water and climate change adaptation - oecd and climate change adaptation- brochure.pdfwater and...

Water andclimate change

adaptationAN OECD PERSPECTIVE

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“Climate change represents a majorchallenge for the management of freshwaterresources, one that requires a long-termvision and urgent concerted action.”Angel Gurría, OECD Secretary-General

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About OECD

The Organisation for Economic Co‐operation and Development

(OECD) is a multi‐disciplinary inter governmental organisation,

tracing its roots back to the post‐World War II Marshall Plan. Today, it

comprises 34 member countries that are committed to democratic

government and the market economy and the European

Commission, with the major emerging economies increasingly

engaged directly in the work. The OECD provides a unique forum and

the analytical capacity to assist governments to compare and

exchange policy experiences, and to identify and promote good

practices through policy decisions and recommendations.

This work is published on the responsibility of the Secretary-General of the OECD. The

opinions expressed and arguments employed herein do not necessarily reflect the official views

of the Organisation or of the governments of its member countries.

© OECD September 2013

OECD freely authorises the use of this material for non-commercial purposes. All requests for

commercial uses of this material or for translation rights should be submitted to

[email protected].

Climate change as water change 2

Thinking risk 3

Climate ready? 5

Adaptation in action across the OECD 6

Adaptive governance, policy and financing 8

OECD WATER AND CLIMATE CHANGE ADAPTATION . 1

Water andclimate changeadaptationAN OECD PERSPECTIVE

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Key challenges for adaptationdecision making

1Climate changeas water change

Climate change is affecting all aspects of thewater cycle. Water is the main way throughwhich the impacts of climate change will befelt. Projections suggest that more torrentialrains, floods and droughts can be expectedin many areas. Changing precipitationpatterns are shifting rainy seasons andaffecting the timing and quantity of meltwater from snow pack and glaciers. Impactson water quality can be expected.Freshwater ecosystems and the servicesthey provide are especially vulnerable.

Reducing the adverse consequences andcosts of climate change and tapping into anyopportunities will require adaptation.Adaptation is not about maintaining thestatus quo at all costs. It is about adjustingto new circumstances in order to reduceadverse effects and minimise costs and seizeany potential opportunities.

The new OECD report Water and Climate

Change Adaptation: Policies to Navigate

Uncharted Waters provides guidance to policymakers on how they can prioritise actionsand improve the efficiency, timeliness andequity of adaptation decisions. It sets out arisk-based approach to improve watersecurity in a changing climate. It alsodocuments key trends and highlights bestpractices from the OECD Survey of Policies on

Water and Climate Change Adaptation, whichcovers all 34 OECD countries and theEuropean Commission. Finally the reportexamines options to improve the flexibilityof water governance, policy and financingapproaches.

In general, the level of confidence in climatechange projections decreases as their potentialutility for making decisions on how to adaptincreases. Adaptation decisions need toaccommodate considerable uncertainty. One trend appears predictable: the future forfreshwater will not look like the past.

2 . OECD CLIMATE CHANGE AS WATER CHANGE

Did you know?

Water is not just animportant “sector”for adaptation, but itis also an essentialresource, as well asa potential threat,affecting a numberof policy domains –energy, agriculture,infrastructure,migration, transport,biodiversity, andhealth.


OECD THINKING RISK . 3

2Thinking risk

A risk-based approach to water encouragespolicy makers to consider a whole range ofpossible future conditions, from thecommonplace to the unlikely, and to weighthe alternatives. Adaptation should not beundertaken in an isolated way that focusesonly on climate as a risk driver to theexclusion of other, often more dominant,drivers of water risks. It should also be seenas a prerequisite to improving water securityover the long-term. A risk-based approachcan improve the cost-efficiency ofadaptation and ensure that measures areproportional to the risks faced.

Water security requires maintainingacceptable levels of four water risks. Thesewater risks are interrelated and should beassessed and managed coherently.

Key steps to applying a risk-basedframework

1. To “know” the risk requires providinginformation to reduce informationasymmetries as the basis for makingeffective and informed riskmanagement decisions. This requiresscientific and technical riskassessments, as well as gaining anunderstanding of risk perceptions ofstakeholders.

2. To “target” the risk requires facilitatingstakeholders’ agreement on theacceptability and tolerability of a givenrisk, relying on both evidence- andvalues-based judgements. Theacceptable level of risk should balancethe economic, social and environmentalconsequences and the cost ofamelioration.

