Sea Level Rise Learning Scenarios for Adaptive Decision-Making Based on IPCC AR6

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Adaptation decision-scientists increasingly use real-option analysis to consider the value of learning about future climate variable development in adaptation decisions. Toward this end learning scenarios are needed, which are scenarios that provide information on future variable values seen not only from today (as static scenarios), but also seen from future moments in time. Decision-scientists generally develop learning scenarios themselves, mostly through time-independent (stationary) or highly simplified methods. The climate learning scenarios thus attained generally only poorly represent the uncertainties of state-of-the-art climate science and thus may lead to biased decisions. This paper first motivates the need for learning scenarios by providing a simple example to illustrate characteristics and benefits of learning scenarios. Next, we analyze how well learning scenarios represent climate uncertainties in the context of sea level rise and present a novel method called direct fit to generate climate learning scenarios that outperforms existing methods. This is illustrated by quantifying the difference of the sea level rise learning scenarios created with both methods to the original underlying scenario. The direct fit method is based on pointwise probability distributions, for example, boxplots, and hence can be applied to static scenarios as well as ensemble trajectories. Furthermore, the direct fit method offers a much simpler process for generating learning scenarios from static or “ordinary” climate scenarios.

Völz, V., & Hinkel, J. (2023). Sea level rise learning scenarios for adaptive decision-making based on IPCC AR6. Earth’s Future, 11, e2023EF003662. https://doi.org/10.1029/2023EF003662

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International Monetary Hierarchy through Emergency US-Dollar Liquidity. A Key Currency Approach (Competition and Change)

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Steffen Murau, Fabian Pape and Tobias Pforr

The notion that the international monetary system is hierarchical has become increasingly common, but the nature, causes, and shape of international monetary hierarchy remain vague. In this article, we develop a monetary theory of international hierarchy based on the “key currency” approach. We perceive the international monetary system as a world-spanning payment system that is inherently hierarchical because it needs central nodes for clearing and settlement. The centrality of the US-Dollar (USD) as global key currency places the US at the apex and makes the Federal Reserve (Fed) the system’s hierarchically highest institution. Other monetary jurisdictions are pushed into peripheral positions and rely on both using and creating USD-denominated credit money instruments “offshore.” Based on this approach, we explain international monetary hierarchy through different mechanisms to supply emergency USD liquidity from the Fed to non-US central banks. Currently, there are three different public mechanisms for non-US central banks to access the Fed’s balance sheet and attain emergency USD liquidity. The first-layer periphery may receive emergency USD liquidity via the Fed’s central bank swap lines. The second-layer periphery can make use of the Fed’s new repo facility for Foreign and International Monetary Authorities to access emergency USD liquidity. The residual mechanism for the third-layer periphery to access emergency USD liquidity is the Special Drawing Rights system, administered by the International Monetary Fund, in which the Exchange Stabilization Fund acts as gatekeeper for the Fed.

Murau, Steffen, Fabian Pape, and Tobias Pforr (2023) ‘International Monetary Hierarchy through Emergency US-Dollar Liquidity. A Key Currency Approach’, Competition and Change 27(3-4), pp. 495–515, doi: 10.1177/10245294221118661.

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Co-creating a coastal climate service to prioritise investments in erosion prevention and sea-level rise adaptation in the Maldives

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While the prioritisation of scarce resources for climate adaptation is becoming a priority for low and middle income countries, the climate service literature addressing adaptation prioritisation decisions is scarce. This paper contributes to filling this gap by presenting a co-creation process carried out in the Maldives among representatives of government, civil society and researchers. Together, we identified the need to improve a ranking method currently used by the Maldivian government to prioritise islands for investments in erosion prevention. As a solution we developed a layered index. The first layer of this index captures the objective dimension of the problem through an erosion hazard subindex, using the three variables wave energy, reef health and reef flat minimum width. The second layer captures the normative dimension through a multi-criteria analysis using the erosion hazard subindex as one criterion next to other stakeholder selected criteria such as critical infrastructure, economic activity, per capita income and the potential to house additional people that resettle from riskier places as sea-level rise progresses. Results of this new ranking method show that socioeconomic criteria were considered more important by the stakeholders than the biophysical criterion of erosion hazard. Among the top-ranked islands are many regional centres but also less populous islands that have a large potential to house additional people. Lessons learnt from the co-creation process highlight the importance of assembling interdisciplinarity teams, fostering mutual learning among project participants, and designing research projects that do not prescribe upfront the exact problems to be addressed and methods to be applied.

