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Chatham House Climate Resilience in China and the European Union: Managing Impacts and Adaptation Beverley Darkin Interdependencies on Energy and Climate Security Environment Energy and Development Programme February 2008 1. Introduction Much of the focus in the international climate change negotiations and of climate policy-making generally is directed towards the creation of a low-carbon economy. However, cutting carbon alone will not solve the climate change problem. Given the rise of greenhouse gas emissions in the atmosphere, the world is already committed to climate change. It is true that the severity of impacts we are likely to encounter will be determined by our ability to slow, stop and reverse emissions over the coming years. But it will also be determined by our capacity to cope with the changes to which we are already committed. For this reason it is essential that governments, industry and NGOs spend more time working out how to create a climate-resilient economy, as well as a low-carbon one. As the science becomes ever more certain and observable impacts start to take hold, governments are showing heightened interest in understanding the effects of climate change and assessing how best to respond. Since 2006 alone: - Parties to the United Nations Framework Convention on Climate Change agreed the ‘Nairobi Work Programme on Impacts, Vulnerability and Adaptation to Climate Change’ in November 2006 to help countries improve their understanding and assessment of the impacts (UNFCCC, 2007). The programme of action was welcomed by the G8 in Heiligendamm, where G8 leaders emphasized their commitment to enhancing cooperation with developing countries in the areas of adaptation and climate research (G8, 2007); - The Chinese Ministry of Science and Technology, the Chinese Meteorological Administration and the Chinese Academy of Science published China’s first national climate change assessment in December 2006 (MOST et al., 2006), compiled to provide a detailed scientific foundation for the development of national strategies and polices to tackle climate change; - The European Commission published its first green paper on climate change and adaptation in June 2007, setting out the case for action and outlining the policy options available (European Commission, 2007a). Governments have recognized that in order to undertake impact and adaptation assessments successfully there is a need to create alliances and learn from activities that have taken place elsewhere. For example, the European Commission has identified the need to ‘improve alliances with partners around the world – particularly in developing countries’ to coordinate action and strengthen cooperation on climate change adaptation (European Commission, 2007a). China, in its National Climate Change Action Plan, published in June 2007, has highlighted that ‘in order to effectively address climate change and implement [its] national programme, China is ready to strengthen international cooperation with all countries.’ (NDRC, 2007) China and the European Union are well placed to act as partners. The EU has developed some of the most advanced technologies world-wide in the field of climate observation and undertaken detailed regional impact assessments on vulnerability and adaptation through the work of the European Environment Agency (EEA) and the European Community’s Joint Research Centre (EEA, 2004, 2005 and 2007). The EU has much knowledge and experience to share with foreign partners. Meanwhile, China is working actively to develop expertise in these areas and collaborate with the international community in order to improve the capacity of developing countries to act against climate change, particularly against extreme events, through capacity-building, the provision of financial assistance and technology cooperation (NDRC, 2007). There is both an economic and a political rationale for acting together. Economically, if China and the EU can find ways to undertake technology cooperation, considerable opportunities exist to generate scale effects in the production of monitoring and observation systems and adaptation technologies. Politically, the EU has already taken on a global leadership role in the field of climate change mitigation, while China acts as a leader among the G77 developing countries. Cooperating on impacts and adaptation will provide the EU and China with the opportunity to act as leaders in the development of a climate-resilient, lowcarbon economy. 2. What common impacts and issues will the EU and China face? No two regions will face exactly the same set of climate impacts. Even in areas where the natural topography is similar, social and economic conditions and the ability of communities to respond to climate change will vary. Nevertheless, scientific evidence suggests that EU and China will face many common issues over the coming decades. Four sectors are singled out here to illustrate this point. Water Globally, climate change is set to alter temperatures by between 1.8 and 4oC by the end of this century. Sea levels are expected to rise by between 0.18 and 0.59m over the same time period (IPCC, 2007). As a result we can expect reduced access to safe drinking water and an expansion of drought-affected areas. Over one billion people rely on glacier meltwater for their supplies, which will eventually disappear (EEA, 2005). Meanwhile, those situated in floodplains and at the coast will experience increased risk of flooding. Such risks apply to both the EU and China. According to the EC Joint Research Centre, mean temperatures have increased in Europe by 0.8oC since 1900. Annual precipitation has increased by between 10% and 40% in northern Europe over the last 100 years, while the Mediterranean basin has experienced a 20% reduction (JRC, 2005). Predictions by the EEA show that in the period up to 2030 climate change will reduce river flow in southern Europe and exacerbate already acute water-shortage problems in the more arid south and southeast. Droughts may