3. To “manage” the risk requires clarity interms of risk sharing arrangementsbetween public and private actors toensure that the risk is managed byactors able to do so most efficiently. Thefull range of risk management strategiesshould be considered: to avoid, toreduce, to transfer, or to bear risks.Governments can tap a broad range ofpolicy instruments to facilitate timelyand efficient adaptation.

Risk ofundermining the resilience of freshwater

systems

Risk of shortage

Risk of excess

Risk ofinadequate

quality

Exceeding the coping capacityof the surface and ground -water bodies; possiblycrossing tipping points, andcausing irreversible damageor system collapse.

Overflow of the normalconfines of a water systemor the destructiveaccumulation of water overareas that are not normallysubmerged

Lack of water of suitablequality for a particular

purpose or use

Lack of sufficientwater to meet demand(in both the short- and

long-run) forbeneficial uses by all

water users


4 . OECD THINKING RISK

Thinking risk

Conventional wisdom typically equates watersecurity with sufficient access to water. However,improving water security requires a much broadervision than just ensuring water access; watersecurity requires managing risks!

Water management, at its core, is about reducingor avoiding water risks and about the distributionof residual water risks (e.g. asking “who bears therisk?”). Responses to water risks may transferrisks to others or defer them into the future. Theymay also increase other water risks (e.g. reducingthe risk of water shortage may increase the risk ofundermining the resilience of freshwater systems).

Current policies often fail to recognise theseunintended effects and to address trade-offsbetween water risks.

The new OECD report Water Security forBetter Lives proposes a fundamental shiftin our approach to tackling watersecurity. It argues that a risk-basedapproach has many advantages over currentpolicies to manage water security and couldbe applied more systematically to improvewater security cost-effectively. It providespractical guidance on how such an approachcan be implemented.

A risk-based approach to water security

l Explicitly address the risk implications ofwater policies, including assigning the risk tothe actor able to manage it most efficiently.

l Consider the full range of strategies tomanage water risks, including to avoid, toreduce, to transfer or to bear the risk by puttingin place policies to alter risk drivers, limitingexposure or making populations, ecosystemsand physical assets less vulnerable.

l Consider climate change adaptation early inthe planning and project cycle to identify lowcost approaches, rather than facing costlyretro-fitting later.

l Use appropriate decision-makingapproaches to deal with pervasive uncertainty,such as sensitivity or scenario-basedapproaches.

l Consider expected costs and benefits ofadaptive actions, which may require appropriatediscount rates for long timeframes.

l Account for the option value of approachesthat allow for scalability and flexibility to favourinvestments that can be adjusted as newinformation is gained.

l Prioritise “no regrets” and “low regrets”options.

l Minimise timing errors by adopting a flexibleapproach to planning and investments underuncertainty.

Policy guidelines to facilitate adaptation for water systems


OECD CLIMATE READY? . 5

3Climate ready?

In order to gauge progress and gain insightsfrom practical adaptation efforts for watersystems, the OECD undertook a survey ofpolicies across all 34 member countries andthe European Commission. The resultsreveal general trends and lessons learned.Country profiles can be accessed at:www.oecd.org/env/resources/waterandclimatechange.htm

The survey reveals that extreme events(e.g. floods and/or droughts) are cited as aprimary concern by 32 countries, along withthe European Commission (EC). Watershortage is a key issue for 23 countries, aswell as the EC. Water quality is a keyconcern for 15 countries, while impacts onwater supply and sanitation were flagged by16 countries. For 13 countries, freshwaterecosystems were among their primaryconcerns.

Progress on water and adaptation hasadvanced rapidly in recent years and asignificant number of efforts are currentlyon-going. Impacts on freshwater nearlyalways feature as a key priority.

The majority of efforts to date have focusedon “knowing” the risk by building thescientific evidence base and disseminatinginformation. Much more can be done to

better “target” and “manage” water risks in achanging climate.

In terms of policy responses, information-based instruments such as flood risk maps,decisions support tools for riskmanagement, and adaptation guidance forlocal governments are by far the most widelyused.

Some countries are also revising laws andregulations such as sustainable waterabstraction limits, building codes, land-useplanning – and adjusting economicinstruments such as water tariffs, water-related environmental taxes, flood insuranceschemes to reduce baseline stress on watersystems, raise financing and addressincreasing flood risks.

