How climate change creates a decision-making problem

The characteristics of the climate change and its impacts discussed in Section 2.1 create a number of changing conditions that intersect with the activities that decision makers need to address in the present and for the future.

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The IPCC report on managing extreme events and disasters to advance adaptation to climate change (IPCC, 2012) conveyed the inter-relationships between the climate and human systems that give rise to the decision-making challenge. Figure 2.4, as elaborated by the IPCC (2014a), shows how risk of climate-related impacts results from the interaction of climate-related hazards (hazardous events and trends) with the vulnerability and exposure of human and natural systems.

Changes in the climate system shown on the left of the diagram and socio-economic processes like adaptation and mitigation on the right drive hazards, exposure and vulnerability.

Figure 2.4 Risk is a combination of climate hazard, exposure and vulnerability in a socio-economic system

Source: SPM1 (IPCC, 2014).

Illustration of the core concepts of the WGII AR5. Risk of climate-related impacts results from the interaction of climate-related hazards (including hazardous events and trends) with the vulnerability and exposure of human and natural systems. Changes in both the climate system (left) and socioeconomic processes including adaptation and mitigation (right) are drivers of hazards, exposure and vulnerability. [19.2, Figure 19.1]

The role played by values and aspirations in people’s perception of risk and their ability to imagine the future with climate change is considered pivotal for responding to change (IPCC, 2012). This highlights the complex interactions between people, their socio-economic context, their environment and their ability to respond.

The significance of these inter-relationships for decision making about climate change adaptation is demonstrated by a number of societal characteristics and trends. For example, half the world’s population resides in urban centres where most assets are located and economic activities take place (World Bank, 2010a). A high proportion of those most affected by extreme weather events

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are located in urban centres (IFRC, 2010). Ten percent of the world’s population and 13% of the world’s urban population are located in the Low Elevation Coastal Zone, defined as the contiguous area along the coast that is less than 10 metres above sea level (McGranahan et al., 2007). A large number of the world’s population are located in low-lying areas adjacent to major river systems which will be exposed to increased frequency and intensity of rainfall events and resulting flood impacts (IPCC, 2012).

Such exposure of people has increased the damages from climate events over time (Lloyds, 2008).

There has also been an upward trend in climate-related events, like flooding (Munich Re Group, 2007). For example, globally in 2013, floods caused 47% of the overall losses and 45% of the insured losses in the first six months alone (Munich Re Group, 2013); 2011 was the year with the highest-ever economic losses recorded for the reinsurance industry at US$265 billion up to the end of June 2011—half of these were from weather events. The World Bank (2010b) has recognised the potential for increasing damage over time by signalling concern that climate change could increase damage from extreme events, tripling in dollar terms over the next 30 years as a result of current economic development pathways and population trends. Hanson et al. (2011) estimate that, with only a 0.5 metre rise in sea level, the population at risk would more than triple, and asset exposure increase by more than 10 times, by the 2070s when taking economic growth, sea-level rise, storm surge and subsidence into account. The level of damage and societal disruption from changing climate will also be influenced by the geographical, social and economic characteristics of specific localities (Adger, Agrawala, Mirza et al., 2007).

This picture suggests that the decision-making problem can be framed in terms of the capacity of institutions to address uncertainty and dynamic climate change that manifests in widespread damages. Dovers and Hezri (2010), in a review of the adaptation literature for coverage of policy and institutions, characterised three possible future climate conditions that make climate change especially challenging for decision makers. They highlighted the critical need to understand decision challenges that flow from the possible climate conditions in relation to institutional capacity.

In the first set of conditions, climate changes are similar to existing climate variability and so, current institutional and organisational capacity and societal memory is sufficient to make adaptive decisions. A middle range of conditions have climate variability and consequent impacts significantly greater than the ranges in climate currently experienced and, while not outside historical or institutional experience, will be challenging because difficult adjustments will be necessary. In the third set of conditions, the climate changes and variability will be beyond lived

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experience and institutional memory and thus well outside current experience and, as such, will involve regime shifts and political instability that challenge institutions’ and society’s ability to cope at a fundamental level. Describing possible future climate conditions in terms of institutional and societal capacity enables a link to be made between institutional analysis and the type of responses required; for example, the response typology of routine, non-routine and complex unbounded disasters described by Handmer and Dovers (2013).

The decision problem caused by the intersection of climate change characteristics with the institutions for addressing climate changes has been examined in the literature, and can be summarised as five main themes. First, climate change is a long-term problem. Sprinz (2009) defines such a policy challenge as characterised by public policy issues that last at least one generation, exhibit deep uncertainty that is exacerbated by time and that engender public good considerations both at the stage of problem generation, as well as at the response stage. Hovi, Sprinz & Underdal (2009) suggest that developing effective long-term responses under great uncertainty and implementing a strategy consistently over time, is difficult because of commitment problems due to time-inconsistency; where the causes and effects of climate change and decisions about their effect are separated in time, and domestic politics have a short-term focus. Decisions that result in long-term spatial commitments that persist over many decades or centuries are particularly at risk (Auld & Maciver, 2006; Stafford Smith et al., 2011). Examples include decisions on infrastructure, the location of urban development and underground network utilities.