increase the risk of forest fires. Meanwhile, higher levels of precipitation will increase river flow in northern Europe. Extreme precipitation, particularly in the winter months, will lead to increased flooding and, possibly, cause a reduction in water quality due to storm water mixing with sewage water. Changes in the frequency and intensity of drought and flooding may cause significant financial and human loss throughout Europe (EEA, 2005). China’s average ground temperature has also increased by 0.5–0.8oC over the last hundred years, although, unlike Europe, changes in annual precipitation are not considered to be significant, despite large year-on-year fluctuations. Predictions show that overall in China the physical impacts of climate change will be very similar to those mentioned above, but the geographic distribution will be almost the reverse of Europe’s. It is anticipated that climate change will lead to decreased precipitation and river flow in the arid north, increasing the number of droughtstricken areas. In contrast, in the south there will be an increase in run-off into rivers, while floods are predicted to become more severe (MOST et al., 2006). Overall, the frequency of droughts and floods is set to increase in China, with an accompanying deterioration in the gap between the demand and supply of water. It is estimated that by 2050 the areas of glaciers in western China – which have already retreated by 21% – will have fallen by a further 17% (China Daily, 2007). The total water available from glacial meltwater will increase in the short term, with supplies expected to peak between 2030 and 2050 and then fall (MOST et al., 2006). According to the Stern Report, 23% of China’s population or around 250 million people live ‘in the western region that depends principally on glacier meltwater’ (Stern, 2006). The impact of increasing water scarcity on these communities could have significant consequences for regional stability. Food and agriculture In northern Europe, climate change and increased atmospheric CO2 concentrations could have a beneficial impact on agriculture as a result of longer growing seasons and increased plant productivity. New cropping opportunities may result as the agricultural belt shifts northwards, and yield increases in commercial forests are expected. However, any benefits arising from these changes may be offset over the longer term by the northward shift in pests and diseases, increasing the need for pesticide usage, as well as the rising threat of flooding. In southern and eastern Europe, the impacts are likely to be negative. Water scarcity may lead to reduced soil moisture content, soil compaction and cracking, and may make irrigation more difficult. Heat stress will affect crop yields and livestock activities. Overall, fewer cropping opportunities are expected in southern Europe and forestry yields are expected to decrease (EEA, 2005; ECCP, 2007). In China, climate change will also lead to changes in the distribution and structure of agricultural production, leading to greater fluctuations in output. Higher temperatures and fewer frost days may lengthen the growing season in northern China but, as in the EU, it is thought that these benefits will be offset by increased water scarcity and greater prevalence of pests and diseases (Lin and Zhou, 2006). Predictions suggest that, if no measures are taken, the overall productivity of the Chinese farming industry may decline by 5–10% by 2030. By 2050 the production of major crops such as wheat, rice and corn may fall as much as 37% (MOST et al., 2006). The consequences of this threat to food security for the world’s most populous country should not be underestimated. Meanwhile the geographical distribution of the major forest types will shift and the distribution range for afforestation is likely to shrink (NDRC, 2007). This may have consequences for China’s large-scale replanting programme – plantations play an important role in protecting watersheds from flooding and preventing desertification. On the plus side, the productivity of primary forests may increase by between 1% and 10%, depending on the forest type (MOST et al., 2006). Coastal regions Climate change is likely to have significant impacts on coastal zones, particularly through sea-level rise and extreme weather events. Direct impacts include inundation, coastal erosion, flooding, increased salinity in estuaries and coastal aquifers and impeded drainage. Ecosystems, infrastructure, settlements, tourism and human health are all at risk. One-third of the European Union population is thought to live within 50km of the coast, with the proportion is as high as 100% in Denmark and 75% in the UK. It is estimated that 9% of all European coastal zones lies below an elevation of 5m and is potentially vulnerable to sea level rise. The Netherlands and Belgium will feel the full force of the coastal onslaught, although other countries such as Denmark, Germany, the UK and Italy, among others, may also be affected. Coastal ecosystems will be threatened, especially in the Baltic, Black Sea and Mediterranean. Sea-water temperature increase and sea-level rise will result in changes in marine biodiversity, and the Mediterranean and Baltic coasts will experience considerable loss of wetlands (EEA, 2005). In China, coastal areas are also likely to be affected by climate change and sealevel rise. By 2030, the sea may have risen by 0.01–0.16m, leading to a higher incidence of flooding and more severe impacts from storm tides. Extreme weather events, such as storm tides and floods, can lead to major disasters and large losses of life in China – in 2007 alone 652 people are thought to have died from floods, landslides and mudslides in southern China, claiming the homes of a further 452,000 (Guardian, 2007). The Yellow, Yangtze and Pearl River deltas are considered the most vulnerable regions because they contain large, dense populations (MOST et al., 2006). Ecosystems and biodiversity Many plant and animal species are unlikely to survive climate change. An article published