1 Cost Analyses on Climate Risks and Effective Adaptation Policies in Developing Countries Akio TAKEMOTO Graduate School of Science and Engineering, Ibaraki University ICSS-Asia Bangkok Thailand, November Photo: Mt. Tateyama, Japan

3 Introduction Regarding Post 2012 negotiation, the world seems to mainly pay attention to mitigation policy, i.e., mid-term target on GHGs emission in major emitters. However, IPCC concluded that even though we achieved such a strict target, adaptation would be necessary to address impacts which are already unavoidable due to past emissions. Developing countries are particularly vulnerable to the impacts of climate change....Therefore, it is necessary to implement adaptation policies appropriately with international cooperation. Keys to address?

6 One of the Keys to address: Mainstreaming adaptation into development Climate risks are comprised of direct and indirect impacts. ☆ Direct impacts: air and sea temperature rise, change in precipitation intensity and volume, extreme meteorological events, etc. ☆ Indirect impacts: economic and social impacts such as deterioration of eco- system and sanitation, decrease of agricultural production, increase of infectious disease, increase of poverty Resilience against climate impacts in developing countries might be mostly determined by social and economic conditions. Stand-alone adaptation measures are not effective in developing countries. It is essential to mainstream adaptation into development policies. It is important to understand relation between development finances and climate risks in order to finance adaptation-related measures more appropriately.

8 (1)Methods Aid amounts for development sectors potentially affected by climate impacts (climate risk sectors) were analyzed Methodology developed by Agrawara (2005) using OECD / Creditor Reporting System (CRS) database to specify climate risk sectors. The CRS database classifies ODA and other concessional finances into 37 purpose codes, which are development sectors designated by OECD / DAC. It also records amounts of ODA and other concessional finances paid by donor countries in each purpose code. Climate risk sectors (Narrowly defined climate-sensitive sectors) “infectious disease”, “water supply and sanitation”, “economic and development policies”, “social infrastructure service”, “renewable energy”, “agriculture, forestry and fisheries”, “tourism”, “environmental conservation”, urban and rural development” Climate risk sectors (Broadly defined climate-sensitive sectors) (Narrow climate risk sectors) + “transportation and storage”, “food aid”, “emergency assistance and reconstruction” Analysis on climate risk in world’s ODA

OECD/DAC ･ CRS purpose codes in the selection of climate change projects (Agrawara, 2005; Takemoto ad Mimura, 2009) Note: some codes shown in this table have been modified by the OECD, since publication of the paper by Agrawara(2005). DAC purpose codesDescription Sectors and DAC/CRS purpose codes classified into those that are affected by climate risk 110 (111, 112, 113, 114)EducationNot included 120 (121, 122)HealthInfectious diseases (122/12250) 130Population policies/programs and reproductive healthNot included 140Water supply and sanitationAll activities 150 (151, 152)Government and civil societyEconomic and development policy/planning (151/15110) 160Other social infrastructure and servicesNot included 210Transport and storageAll activities 220CommunicationsNot included 230Energy generation and supply Power generation (renewable sources) (230/230230) Hydroelectric power plants and other renewable energy (230/23065–23070) 240Banking and financial servicesNot included 250Business and other servicesNot included 311AgricultureAll activities 312ForestryAll activities 313FishingAll activities 321IndustryNot included 322Mineral resources and miningNot included 323ConstructionNot included 331Trade policy and regulationsNot included 332TourismAll activities 400 (410, 420, 430)Multi-sector/cross-cutting General environmental protection (410) Urban development and management (430/43030) Rural development (430/43040) 500 (510, 520, 530)Commodity aid and general assistanceFood aid/security programs (520) 600Action relating to debtNot included 700 (710, 720, 730)Emergency assistance and reconstruction All Activities 910Administration costs of donorsNot included 920Support to NGOsNot included 998Unallocated/unspecifiedNot included

OECD/DAC ･ CRS purpose codes in the selection of climate change projects (Agrawara, 2005; Takemoto ad Mimura, 2009) Note: some codes shown in this table have been modified by the OECD, since publication of the paper by Agrawara(2005). DAC purpose codesDescription Sectors and DAC/CRS purpose codes classified into those that are affected by climate risk 400 (410, 420, 430)Multi-sector/cross-cutting General environmental protection (410) Urban development and management (430/43030) Rural development (430/43040) 500 (510, 520, 530)Commodity aid and general assistanceFood aid/security programs (520) 600Action relating to debtNot included 700 (710, 720, 730)Emergency assistance and reconstruction All Activities 910Administration costs of donorsNot included 920Support to NGOsNot included 998Unallocated/unspecifiedNot included

