1 November 2012 — Frankenstorm Sandy has just wiped out at least $45 billion of buildings and infrastructure in the US and yet the state governments of Victoria, NSW and now Queensland have wound back their coastal planning controls.
The dangerous moves by the states was noted by Climate Institute chief executive officer John Connor days after releasing a report that found Australia’s infrastructure was unprepared for climate change impact and the property sector not much better.
Mr Connor said the Council of Australian Governments needed to see “all governments lift their game”.
Likewise the Commonwealth’s response to the Productivity Commission’s report on barriers to adaptation.
A risk for business was “greater intervention from insurance companies and superannuation funds, who are beginning to realise the cost implications and legal responsibilities of climate risks”.
The new report Coming Ready or Not: Managing Climate Risks to Australia’s Infrastructure, was prepared in partnership with Mirvac and Manidis Roberts, and includes case studies from Mirvac, Westpac, AGL, City of Melbourne, Department of Transport Victoria and VicRoads.
Mirvac chief operating officer Gary Flowers said there was a need to future proof assets from climate impact.
“As a major real estate group we want the infrastructure we invest in to last, so it makes sense to account for future risks in that equation. By participating in this study Mirvac hopes to encourage others to start considering the challenges ahead,” Mr Flowers said.
According to Mr Connor, Sandy had provided a “tragic and costly lesson” in the consequences of lack of preparation for climate change and the harsh reality was that Australia’s electricity, transport, property and financial infrastructure is mostly underprepared.
“Even the Asian Century White Paper released on Sunday noted that climate change was likely to add to the frequency and severity of disasters,” Mr Connor said.
“Our report revealed that government policy is fragmented and the business response uneven.
“Last week a report by Baker & McKenzie argued that trustees in charge of Australia’s $1.4 trillion in superannuation who failed to consider climate change risk may be in breach of their fiduciary duties.
“In September, Global reinsurer Munich Re reported that it was seeing the initial footprint of climate change in loss data.
“It has since been reported stating that Australia’s weather-related losses rose more than fourfold in the 1980-2011 period (in inflation-adjusted terms), a pace only exceeded among the continents by North America.
The report calls for governments “to integrate climate risk management into nationally co-ordinated policies and regulations”.
The institute says the annual costs of unmitigated climate change on Australia’s infrastructure would reach 0.5 per cent of GDP, about $9 billion, in 2020 and 1.2 per cent of GDP, $40 billion, in 2050.
According to the report, Australia is among the developed countries most vulnerable to climate change:
- Our climate is highly variable and predisposed toward extreme weather events, and our ecosystems are finely balanced and often unique.
- Most of the country’s population lives in coastal cities exposed to rising sea levels and connected by infrastructure exposed to the full range of weather conditions. Climate change will have direct economic costs for Australia that need to be managed.
- As global emissions and temperatures rise, so do the costs of adaptation, and the risks of getting it wrong.
- For a global temperature rise of less than 2°C, climate impacts must at least be integrated to infrastructure design, construction, maintenance, operations and regulations as a matter of routine.
- For a world where global warming is greater, we need this and much more: radical realignment of exposed infrastructure, alternative pathways for essential services and dramatic transformation of how and where we live and work.
The report says with strong national wealth and experience living with a highly variable climate, Australia should be better placed to manage climate risk than many other countries.
“However, with some exceptions, our preparedness is patchy and we are not using our strengths as we should.”
The report focused on infrastructure because this was “a critical enabler for activity across all sectors of the economy, and because its exposure to climate change puts other parts of society at risk.”
Modelling for the 2008 Garnaut Review conservatively estimated that the annual costs of unmitigated climate change on Australia’s infrastructure would reach 0.5 per cent of GDP, about $9 billion, in 2020 and 1.2 per cent of GDP, $40 billion, in 2050.
Globally, climate change is already costing an estimated $US1.6 trillion per year, rising to over $US4 trillion by 2030.2, the report said and some warming was already locked in, which would lead to “not just warmer but wilder weather”.
The report says most infrastructure assets are intended to last for many decades including:
- electricity networks – 60 years
- buildings – more than 100 years
- bridges and dams – 200 years.
Mr Connor said the report was prepared against a backdrop of recurring news stories of climate-related damage and destruction in the United States.
“Stories of temperature records being broken across the country were joined by reports of a ‘flash drought’ withering corn and soybean crops and increasing global food prices,” he said.
“The impacts of what became recognised as the United States’ hottest summer since records began were also felt by the country’s infrastructure: roads buckled, rail bridges collapsed and power plants were forced to shut down because cooling water was too warm.
“Here in Australia, we have recent memories of similar experiences. Moreover, it is becoming increasingly clear that, even with concerted global action to reduce carbon pollution, we are feeling the symptoms and costs of early climate change. More is on the way.”
Case study from the report, on property
Improvements in energy efficiency in Mirvac’s investment portfolio have reduced Mirvac’s carbon footprint as well as the company’s exposure to some climate impacts in the electricity sector. Since 2009, Mirvac has reduced the energy intensity of its assets by 34 per cent and carbon intensity by 36 per cent while increasing group revenue and NLA by more than 91,000 square metres.
For some assets, operating expenses were considerably lowered through energy efficiency projects with minimal capital investment.
Enterprise risk management
Mirvac’s enterprise risk management system registers consideration of 11 physical climate impacts in the management of both operational and project based risk. In 2011 Mirvac completed a climate risk assessment of its assets across its investment and development divisions. In assessing Mirvac’s adaptive capacity, the report considered potential physical impacts of climate change, together with the Australian regulatory and business operating context. The physical impacts considered include temperature rise, extreme weather events, precipitation changes and increase in sea level.
Data for the assessment used a “moderate” emissions scenario from the IPCC [Intergovernmental Panel on Climate Change]. A sea level rise of 0.8metres to 2100 was assumed, in alignment with coastal zone planning guidance adopted by various Australian states.
Under this assessment, existing property investments were examined against key climate risks, with some variance in adaptive capacity to specific risks dependent upon: the age, structure and size of the asset; existing design elements (energy efficiency); and any planned future capital upgrades.
Therefore whether older assets should be upgraded to increase resilience will be dependent upon the expected life of the asset, cost of the upgrade, effectiveness of the adaptation measures, the overall vulnerability of the asset, and the strategic role of the asset within the property portfolio.
Mirvac chief operating officer Gary Flowers said:”Buildings are an important part of our national infrastructure and we need to account for the long term future of these assets. Companies that seek to play a role in providing Australia’s infrastructure should consider climate within a suite of key risks to deliver a quality, future-proof product.”