global environmental risks: action or denial
TRANSCRIPT
NEW THINKING ABOUT GLOBAL CHANGES, BERLIN, OCT. 10, 2011
Prof. Dr. Peter HoeppeGeo Risks Research/Corporate Climate Centre, Munich Re
GLOBAL ENVIRONMENTAL RISKS: ACTION OR DENIAL
Global Environmental Risks
Natural risks (hazard not influenced by human activities):
• Meteorites (effects depending on size and location of the crash): tsunamis, global cooling
• Solar storms: disturbance of communication systems, long term power outages
• Volcano eruptions: disturbance of air traffic, global cooling
Characteristics of natural risks:• Hazard cannot be influenced
• Hazard follows natural fluctuations, does not have a long term trend.
• Risks partially can be managed by preventive measures,
• No direct liability issues
Global Environmental Risks
Anthropogenic risks (hazard influenced by human activities)
Human activities became relevant for the environment at different places thanthe origin or even globally starting in the 20th century.
Risks
• Change of land use: influence on global climate in different directions
• Acid rain: caused by high SO2 emissions especially in Europe and NorthAmerica
• Ozone hole: caused by emissions of CFCs (Chlorofluorocarbons)
• Global warming: caused by emissions of green house gases,predominantely CO2
Acid Rain - Solutions
4
Clean Air Act Amendments of 1990 (USA) – title IV: Acid Deposition Control
• 10 million ton reduction in SO2 emissions from 1980 levels• EPA’s Acid Rain Program sets nationwide cap on SO2 emissions from electric-generating facilities• By 2010 the program has resulted in a 50% reduction from 1980
SO2 emission trading law:
Allows utilities to trade SO2 allowances within theirsystems and/or buy or sell allowances to and from otheraffected sources.Each source must have sufficient allowances to cover itsannual emissions. If not, the source is subject to a$2,000 /ton excess emissions fee and a requirementto offset excess emissions in following year.
Source: US Environmental Protection Agency (2010)
5
Ozone Hole - Causes
Stratospheric ozone depletion over polar regions through catalytic destruction ofozone by atomic halogens.
Main source of halogens in the stratosphere is photo-dissociation of man-madehalocarbons, such as CFCs, freons and halons, after being emitted at thesurface.
During polar spring, UV radiation of sun producesatomic chlorine radicals from CFCs via photo-dissociation.
Atomic chlorine radicals decompose ozone.
(Source: NASA -- http://www.nasa.gov/vision/earth/lookingatearth/ozone_record.html)
Antarctic Ozone Minimum Sept. 2006 (“Antarctic Spring”)
Ozone Hole – SolutionsThe Montreal Protocol (1989)
28.10.2011 6Titel der Präsentation und Name des Redners
Protocol on Substances that Deplete the Ozone Layer (Chlorofluorocarbons andChlorinated Hydrocarbons)
• International treaty to protect the ozone layer by phasing out the production of substances responsible for ozone depletion• Treaty entered into force in 1989, ratified by 196 states• Adherence to the international agreement should result in recovery of ozone layer by 2050.
Due to its widespread adoption and implementation it has been hailed as anexample of exceptional international co-operation, with Kofi Annan quoted assaying that "perhaps the single most successful international agreement to date hasbeen the Montreal Protocol”
Long term ozone trends measured at DWD observatoryHohenpeissenberg (http://www.dwd.de/ozon)
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Climate Change by now the only real globalanthropogenic environmental risk
• Effects not bound to the regions where the problem is caused
• CO2 the most relevant green house gas is emitted whenever fossil fuelsare burned
• Emissions stay more than 100 years in the atmosphere
• Almost even distribution in the global lower atmosphere (troposphere)
• In contrast to acid rain and ozone hole difficult to fight the causes as thereare not only few easy to regulate and concentrated emitters but 7 bn ofthem spread all over the globe
Black lines: decadal averages of observationsBlue band: 5-95% range 19 simulations from 5 climate models using only natural forcingsRed band: 5-95% range for 58 simulations from 14 climate models using natural and anthropogenic forcings
Quelle: IPCC FoAR, 2007
Global Warming is Real!Continental Temperature Changes
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CO2 concentration in the atmosphereof the past 650,000 years from Antarctic ice core data
160
180
200
220
240
260
280
300
320
340
360
380
400
-650 -600 -550 -500 -450 -400 -350 -300 -250 -200 -150 -100 -50 0
Thousand years before present
CO
2 (
pp
mv
)
2010: 390 ppmx
Sources: Siegenthaler et al., Science (2005). Etheridge et al., J. Geophys. Res. (1996). Petit et al., Nature (1999). Fischer et al., Science (1999). Indermühle et al., Geophys. Res. Lett. (2000). Monnin et al., Earth Planet. Sci. Lett. (2004). Monnin et al., Science (2001).