Hinkel, J., Garcin, M., Gussmann, G., Amores, A., Barbier, C., Bisaro, A., Cozannet, G. L., Duvat, V., Imad, M., Khaleel, Z., Marcos, M., Pedreros, R., Shareef, A., & Waheed, A. (2023). Co-creating a coastal climate service to prioritise investments in erosion prevention and sea-level rise adaptation in the Maldives. Climate Services, 31, 100401. https://doi.org/10.1016/j.cliser.2023.100401
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Climate learning scenarios for adaptation decision analyses: Review and classification

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Economic decision analysis is an important tool for developing cost-efficient adaptation pathways in sectors that involve costly adaptation options, such as flood risk management. Standard economic approaches, however, do not consider learning about future changes in climate variables even though a large literature on adaptive planning emphasises the key role of learning over time, because uncertainties about climate change are substantial. An emerging, diverse and fragmented set of economic adaptive decision making approaches, coming under labels such as real-option analysis or optimal control, have started to address this challenge by including the economic valuation of learning in the economic appraisal of adaptation options through making use of so-called climate learning scenarios. We synthesise this literature and classify the climate learning scenarios applied with respect to which climate variable is learned about, which learning sources are employed, how the learning is modelled, which climate data is used for calibrating learning scenarios, which goodness of fit information is provided and how deep uncertainty is handled. Our results show that publications consider learning through observations or do not explicitly state the source of learning. Most authors generate climate learning scenarios through stochastic processes or Bayesian approaches and use climate model output from the IPCC or the UK Met Office to calibrate the learning scenarios. The reviewed literature rarely provides information on the goodness of fit of learning scenarios to the underlying climate data. We conclude that most of the methods used to generate climate learning scenarios are not well-grounded in climate science and are inadequate to represent climate uncertainty. One avenue to improve climate learning scenarios would be to combine a Bayesian approach with emulators that mimic climate model runs based on observations from future moments in time.

Völz V., Hinkel J., Climate learning scenarios for adaptation decision analyses: Review and classification, 2023, Climate Risk Management, https://doi.org/10.1016/j.crm.2023.100512.

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Decision-support for land reclamation location and design choices in the Maldives

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Land reclamation in the Maldives is widespread. Current land reclamation practices, however, lack a systematic approach to anticipate sea-level rise and do not account for local flood risk differences to inform location and design choices. To address these limitations, this paper applies two decision-support tools: a hazard threshold analysis, and a cost-benefit analysis. Both tools produce site-specific estimates of land elevations or flood defence heights but do so for different goals. The hazard threshold analysis identifies hazard-based solutions that meet an acceptable flood probability for an intended lifespan without follow-up actions by reliability optimisation. The cost-benefit analysis identifies risk-based solutions using dynamic programming. We apply both tools to two land reclamation sites, a newly reclaimed airport island and a land extension of an inhabited island, in the Maldives. We find that total hazard-based heights for long-term planning horizons are highly uncertain, with local height differences of up to 1.9 m across sea-level rise scenarios by 2100. Risk-based Island elevations, in contrast, differ much less across scenarios, offering a practical advantage for decision-making. However, land reclamation choices on location, land elevation and investment in flood protection are not only driven by hazard-related aspects, such as reef characteristics, swell exposure, and sea-level rise, but also by estimates of exposed assets, reclamation, and flood protection costs. Taken together, the two decision-support tools are helpful for improving adaptation decisions and are also applicable in other small island regions.

Van der Pol T., Gussmann G., Hinkel J., Amores A., Marcos M., Rohmer J., Lambert E., Bisaro A., 2023, Decision-support for land reclamation location and design choices in the Maldives, Climate Risk Management, https://doi.org/10.1016/j.crm.2023.100514

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New GCF study on climate change impacts on Pari island (Indonesia)

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(German version below)

In a new study, scientists from the GCF examine the current and future effects of anthropogenic global warming on the Indonesian island of Pari. The focus is on sea level rise as this is responsible for much of the climate change impacts on low-lying coral reef islands as Pari. In particular, the study examines two questions:

Can it be determined whether there is an significant likelihood that human-caused global warming and associated sea-level rise have caused, and will cause, climate change-related impacts and damage in the future?
Can it be quantified what proportion of historical and future flood damage can be attributed to anthropogenic global warming?