in the science journal Nature suggests that, based on a sample of 1,103 land plants and animals, 15–37% of the species investigated will eventually become extinct as a result of climate changes expected by 2050 (Thomas et al., 2004). According to the EEA, observed temperature rise and changes in precipitation are already affecting Europe’s ecosystems. The most vulnerable regions are the Arctic and mountains as well as the coastal wetlands and ecosystems of the Mediterranean. The impact of rising temperatures on snow cover, glaciers and permafrost could adversely affect winter tourism and give rise to more frequent natural disasters such as landslides, as well as species loss (EEA, 2005). In China, there is likely to be an increase in desertification of semi-arid areas. Regional warming and drying will lead to reductions in wetlands. Large areas of swamp will become meadow wetland. The spatial distribution of frozen soil on the Tibetan Plateau will decrease, with the areas of surface frozen soil predicted to fall by 10–15% over the next 50 years. Climate change will also lead to the shrinkage of inland lakes – although those that rely on glacial melting may expand first before disappearing (MOST et al., 2006). In both regions, the impacts of climate change on ecosystems and biodiversity will contribute to the undermining of the natural systems upon which human civilization depends. The valuable services that these ecosystems provide, including water purification, protection from flooding and access to medicinal products, will be costly and difficult to replace. 3. Assessing vulnerability and identifying adaptation measures The combined impact of all this change, on top of existing human-induced pressures on the natural environment, is that some regions of China and Europe will become more vulnerable as access to environmental resources comes under threat. Through integrated assessment it is possible to identify how the physical impacts of climate change will interact with socio-economic factors in order to determine where the vulnerable regions are likely to be located. This can help governments to improve regional adaptive capacity so that socio-economic and political systems are better equipped to cope with the physical changes, and in doing so, reduce the threat of conflict over access to vital resources and distress migration. Vulnerable areas identified in the European impact assessments and highlighted in the 2007 Commission Green Paper include the south European and Mediterranean basin (owing to water scarcity); mountainous areas (particularly the Alps); coastal zones because of sea-level rise and storm surges; densely populated flood plains; Scandinavia (where there will be increased precipitation falling as rain instead of snow); and the Arctic region, where temperature increases will be highest. In China, most regions highlighted in the 2006 impact assessment will experience increased vulnerability of some form: northern China owing to the degradation of agricultural zones; northwest China because of water shortages; eastern China because of flooding; southwestern China owing to increased natural hazards in the mountains; and the south because of sea-level rise. Further integrated analysis is required to identify vulnerable areas with greater precision. China in particular faces considerable challenges in translating existing knowledge of the projected impacts of climate change and information about vulnerable areas into specific adaptation measures. According to environmental economist Ji Zou (2005), knowledge in China about adaptation resides almost entirely within the academic community and much work still needs to be done by decision-makers to develop and implement strategies and action plans for adaptation. China’s first provincial-level adaptation strategy is now under development in the province of Ningxia, involving international collaboration between the UK and China and the engagement of eighteen partner organizations (DEFRA et al., 2007). Figure 1: Progress in China in developing and implementing strategies and action plans for adaptation to climate change Assess effectiveness, and benefits of the candidate options Assess costs of the candidate options Assess damage, risk, and vulnerability in both physical and socioeconomic terms Conduct CBA/CEA and identify options with largest net-benefit (CBA) or least cost (CEA) A A A A A some → less → nothing Develop and implement strategies and action plans for adaptation to CC Source: Zou and Wang, 2005. According to Klein et al. (2005), adaptation can either be proactive or reactive and the form of response can take place within natural systems (e.g. adjusting to changes in the growing season) or within human systems. Responses within the human system can be motivated by either public or private interests and they can In decision- A Set up goals/targets for adaptation and select measures incl. technologies making stage Identify candidate options of measures to adapt to impacts of climate change, including D&T&T In academic research stage In academic research stage Degree In China: Assess physical impacts of climate change on specific sectors and stakeholders be planned (as a result of a collective action decision) or autonomous (individual actors taking rational, self-interested decisions). (See Figure 2.) Figure 2: Matrix showing the five prevalent types of adaptation to climate change Anticipatory -Changes in length of growing season; - Changes in ecosystem composition; - Wetland migration Natural Systems Private Human Systems Reactive Public - Purchase of insurance; - Construction of house on stilts; - Redesign of oil-rigs. - Changes in farm practices; - Changes in insurance premiums; - Purchase of air-conditions - Early-warning systems; - New building codes, design standards; - Incentives for relocation. - Compensatory payments, subsidies; - Enforcement of building codes; - Beach nourishment. Source: Klein et al., 2005. To improve resilience, it is necessary for decision-makers to anticipate the impacts and encourage decisions that improve the region’s ability to cope, such as the development of early warning systems. Decision-makers also need to discourage autonomous, reactive decisions which may further contribute to the problem of climate change. So, for example, there is a danger that, in response to higher temperatures, individuals will purchase air-conditioning which will contribute to further warming. Decision-makers can proactively prevent such measures by, for example, setting standards in the building sector to improve energy efficiency for heating and cooling. 