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Climate Change

"We have avoided the unmanageable”

Not long after the Climate Summit in Paris, Hans Joachim Schellnhuber, Director of the Potsdam Institute for Climate Impact Research, and Peter Höppe, Head of Munich Re’s Geo Risks Research/Corporate Climate Centre, met to discuss the results.

02.03.2016

"We have avoided the unmanageable!"
Hans Joachim Schellnhuber, Director of the Potsdam Institute for Climate Impact Research, and Peter Höppe, Head of Geo Risks Research/Corporate Climate Center at Munich Re.

Peter Höppe: You participated in many events at the Climate Summit in Paris. What is your overall assessment of its outcome?

Hans Joachim Schellnhuber: In a nutshell, the spirit of Paris has defeated the ghost of Copenhagen. But we still need to do a lot and we can achieve a lot.

PH: I was surprised that the 195 countries would even agree to tighten the two-degree limit, let alone put “well below two degrees” in the agreement. How will we now have to shape regulations to achieve this?

HJS: In a way, the politicians got slightly carried away by their love of the climate, but I’m saying this with a smile. It is entirely appropriate to try to land Planet Earth somewhere between 1.5 and two degrees. However, I’m only tolerably pleased with the plan to come to zero net CO2 emissions by 2070 to 2080. Because when you really convert the Paris Agreement into scenarios for emissions, you come to the robust conclusion that you already have to phase out CO2 emissions between 2050 and 2070. That is the crux of the matter.

PH: Apart from mitigation, adapting to the unavoidable consequences of climate change takes up a lot of space in the Paris Agreement. The US$ 100bn to support developing countries have been confirmed again, which is very important. But what else is necessary to become more resilient against the effects of climate change?

HJS: In my view, the key phrase is capacity-building. It’s not just about money. Recently, I went to Cameroon, where they told me: “When the British left the country in the 1960s, we had 49 meteorological stations. Now we have just three left at the big airports.” So we need capacity-building, which enables the countries to absorb the money, the help and the expertise. In countries like those in sub-Saharan Africa this is absolutely key.

PH: In Article 8 of the Paris Agreement, insurance is mentioned as a potential solution in the framework of climate change adaptation. In your new book, Self-Combustion, you use data from Munich Re’s NatCatSERVICE database, showing the trends of natural disasters and the losses they have caused. What role do you see for insurance now, after Paris, in terms of adaptation?

HJS: If we are moving into a new regime of extreme events – and a world two degrees warmer will be a new regime – and if we want to provide the most vulnerable people with a shock-absorbing system, then that can only be done with insurance. The problem is that those people who are most vulnerable will not be able to afford the premiums, so it has to be set up as a global system of solidarity. I wonder whether we could take a more detailed look at who is really affected by extreme events. Can we show from data that the poor are hit hardest?

PH: Yes, we can. We have broken down our data in the NatCatSERVICE database into different income groups. So we have the very poor countries, the middle-income countries and the rich ones. Here we can clearly see that the poorest people are affected most, especially if you relate losses to the GDP of the country, to what they have, to what they can afford.

HJS: In terms of income?   

PH: Right. The rich countries can afford disasters. They have insurance, they have quick access to money to stabilise or even boost their economy. But the poor countries fall into a poverty trap if there is nothing available – like insurance – which can help them get back into business. The other reason why poor countries are more affected by climate change is that most of them are situated in extreme climate zones. Being aware of that, we established the Munich Climate Insurance Initiative about ten years ago. And just before Paris, we saw that the G7 countries – parallel to the climate negotiation process – have decided to initiate a large project on climate risk insurance. Do you see this as a valuable contribution to the whole negotiation process?

HJS: I am really enthusiastic about it actually. And I am so glad it happened just before Paris. It sent the right signal. But let me also refer to something else that we may have to consider: if you talk about adaptation as a global strategy, then I guess the most important adaptation of all is migration. But not everyone has the means to migrate. A lot of people are trapped in risk zones – they have no money, not even information. But I guess if we have two degrees warming, we will have to move people around the planet.

PH: Especially from the small island states.

HJS: The Maldives are doomed, even with well below two degrees, let’s face it. But also other people in other regions are affected by changes in weather patterns or precipitation. So yes, if we want to provide support for people, if we want to absorb shocks, we might have to think about new forms of insurance to make people more mobile, even if this might be going beyond the classic format of insurance.

PH: Munich Re is certainly one of the first movers in this respect. We have provided data on losses and shown that weather-related loss events have already changed, thus creating an awareness of the problem. We are providing new solutions, microinsurance for example. But is there anything else that you would expect in the coming years from the insurance industry?

HJS: First of all, let me re-emphasise that you are a double hero in this game, so to speak. You have indeed provided some of the best data in the world on the development of extreme events and losses, and everyone looks at the tables and charts compiled by Munich Re. You have the climate change unit, and you were among the first to consider new formats and schemes for insuring those who have no chance to be insured under normal conditions. But I think you would complete your mission if you would also think about how to divest from fossil business. You increase your own risks because, in the end, you fund the creation of tropical storms, and that doesn’t make sense.

PH: That’s a point that certainly needs to be looked at. And what about climate research? You have built up one of the most renowned climate impact research institutes in the world. Do you see, after Paris, any necessary changes in the fields of your research?

HJS: Paris is also very good news for climate impact research. I have been in extremely unpleasant situations talking about futures of the planet which are not researchable any more. What can you do with climate impact research when you talk about catastrophic situations? However, we can conduct a very solid impact analysis if we are able to keep global warming well below two degrees, even if this is already quite a departure from the world as we know it. We have avoided the unmanageable now. Or we will at least get a chance to avoid the unmanageable. Now let’s manage the unavoidable.

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