Climate change and development aid: The economic case for prevention

Floods affect more people globally than many other type of natural hazard. [Howard Lake/Flickr]

This article is part of our special report Decoupling economic growth from greenhouse gas emissions.

Climate change affects developing countries more heavily, with broad impacts on the environment and the economy, insurers say, highlighting the need to act before damage is done.

“No degree of global warming is safe. Even at one degree (of warming) we’re seeing consequences for people, nature and livelihoods,” said Debra Roberts, who co-chaired the landmark 1.5°C report released in October by the Intergovernmental Panel on Climate Change (IPCC).

“The risks rise significantly with each additional bit of warming,” the scientist warned.

Roberts was speaking at the 16th edition of the Development and Climate days, which took place on 8-9 December on the sidelines of the COP24 in Katowice, Poland. 

The conference highlighted the disproportionately higher impact of climate change on local communities that make a living from agriculture or coastal activities like fishing. It focused on four main themes: resilience, local knowledge, accountability, and financing adaptation while managing risk.

Pin Meechaiya, hydrologist and senior project coordinator in the climate resilient department of the Asian Disaster Preparedness Center, explained to EURACTIV what the additional bit of warming Debra Roberts was referring to means for her own country, Thailand.

“In my work, I try to actually see the impact climate change already has on the ground and in Thailand, you can see it with mangoes,” she said, adding that this is a significant commercial crop for her country that has already suffered from the effects of climate change.

“Since 2014, the rise in temperature increases the impact of thrip, an insect that feeds on Mango flowers which renders the fruit unsuitable for marketing,” Meechaiya explained.

Until 2014, Thailand exported between 50 to 60% of its mangoes, with a price set at €3 a kg. Because of the reduced quality, Thailand is now exporting between 20 to 30% with a price  set at €1, she said.

The Thai government was “a little bit panicked” by the fall in revenue, Meechaiya said. “Farmers have to use pesticides to fight thrips and this costs money of course and reduces their revenues,” she continued, while underlining that the thai mango sector never had trouble before.

“It is a new sector of our economy that is being affected by climate change,” she said. 

EU budget promises sweeping changes to development policy

The development policy community is anxiously awaiting an overhaul of the EU’s development budget and the instruments used to spend it, when the European Commission publishes its communication on Wednesday (2 May) for the bloc’s next seven year budget.

Reversing the development money flow

Commenting on financing, Michael Szöny of Zurich Insurance, underlined the cost efficiency of investing in prevention. “Beyond humanitarian life savings, and making lives more livable, there is an economic case that is if you invest early, you need less money to provide response relief and recovery,” he told EURACTIV.

Michael Szöny leads the Zurich Flood Resilience Alliance, which is a multi-sectoral partnership focusing on providing solutions to help communities strengthen their resilience to flood risk. The first phase of the program ran from 2013-2018 and the second phase started 3 July. 

“Our numbers show that if you invest $1 upfront, before the event happens, then you save $5 on average in future losses. So you have this one to five cost-benefit evidence,” he underlined.

Focusing on prevention and resilience is particularly relevant for flood-prone areas, he said. Floods affect more people globally than many other type of natural hazard. This is only going to get worse not only with raising temperature, but also with increases in population, urbanisation, and economic development,” he pointed out, stressing that flood risks are increasingly interconnected and interdependent.

“As it is, if you are looking at where the money is going, only 13% of spending goes into pre-event resilience and risk reduction, meaning that 87% goes into post-event relief,” he stressed.

And the figures are even worse when looking at overseas development aid. “Only 40 cents out of a $100 of development money overall goes into risk-informed development,” he said. “So we have an economic case here, but what we see is that in reality the money is going somewhere else,” Michael Szöny noted, underlining the necessity to reverse that trend.

You want to make sure that more money is spent upfront so you need less money spent at the end, when the event has happened,” he stressed.

But this is only one aspect of how climate change impacts on development aid, he continues. “You also have to figure out how you can mainstream development being more risk-informed and how to make your investment more clever,” he added.

Presently, development money is divided into three different flows: climate finance, development financing, and risk financing. “They should not be separate because that means you are effectively spending development money three times,” Szöny said. “So you need to mainstream these three flows and make your investment more clever,” he stressed.

Szöny said Zurich was investing about $50 million in its flood resilience programme.

“That is not enough obviously since we are talking about an annual $100 billion  within the climate negotiations. But we have to find a development funding that is climate smart,” he said. “In our case, we are asking how can we leverage $1 billion  that is risk-informed development,” he noted.

‘Risk data hub’ to enhance EU resilience to climate hazards

The European Commission is preparing to launch a “risk data hub” in the coming months that will help map out loss and damage from natural disasters such as floods, droughts, storms and other extreme weather events that are becoming more frequent with climate change.

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