Climate model outputs are important inputs to some long-term infrastructure decision making. Some port facilities planning and coastal zones management activities are cognizant of potential climate and sea-level changes. But the use of climate and sea-level information is heterogeneous, and there are major national and private investments being made without regard to the fact that much of their planned usage could occur with a very different climate or sea level.
Climate projections are also important to ongoing decisions regarding energy. For example, winter electric power demand and spring and annual hydropower production in the Pacific Northwest are related to both El Niño and the Southern Oscillation (ENSO) and the Pacific Decadal Oscillation (PDO) through variations in winter climate (Voisin et al., 2006). The out-of-phase nature of electricity generation and demand between the Pacific Northwest and California, particularly in spring and summer, provides an opportunity for transfers of hydropower between the two. Forecasts of ENSO and PDO, then, can provide an economic benefit as well as a planning tool.
Insurance and Reinsurance
An important function of the insurance sector is to manage the risk of adverse, weather-related events. The sector insures owners of resources against the effects of events such as floods, hurricanes, and other severe storms. Systematic changes in the frequency and/or intensity of such events are of direct interest to the financial integrity of the sector. Many of the costs of climate change, particularly unanticipated climate change, could be reflected and concentrated in this sector of the economy.
The insurance sector is potentially affected by climate change in its role as a risk manager for economic agents. The sector has been aware that a changing climate could have important effects for years. The consideration is raised in the Intergovernmental Panel on Climate Change’s (IPCC’s) Second Assessment Report (IPCC, 1995). Insurers and reinsurance companies have taken note of the possible increasing trend in weather-related disasters. Munich Re, a reinsurer based in Germany, has indicated that this trend is associated with climate change and monitors the trend very closely.1 There is a controversy over whether or not the trend is significant globally; however, there is little dispute that the trend is apparent in data for the United States (Barthel and Neumayer, 2012).
1http://www.munichre.com/en/media_relations/company_news/2010/2010-11-08_company_news.aspx (accessed October 11, 2012).