World Economic Forum

“Adapting to Climate Change:
the Challenge to Business”

 Cape Town, South Africa, 13 June 2007

Ladies and Gentlemen,

The international community has now reached a consensus on the fact that increasing emissions of greenhouse gases like carbon dioxide and methane - most of which are linked to the human use of fossil fuels - are causing changes in the global climate systems. Climate change currently poses one of the greatest risks to environmental, social and economic development in both rich and poor countries.

Climate change is emerging as perhaps the most important international challenge of the 21st century. The economic and social welfare of our societies and indeed their long term sustainability is increasingly vulnerable to climate change risks.

The recently published report of the Intergovernmental Panel on Climate Change concludes that there is a “very high confidence” about the fact that increased emissions of Green House Gases like carbon dioxide are of human origin. Developing countries are the most vulnerable and bear the highest risks on their natural resources as climate change and climate variability critically jeopardize their economic development and poverty reduction achievements.

Direct and indirect impacts of climate change severely threaten development efforts. To address these risks, response strategies need to be integrated into the overall development agenda. The Stern Review on the economics of climate change concludes that there is still time to avoid the worst impact of climate change.

In Africa, climate change is already having profound and irreversible impacts on the continent’s economic, social and environmental systems. This is increasingly apparent from the frequency and intensity in the occurrence of natural imbalances and weather related disasters, including recurrent droughts, floods, erratic rainfalls, that threaten human health and infrastructure; agriculture production and food security, water, land and other natural resources sustainability that are key to human survival and economic development.

At the outset we have to recognise that climate change is a phenomenon that occurs in a world that is already severely challenged. This is especially true of Africa where the existence of widespread poverty, hunger and poor health already affect millions of people. All of the prognostications suggest that climate change will particularly worsen the situation of the most vulnerable populations.

Impacts of climate change are inequitable. Poor countries are hit hardest and earliest, while it is the rich countries that are responsible for three quarters of Green House Gases emissions. Africa is particularly vulnerable to climate change because of various factors, such as widespread poverty, the unsustainable use of natural resources, over-dependence on rain fed agriculture, and weak governance structures. Africa is steadily warming, and models predict further increases of temperature and further changes in rainfall patterns.

Key sectors such as agriculture, fisheries, forestry, industry, energy and transport are very sensitive to climate change. Natural disasters destroy strategic national investments in infrastructure while there is lack of insurance to cover the losses. It is estimated that the cost of disasters over the next 20 years will be from 6 to 10 trillion US$, i.e., ten times predicted aid flows. Sea level rise is causing enhanced soil erosion, loss of productive land, increased risks of storm surges, reduced resilience of coastal ecosystems and the attendant costs of responding and adapting to these shocks. Small Island Developing Countries in Africa are particularly vulnerable. Climate change will also negatively affect coral reefs and key ecosystems.

Agriculture is undoubtedly the most important sector in the economies of most non-oil exporting African countries. It constitutes approximately 30% of Africa's GDP and contributes to about 50% of the total export value, with 70% of the continent's population depending on the sector for their livelihood. However, agricultural production has a high dependence on the rain. The debate on climate change and its impacts on agriculture are therefore crucial to the very survival of the continent and its people.

The Stern Report indicates that yields of the key crops across Africa may fall by between 15% to 35% or 5% to 20% (assuming weak or high carbon fertilization respectively) once temperatures reach 3 or 4°C of increase. Climate change is also predicted to decrease - and/or shift - the areas of suitable climate for 81% to 97% of Africa’s plant species. By 2085, 25% to 42% of plant species could no longer have any suitable habitat. Such a decline in productivity would pose a real challenge for the poorest countries, especially those already facing water scarcity. In sub-Saharan Africa, for example, only 4% of arable land is currently irrigated and the effects of climate change may constrain the long-term feasibility of this investment. Some extreme scenarios suggest that by 2100 the Nile could face a decrease in flow of up to 75%, when normal irrigation practices having been found to cease when annual flow is reduced by more than 20%.

Water pressures may be intensified as rainfall becomes more erratic, glaciers retreat and rivers dry up. While there is much uncertainty about the flow of the Nile, several models suggest a decrease in river flow, with several climate scenario impacts ranging from no change to more than 75% reduction in flows by 2100. This will have a significant impact on the millions of people that have competing claims on its supplies. Many large cities in Africa that lie on or very close to the coast could suffer severe damages from sea level rise. According to national communications to the United Nations Framework Convention on Climate Change, a 1 meter sea-level rise (a possibility by the end of the century) could result in the complete submergence of the capital city of Gambia, and losses of more than $470 million in Kenya for damage to three crops (mangoes, cashew nuts and coconuts).

Enhanced investment in water management and water control for agriculture will become even more critical as economies in Africa adapt to climate change. As the expected volatility of rain fed agriculture increases, more pressure will be placed on farming systems that can buffer the inter-annual variability in rainfall patterns.

Water control is the critical input for agriculture-based economies seeking to intensify and diversify.

The role of the individual farmer as investor and manager should never be under-estimated. What is important in adapting farming systems to climate change is the ability of such farmers to invest in the long term. This requires policy and legal provisions that reflect the long term interests of farmers in land and water resources, and effective credit arrangements that appreciate the long term nature of water control investments. Technical and financial assistance from both the public and the private sector will be key.

Ladies and Gentlemen,

Climate change could be the greatest market failure the world has ever seen. Three sets of policies are being developed at international level to effectively address this failure by establishing:

- Cap-and-Trade policies on carbon pricing, taxation, emissions trading and regulation, so that people are faced with the full socio-economic costs of their actions.

- Policies to promote home-grown technological solutions and incentives that will drive the development and deployment of a wide range of low-carbon and high-efficiency products and services.

- Policy measures to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to Climate Change in each sector of the economy.

Effective action requires a global policy response, guided by a common international understanding of the long-term goals for climate policy and strong frameworks for co-operation. Addressing Climate Change typically involves two types of actions:

- Mitigation, by reducing Green House Gases emissions, i.e. investing in a low carbon economic development path, and

- Adaptation, by “climate proofing” economies i.e. increasingly ensuring the development of climate resilient societies.

2005 saw a renewed commitment from donors to help Africa address these problems. The task was graphically described in the Commission for Africa report and the commitments followed at the Gleneagles meeting of the G8 chaired by the United Kingdom. The G8 Meeting in Heiligendamm in 2007 renewed these commitments again. Now we need to make these commitments become a reality.

Ladies and Gentlemen,

Key required actions in Africa include:

- Improving institutional, regulatory and policy frameworks to speed up both public and private sector investments for harnessing available energy resources and promoting increased market penetration of renewable energy sources.

- Supporting the commercial dissemination of renewable energy technologies such as wind energy, solar energy (photovoltaic and thermal), and biomass energy, geothermal and large and small hydro. As a result, there is a need to ensure that national policies and development strategies identify, where and when applicable, renewable energy as a viable option is such areas.

Africa contributes only about 5% to global carbon emissions and hence the potential of attracting carbon finance in the continent is still low compared to other continents. However, FAO can play a leading role in assisting member countries to take advantage of the opportunities for carbon trading opened by the Kyoto mechanisms. Engagement in carbon trading requires associated human and institutional capacities that FAO can assist in building.

Climate change is the consequence of many factors, many of them caused by the human beings. It needs to be tackled by each one of us, and the private sector and business community have a fundamental role to play. FAO is ready to assist in this common endeavour in its field of expertise.

Thank you for your kind attention.

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