1856
1601
Observed changes in sea surface temperaturein tropical ocean basins with TC activity
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Source: Munich Re, November 2009.Data source: HadISST, MetOffice, 2009
2011 a year with extremely low arctic sea ice extent
Source: The National Snow and Ice Data Center, Boulder CO (2011)
Munich Re NatCatSERVICE –The most comprehensive database of natural loss events
29,000 data sets
© 2011 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE
Floods, PakistanJuly – September 2010
Source: Reuters
Country affected Overall losses Insured losses FatalitiesPakistan US$ 9,500m US$ 100m 1,760
Wildfires/Heat wave, RussiaJune – August 2010
Source: Reuters
Country affected Overall losses Insured losses FatalitiesRussia US$ >3,600m US$ 20m 130 (wildfires)
56,000 (heat wave, smoke)
Floods, Queensland, AustraliaDecember 2010 to January 2011
Source: New York Times
Region Overall losses Insured losses FatalitiesQueensland, Australia US$ 7,800m US$ 2,570m 29
© 2011 Münchener Rückversicherungs-Gesellschaft, GeoRisikoForschung, NatCatSERVICE
Quelle: ReutersReuters
Australia rainfall anomalies (Oct-Dec 2010)
Sea surface temperature is rising due to climate change
Queensland floods – is there a link to climate change?
December sea surfacetemperature in theAustralian region has beenthe highest on record
There is a relation betweenprecipitation and the seasurface temperature inAustralia
Source: Bureau of Meteorology (Australia)
© 2011 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research Source: RAHMSTORF, S. (2011): Überschwemmungen in Queensland. WISSENSlogs.de
Cyclone Yasi, Queensland, AustraliaFebruary 2011
Source: New York Times
Region Overall losses Insured losses FatalitiesQueensland/Australia US$ 2,000m US$ 1,000m 1
© 2011 Münchener Rückversicherungs-Gesellschaft, GeoRisikoForschung, NatCatSERVICE
Quelle: Reuters
Foto: dpa
Source: Property Claims ServiceMR NatCatSERVICE
U.S. Thunderstorm Loss TrendsAnnual Totals 1980 – 2010 vs. First Half 2011
Average thunderstorm losses have increased fivefold since 1980.
First Half 2011$16.4 bn
U.S. Natural Catastrophe Update
19© 2011 Munich Re
First Half 2011$16.4 bn
Weather catastrophes worldwide, 1980 – 2010Number of weather-related events per continent
NatCatSERVICE
© 2011 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at March 2011
Meteorological events(Storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, forest fire)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Asia (4,950)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Australia/Oceania (1,300)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Europe (3,700)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Africa (1,560)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
South America (975)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
North and Central America, Caribbean (4,200)
NatCatSERVICE
© 2011 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at January 2011
Meteorological events(Storm)
Hydrological events(Flood, massmovement)
Geophysical events(Earthquake, tsunami,volcanic eruption)
Natural catastrophes worldwide, 1980 – 2010Number of events by peril with trend
50
100
150
200
250
300
350
400
450
500
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Number
very likely > 90% likely >66% more likely than not > 50%
Climate change and extreme weather events(IPCC, 2007)
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New studies show causal associations betweenclimate change and weather extremes
“… Here we show that human-inducedincreases in greenhouse gases havecontributed to the observedintensification of heavy precipitationevents found over approximately two-thirds of data-covered parts of NorthernHemisphere land areas. ..Changes inextreme precipitation projected bymodels and thus the impacts of futurechanges in extreme precipitation, maybe underestimated because modelsseem to underestimate the observedincrease in heavy precipitation withwarming”.
