Lloyds Warns Of Climate Change Risk

Insurers predict losses as high as $150 Billion for Australian coastal properties

A new report published by Lloyd's and Risk Management Solutions warns that without adaptation, insurance losses from coastal flooding for high-risk properties could double by 2030.

Lloyd's chief executive Richard Ward says: ''With over half the world's population expected to live within 100 kilometres of the coastline in 25 years' time, it is imperative that we address this risk now by starting to adapt.

''The world cannot insure its way out of climate change, but the insurance industry can play a key role in the fight against it by encouraging adaptation. ''If this doesn't happen, insurance will become more expensive and less available.''

Because rising sea levels threaten all coasts, insurers can't diversify risk.

The insurance sector has hundreds of thousands of coastal property and other key infrastructure on its general insurance books, but developers, insurers and governments are all grappling with the impact of predicted rising sea levels on homes in low-lying areas close to the sea.

In Australia, insurers are suggesting a fund into which owners of low-lying land would pay a regular levy for compensation when sea levels cause their land to become permanently unusable.

The Insurance Council of Australia has estimated that over the past 12 months, severe weather has already cost about $2.2 billion in insured losses. One general insurer has estimated that the value of Australian coastal property at risk to rising sea levels and erosion is between $50 billion and $150 billion.

Detailed vulnerability mapping would be available there in 2010, yet it would not ban development or predict sea level rise precisely.

That is partly because mapping likely sea level rise could greatly diminish coastal property values, the cornerstone of the wealth of thousands of families.


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Who Will Pay The Costs Of Climate Change?

Coastal regions worldwide facing rising sea-levels are beginning to practice triage

It's easy to think that sea-level rise is some remote and distant threat only faced by far away people who live in places like the Tuvalu Islands in the South Pacific which is having to evacuate to New Zealand as tidal floods increasingly cover their crops in seawater.

But right in the Bay Area, the Sacramento Delta has just joined those low-lying coastal regions that are the early victims of sea level rise. It's a typical suburban American area with some great salmon fishing and home to one of the stars of the UC system, CalDavis, renowned for its environmental study programs.

A CalDavis Public Policy Institute of California study has found that it will become increasingly beyond the ability of California taxpayers to keep shoring up levies to save parts of it next time it floods, and that these areas should just be abandoned.

While conceding that this is a very difficult and controversial conclusion for property owners who have been helped previously, study spokesman Professor Jay Lund says "I don't see any way they are not going to be losers, so the state policy should be that we all quit losing." Land owners would lose their property under the plan.

When a delta levee collapsed in 2004, the State and the Federal government spent a combined $75 million to repair land worth only $22 million. Richard Howitt, a UC Davis economist who helped put together the study felt that this was an irresponsible use of taxpayer money:

"We wanted to put a lot of work into what really amounts to a triage list - and say which islands, if they collapse, we say, "Sorry about that" but you don't repair them or pump them. You adjust to a new ecology." The participants making this tough collective decision were from diverse disciplines: civil engineering, climate science, economics, hydrology and biology. They established the boundary between the areas that should be saved and the places that would be left to go under.

Triage decisions like this one are already being practiced by other coastal low-lying coastal regions facing rising sea levels and costly climate change defenses. Seaside resorts on the coast of the UK are made an almost identical cost/benefit analysis. The whole town moved.

The financial issue is coming to the fore. Who will pay? Who should pay relocation costs? The Brazilian town of Atafono has been swallowed by the ocean. In Alaska, Kivalina is filing a lawsuit against oil companies for redress. The Sundurbans were already a lost cause in 2003, but little financial assistance has been forthcoming.

Ten percent of the world's population (600 million people) live in coastal areas that are less than 33 feet above sea level. These people are being being bandoned by their insurers, even when they live in the nice upscale coastal suburbs in America, from Florida and the Louisiana Gulf, and up to New York.

Furthermore, these direct climate change costs are in addition to the heavy costs we already collectively bear, as nation, of the damage caused by natural disasters like hurricanes and floods.

Disasters have increased four-fold in the last two decades, as worldwide temperature averages have increased.

Artwork by Dutch Artist Jaap Vliegenthart

From MIT Tech Review

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Hot New Green Collar Job: Auditor!

Must be able to compute costs and benefits of intangible commodities (and detect fraudulent ones)






Foolish eco-guilt-ridden carbon-offset purchasers pay $34,000 to a landfill company to flare methane! That is the smirking message of a Washington Post story citing a perfect case of preventable offset fraud.

In this case, not only did the landfill operator admit that the funding was redundant,

"But that project was put in long before the offsets were sold and for a different reason: to keep dangerous gases from accumulating in a capped landfill. So if the offset market dried up completely? Nothing would change.

The money "is gravy to us right now," said Alan Cummins, executive director of the regional authority that runs the landfill. Even without it, he said, "we would always continue to flare.""

How frustrating, when there are plenty of worthwhile projects in need of financing to make zero emissions electricity from methane digesters, that cost up to $2 million dollars.

Maddening, right? But in Europe ---where they have been doing this for longer because of Kyoto --- carbon offsets routinely are audited by third party accounting firms, both to check the emissions data, and to see if they would have been done anyway, regardless of incentives.

There has been a concerted push in the media to deride buying carbon offsets. Yet, consider this: it is a business model we already use: this is just "altruistic" business financing. We send money to P.B.S., yet nobody derides us as fools for sending money to support public broadcasting. We understand voluntarily supporting something for the Common Good.

Most offset companies do give you the choice of what to support with your funding, and if you are smart enough to care, you are probably smart enough to make good use of your funds.

For example, offset buyers have now funded more than 17,000 megawatt-hours, or 9% of total capacity of one wind farm, just through Terrapass. That means that of their 45 turbines, 4 of them turn just because TerraPass members sent money to turn them.

There is a danger to this kind of reporting: it encourages a simplistic view that all offsets are foolish and redundant frauds perpetrated on gullible treehuggers. This reduces the financing that good projects could receive. But we should not discredit this "altruistic" business model. We should just ensure that projects are professionally certified to be fraud-free.

Accountants are already capable of adding and subtracting intangible goods and services. They just need to apply it to new territory: the Common Good.

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