4. Opportunities for collaboration Given that China and the EU will confront similar challenges over the coming decades, there exists an opportunity for the two to form an alliance and work together to find ways to improve their resilience to climate change. Specific actions that could be taken in pursuit of this goal are outlined below. Expand the knowledge base (research and development) A critical first step in developing an effective response strategy is to improve access to evaluation and monitoring tools to assist with research on impacts and adaptation. These issues were discussed at a joint workshop on vulnerability and adaptation held in Beijing in 2006 as part of the EU–China partnership on climate change established at the 2005 EU–China Summit. Topics covered included the assessment of current impacts and the modelling of future ones in specific sectors as well as strategies for adapting to climate change that are being developed and implemented in both the EU and China. Building on this work, and that of the China–UK Working Group on Climate Change established in September 2006, a more detailed collaboration between the EU and China could now take place to capture the full benefits of the monitoring and evaluation tools that have been developed globally. These include high-resolution general circulation models that provide information on climate scenarios. These can help decision-makers identify and quantify the potential impacts of climate change (IISD, 2005). Other tools are available to assess and manage climaterelated disasters, identify vulnerability on the ground, and help decision-makers design and screen development projects for climate impacts – a process known as ‘climate- proofing’. Work has been undertaken by the International Institute for Sustainable Development, the World Bank, the Institute of Development Studies and the United Nations Framework Convention on Climate Change (UNFCCC), among others, to disseminate the latest information on available climate adaptation tools (IISD et al., 2007). This is in recognition of the important role that these tools play in engaging adaptation efforts and the need to connect top-down information on climate scenarios with bottom-up vulnerability assessments. Working at the regional level through the EU–China partnership provides the opportunity to mobilize and share these resources. Recommendation for the Chinese and EU governments: Improve access to monitoring and adaptation tools through official-level exchanges and the establishment of an internet-based learning/information platform. Enhance adaptation planning Enhancing adaptation planning requires undertaking research on impacts, vulnerability and adaptive capacity (as defined in Annex I) and then connecting this analysis with technological and policy options. But such analysis can only be useful if there is high-level agreement to integrate climate change adaptation into the policy process in the first place. There is evidence that the political will to incorporate adaptation into the decisionmaking process does exist, in both China and the EU. For example, the European Commission, in its 2007 Green Paper on Climate Change and Adaptation, has pinpointed European policies where climate change needs to be fully incorporated, ranging from the Common Agricultural Policy and the Water Framework Directive to the Sustainable Consumption and Production Plan and the Common Foreign and Security Policy. China, in its National Climate Change Programme, has identified areas where climate change can be incorporated into other policy areas such as the Agriculture Law, Forest Law and the Marine Environment Protection Law. There is therefore scope for China and the EU to collaborate in the area of integrated assessment and analysis, with the aim of sending a strong political signal of the need to incorporate adaptation early into the decision-making process. To be effective, this political signal must be backed up by analysis which identifies the linkages between the impacts of climate change and the technical and policy solutions. This requires the establishment of a multi-disciplinary centre to bring together experts from science, social science, technology and policy fields in order to connect integrated research with solutions. Recommendations for the Chinese and EU governments: Create political consensus on the need to incorporate climate change adaptation early into European and Chinese policy process; and Establish a multidisciplinary EU–China centre for adaptation to provide analysis that connects the emerging scientific /technical research with policy options. Improve technology cooperation and investment The Chinese government has undertaken several technology needs assessments. These are summarized in the Chinese Initial National Communication, published in 2004 (full details are included in Annex II to this paper). According to Klein et al. (2005), a successful adaptation strategy typically combines hard technologies such as drought-resistant seeds, seawalls and irrigation technology with soft technologies such as insurance schemes and crop rotation patterns. They argue that most communities have local-level technologies for adaptation that can be of value. Despite the argument that many of technologies already exist at national level (UNFCCC, 2006a), there is evidence that the Chinese are experiencing difficulty in accessing the technology that they need for monitoring and evaluating climate change and adapting to the impacts (UNFCCC, 2006b). Indeed, economic and market barriers are frequently cited as one the major hurdles to technology transfer by developing countries, with lack of financial resources, high investment costs, incompatible prices, subsidies and tariffs and lack of incentives identified as problems (see Figure 3). Figure 3: Economic and market barriers to technology transfer, cited by developing countries in their technology needs assessments 10 8 6 4 Source: UNFCCC, 2006b. According to the OECD (2002), measures to facilitate technology investments in developing countries include: - Foreign direct investment (FDI) – this is considered the most important means of transferring technology to developing countries because it includes an entire package of management experience that can be transferred by the multinational company, through methods such as training programmes and learning by doing; IPR issues Dominant interests of large energy producers High transaction costs High borrowing costs Lack of competition Lack of acces to credit High upfront costs lack of markets Consumers low income Lack of incentive Incompatible prices High investment costs Lack of financial resources 0 High costs vis-à-vis traditional technology 2 Weak currency Number of Barriers 12 - Joint ventures – this is a common business arrangement where firms in different countries agree to mutually beneficial transfers of technology and information. In the case of adaptation technologies in China, this will require the involvement of local firms who will work with the technology on the ground; - Licences – firms may license their technology to a local firm to enable it to upgrade its technology; - Temporary relocation of employees – technological know-how can be transferred internationally by employees; - International development aid – This involves national development programmes to facilitate the transfer of adaptation technologies. Liberalizing trade in environmental goods and services is a second way to improve access to technologies by removing tariff and non-tariff barriers. Environmental goods and services are on the agenda of the Doha round of WTO negotiations. However the discussions over environmental goods and services have become bogged down over definitional issues. China and the EU could find a way round this impasse by developing a bilateral or plurilateral agreement (possibly involving Japan) with the aim of immediately eliminating tariffs and non-tariff barriers on monitoring, evaluation and assessment equipment and adaptation technologies. Recommendations for the Chinese and EU governments: Negotiate a bilateral or plurilateral agreement (involving Japan) to remove tariff and non-tariff barriers on monitoring, evaluation and assessment equipment and adaptation technologies. Set up an active Chinese Trade and Investment Office in Brussels and European equivalent in Beijing. These offices could be tasked to undertake an assessment of EU and Chinese FDI frameworks respectively, with specific focus on adaptation technologies, to further clarify the barriers to trade that need to be overcome, and to identify opportunities for improving FDI and joint ventures between the two regions. Establish joint standards Anticipatory measures can be taken by China and the EU to establish standards that will improve community capacity to cope with impacts of climate change and to avert actions (such as the purchase of air-conditioning) that will contribute to further warming. These could focus on the building sector and product design to improve energy efficiency. Within the European Union two directives are particularly relevant – the Directive on Energy Performance in Buildings and the Ecodesign Directive. In the 2007 Green Paper on climate change and adaptation, the Commission undertook to revise the Directive on Energy Performance of Buildings and develop a Strategic Energy Technology Plan to ‘match the double challenge of climate change mitigation and adaptation’ (EEA, 2005). The EU Ecodesign Directive, which is due to be implemented in August 2007, aims to reduce energy consumption from household electrical appliances, including heating, ventilation and air-conditioning. This directive makes no direct provision for mandatory requirements for specific products, which will be negotiated over the next two years following consultation and an impact assessment. The provisions on room air-conditioning will be negotiated in the latter part of 2007 and 2008 and adopted in 2009 (European Commission, 2007b). China too, in its 2007 National Climate Change Programme, has highlighted the need to ‘improve existing energy-saving regulations and standards’ (NDRC, 2007). The laws cited include the Energy Conservation Law and Building Energy-Saving Management Regulation. Given the desire to review all these regulations in both regions, this is a timely opportunity to establish joint standards in building efficiency and product design and incorporate them into legislation. Recommendation for the Chinese and EU governments: Develop joint standards for energy efficiency in the building sector and product design (particularly heating, ventilation and air-conditioning), which would be followed up by detailed technical analysis by officials in 2008. Mobilize financial resources The international community established three funds under the UNFCCC and Kyoto Protocol, designed to meet the adaptation requirements of developing countries – the Special Climate Change Fund, the Adaptation Fund and the Least Developed Countries Fund. However, these funds will be insufficient to finance the necessary adaptation measures needed in order to respond effectively to climate change. There is therefore a need to obtain funding from sources outside the UNFCCC, through the international financial institutions (IFIs), government development assistance and the private sector. The difficulty with this is that adaptation initiatives are closely connected to other aspects of development and it can be difficult to disentangle the adaptation component from the rest of the