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News / Comment

02NOV
2015
NEWS / Climate risk management in the energy sector: a long road to resilience
Category: Energy, Features, Oil, Gas & Extractives

Image: "Srisailam-dam-with-gates-open-2" by Chintohere - Own work. Licensed under Public Domain

By Daniel Puig

What does ‘adaptation to climate change’ mean to energy sector businesses? A seminal 2011 World Bank study, to which the UNEP DTU Partnership (UDP) contributed, shed light on the issue, by presenting the key options available to energy sector actors to manage their operations against the background of a changing climate. Earlier this year UDP contributed additional insights in this area through two studies aimed at identifying key climate change risk management elements for Nicaragua’s hydropower industry, and Colombia´s oil and gas industry.

Uncharted territory

The studies relied on high-resolution downscaling of global climate model outputs for each country, to identify anticipated climate hazards at a fine geographical scale. Projections were obtained for maximum and minimum temperature, precipitation and wind speed. Ten different models were used, to quantify the uncertainty associated with the projections.

Together with information on recent climate-change related impacts, industry and socio-economic data were used to identify vulnerabilities and, ultimately, potential exposure to climate impacts in different locations. Industry data analysed related to technology standards in use (e.g. the extent to which water pumps in use are ‘climate proof’) as well as to preparedness and response capabilities (e.g. the extent to which quality assurance procedures are in place to manage climate change-related events, such as flooding). Socio-economic data analysed related to past and likely future trends in land use and urbanisation, energy demand, or water use, for example.

While the studies did not result in full-fledged risk management plans for either of the two sectors under consideration, they did provide an overview of key issues and data gap that will have to be addressed when such plans are prepared. In addition, and to facilitate this task, all study findings were structured around the various elements identified in the ISO 31000 risk management framework.

The studies highlighted that both industries have a long way to go with regard to risk management for climate change: lack of data compounds to limited awareness and experience, both within the industry and its supply chains, and increases the risk of climate change-related events. The critical developmental role that both sectors play underscores the pressing need to make progress in this area.

 

Next steps

The studies put forward several recommendations for each industry, with a view to promoting increased dialogue among stakeholders and setting up indispensable data collection mechanisms. The case is made to frame these initiatives as a part of the industries’ regular quality assurance mechanisms, rather than presenting them as parallel processes that are separate from day-to-day management practices.

In addition to the above generic shortcoming, specific recommendations were made for each industry. For example, the studies encouraged that the Colombian authorities promote the creation of an insurance scheme that effectively rewards progress in the area of risk management. This was seen as a practicable option to engage some of the many actors in Colombia’s oil and gas industry, which is rather fragmented.

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The studies were part of a larger Canadian International Development Agency-funded programme administered by the Latin American Energy Organization (OLADE). UDP worked on a contract with OLADE.

For additional information, contact Daniel Puig (dapu@dtu.dk).

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