher Thomas Walker Managing Director Swiss Re Richard Walsh Head of Health Association of British Insurers Robert J. Weireter Supervising Underwriter Swiss Re Martin Whittaker Innovest Mary Wilson Harvard Medical School Ginny Worrest Senator Olympia J.Snowe Robert Worrest Senior Research Scientist CIESIN Columbia University X.B. Yang Iowa State University Durwood Zaelke Office of the INECE Secretariat Aurelia Zanetti Swiss Re

43

Bibliography

Albritton, D.L., M.R. Allen, A.P.M. Baede, et al., 2001: IPCC Working Group I Summary for Policy Makers, Third Assessment Report: Climate Change 2001: The Scientific Basis. Cambridge University Press, New York, NY. Easterling, D.R., G.A. Meehl, C. Parmesan, S.A. Changnon, T.R. Karl, and L.O. Mearns, 2000: Climate extremes: observations, modeling, and impacts. Science 289: 2068-2074. Epstein, P.R., and James J. McCarthy, in press. Assessing Climate Stability. Bull Amer Met Soc. Ebi, K.L., Teisberg, T.J., Kalkstein, L.S., Robinson, L. and R.F. Weiher, 2004: Heat Watch/Warning Systems Save Lives: Estimated Costs and Benefits for Philadelphia 1995-1998. Bulletin of the American Meteorological Society 85: 1067-74. Epstein, P.R., 1999: Climate and health. Science 285:347-348. Epstein, P.R., and J. J. McCarthy, in press: Assessing climate stability, Bull. Amer Met. Soc. Groisman, P.Y, Knight, R.W., Karl, T.R., Easterling, D.R., Sun, B. and J.H. Lawrimore, 2004: Contemporary changes of the hydrological cycle over the contiguous United States: Trends derived from in situ observations. Journal of Hydrometeorology 5: 64- 85. Hoerling, M., and A. Kumar, 2003: The perfect ocean for drought. Science 31: 299: 691-694. (IPCCC, TAR 2001) Houghton, J.T., Y. Ding, D.J. Griggs, M. Noguer, P.J. van der Linden, X. Dai, K. Maskell, and C.A. Johnson, 2001: IPCC Working Group I Third Assessment Report: Climate Change 2001: The Scientific Basis. Cambridge University Press, New York, NY. Karl, T.R., R.W. Knight, and N. Plummer, 1995: Trends in high-frequency climate variability in the twentieth century. Nature 377:217-220. Meehl, G.A., and C. Tebaldi, 2004: More Intense, More Frequent, and Longer Lasting Heat Waves in the 21st Century. Science 305:994-997. Schar, C., Vidale, P.R., Luthi, D., Frei, C., Haberli, C., Liniger, M.A., and C. Appenzeller. The role of increasing temperature variability in European summer heatwaves. Nature 427: 332-336. World Meteorological Organization, 2004: WMO Statement on the status of the global climate. WMO-No. 966. Kalkstein, L.S., 2000. Saving lives during extreme weather in summer. British Medical Journal - Editorials, 321:650-651. Kalkstein, L.S., M.C. Nichols, C.D. Barthel and J.S. Greene, 1996. A new spatial synoptic classification:

Application to air mass analysis. International Journal of Climatology, 16(8):983-1004. Kalkstein, L.S., 2003. The Great European Heat Wave of 2003. Presentation given to the U.S. EPA Heat Island

Reduction Initiative Group, unpublished. Kalkstein, L.S. and J.S. Greene, 1997. An evaluation of climate/mortality relationships in large U.S. cities and the

possible impacts of a climate change. Environmental Health Perspectives, 105(1):84-93. McMichael, A.J., L.S. Kalkstein and other lead authors, 1996. Climate Change and Human Health, (eds. A.J.

McMichael, A. Haines, R. Slooff, S. Kovats). World Health Organization, World Meteorological Organization, and United Nations Environment Programme (WHO/WMO/UNEP), Geneva, 297 pp.

Schar, C., Vidale, P.L., Luthi, D., Frei, C., Ha@berli, C., Liniger, M.A., and C. Appenzeller, 2004: The role of increasing temperature variability in European summer heatwaves. Nature, 427:332-335.

Sheridan, S.C., 2002. The redevelopment of a weather-type classification scheme for North America. Int'l. J.

Climatology, 22:51-68.

CENTER FOR HEALTH AND THE GLOBAL ENVIRONMENT

HARVARD MEDICAL SCHOOL

MONTANE REGIONSMONTANE REGIONS

Scientific American, Aug 2000: Paul Epstein

45

7 August 2004 90 deg N

The Disappearing North Pole: J. J. McCarthy, Harvard University.

Contacts: Paul R. Epstein, M.D., M.P.H.

Kathleen Frith, M.S. Tracy Graham

Margaret Thomsen Center for Health and the Global Environment

Harvard Medical School Landmark Center

401 Park Drive, Second Floor Boston, MA 02215

Tel. 617-384-8530 Fax. 617-384-8585

Email. chge@hms.harvard.edu Website. http://www.med.harvard.edu/chge

46