The study was commissioned by the Swiss Evangelical Reformed Church (HEKS) and is intended to support decision-making processes with regard to the effects of climate change and sea level rise on small islands and specifically on the island of Pari in Indonesia. The background is a lawsuit by four Indonesians against the concrete producer Holcim.

The full study can be viewed here.


Neue GCF Studie zu Auswirkungen des Klimawandels auf der indonesischen Insel Pari

In einer neuen Studie untersuchen Wissenschaftler und Wissenschaftlerinnen vom GCF die heutigen und zukünftigen Auswirkungen der menschengemachten (anthropogenen) Klimaerwärmung auf die indonesische Insel Pari. Der Schwerpunkt liegt dabei auf dem Meeresspiegelanstieg, weil dieser für einen Großteil der klimawandelbedingten Auswirkungen auf niedrig gelegene Korallenriffinseln (wie Pari) verantwortlich ist. Insbesondere untersucht die Studie zwei Fragen:

Läßt sich feststellen, ob es eine überwiegende Wahrscheinlichkeit gibt, dass die menschengemachte Klimaerwärmung und der damit verbundene Meeresspiegelanstieg zu klimawandelbedingten Auswirkungen und Schäden geführt haben, und in der Zukunft zu Schäden führen werden?
Kann quantifiziert werden, welchen ursächlichen Anteil die menschengemachte Klimaerwärmung an historischen Flutschäden und zukünftig zu erwartenden Flutschäden hat?

Die Studie wurde vom Hilfswerk der Evangelisch-reformierten Kirche Schweiz (HEKS) in Auftrag gegeben und soll Entscheidungsprozesse im Hinblick auf die Auswirkungen des Klimawandels und des Meeresspiegelanstiegs für kleine Inseln und speziell für die Insel Pari in Indonesien unterstützen. Hintergrund ist eine Klimaklage von vier Indonesier:innen gegen den Betonproduzenten Holcim.

Die vollständige Studie kann hier eingesehen werden.

Public Sustainable Finance. Von nachhaltigen Finanzmärkten zur sozialökologischen Transformation (Vierteljahrshefte zur Wirtschaftsforschung)

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Phillip Golka, Steffen Murau and Jan-Erik Thie

In this article, we argue for “public sustainable finance,” in which the state has a central role to play for maximum transformational impact. To date, sustainable finance has focused on ESG criteria, divestment, voting, engagement, and impact investing. The goal is to mobilize private capital by “de-risking” private investments through public funds. Government action in the form of direct financing is not considered in the current discussion on sustainable finance. We argue this is due to an implicit reference to mainstream economic theory: according to the New Consensus model, an overly active state leads to time inconsistency problems and crowding out effects. The theoretical assumptions are also reflected in the current institutional framework in the form of the EU’s Maastricht Treaty and the German debt brake. However, these assumptions based on the loanable funds theory have been sufficiently refuted in recent years. Loans arise out of thin air and can provide additional public investments, which in turn lead to increased private investment (crowding in). It is true that a reform of the debt brake is unlikely at present. However, public investments in climate protection and renewable energy can be made possible within the current debt brake regime by means of exceptions. To this end, we propose that the Climate and Transformation Fund (KTF) be given its own borrowing powers. By borrowing 162 billion euros by 2030, the existing financing gap can be closed and important investments in the future can be made.

Golka, Philipp, Steffen Murau, and Jan-Erik Thie (2023) ‘Public Sustainable Finance. Von nachhaltigen Finanzmärkten zur sozialökologischen Transformation’, Vierteljahrshefte zur Wirtschaftsforschung, 92 (1), pp. 97–112, doi: 10.3790/vjh.92.1.97

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Making the UN Ocean Decade work? The potential for, and challenges of, transdisciplinary research and real-world laboratories for building towards ocean solutions