10 World’s annual ODA amount (US million dollars) potentially affected by climate risks and its share to the total ODA volume (averaged over ). (Takemoto and Mimura, 2007) 分 野 Average World’s annual ODA amount 55,36464,77990,56898,348121,72686,157 Water supply and Sanitation 3,1202,2033,3904,8455,9603, %3.4%3.7%4.9% 4.5% Agriculture, Forestry and Fishery 3,8943,0104,1564,0854,6243, %4.6% 4.2%3.8%4.6% Transportation and Storage 4,9324,0574,4426,5597,3005, %6.3%4.9%6.7%6.0%6.3% Food Aid 1,8152,0521,5101,4601,4341, %3.2%1.7%1.5%1.2%1.9% Emergency Assistance and Reconstruction 3,0775,8087,7756,93312,4907, %9.0%8.6%7.0%10.3%8.4% Sectors potentially affected by climate risks （ narrowly defined) ） 12,49910,81513,55716,40019,57314, %16.7%15.0%16.7%16.1%16.9% Sectors potentially affected by climate risks （ broadly defined) ） 22,32322,73227,28431,35240,79728, %35.1%30.1%31.9%33.5%

11 In this study, aid amounts of development sectors potentially affected by climate impacts (climate risk sectors) and regional characteristics of the shares in aid amounts for the climate risk sectors were analyzed (Takemoto and Mimura, 2009). Japanese ODA funding data were collected from the “ODA data book 2006”. The 49 developing countries were selected by using Agrawara (2005) method for this study. Cost analysis on climate risks in Japanese ODA

12 Table 2 Fundamental information on 49 developing countries selected in the study （ Takemto and Mimura, 2009 ； MOFAJ, 2006a ）.Countries receiving more than US$100 million of net amount ODA over 5years ( ) (as for Oceania, US$ 50 million). Countries not disclosed their GNI in these 5 years were excluded. Regions GNI per capita (US dollars) Number of aid recipient countries Net disbursement s on bilateral ODA (million US dollars) Number of countries selected for case study 1 Aid amount for countries selected for case study (million US dollars) Proportion of selected countries in region Proportion of regional ODA provided to selected countries East Asia1, ,920813,57882%105% Southwest Asia 61174,18054,05571%97% Central Asia and Caucasus 1,09581,33841,14650%86% Middle East1,416175, %15% Africa349463,736122,66426%71% Central/Latin America 2,762322,49592,21128%89% Oceania2, %52% Europe3, %73% Total1, , ,29333%81%

14 Regional Comparison on shares of Japanese ODA amounts in 49 selected countries over in major sectors affected by climate risks (unit = %). Technical cooperation projects were excluded in accounting climate risk sectors (Takemoto and Mimura, 2009). How much is Asian vulnerability compared to other developing regions?

13 Regional distribution of Japanese ODA funding over to the 49 selected countries in the narrowly and broadly defined climate risk sectors (Takemoto and Mimura, 2009)

Regarding shares of funding affected by climate risks, the shares in Asian regions is the largest (> 50%); shares in yen loan projects in transport, agriculture, forestry and fishery, water supply and sanitation, etc. >>> strong relation between ODA and climate risks >>> in other words, ODA contributed to enhancing resilience against climate risk. The shares in Africa is the smallest (< 20%); basic human need sectors (shares in grant aid projects in infectious disease, aid for poor farmers, etc.),food aid and emergency assistance are relatively high >>> weak relation between ODA and climate risks >>> in other words, ODA has not contributed to enhancing resilience against climate risks. GNI/capita Both GNI/capita of Southwest Asia (US$611) and that of Africa (US$349) are very low, however, quality of Japanese ODA for these two regions are different.