New GDV-study on future nat cat losses based on climatemodelling
Statistical loss model storm/hail of PIK:Regional distribution of changes in losses in a A1B-scenario relative to theaverage of the past 25 years
New GDV-study on future nat cat losses based on climatemodelling
Flood model of PIK:Mean loss in dependence on return period (values in million EUR)
World Economic Forum 2011
• Survey of 580 leaders and decision makers across the globe
• Supported by 18 workshops
• Assessment of 37 global risks for the next 10 year period
Long-term, far-reaching and with significant impact onthe industry.
Offers business opportunities but risks that othersectors will capitalize first.
Rising costs and serious impact on earnings forinsurers.
Risk and opportunity but competitive threat from newplayers.
Increased scrutiny impacting on operations andpractices.
Top 5 risks for the insurance industryMore than 70 industry analysts from around the world interviewed
Munich Re Publication,1973
Munich Re the first alerter in the industryto global warming
Climate change is a strategic topic for Munich ReThe three pillars of Munich Re’s climate change strategy
Becoming carbon neutral (Munich: since 2009, reinsurance worldwide: 2012)
Asset management
Integration ofsustainability criteria intoinvestment strategies
Significant expansionof renewable energyinvestments whereframeworks areappropriate
Research of naturalhazards and climatechange impacts
Climate liability issues Prospective risk
management (consideringweather oscillations suchas El Niño)
Risk assessment Business opportunities
Growing demand forrisk transfer solutionssuch as renewableenergy covers
Performance covers forsolar modules
Supporting several climate initiatives (Climate Group, UNEP FI, …)
Initiating flagship projects such as MCII and Dii GmbH (“Desertec Industrial Initiative”)
Increased demand for renewableenergy and related investments
New technological challenges createnew risks
Risks and threats change as projectsmove through different phases oftheir life cycle
Construction Phase: Erection – AllRisk, Transit/Marine, 3rd PartyLiability, Advance Loss ofProfits/Delay in Start-Up, SuretyBonds
Operational Phase: All Risks –Traditional P&C Covers, IncludingMachinery Breakdown, Lack ofWind/Sun, Premature Ageing
Challenge Solution
Protecting the entire life cycle of renewable energy projects
Strengthening security and reliability for investors and thus incentivizinginvestments by offering complete life cycle protection
New Munich Re risk covers for renewable energiesCPV cover
Performance warranty cover for concentrator photovoltaic systems (CPV)
Collaboration between Munich Re, SolFocus and brokerWoodruff-Sawyer on the new coverage of its kind for CPVtechnology systems
SolFocus is the first CPV company that can provide itscustomers a warranty for its CPV systems of 25 years forpower performance
If the product fails to reach the performance, Munich Recover attaches
This innovative insurance solution is an importantmilestone for the financing of photovoltaic projects, offeringproducers additional financial protection
Source: Munich Re; picture source: SolFocus
Munich Re investments in renewable energies
Renewable Energies / New Technologies
Wind
Water
Solar
Geothermal
Bio energyResources(e.g. wood,
silicium)
ComponentsPower plants(e.g. Module)
Storage
Grid(e.g. expansion,de-regulation)
Efficiency(e.g. insulation,
usage)
Renewable Energies New Technologies
Source: Munich Re, Asset Liability Management (ALM)
Munich Re will expand its investments in Renewable Energies and New Technologiesto € 2.5 bn. over the next years (currently about € 0.5 bn invested).
Asset Management
Munich Climate Insurance Initiative (MCII)
Objectives of MCII:Development of risk transfer solutions
to support adaptation mechanismsto global warming in developingcountries in the framework of theUNFCCC-process.
