What is Climate Risk Management?

by Stephen Zebiak

As I wrote in the previous installment, climate risk management is a process that informs decision making through the application of climate knowledge and information. IRI's approach to climate risk management consists of four components. The first is identifying vulnerabilities and potential opportunities posed by climate variability or change in a given part of the world and in a given sector. For example, an extended drought or a delayed rainy season could have serious impacts on farmers who grow rain-fed crops. On the other hand, there might be periods of above-normal rainfall they could take advantage of, if they had access to information about the likelihood of when and where those rains would occur.

The second component involves assessing the relevant climate risks. Relevance here is determined by the problem at hand. For example, are wheat farmers in Ethiopia more concerned about the predicted timing of the rainy season--how early or late it starts--or how much total rain is predicted to fall? Perhaps instead they are most interested in the predicted total number of dry days or dry spells. Using the best science and available data, we try to assess the range of possible future conditions for whatever climate parameters are targeted. This typically involves gleaning information from historical records, assessing the skill of climate forecast products and estimating the uncertainties in monitored information. It also requires us to understand the nature of climate variability at the different time scales defined by stakeholders. Farmers and health workers might need information at seasonal to interannual scales--three months to a year ahead of time. Development banks, foresters and dam builders may need decade-level outlooks; national authorities negotiating in the United Nations Framework Convention on Climate Change may require climate scenarios for the next 50-100 years. Each satisfies a set group of stakeholders, and each comes with its own set of uncertainties and limitations.

The third component is identifying technologies and practices that optimize results in normal or favorable years as well as those that can reduce vulnerabilities during unfavorable years or during extreme events such as droughts and floods. Farmers could decide whether to invest in fertilizers and improved seeds or switch crops altogether, if they had access to seasonal forecasts and understood how to interpret them. Forecasts could also help food-security agencies determine if, when, and where to preposition food aid in anticipation of a crisis. Some crop failures may not be avoidable, but every famine is. In the water sector, engineers using good quality decade-scale climate information can optimize the design of dams. For existing reservoirs, they can use the information to make better decisions on how to allocate the water, or better quantify the chances that extremely low or extremely high reservoir levels will occur.

Once we've identified the best technologies and practices, the fourth and final step is finding the "real world" arrangements that enable their implementation. Using the example of an early-warning system for food crises, we can ask: What are the actual mechanisms to have in place for hunger relief? Who are the key decision makers to identify? What specific types of climate information do they need in order to take action and who will supply it? How do we make this sustainable?

The fact that climate risk management can be effective doesn't make it easy. Because the process is inherently interdisciplinary, it requires a detailed understanding of complex, context-specific interactions between physical, natural and social systems. It also involves collaboration among experts who must work together on cross-disciplinary problems. Although developing the proper strategies is a complicated task, climate risk management can be applied to agricultural, water, health or any other sector, on spatial scales that range from local to global, and on time scales from near- to long-term.

While the science of climate risk management is still in its infancy, strategies already exist for every sector. For instance, an effort to address deepening drought in Western Australia created a constructive engagement between water managers and climate scientists that improved practice in both fields and contributed to better policy (see relevant links below). In the realm of public health, a group of partners developed an integrated malaria epidemic early warning and response system that is being implemented in conjunction with the Roll Back Malaria campaign. The system includes seasonal forecasts, climate monitoring, vulnerability assessments, case surveillance and response planning.

Similarly, an IRI project in the Southern Cone of South America manages agriculture related climate risk through a series of technological and policy interventions. It also works to reduce the uncertainty associated with the impacts of climate variability on agriculture. Our project partners are currently developing information and decision support systems that include long-term climate and agricultural impact information, continuous monitoring of climate and vegetation, and seasonal climate forecasts.

We've also been involved on innovative weather-risk transfer solutions such as index insurance, which provides a way to minimize the livelihood impacts of 'bad years' associated with extreme events. This has the benefit of setting people free to invest in production during good years. In the future, it may be possible to combine index insurance with climate forecast information, providing insurance against the uncertainty of the forecast. At the same time, drought index insurance allows relief agencies to respond quickly as droughts unfold, thus avoiding catastrophes that may otherwise destroy livelihoods and force farmers into poverty traps.

Obstacles to effective climate risk management

The practice of climate risk management as described above is rare throughout the world today. Communities are therefore left exposed to a great deal of climate-related risk. This happens despite the increased interest in climate, evidenced by the resources invested in climate-related science, unprecedented discussions on climate policy and increasing support for disaster-risk reduction and climate-smart development.

Very few development organizations use climate knowledge, information products, or related management strategies as part of their overall toolkit. Practitioner communities in health, water, agriculture, finance and other key sectors have not yet begun to incorporate climate risk management into their day-to-day programs. Many climate service providers do not provide information on scales that are relevant to policy and management decisions, or that can be easily incorporated into their decision-making process.

A recent study by the IRI characterized the current situation as one of market atrophy--negligible demand coupled with inadequate supply of climate services for development decisions. In this sense, the main obstacle to the widespread implementation of climate risk management is the lack of engagement and communication between communities, and the lack of investment to foster these critical interactions. Climate researcher and service communities develop knowledge and related information products from a disciplinary research perspective--often uninformed about stakeholder needs. Meanwhile stakeholders in development, policy and planning are not capable of assimilating relevant climate information that is available. As a result, research is not being taken up, while stakeholders increasingly worry about climate but remain largely at a loss about what to do in practice.

The solution to this dilemma requires a focus at the nexus of these communities. It also requires the cooperation of relevant communities on global and local scales. The extent to which we can meet this challenge will, in large measure, determine the benefit that can be realized from major ongoing investments in research, observations, assessments, international policy and climate-sensitive development programs in years to come.

In the next and final installment, I'll provide a path forward for the improvement and uptake of climate risk management practices.

Stephen Zebiak is director-general of the International Research Institute for Climate and Society at Columbia University, which uses a science-based approach to enhance society's ability to understand, anticipate and manage climate risk to improve human welfare. He leads an interdisciplinary team of more than 40 scientists specializing in climate prediction, agriculture, health, water, economics and development policy. Dr. Zebiak has worked in the area of ocean-atmosphere interaction and climate variability since completing his Ph.D. at the Massachusetts Institute of Technology. He and Mark Cane authored the first dynamical model used to predict El Niño successfully.

The Influence of Climate Science on Water Management in Western Australia: Lessons for Climate Scientists

Malaria Early Warning Systems - Concepts, Indicators and Partners - A Framework for Field Research in Africa

Climate Change and Variability in the Expansion of Agricultural Frontier in the Southern Cone: Technological and Policy Strategies to Reduce Vulnerabilities

A Gap Analysis for the Implementation of the Global Climate Observing System Programme in Africa

Climate Risk Management for Adaptation to Climate Variability and Change

Adaptation as "Climate-Smart" Development