15 Preliminary Estimate of the Costs of Additional Impacts of Climate Change and Adaptation (World Bank, 2006) Note: “B” denotes billion. Item amount per year Estimated portion climate sensitive Estimated costs of adaptation Total per year (USD 2000) ODA & Concessional Finance $100B 40%10 to 20%$4B to $8B Foreign Direct Investment $160B10%10 to 20%$2B to $3B Gross Domestic Investment $1500B2 to 10%10 to 20%$3B to $30B Total International finance $6B to $11B Total adaptation finance $9B to $41B Cost of additional impacts $40B ($10B to $100B)

16 Estimate of additional costs for adaptation to climate risk (Unit: million US dollars) (Takemoto and Mimura, 2007) SectorsAdditional adaptation cost Lower estimation (10%)Higher estimation (20%) Water supply and sanitation Agriculture, forestry and Fishery Transport and storage Food aid Climate risk sectors (broadly defined) 2,2004,300 Estimation of future adaptation costs in developing countries Takemoto and MimuraUS$ 2.2–4.3 billion/yrAdditional to conventional ODA World BankUS$ 4–41 billion/yrAdditional financial investments UNDPUS$ 86 billionBy 2015 UNFCCCUS$ 28–67billionBy 2030

17 Additional annual adaptation cost would be  US$ billion for ODA projects (Takemoto and Mimura, 2007).  More than US$10 billion for all development projects (World Bank, 2006) Multilateral funds available that are related to adaptation will be not more than several million US$. → not be able to cover adaptation costs. By mainstreaming adaptation measures into bilateral development funds additional to multilateral adaptation funds. →prioritizing development projects from the view point of climate change adaptation. Gap between multilateral fund and cost for adaptation Scales of adaptation-related funds of UNFCCC and GEF (Fujimori, 2009; Takemoto and Mimura, 2007) Adaptation-related fundsScales of Funds (million dollars) Least Developed Countries Fund (LDCF) 172 Special Climate Change Fund (SCCF) 106 GEF Trust Fund (including fund for projects other than adaptation) 3,100 Adaptive fund (AF)100–500

18 Strategy for mainstreaming adaptation (Takemoto and Mimura, 2009) (1) Implementation of climate risk assessment present, sort-term time scale and local scale are particularly important Capacity enhancement on assessment technology is essential (2) Analyses on past development projects in the target countries and their relation to climate risk to learn from past experiences Key sectors peculiar to the target countries Type of development funds implemented in the countries (3) Prioritizing projects by taking into consideration both the extent of climate change risks and the needs of the target countries WIN-WIN policy should be implemented (beneficial to community first, capable to adapt to climate risk as well) Mal-adaptation should be avoided (Infrastructure projects in areas that would be vulnerable to climate risks)

Climate risks : what is Asian vulnerability?  More than 60% of the world’s population concentrates in Asia.  Coastal areas such as Mekong delta and Bangladesh are particularly vulnerable.  Shortage of food supply due to decrease in crop yields and increase in population.  Increase of population density, rise in sea level, increase in risk of flooding, and tidal wave due to rise in sea level, etc.  Shortage of water supply due to melting of glaciers in the Himalayan Mountains, etc. Will vulnerability gradually decrease thanks to economic development?

Hotspots of key future climate impacts and vulnerabilities in Asia.(IPCC AR4, 2007) Climate impacts appear / will appear in whole Asia

In Asia, 470 million people (13% of the whole population) settle in coastal area which is highly vulnerable to climate change. (IHDP, 2007) Coastal settlements at more risk (IPCC, 2007)

19 Prioritization in development cooperation projects according to development stages from the view point of adaptation  For least developed countries, sectors such as basic human needs and rural development should be supported through grant aid programs as a first priority  For countries with an emerging economy, but still require ODA, enhancing financial support to vulnerable sectors to climate change should be accomplished through loan projects  For countries which have become ODA donors thorough advances in their economic development, should deal with climate risks through FDIs and domestic investment projects.  However, even in countries where economy has been developed, vulnerable sectors and areas still exist, especially considering future climate change impacts. Therefore, cooperation with ODA will still play roles.

7 Another key to address : Establishment of effective international framework on adaptation International cooperation is needed for mainstreaming adaptation into development policies. It is important to harmonize adaptation measures with mitigation measures because adaptation is effective in mitigating level of stabilization on atmospheric GHGs that would prevent dangerous anthropogenic interference with the climatic system (Article 2, UNFCCC) How could we establish effective adaptation framework in the new Kyoto (post 2012) framework?

Thank you for your attention!