project. This problem is aggravated still further when adaptation is ‘mainstreamed’ into development planning. According to Huq and Reid (2004), ‘bringing adaptation to the centre of decision-making and programming makes it even more challenging to separate financial flows that are “new and additional” from non-climate change ODA activities’. The EU and China therefore need to develop a systematic methodology for climate-proofing development projects from IFIs, bilateral and private sources of funding. This further emphasizes the need for improved access to the adaptation policy tools mentioned above. Improve access to insurance Discussions have been taking place for a number of years within the UNFCCC on ways to improve access to insurance in developing countries. Article 4.8 of the Convention calls upon Parties to consider actions, including those related to insurance, to meet the specific needs and concerns of developing countries with respect to both the adverse impacts of climate change and the impact of the implementation of response measures. Article 3.14 of the Kyoto Protocol calls for the implementation of Articles 4.8 and 4.9 of the UNFCCC in fulfilling obligations of the Kyoto Protocol, and explicitly calls for the consideration of the establishment of insurance. The EU and China also need to look into the issue of insurance outside the international negotiations, to ensure that access to predictable funds is available for disaster relief. Globally, insurers are increasingly claiming that governments are not doing enough to prepare for natural disasters linked to climate change. They have called for governments to shoulder more responsibility rather than relying on the insurance sector by, for example, implementing building codes, preventing residential developments in flood plains and other high-risk areas, developing stronger storm run-off systems and cleaning out forest waste to avoid the spread of fires (Insurance Times, 2007). But even if governments take measures to reduce the risks, natural disasters will still occur. Climate change will increase the potential for large-scale flooding and drought to cause big economic losses. Until recently insurers have been prepared to accept this increased risk. But climate models are becoming ever more precise, enabling insurers to pinpoint the regions at threat with greater accuracy. Factor in higher levels of competition in the industry and it is easy to see why insurers are becoming more discerning about the properties that they are prepared to underwrite. There is a danger that insurers might decide to withdraw their products from households located in risky areas, or charge a premium that is above the ability of home-owners to pay. There is even a danger that if governments decide to prevent new residential developments in areas such as flood plains, such ‘uninsurability’ will lower the cost of this land, making it more likely to be occupied by the poorer, marginalized members of society who cannot afford to live in the safe areas. As a result the most vulnerable communities that are least able to respond (by relocating) are likely to be most exposed to extreme weather events or sea-level rise. To find a way out of this quandary it is necessary for European and Chinese governments to work with investors and insurers to discuss insurance products that can be made available for these most vulnerable communities. Some options for developing countries have been identified by the International Institute for Sustainable Development in response to the fact that formal insurance schemes play a limited role in protecting individuals (IISD, 2005). These include: International Insurance Pool: A collective loss-sharing fund to compensate victims of sea-level rise. Public-private Insurance Partnerships: Schemes where the insurer is the government, but policies are developed and managed by the insurance sector and, where required, joint mutually beneficial activities are undertaken. Regional Catastrophic Insurance Schemes: Regional cash reserves are pooled through mandatory contributions from governments. These reserves are lent to members in the event of extreme events. Micro-insurance: These use risk-pooling to provide compensation to low-income individuals or groups adversely affected by a specified risk or event. In addition, financial institutions are developing ‘alternative risk transfer initiatives’ to reduce exposure to climate impacts, including bonds, derivatives and hedge funds to protect against extreme weather events. Recommendation for the Chinese and EU governments: Establish a high-level group of investors and insurers to work with the European and Chinese governments in order to explore which financial products and services can be developed for vulnerable communities. Build capacity and exchange information The Chinese National Communication (PRC, 2004) outlines the areas where capacity-building can assist with adaptation efforts, as follows: - Guidelines for the development of adaptation projects; - Adaptation technology needs assessment and technology transfer; - Case studies on extreme climate events and research report compilation and dissemination; - Capacity-building in ocean and water resource departments; - Capacity-building in climate observation systems; - Identification and enhancement of traditional knowledge, skills and practical experiences in adaptation. Many of these measures have already been touched upon in the recommendations for collaboration mentioned above, but there is scope for greater sharing of existing information between China and Europe to help communities adjust to their changing natural environment. This might include sharing knowledge on stressresistant crops, on controlling pests and disease or on preventing desertification. It might involve passing on information about integrated water resource allocation and optimising water allocation, introducing anti-flood measures or guaranteeing safe drinking water. It may involve working collectively to improve early-warning and emergency response measures to manage climate-related disasters. Measures can be taken up by the EU and China to improve access to training and exchange information in order to build capacity. Recommendation for the Chinese and EU governments: Undertake joint training, international exchanges, public awareness and information-sharing initiatives between the EU and Chinese research and policy-making communities through universities and government departments. 