Only a handful of countries have begun toaddress the issue of financing adaptation forwater systems. Some countries aremainstreaming adaptation into existingbudgetary mechanisms, while others areaddressing adaptation via specific waterprogrammes or projects. Some countries aretapping international financingmechanisms. A few countries have allocateddedicated funding to climate changeadaptation in general, which typicallyincludes measures for water.

Timeline of development of National Adaptation Strategies and Plans in OECD countries

NATIONAL ADAPTATION STRATEGY

NATIONAL ADAPTATION PLAN

2005 2006 2007 2008 2009 2010 2011 2012 Post-2012

Czech Republic

Estonia

Greece

Israel

Italy

Norway

Poland

Slovenia

Slovak Republic

Austria

Ireland

Switzerland

Turkey

Belgium

Korea

Portugal

Denmark

Germany

Hungary

UK

Australia

Mexico

Netherlands

Chile

France

SpainFinland

Belgium

Chile

Estonia

Hungary

Israel

Poland

Portugal

Slovenia

Switzerland

UK

Austria

Denmark

Turkey

France

Germany

Luxembourg

Netherlands

MexicoFinlandSpain

Source: OECD (2013), Water and Climate Change Adaptation: Policies to

Navigate Uncharted Waters, OECD Studies on Water, OECD Publishing.

http://dx.doi.org/10.1787/9789264200449-en.

Did you know?

Nearly all OECDcountries projectincreasing waterrisks due to climatechange.


All of Canada’s 10provinces and 3territories havedeveloped a climatechange adaptationstrategy or plan whichtake into accountwater resources or,they have main -streamed climatechange adaptation intheir water strategiesand plans.

In the UnitedKingdom, a realoptions approach hasbeen applied to floodrisk management forthe Thames Estuary toincorporate theuncertainty of climatechange and the valueof flexibility intodecision making.

Spain was the firstcountry to developboth a NationalAdaptation Strategyand Plan. Waterresources areconsidered both a keysector and a cross-cutting theme.

France’s “Rain Tax”was introduced toprovide incentives forthe improvedmanagement of urbanrainwater in order tohelp municipalitiesmeet the challenge ofcoping with increasingstorm water runoffthat strains thecapacity of currentwater treatmentsystems.

In Chile, glaciers actas strategic waterresources and providethe single mostimportant source ofreplenishment forrivers, lakes, andgroundwater in aridregions during periodsof drought.

Since theimplementation of theLerma ChapalaSurface WaterAllocation Agreementin Mexico, the lakelevels have shownremarkable recovery,reducing water stressand countering theadverse effects ofclimate change.

In 2008, a Glaciologyand Snow Unit wasestablished toinventory, study andmonitor glaciers, andto identify adaptationstrategies for differentclimate scenarios.

6 . OECD ADAPTATION IN ACTION

Adaptation in action across the OECD


In Australia, watertrading allows accessto water resources tobe reallocated overtime in response tochanging conditionsand allows scarcewater resources to betransferred to theirmost productive uses.

All 98 municipalities in Denmark arerequired to develop aclimate changeadaptation plan beforethe end of 2013,including a risk-mapping of the entiresurface in eachmunicipality for floodevents from all watersources (e.g. rainevents, sewersystems, creeks, seaand groundwater).Denmark is alsotapping ecosystem-based approaches byrestoring wetlands toprovide floodprotection for low-lying, denselypopulated areas.

In Germany, there areawareness raisingcampaigns underwayat the Länder levelwith the goal toincrease thepercentage of peopleand businesses withvoluntary insuranceagainst naturalhazards.

Recent legislation inKorea aims to reducedependency onexisting freshwaterresources and toreuse rainwater,wastewater andtreated water, thushelping to addresswater shortagesdriven, in part, byclimate change.

The Netherlands hasdeveloped “adaptivedelta management” topromote flexiblestrategies for watermanagement andreduce the risk ofover- orunderinvestment infuture flood riskmanagement andfreshwater supplies.

OECD ADAPTATION IN ACTION . 7


8 . OECD ADAPTIVE GOVERNANCE, POLICY AND FINANCING

5Adaptive governance, policy and financing

Regulatory,economic andinformation-basedinstruments all havea role to play ineffective adaptation.Well-designedeconomicinstruments canimprove theefficiency andtimeliness ofadaptationresponses byreducing baselinestress on waterresources andhence, vulnerability.They can alsoprovide flexibility todeal with increasedvariability, risks, anduncertainty andlower the cost ofadjusting tochanging conditions.

