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UNEP Backs Emissions Trading as a Key Weapon Against Climate Change

Natural disasters, the lion’s share of which were weather-related catastrophes, cost the world over $60 billion in 2003 up from around $55 billion the year before.

Weather Related Natural Disasters in 2003 Cost the World Billions

Milan/Nairobi, 10 December 2003 - Natural disasters, the lion’s share of which were weather-related catastrophes, cost the world over $60 billion in 2003 up from around $55 billion the year before.

The high economic losses, highlighted in a report by experts with the Finance Initiative of the United Nations Environment Programme (UNEP) are part of a worrying trend that is being linked with climate change.

UNEP is calling on governments, business and industry to back emerging emissions trading markets as one way of tackling the crisis.

The extreme summer heat wave, in which crops and livestock wilted across many parts of Europe and some 20,000 people were killed, is expected to have been the most costly single event with agricultural losses alone estimated to be over $10 billion.

The second most costly events are likely to have been the floods along the Huai and Yangtze Rivers in China between July and September. Some 650,000 apartments were damaged with overall losses estimated at nearly eight billion US dollars.

The biggest insured losses were in the United States where a series of tornadoes ripped through the Midwest in April and May leaving a trail of destruction in their wake. They are calculated to have cost insurers more than three billion US dollars.

These are just some of the preliminary “snapshot” findings from Munich Re, one of the world’s biggest re-insurance companies, which has been tracking the economic and insured losses as a result of natural and weather-related catastrophes since the 1950s. The final, full report, will be completed at the end of the month.

Thomas Loster, Head of Weather/Climate Risks Research at the company and Head of the Climate Change Working Group of the UNEP Finance Initiative, said today that the years of the late 1990s and early 21st century had been marked by increasingly “extreme” weather and climate-related events.

“We will have to get used to the fact that extreme summers, like the one we had in Europe this year, are to be expected more frequently in the future and that they will become more or less the norm by the middle of the century. The summer of 2003, with its extensive losses, is therefore a glimpse into the future, a ‘future summer’ so to speak,” he said.

Klaus Toepfer, Executive Director of UNEP, added: “ Climate change is not a prognosis, it is a reality that is, and will increasingly, bring human suffering and economic hardship. Developed countries have a responsibility to reduce their emissions, but also have a responsibility to help developing countries adapt to the impacts of global warming. So I welcome pledges, made here in Milan and amounting to over $400 million, that will support funds that will help poorer nations cope with the impacts. We need to make these operational”.

“The Kyoto Protocol, the instrument agreed on in 1997 as the way to deliver these goals, remains unratified and not in force. However, this cannot be an alibi for inaction and indeed many countries, industries, local authorities, businesses and non-governmental organizations are acting. You only have to look at the numerous programmes underway in places like Europe, North America and Japan designed to encourage cleaner and renewable energies, promote energy efficiency in the workplace and in homes and introduce new technologies, like hydrogen fuels for cars, to see that the world is not deaf, nor blind, to the seriousness of this most alarming of global threats,” he said.

“But, as national emission figures now show (see notes to editors), the effort is not enough and many countries including ones in Europe are seeing an upturn in emissions of greenhouse gases, such as carbon dioxide, despite having ratified the Kyoto Protocol. So here, in Milan, we need to engage with even greater vigour in this marathon race against climate change. We need political will, technological innovation and economic creativity. One key weapon is emissions trading. I would therefore urge the heads of all large corporations to join the various schemes being proposed so that market forces and market instruments, properly regulated by governments, can play their part,” said Mr. Toepfer.

The Climate Change Working Group of the UNEP Finance Initiative today also launched a briefing document highlighting the opportunities and challenges of emissions trading and aimed at the Chief Executive Officers of large corporations.

The report says that several national and regional emissions trading schemes have been launched or are being proposed including a Europe-wide scheme planned for 1 January 2005 that plans to trade some 1,200 million tonnes or just under half of the European Community’s carbon dioxide emissions, and others in Canada, Japan and the United Kingdom.

It argues that, crucial to the success of such schemes, will be “liquidity”, broad participation by business and industry and legislation that progressively makes carbon emissions more expensive.

Paul Clements-Hunt of the UNEP Finance Initiative said emissions trading had the potential to encourage highly polluting industries to invest in “carbon abatement” technologies by making it more and more expensive to pollute.

Such schemes should also encourage direct investments in projects that reduce greenhouse gas emissions such as tree planting or renewable energy schemes in the developing world.

“Companies need to start planning for emissions trading now by allocating future expenditure for anti-pollution abatement technologies and by carrying out thorough and rigorous assessments of their greenhouse gas emissions. Otherwise they may find themselves exposed to higher and higher costs related to their carbon emissions which may make them less attractive to banks and other lending institutions,” he said.

For example, under the planned European scheme, power, steel, paper and other participating companies face a fine of 40 Euros for each tonne of carbon dioxide they emit above their approved level. The fine will rise to 100 Euros a tonne after 2008.

Notes to Editors: Munich Re’s full findings on the economic and insured costs of weather related natural catastrophes in 2003 is expected to be published at the end of 2003. www.munichre.com

UNEP’s Finance Initiative CEO Briefing on Emissions Trading: Climate Change Working Group Statement is available at www.unepfi.net or www.unep.org

Graphics of national greenhouse gas emissions figures have been compiled by UNEP Grid Arendal and are available at www.grida.no/climate

For More Information Please Contact Eric Falt, Spokesperson/Director of UNEP’s Division of Communications and Public Information, on Tel: 254 20 623292, Mobile: 254 (0) 733 682656, E-mail: eric.falt@unep.org or Nick Nuttall, UNEP Head of Media in Milan, on Tel: 254 733 632755, E-mail: nick.nuttall@unep.org 

UNEP News Release 2003/69

Wednesday 10 Dec 2003
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