5. What happens if we fail to respond quickly enough? The Stern Review on the economics of climate change concludes that market forces alone are unlikely to lead to efficient adaptation, owing to uncertainty in the climate projections and lack of financial resources. Policy measures need to be put in place to encourage cost-effective adaptation. The Stern Review advocates early action by anticipating potential damage, minimizing threats and providing competitive advantages for companies leading in adaptation strategies and technologies (Stern, 2006). As an illustration of this, the Joint Research Council ‘PESETA’ study, which assesses the economic impacts of climate change in the EU, demonstrates the impacts of adaptation measures on the level of damage due to sea-level rise (see Figure 4) (JRC, 2007). This shows that damage caused by sea-level rise without adaptation can be up to four times higher than the likely costs if additional flood defences are built. Without action, the costs increase steeply from the 2020s to the 2080s. Figure 4: Impacts of adaptation measures on damage due to sea-level rise – costs billion euro per year with and without adaptation measures 20 18 16 14 12 10 8 6 4 2 0 2080s 2080s 2020s 2020s 2020s Without With 2020s 2080s without with without sea level rise of 25.3 cm Total residual damage costs with 2080s without with sea level rise of 56.4cm Adaptation Costs Source: JRC, 2007 According to the European Commission (2007), ‘If there is no early policy response, the EU and its Member States may be forced into reactive unplanned adaptation, often abruptly as a response to increasingly frequent crises and disasters, which will prove much more costly and also threaten Europe’s social and economic systems and its security.’ (European Commission, 2007a) Given that China appears to be at least as vulnerable to climate change impacts as the European Union, it seems reasonable to conclude that the costs of adaptation measures are likely to rise sharply in China as well if early action is not taken. 6. Conclusion Analysis of four sectors in China and the EU – water, food and agriculture, coastal regions, and ecosystems and biodiversity – demonstrates that both regions will face similar challenges as a result of climate change, including drought, flooding, shifting agricultural zones and productivity, sea-level rise and disturbance to natural ecosystems and biodiversity loss. Taking into consideration that the EU and China will be facing these impacts together, we can expect to experience increased vulnerability across both regions. Our ability to cope will depend on our adaptive capacity, which in turn is influenced by socio-economic and political factors. Given this shared set of challenges, China and the EU now face a choice – whether to collaborate and face up to these challenges together or to take separate paths and wait to see what the consequences will be. The longer the delay in taking action, the more expensive it is likely to be. This paper has outlined six areas where China and the EU can work together to: • expand our understanding of the impacts and vulnerability; • enhance adaptation planning; • improve technology cooperation and investment; • establish joint standards; • improve access to insurance; and • build capacity and exchange information. In summary, specific recommendations for Ministers to consider at the November 2007 EU–China Summit are: - Improve access to monitoring and adaptation tools through official-level exchanges and the establishment of an internet-based learning/information platform; - Create political consensus on the need to incorporate climate change adaptation early into European and Chinese policy processes; - Establish a multi-disciplinary EU–China centre for adaptation to provide analysis that connects the emerging scientific/technical research with policy options; - Negotiate a bilateral or plurilateral agreement (involving Japan) to remove tariff and non-tariff barriers on monitoring, evaluation and assessment equipment and adaptation technologies; - Set up an active Chinese Trade and Investment Office in Brussels and European equivalent in Beijing. These offices could be tasked to undertake an assessment of EU and Chinese FDI frameworks respectively, with specific focus on adaptation technologies, to further clarify the barriers to trade that need to be overcome, and to identify opportunities for improving FDI and joint ventures between the two regions; - Develop joint standards for energy efficiency in the building sector and product design (particularly heating, ventilation and air-conditioning), which would be followed up by detailed technical analysis by officials in 2008; - Establish a high-level group of investors and insurers holders to work with the European and Chinese governments in order to develop financial products and services targeted towards vulnerable communities; - Undertake joint training, international exchanges, public awareness and information sharing initiatives between the EU and Chinese research and policy-making departments. communities through universities and government Annex I – Definition of terms 1 Adaptation – Adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities. Various types of adaptation can be distinguished, including anticipatory and reactive adaptation, private and public adaptation, and autonomous and planned adaptation. Adaptive capacity – The ability of a system to adjust to climate change (including climate variability and extremes), to moderate potential damage, to take advantage of opportunities or to cope with the consequences. Vulnerability – The