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Summary: In addition to possible changes in the frequency and magnitude of "natural disaster" type events such as urban fringe fires, floods, and extreme sea-level events, urban areas and industry will experience a variety of other direct climatic impacts on water and air quality, water supply and drainage, waste disposal, energy production and distribution, minerals production, transport operations, insurance, and tourism. The effects of the direct impacts are likely to be small relative to other economic influences, but the sectors are very large, and the impacts and necessary adaptations may represent major losses and costs. Thus, a moderate degree of vulnerability is present. Adaptations will include improved planning, zoning, and engineering standards that take climate change and sea-level rise into account.
Rising temperatures will lead to reduced heating demand in winter and increased air conditioning demand in summer. Because of the temperate marine climates of coastal Australia and New Zealand, there are relatively smaller demands for heating and air conditioning than in continental climates, and the net impact on the economy is likely to be relatively small. In New Zealand, the expected smaller seasonal variation in demand for electricity would provide an operational gain for the electricity industry. In Australia, the summer seasonal peak from air conditioning would increase, requiring additional peak plant capacity. The efficiency of thermal generation plants decreases with increasing temperature, as does the maximum carrying capacity of transmission lines. Any increase in weather extremes would decrease system reliability (IPCC 1996, WG II, Section 11.5.3). Any changes in rainfall characteristics in hydroelectricity catchments would have impacts on electricity generation operations (see Section 4.3.2.3).
Air pollution from vehicle emissions and industrial processes is primarily a problem of the region's urban areas. The climate affects the photochemical production of secondary pollutants-through sunlight, humidity, and temperature-and the dispersal of source pollutants and photochemical products through winds, rainfall, and atmospheric stability. The severity of photochemical smog episodes is increased by higher temperatures, more sunshine, and lighter winds. Reviews of the impacts of climate change on air pollution for New Zealand (Wratt, 1990) and Australia (SOEC, 1996) note a variety of possible effects, the most certain being the role of increased temperature.
Any increase (decrease) in high rainfall events and runoff would increase (decrease) the risk of breach in sewerage systems (which in some cities, such as Sydney, already are subject to overflow), as well as other waste collection facilities and chemical storage facilities. Conversely, any reduced water flows may result in increased concentrations of chemical and biological toxins in waterways, and vice versa. Nonurban water pollution has been discussed in previous sections; urban-rural interactions may be important with respect to water sources for cities and pollution of natural environments downstream of cities.
As with most other environmental issues, there are many factors involved in air and water pollution, many of which are either more significant or more rapidly changing than climate, and there is great uncertainty about likely climate impacts. In general, the technical means to appraise, monitor, and manage the potential impacts of climate change on air and water quality already are available, if not in place.
The minerals industry (predominantly in Australia) will experience some impacts-depending on the extent of climate change, the environmental conditions at the site, and the nature of the operations. Temperature has a role in process design and operation; rainfall and evaporation affect materials handling, the design and operation of civil structures (pits, drainage systems, tailings and mineral waste disposal, roads, and railways), supplies of surface and groundwater, the quality and disposal of wastewater, management of dust and air quality, and site rehabilitation and revegetation. Storm events (in coastal subtropical regions) and sea level have impacts on ports and other materials transport facilities. Positive and negative impacts may be expected. These impacts also will depend on minerals demand; government policy, especially in respect to fuels and climate change; and knowledge of the impacts and possible adaptation options. Because of the size of the industry, any impacts would have significant consequential effects on the Australian economy.
Because of the region's relatively high frequency of climatic and other natural hazards (Pittock et al., 1997), insurance against extreme events is especially important; the cost of insured catastrophes in Australia is at least 12% of the costs of non-life insurance premiums, whereas globally the corresponding figure is only 2.5% (IPCC 1996, WG II, Section 17.5). However, in Australia, private insurance has never been available for flood damage to domestic dwellings and small businesses, presumably because the risks are too high-though assistance may be made available under National Disaster Relief arrangements. The cost of insurance in the region has risen already because of increasingly large losses in the international reinsurance market from recent, mainly weather-related, disasters. The common perception that there is a global trend toward increased frequency of severe climatic events is not well substantiated by meteorological evidence (IPCC 1996, WG II, Section 17.4.1), apart from the evidence of increases in the frequency of heavy rainfall (Karl et al., 1995; Suppiah and Hennessy, 1996, 1997). However, there is some evidence for possible future increases in flood and fire risks (Pittock et al., 1997; see also Sections 4.3.1.3 and 4.3.2.2).
It is likely that climate change will adversely affect property insurance, where such insurance is available, but current knowledge is insufficient to allow the industry to quantify its changed exposure (IPCC 1996, WG II, Section 17.4.2). Even if the mean long-run losses were to remain unchanged, the greater uncertainty in quantifying the risk would demand a higher premium. Adaptation options include primary risk management through hazard assessment (such as Australia's 52 zones for cyclone, thunderstorm, wildfire, and earthquake) (IPCC 1996, WG II, Section 17.3.2), land-use regulation, building design and construction permits, retrofitting in high-risk areas, and public education (IPCC 1996, WG II, Section 17.6).
An important feature of the region is the very high level of individual home ownership. Personal assets often are closely tied to the market value of a person's home and the land it is built on, and equity usually is highly leveraged with mortgages. Typically, the real long-term risks of urban flooding and coastal inundation in a locality are not transmitted into market values or into insurance premiums, and an adverse event can cause large personal and insurance losses, withdrawal of insurance coverage, and dramatic declines in property values and personal equity. By way of example, residential losses in Florida constituted 65% of the insurable losses from Hurricane Andrew (IPCC 1996, WG II, Section 12.3.4).
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