Flood insurance schemes

l Can provide incentives to reduce exposure and vulnerability to floods,efficiently spread residual risk, and offset the economic impact of floods.

l Greater uncertainty about the likelihood and severity of floods makesappropriately pricing flood insurance increasingly difficult.

l A key challenge is striking a balance between efficiently pricing flood risk,while maintaining affordability and broad coverage.

Water trading

l Allows for efficient reallocation of water resources in response to changingconditions, including increasing variability and more frequent episodes ofshortage.

l Allows scarce water resources to be transferred to their most productiveuses.

l While temporary transfers can be effective for managing drought-inducedsupply variability, they are insufficient on their own to adjust to long-termchanges in total water availability.

Efficient water pricing

l Can reduce inefficient water use, encourage the diversification of sources ofsupply and raise financing for potentially higher investment needs.

l Prices could also be used to signal scarcity and hence the optimal timing forexpanding supply.

l Climate change strengthens the economic case for efficient water pricing,however, in practice, water has long been inefficiently priced in most casesand scarcity pricing has met with resistance.

Incentives for ecosystems-based adaptation and greeninfrastructure

l Can provide a cost-effective means to address uncertainty by avoiding ordelaying lock-in to capital-intensive infrastructure, hence providing anadditional “option” value.

l Gaining attention, especially in urban settings, yet experience to dateremains limited.

Financing adaptation and water

l Adapting to climate change will likely add to the already substantial financinggap for water systems in OECD countries.

l Financing adaptation should build on sound approaches and avoid skewingfinancing to “speciality” projects that might be easily labelled as adaptation,but do not necessarily maximise net benefits.

l A real options approach can be employed to explicitly incorporate the valueof flexibility into decision-making, in particular for investments in waterinfrastructure, which are often capital-intensive, long-lived, with highsensitivity to climate.

Did you know?

A study byAustralia’sProductivityCommissionindicated thatapplying a realoptions approachcould reduce thecost of watersupply forMelbourne andPerth by over AUD1 billion over a 10year period,compared withtraditionalapproaches toplanning andinvestment. Source: Government of AustraliaProductivity Commission (2011),“Australia’s Urban Water Sector”,Productivity Commission InquiryReport, Vol. 2/55.


CONTACT:

Kathleen Dominique

([email protected])

“Nature never

deceives us; it is

always we who

deceive ourselves.”Jean Jacques Rousseau (1762)

Ecosystem-based approaches and greeninfrastructures leverage the services provided bynature to promote adaptation. Examples includerestoring wetlands to reduce vulnerability to floods orimproving catchment management to improve waterquality. In a changing climate, they can provide a cost-effective means to address uncertainty by avoiding ordelaying lock-in to capital-intensive infrastructure, henceproviding an additional “option” value.

In New York City green infrastructure has been used tooffset the adverse impacts of urban flooding expected tobecome more frequent due to greater storm intensityand sea level rise due to climate change. Since 2007,USD 1.5 billion has been committed for greeninfrastructure to clean New York City waterways bymaking the city greener and more permeable. The Cityexpects that this investment, combined with targetedcost-effected grey infrastructure, will reduce combinedsewer overflows by 40%. Compared with an “all-grey”approach, the plan is expected to save ratepayersmore than USD 2 billion.

Ecosystem-based approaches

Real options analysis explicitly incorporates the valueof flexibility into decision-making. A “real option” is analternative that can be put into place, modified orabandoned as new information is gained. It isparticularly useful in cases where projects are scalable,have high sunk costs and long lead times and there isan expectation of improved information over time. Thisis the case for many investments in waterinfrastructures. Real options analysis can be used toadjust investments to respond to higher or lowermagnitude impacts, sooner or later than anticipated, asknowledge about future climatic conditions improves.Interest is growing in a number of OECD countries inthe context of climate change adaptation.

Examples include:

l In the UK, a real options approach has been appliedto flood risk management for the Thames Estuary.

l A real options approach has been employed toassess water-related projects under climate changein the Netherlands.

l The Australian Productivity Commission hasproposed wider use of real options approaches forwater supply augmentation decisions.

Real options analysis

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For more information:www.oecd.org/env/resources/waterandclimatechange.htm


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