Loss and damage: Doha deal signals adaptation is not enough

By Magnus Benzie

Much has been written about the inadequacies of the Doha Gateway – the outcome of COP18.

Once again, decisions do not reflect the science of climate change, which says action is urgent and time is running out. And once again, financial pledges fell far short of documented needs, both for mitigation and adaptation.

Yet the Parties also made an important acknowledgment in recognizing the concept of “loss and damage”: adaptation has limits, and already, in some places, the impacts of climate change exceed people’s ability to adapt. As global temperatures continue to increase, so will those unavoidable losses.

In the short and medium term, however, we can do much more to protect ourselves.

Typhoon Bopha slammed into the Philippines during the COP18 climate change talks in Doha. (Flickr/Greenpeace Southeast Asia)

One option that is notably under-discussed and under-appreciated is the potential for insurance to complement adaptation planning. Pooling and transferring risk via insurance mechanisms is a common way of managing existing climate variability, and it will be increasingly important in the future.

Not all adaptation measures are cost-effective in the short term; research by insurance giant Swiss Re highlights that up to 75% of measures in Barbados have a net economic benefit considering the period up to 2030, but as few as 17% do in the nearby island of St. Lucia (small island states literally have less room for manoeuvre when it comes to adaptation).

What can countries do when reducing losses by adaptation is not economical? Risk transfer schemes, via regional risk pooling between affected countries, for example, offer another option.

Risk pooling helps reduce the costs of insurance and increase regional resilience. Countries should explicitly consider a role for insurance in augmenting adaptation measures to address climate risk in their national strategies.

Insurance can also work well at the household scale, for example, to avoid a spiral into poverty caused by repeated failed harvests due to extreme climate events.

Interesting work by the World Food Programme shows how carefully designed micro-insurance policies, using innovative premium payment methods, can get cash to farmers early enough to avoid drought-induced poverty traps.

What the Green Climate Fund can do

There are significant opportunities for multilateral climate finance, including the Green Climate Fund (GCF), to help upscale both micro-insurance schemes and regional risk pools. This offers a rare, rich and relatively unexplored opportunity to leverage private finance in the GCF and other multi- and bilateral climate initiatives.

Plausible ideas for leveraging private-sector finance were glaringly absent in Doha.

The problem with insurance, though, is that risk pooling is only effective when costly events are relatively infrequent and affect only a fraction of the pool. That is still the case in most of the world today, which means the optimal window for deploying insurance is now and over the coming decades. But as temperatures keep rising and extreme events become more common, insurance may no longer help.

This brings us back to “loss and damage” – payments to offset losses and damages that occur despite adaptation. The COP decision shows political leaders are slowly realizing what scientists have long said: Adaptation can only do so much, and given the slow pace of mitigation efforts, it will not be enough.

COP19 will continue the debate around what institutional arrangements could be created to address loss and damage. But given the challenges in scaling up finance for mitigation and adaptation – including the bitter disputes over funding for 2013-2019 – there is little reason to believe that sufficient money will be found to cover the potentially massive costs of loss and damage.

An interconnected world

Part of the problem is that political leaders are still negotiating as if each country’s interests were independent of the others’. In reality, we are in an increasingly interconnected world: countries trade with one another; their economies are linked; we are all affected by global markets, competition for resources, migration patterns, security and humanitarian crises.

Climate change impacts can thus affect people well beyond the places where they occur. They can raise commodity prices, cause shortages and disrupt supply chains and export markets. And as conditions get worse, be sure that the cross-border impacts will be even greater.

Recognizing this might change the dynamics at the COP, and it should also change national policies. Most countries’ adaptation plans tend to focus exclusively on domestic impacts, but they need to look farther.

Another promising venue for these discussions is the development of National Adaptation Plans to address mid-term adaptation needs, which will provide a common platform for comparing how adaptation plans – and the potential for crossing adaptation limits – may affect countries that rely on one another for their prosperity and well-being.

At the Stockholm Environment Institute, we’ll be exploring these questions in a new project, Adaptation Without Borders, that begins in January. We will be looking at both the public and private sectors, and hope our research will inform smarter, more globally aware policies and strategies.

Magnus Benzie is a research fellow at the Stockholm Environment Institute

RTCC Video: The Stockholm Environment Institute’s Richard Klein discusses the importance of adaptation at the UN climate talks in Doha

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