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  1. Due to the strong interconnectedness between the ocean and our societies worldwide, improved ocean governance is essential for sustainable development in the context of the UN Ocean Decade. However, a multitude of different perspectives—ecological, societal, political, economic—and relations between these have to be understood and taken into consideration to foster transformative pathways towards marine sustainability.
  2. A core challenge that we are facing is that the ‘right’ response to complex societal issues cannot be known beforehand as abilities to predict complex systems are limited. Consequently, societal transformation is necessarily a journey towards the unknown and therefore requires experimental approaches that must enable the involvement of everyone with stakes in the future of our marine environment and its resources.
  3. A promising transdisciplinary research method that fulfils both criteria—being participatory and experimental—are real-world laboratories. Here, we discuss how real-world labs can serve as an operational framework in the context of the Ocean Decade by facilitating and guiding successful knowledge exchange at the interface of science and society. The core element of real-world labs is transdisciplinary experimentation to jointly develop potential strategies leading to targeted real-world interventions, essential for achieving the proposed ‘Decade Outcomes’.
  4. The authors specifically illustrate how deploying the concept of real-world labs can be advantageous when having to deal with multiple, overlapping challenges in the context of ocean governance and the blue economy.
  5. Altogether, we offer a first major contribution to synthesizing knowledge on the potentials of marine real-world labs, considering how they act as a way of exploring options for sustainable ocean futures. Indeed, in the marine context, real-world labs are still under-explored but are a tangible way for addressing the societal challenges of working towards sustainability transformations over the coming UN Ocean Decade and beyond.

Franke, A., Peters, K., Hinkel J., Hornidge, A., Schlüter, A., Zielinski, O., Wiltshire, K., Jacob, U., Krause, G., Hillebrand. H., 2022. Making the UN Ocean Decade work? The potential for, and challenges of, transdisciplinary research and real-world laboratories for building towards ocean solutions. People and Nature. https://doi.org/10.1002/pan3.10412

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The macroeconomic effects of adapting to high-end sea-level rise via protection and migration

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Climate change-induced sea level rise (SLR) is projected to be substantial, triggering human adaptation responses, including increasing protection and out-migration from coastlines. Yet, in macroeconomic assessments of SLR the latter option has been given little attention. We fill this gap by providing a global analysis of the macroeconomic effects of adaptation to SLR, including coastal migration, focusing on the higher end of SLR projections until 2050. We find that when adapting simultaneously via protection and coastal migration, macroeconomic costs can be lower than with protection alone. For some developing regions coastal migration is even less costly (in GDP) than protection. Additionally, we find that future macroeconomic costs are dominated by accumulated macroeconomic effects over time, rather than by future direct damages, implying the need for immediate adaptation. Finally, we demonstrate the importance of including autonomous adaptation in the reference scenario of economic assessment studies to avoid overestimation of adaptation benefits.

Bachner, G., Lincke, D. & Hinkel, J., 2022. The macroeconomic effects of adapting to high-end sea-level rise via protection and migration. Nat Commun 13, 5705. https://doi.org/10.1038/s41467-022-33043-z

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New working paper: Klaus Hasselmann and Economics

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Klaus Hasselmann has earned the 2021 Nobel prize in physics for his breakthroughs in analysing the climate system as a complex physical system. Since decades, as a leading climate scientist he is aware of the need for creative cooperation between climate scientists and researchers from other fields, especially economics. To facilitate such cooperation, he has designed a productive research program for economic analysis in view of climate change. Without blurring
the differences between economics and physics, the Hasselmann program stresses the complexities of today’s economy. This includes the importance of heterogeneous actors and different time scales, of making major uncertainties explicit and bringing researchers and practitioners in close interaction. The program has triggered decades of collaborative research, especially in the network of the Global Climate Forum, that he has founded for this purpose. Research inspired by Hasselmann’s innovative ideas has led to a farewell to outdated economic approaches: single–equilibrium models, a single constant discount rate, framing the climate challenge as a kind of prisoner’s dilemma and framing it as a problem of scarcity requiring sacrifices from the majority of today’s population. Instead of presenting the climate problem as the ultimate apocalyptic narrative, he sees it as a challenge to be mastered. To meet this challenge requires careful research in order to identify underutilisation of human, technical and social capacities that offer the keys to a climate friendly world economy. Climate neutrality may then be achieved by activating these capacities through investment–oriented climate strategies, designed and implemented by different actors both in industrialised and developing countries. The difficulties to bring global greenhouse gas emissions down to net zero are enormous; the Hasselmann program holds promise of significant advances in this endeavour.
Access the paper HERE or through the link in the title.