Climate change: uncertainty is inevitable but risk is certain

Business and investors refer to a quasi-legal concept of "sovereign risk" by which they mean the risk of additional costs due to a government changing the rules, as if it were the government's fault. However, if the risk is reasonably well known due to scientific evidence and warnings, then governments have a duty to take account of that risk. It is not the government's fault that there is a risk which requires action – that is due to the laws of Nature, and it is the laws of Nature that scientists try to understand. If people add greenhouse gases to the atmosphere and it has consequences, the consequences are not due to government action or of scientists' research results, but due to the laws of Nature.

Given warnings and risk, if the government fails to take preventive action, who is responsible for future losses? Is it the individual, the local council, the state or federal government, the developer or investor, the scientist or engineer, or the insurance company (and by implication others who pay insurance premiums)? Who will lose out, and who will be sued in decades to come?

There is a communication problem here. Research on climate change is becoming increasingly policy-relevant, but there are often large ranges of uncertainty. Scientists often apply the traditional standards of proof for "proving" something to be true (i.e., the 95% or 99% probability) rather than be "alarmist" by highlighting the risk-relevant probability. Thus scientists often offer a central or "best estimate", rather than the policy-relevant risk probability. They emphasise "scientific rigour" and stress caveats, rather than stressing the small but non-negligible likelihood of really dangerous outcomes that must be avoided. Thus an outcome with only a 10% probability of occurring should not be labelled as "unlikely" (and thus often dismissed), but rather as "possible" (and thus worthy of examination).

So-called "sceptics", who want no action on climate change, focus on the low impact end of the uncertainty range, "pure" scientists focus on the middle "best guess" result, while applied scientists such as engineers and managers focus on the high impact end of the range of possibilities as these are the ones to be avoided or coped with. It is not only engineers that focus on the high consequence risks – so too do military planners and insurance companies, because it is their business to do so.

So what are the risks from climate change? A short list would include:

• temperature rises → heat waves, crop failures
• heavy rains → floods, damages, loss of life, erosion, siltation
• droughts → crop losses, water shortages, soil erosion
• sea-level rise → coastal erosion, estuarine flooding, salinisation of coastal aquifers, damage to coastal buildings and infrastructure
• wild fires → loss of crops, wildlife, forests; loss of life and property; increased soil erosion and runoff
• food shortages, displaced people, "climate refugees"
• failed investments.

And how do we best adapt to climate change, given that we will not stop it entirely in the foreseeable future?

Prof. Gilbert White, in his 1945 Ph. D. thesis, provided a rigorous examination of how to live on a flood plain. He identified eight forms of adjustment, and stated that these need to be pursued in appropriate combinations:

1. Abating floods by land treatments: e.g., decrease upstream erosion and runoff by tree plantings and fire control.
2. Protection via dams, diversions and levee banks: these are 'obvious' but costly in dollar terms and to the environment, increase exposure to larger extremes, and involve management conflicts (e.g., flood control requires keeping dams as empty as possible, but water supply requires keeping them as full as possible).
3. Elevating land or buildings: a permanent solution (maybe), but costly.
4. Emergency warnings and evacuation: good if timely and efficient but mainly saves lives rather than investments.
5. Structural changes to buildings and transport: reduces losses, safeguards services, but expensive.
6. Change land use planning: avoids loss of vulnerable investments.
7. Distributing relief: essential if other adjustments inadequate, but can be repetitive.
8. Compulsory un-subsidised insurance: this identifies risks and dissuades unwise investments.

Following Gilbert's example, but with much less expertise, here are my suggestions for forms of adjustment to sea level rise:

1. Estimate effects: of sea-level rise, changing wave climates and storm surges, and their effects on local aspects such as cliffs, dunes, currents and estuaries.
2. Invest in "hard" defences such as sea walls, groynes and imported sand: but these are costly and have side effects.
3. Plan "soft" defences: escape routes and evacuation.
4. Planning: retreat, zoning, engineering standards, re-routing of transport and drains.
5. Invest at owner's risk: written in to permits or titles.
6. Mandate unsubsidised insurance to dissuade development in unsafe areas.

In summary, managing risk from climate change involves taking notice of small chances of large impacts and looking at a range of options to deal with these to minimise losses. Given the likelihood of ongoing climate change, despite efforts to reduce greenhouse gas emissions, these adjustments will be expensive but cheaper than suffering the consequences of inaction. In some cases such measures will be unpopular, particularly to those who do not understand the real problem. Serious efforts must therefore be made to educate the people and communicate the real situation and options. Communicating the need for risk management is vital. This is especially so for investors in business enterprises that require major infrastructure such as open-cut mines, railways and ports. Full returns on such investments will take decades, and on this time-scale the risks may be large indeed.