Second, risk is changing over time due to changes in the climate and by greater exposure of people to the risk, which is exacerbated where there have been low levels of adaptation to past changes in risk (Burton, 2009). Coping strategies typically do not address future accelerated climate changes or the reduction of exposure to risk over long timeframes by changing system conditions or institutions (Pelling, 2011). The legal instruments of practice are also limited in their ability to manage change over time as discussed by Ruhl (2012):

First, dynamic, changing conditions in which uncertainty is high give law the jitters.

The central theme of panarchy theory is that successfully working with the dynamic forces of complex adaptive natural and social systems demands an active adaptive management regime that eschews optimization approaches seeking stability (Holling, Gunderson, & Ludwig, 2002). Yet one of the principal goals of law is to establish and maintain the relatively stable contexts within which other social systems...can operate over time. (p. 2)

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Third, decision makers have no or very little experience with the climate change futures envisioned by the research community, especially at the extremes (Kousky, Pratt, & Zeckhauser, 2010) and perceive the change as a ‘distant threat’ (Weber, 2006). The prospect of surprises and thresholds over which new system dynamics could develop (Gunderson & Holling, 2002;

Scheffer, 2009) and make conditions worse than expected, and the fact that sea-level rise will continue for centuries even with greenhouse-gas emissions reductions, makes the decision makers’ challenge even more complex. For example, the ‘certainty’ created from the protection afforded by sea walls and flood levees can give a false sense of security because they cannot hold the line forever (Burby, 2006).

Fourth, there are added policy and implementation risks if decisions are taken too early or too late; there will be increased costs to either present or future generations. Tobin (1995) coined the phrase ‘levee effect’ to describe the increased path-dependency and increased exposure of communities to risk, as development in the ‘protected’ area becomes entrenched, thus reducing flexibility over time to adjust to changing conditions. This has been described as maladaptation (Barnett & O'Neill, 2010); the maladaptation transfers the risk within current and to future generations in a more costly form than may otherwise have been the case; and externalises costs to the public not affected by the impacts, either within or between generations, thus creating a public good problem (Sprinz, 2009). Where the risks are not made transparent there is also the potential for ‘non-adaptation’, where responses don’t keep up with climate change impacts, and additional maladaptation where responses lead to the capacity to adapt being undermined (Niemeyer, Petts, & Hobson, 2005).

Fifth, contestation of climate change has seen the national level of governments sceptical of climate change, evidenced by decision-making ‘flip-flop’ according to political philosophy and sector-group pressure. At the local level this is reflected in slow and difficult decision making (McDonald, 2007) leading to delay in adaptation decisions that constrains the ability to adapt flexibly. Political unwillingness of decision makers to address climate change effects over timeframes beyond their term of office at all scales of government, has led to compromise within short electoral cycles, particularly when decision makers are under ‘fire’ from groups with short-term private interests (Handmer, 2008; McDonald, 2011). These types of condition, in association with uncertainty and ambiguity, have led to calls for decision-making procedures that go beyond conventional risk management practice. As a result, risk and adaptive governance frameworks have been developed to address the associated ethical issues, such as who pays and who is affected within society and how to address them through stakeholder and public deliberation that can reflect different societal values (Renn, & Schweizer, 2009; Klinke, & Renn, 2012).

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The themes discussed here come together to make climate change especially challenging for decision makers: uncertainty and dynamic change escalating climate impacts; changing societal characteristics and values; the continuous nature of change; and the lifetime of decisions increasing exposure of people and assets thus creating path-dependency; the perception that climate change is a distant threat; public good issues that arise within and between generations; and political economy issues related to short electoral cycles.

Decision makers already work within a constantly changing environment and have experience in decision making under uncertain conditions. But it is not apparent whether this experience prepares decision makers for making climate change adaptation decisions that are robust and flexible over long timeframes. Are decision makers able to address the type of changes described above over the long-term in order to reduce exposure to the costs of damages before extreme events occur?

Importantly, since decision makers operate within institutional frameworks, can the current institutional framework and practice to manage the risks from climate change, operate effectively within the complex changing environment? How can the institutional frameworks and decision processes be designed to adjust activities over time to enable the impacts of changing climate to be managed as society also changes? A detailed examination of these questions is the subject of this thesis. Every institutional context differs. New Zealand’s is described in the next section as the empirical basis for answering these questions.