Geoscience Reference
In-Depth Information
An example is significant sea-level rise, which would make it inevitable that
large numbers of coastal properties would be inundated or rendered vulnerable
to extreme storm events. But uncertainty would remain about the timing of the
loss. There might then be scope for developing new property insurance products
that share characteristics with traditional life insurance. Life insurance covers
the risk of timing of death, although the fact of eventual death is itself certain.
The development of innovative products that matured on loss of property
and that would provide the means of buying housing elsewhere if the insured
event occurred could be developed by the commercial insurance sector. The
commercial viability of such instruments would depend on insurance companies
being able to develop a balanced portfolio of insurance and financial risks in a
world of climate change.
But no portfolio would be resilient against the costs of meeting many large
claims from a single source or correlated sources associated with the unhappier
end of the range of possible climate change. This is one highly practical example
of the limits of adaptation.
The challenges for rural and urban water supply result from the interaction of
climate change with increased demand from growth in population and economic
activity. The limited scope of markets has complicated the task of allocating
water to its most valuable uses. Australia's rural water market is the result of
many years of reform, but barriers to efficient operation remain. While extraction
of in-stream flows has been regulated and subsequently subject to a price, access
to groundwater and surface flow has often been left as a common property
resource, with predictable consequences.
Barriers to efficient water management in a changing climate persist. For
example, in water markets, regional restrictions on trading remain a significant
barrier. Severe water shortages in urban centres have led to the development of
a number of desalination plants in Australia over the past few years, at high cost.
The Productivity Commission has questioned the cost-effectiveness of some of
this expenditure (Productivity Commission, 2011). Wider market exchange of
water, with bids based on supplies from desalination plants competing with bids
embodying supplies from a range of sources, including-long distance storage, is
likely to have produced a good result at lower cost.
But here with water, too, there are limits to the effectiveness of a market. A
sound market will not be able to avoid highly disruptive outcomes if expected
average precipitation falls sharply or if rainfall becomes much more variable
or if run-off is greatly diminished by evaporation associated with increased
temperatures.
In the absence of effective and ambitious global action, deep participation in
international trade in food as an importer as well as in Australia's traditional role
as an exporter is going to be important for Australian food security. This is going
to require the easing of inhibitions about the import of food. This will be stressful
for many Australians, but the alternatives will be worse.
Free trade in food is essential to food security in a world of moderate climate
change (Garnaut, 2008, pp. 375-6; Garnaut 2011b,
Chapter 10
;
Martin and