Milestones reached: Insurance relatedprocesses part of adaptationnegotiation texts, decision inCancun on “Loss and Damage”programme of UNFCCC for nexttwo years.
MCII
Insurability of Global Warming Effects inDeveloping Countries
MCII was founded in 2005 on initiative by Munich Re together with Germanwatch,International Institute for Applied Systems Analysis (IIASA), Munich Re Foundation,Potsdam Institute for Climate Impact Research (PIK), Tyndall Centre, World Bankand independent experts..
The MCII Proposal
Prevention Pillar
High LayerRISK
Middle LayerRISK
Low LayerRISK
TIER 1Climate Insurance
Pool
TIER 2 Support for micro and
macro insurance systems
InsurancePillar
RIS
K M
AN
AG
EM
EN
T M
OD
ULE
The two-tiered insurance pillar• Meets the principles set out by the UNFCCC• Provides assistance to the most vulnerable, and• Includes private market participation.
Premiumspaid by AF
($5 bn)
Supportfinanced byAF ($2 bn)
Supportfinanced byAF ($3 bn)
Roughestimated
annual costs:$ 10 bn
RIS
K M
AN
AG
EM
EN
T M
OD
ULE
Prevention Pillar
InsurancePillar
Low LayerRISKmainlymainly
TIER 1Climate Insurance
Pool
TIER 2 Support for micro and
macro insurance systems
High LayerRISK
Middle LayerRISK
Munich Re together with the Desertec Foundation has initiatedthe foundation of the Desertec industrial initiative (Dii GmbH)
Origin and vision
Developed by the Clubof Rome’s TRECInitiative (Trans-mediterraneanRenewable EnergyCooperation)
Vision: ProvidingEurope (EU), the MiddleEast and North Africa(MENA) with asustainable supply ofrenewable energy bythe year 2050
“Within six hours, deserts receive more energy from the sunthan humankind consumes within a year.”
The founding of the Dii GmbHMilestones
07/13/09
10/31/12
03/10/10
10/30/09
Joint signature for a memorandum of understanding by 12 companiesand the DESERTEC Foundation for the formation of the Dii GmbH
Legal foundation of the planning company (LLC) Appointment of Paul van Son as CEO Definition of Dii’s governance structure
Appointment of Prof. Klaus Töpfer as special envoy
Development of an implementable roadmap to „green energygeneration“ in the deserts of North Africa and the Middle East
2020 20GW installed capacity (according to political goal of MSP)
2050 100GW installed capacity (referring to the 15% aim of the Dii concept)
36
Dii Shareholders
20 Dii Shareholders
Dii Associated Partners
32 Dii Associated Partners
Objectives of Munich Re as initiator of the Dii GmbH
Relevant contribution to the solution of one of humankind‘slargest problem in this century (climate change) bysignificant reduction of CO2-emissions
Leading role in the development and provision of new risktransfer products for renewable energies/new technologies.
CLIMATEPROTECTION
BUSINESS CHANCES
INVESTMENT New (direct) investment opportunities
Munich Re publication on „Energy Situation, Problemswith Commodities and Insurance“ dated 19781978
Conclusions
Global environmental risks caused by human activities are a relatively new phenomenon in the history of humans
The first of those global risks, change in land use, acid rain and the ozone hole, are either of minor range or solutions have been found to mitigate them
The general difference between global warming and previous environmental risks is the large number of polluters, its link to cheap energy use and the long residence time of CO2 in the atmosphere.
Global warming is THE environmental risk of this and probably also the next centuries. A solution is not in sight.
CO2 not only is the major green house gas but also acidifies the oceans and thus threatens maritime ecosystems.
Conclusions
Key to reduce climate change risks and also acidification of the oceans is a quick switch in energy production from fossils to renewable energies.
As such a switch will be necessary anyway as fossil fuels are finite, ambitious climate protection is a no regret project
So let us take action as quick as possible and not denythis problem any longer!
Denial of the risk and delay of action may cause abrupt and irreversible changes in the climate system
Thank you for your interest!