degree to which a system is susceptible to, or unable to cope with, adverse effects of climate change, including variability and extremes. Vulnerability is a function of the character, magnitude and rate of climate change and variation to which a system is exposed, its sensitivity and its adaptive capacity. Technology – A piece of equipment, a technique, practical knowledge or skills for performing a particular activity. • Environmentally sound technologies – Technologies that protect the environment, are less polluting, use resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes, and are compatible with nationally determined socioeconomic, cultural and environmental priorities. The term includes hard and soft technologies. • Technology transfer –The broad set of processes covering the exchange of knowledge, money and goods among different stakeholders that lead to the spread of technology for adapting to or mitigating climate change. The word ‘transfer’ encompasses both cooperation across and within countries. diffusion of technologies and Annex II – Technology needs for adaptation to climate change in China Everyday Water Resources Agriculture Natural ecology and forestry Sea level and coastal zone Desertification and natural disasters Other Capacity-building on methods and rules for regional water resource management High-efficiency water-saving agro-technology for spray and drip irrigation Technology for economizing on and reusing industrial water resources Water-saving technology and water-saving appliances transformation Technology for the treatment, recycling and reuse of industry and daily-life wastewater High-efficiency flood-control technology Water and soil preservation technology Technology for observation and pre-warning of floods and droughts Technology for deep and intensive processing of agro-products Technology for observation and pre-warning of agriculture calamity Capability for research and development of agro-biological technology Agricultural seedling technology Capability for research and development for innovative fertilizer and prevention and destruction of agricultural pests Technological support for the prevention and treatment of salinity and alkalinity and water-soil erosion Technology improving water-use efficiency in agriculture Modern agro-technology on basis of automation and intelligence Technology support for eco-protection of forestry and grassland Capability for research and development of technology for the prevention and treatment of forest and grassland pests Public welfare eco-forest, speedy and lush growth forest, forest for high-efficiency coke and charcoal, and afforestation technology Education and training for forestry and grassland management Support and training for the protection of eco-system of marshland, mangroves and coral reefs etc Technology for observation, pre-warning and forecast of sea-level rise and coastal and marine eco-environment High-standard dyke and embankment construction technology Research on the impact of global climate change on China’s marine eco-environment Technology for the recovery and reconstruction of marshland, mangrove and coral reefs Technological support for the prevention and treatment of desertification Technology for observation and pre-warning of natural disasters Protection of bio-diversity, construction and preservation of nature reserves, protection of marshland, prevention of and recovery from soil deterioration and other relevant technologies Source: adapted from UNFCCC, 2004, Initial National Communication Technology needs for climate and systematic observation in China Atmospheric observation Marine Observation Terrestrial ecoobservation Meteorological, marine and terrestrial resource satellites Data management Monitoring and detecting of climate change Calculation capacity Personnel training Density increase and improvement of network stations, including technologies and equipment for observation of the earth-surface, boundary between land and atmosphere, water-heat flux exchange, radiation exchange, partitioned observation of atmospheric energy balance, etc. Technology and equipment support for observation and analysis for global and regional atmospheric background and composition Equipment and technological support for selected key meteorological stations for observation of atmospheric chemical composition Technology and equipment support for density-increase construction of observation spots in typical and climate sensitive areas in west China (including exploration by robot plane) Equipment and technology for oceanic observation, radiation parameter, land and oceanic atmosphere boundary related flux and exchange Technology and equipment for monitoring water and carbon circulation on land Equipment and technology for monitoring and observation of typical ecosystems such as agricultural land, forest, grassland, wetland, lake, waste desert and urban areas. Equipment and technology for observation of changes in soil, vegetation and land use Technology and equipment for high spectrum revolving power and highprecision effective load Technology for satellite data acquirements and remote-sensing information collection and reviewing Technology and equipment for quality control, collection, collation, storage and distribution of climate information Technology and equipment for substitute data collection and technology and equipment for extreme weather/climatic events monitoring and prewarning Climate forecasting technology covering multi-strata (atmosphere-landocean) coupling, life-cycle processes and human activity influences Technology for integrating analysis and assessment modelling of influence of climate change High-performance calculation technology and equipment New equipment operation, data analysis and personnel capacity building Source: adapted from UNFCCC, 2004, Initial National Communication References China Daily (2007), Climate change taking toll on glaciers, available at: www.chinadaily.com.cn/china/2007-07/17/content_5437262.htm. 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