Developing Improved Climate Products for Effective Climate Risk Management

1. Developing Improved Climate Products for Effective Climate Risk Management C. F. Ropelewski International Research Institute for Climate and Society The Earth Institute, Columbia University 31st Climate Diagnostics and Prediction Workshop 23-27 October 2006 Boulder, CO

2. Development of new climate products for Effective Climate Risk Management “Involve the Users from the start” Considerations: Be aware of the other factors effecting the system. Understand the limiting factors (Internal and External) Encourage flexibility in decision making and understand how much flexibility resides in the system. Be aware that there may be alternatives to those offered in the use of climate information.

3. Institutions and Policies Research • Methodologies for mapping institutions and • policy process • Methodologies to analyze policy responses and • development outcomes • Methodologies to analyze institutional utility • of climate information

4. Example 1 - Health Epidemic Preparedness and Response (EPR) An example of how climate information can influence decisions in a real-world setting.

6. Why EPR Planning: Outbreak Detection and Response Without Preparedness First Cases Late Detection Delayed Response CASES Opportunity for control DAY

7. Why EPR Planning: Outbreak Detection and Response Without Preparedness Early Detection Rapid Response Potential Cases Prevented CASES DAY

8. Case Study: Public Health, Botswana Dec-Feb RAINFALL and Jan-May MALARIA incidence (Thomson et al, 2006; Nature)

9. Environmental monitoring Example in Botswana … ENV monitoring enables opportunities to mobilize more localized response >>

10. Seasonal Forecasting ….. SCF offers opportunities for planning and preparedness ……. NMCP strengthen vector control measures and prepare emergency containers with mobile treatment centers

11. Example 2 – Agriculture Using climate information to inform decisions in agriculture.

12. Case Study: Agricultural production, SE S.America Adjusting crop management practices to ENSO phases Maize: Changing sowing date and hybrid type La Niña years: shorter season hybrid, late sowing date

13. CV = 128% 9 years in 30: results ( 0) 60% of Total Income in 6 years Gross Margins for Rainfed Maize (1960 – 2001) CERES Model

14. Gross Margins for Rainfed vs Irrigated Maize (1960 – 2001) CERES Model Rainfed Irrigated

15. Example 3 – Reservoir Management Using climate information to inform decisions in Water Resources.

16. Case Study: Angat Reservoir, Philippines Assume that the current priority in water allocation is honored: 1st Manila water supply; 2nd Irrigation; 3rd Hydropower Oct-Feb performance of the reservoir

17. Index insurance • Insurance is a key tool to allow use of information in decisionmaking • Problems with traditional crop insurance • Moral hazard • Adverse selection • The index innovation • Insure weather index (such as seasonal rainfall), not crop • Only partial protection (basis risk), should not overuse • Cheap, easy to implement, good incentives • Minimum possible price (easy to determine): • aver insurance payout + admin + risk finance costs • This price must < value to client for market to exist

18. Case Study: Index Insurance, Southern Africa • In Malawi, smallholder farmers report they cannot currently obtain inputs necessary to address climate variability • New contracts provide for a package of loans, groundnut and maize inputs • Working toward packages including price incentives, risk protection to take advantage of forecasts • Partners include Malawi farmers and financing associations (NASFAM, OIBM MRFC, Malawi Insurance Association), the World Bank CRMG, Malawi Met Service, CUCRED

19. Summary of current activities in Africa • Ethiopia • Drought famine relief (client: national government, pilot 2006) • Crop loss micro-insurance (client: farmers, pilot 2006) • Morocco • Crop loss micro-insurance, climate change problems • South Africa: Relatively developed financial markets • Apple grower cooperatives and freeze coverage • Malawi • Drought relief (client: national government, pilot 2006) • Farm level crop loss, bundled contracts (~900 farmers, transacted 2005) • Scoping: Tanzania, Uganda, Kenya, more on the way • India: BASIX, thousands of farmer transactions completed World Bank CRMG, Re-insurers, WFP highly involved

20. SUMMARY Climate Risk Management provides: More resilient systems for management of seasonal climate variability. and A mechanism for building management systems to cope with climate variability on longer time scales Tailoring climate information to risk management problems is key methodological issue Early and effective engagement with stakeholders is essential For most effective and timely implementation, institutional mapping is key

21. Summary (continued) Be aware of the other factors effecting the system. Understand the limiting factors (Internal and External) Encourage flexibility in decision making and understand how much flexibility resides in the system. Be aware that there may be alternatives to those offered in the use of climate information. “Involve the Users from the start”