Integrating Climate Risk Management into Sri Lanka’s Nationally Determined Contributions
Nationally Determined Contributions (NDCs) are commitments under the Paris Agreement that relate to climate change mitigation and adaptation. As the example of Sri Lanka shows, a comprehensive risk management strategy can be integrated into NDCs, and the current 2020 NDC review process offers an important opportunity to strengthen and add to this integration. The non-profit organisation Sylcan Trust, which is registered in Sri Lanka, has analysed the country’s strategy.
NDCs are the beating heart of the Paris Agreement. They represent national commitments to reduce greenhouse gas emissions, outlining the actions that parties intend to take from 2021 onward (UNFCCC, 2020).
With more frequent and intense impacts of climate change, comprehensive risk management is critical for vulnerable developing countries such as Sri Lanka. Without it, climate change will jeopardise the lives and livelihoods of millions and threaten central economic sectors such as agriculture, fisheries, forestry, and tourism.
South Asia’s Climate Commitments under the Paris Agreement
Sri Lanka is a small island nation in the Indian Ocean with a population of almost 22 million people. More than a quarter of the working population is employed in agriculture, other important sectors of the economy include manufacturing, the plantation industry, fisheries, and tourism (Central Bank of Sri Lanka 2019). The country has officially submitted its Nationally Determined Contributions to the UNFCCC in November 2016 (Ministry of Mahaweli Development and Environment, 2016).
All countries in the region – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka – have committed themselves to both mitigation and adaptation in their NDCs, in many cases including loss and damage. All South Asian countries have identified meteorological data, weather forecasts, and early warning systems as important components of their NDCs, and all but Afghanistan, Bangladesh, and Nepal explicitly mention insurance schemes (UNFCCC, 2020).
The Nationally Determined Contributions of Sri Lanka
The NDCs of Sri Lanka are divided into five mitigation sectors, eight adaptation sectors, one sector on loss and damage, and means of implementation. They use 2010 as the baseline year for a business-as-usual scenario and target implementation for 2021-2030, with an NDC review and update scheduled for 2020.
Of the five commitments of the loss and damage sector, one concerns climate insurance, one forecasting capabilities, and one the analysis of total losses and damages caused by climate-induced disasters. In addition, several other sectors include risk management elements as well: for example, the food security sector includes the identification of vulnerabilities and the introduction of „alternative measures to minimize adverse impacts of climate change,“ while the irrigation sector contains early warning systems for floods (Ministry of Mahaweli Development and Environment, 2016).
Risk Transfer and Comprehensive Risk Management in Sri Lanka’s NDCs
Climate and Disaster Risk Finance and Insurance (CDRFI) is part of Sri Lanka’s NDCs mainly through the national risk transfer mechanisms currently in use.
Sri Lanka has experimented with crop insurance schemes since 1958 and established a national insurance scheme in the 1960s and 1970s. In addition to this agricultural insurance, the country also has a national disaster insurance and an agricultural loan protection scheme, covering natural disasters such as droughts and floods as well as elephant attacks (Slycan Trust, 2019). However, farmers do not seem to have widespread awareness of these insurance schemes, and the indemnity-based nature of the insurance leads to delayed payouts and their dissociation from the actual losses. On the other hand, compensation payments after natural disasters are widely accepted and can be seen as an alternative risk transfer instrument.
While risk transfer can and should be part of a comprehensive risk management strategy, it cannot work in isolation. As indicated above, Sri Lanka’s NDCs contain a number of additional risk management elements:
- Developing risk maps and identifying vulnerabilities for specific sectors
- Analysis of loss and damage caused by climate-induced disasters
- Risk reduction through technology, better practices, management plans, and early warning and forecasting systems
- Creation of a local mechanism in line with the Warsaw International Mechanism for Loss and Damage (WIM)
The NDCs of the loss and damage sector will be implemented through sectoral authorities of the relevant sectors. This cross-sectoral integration of risk management avoids duplication of efforts and sectoral authorities working in silos. Especially when it comes to early warning and weather forecasting systems, an integrated, cross-sectoral multi-hazard warning system, such as the one run by Sri Lanka’s Disaster Management Centre, provides greater efficiency. However, there is a lack of capacity regarding early warning for landslides and automated rainfall measurement systems in rural areas.
Identifying Gaps and Needs in the Loss and Damage Sector
Risk management is integrated into Sri Lanka’s NDCs. However there are opportunities for improvement that can be addressed by government and non-government stakeholders as part of the review process in 2020. Experts and key stakeholders identified a number of gaps and needs during NDC consultations held in 2018 and 2019 (Stakeholder consultations for NDC sectors organized by the Climate Change Secretariat of the Ministry of Mahaweli Development and Environment in collaboration with Slycan Trust).
The implementation of loss and damage NDCs involves laws and policies of many different sectors, which underlines the importance of cross-sectoral coordination and a national mechanism to facilitate the WIM and the Sendai Framework on Disaster Risk Reduction. Further recommendations from the consultations include the drafting of laws and policies that focus on climate-induced migration and gendered impacts of climate change, the integration of land-use laws and environmental impact assessments, a connection to private sector and international finance, improved and free access to climate data, the setup of a capacity-building mechanism, a move toward index-based/parametric insurance, and the creation of a more participatory system.
It was also pointed out that heat waves and thermal stress should be included as climate-induced disasters, and non-economic losses need to be addressed. There is a need for more data on groundwater and insurance payments, as well as for an enhanced institutional setup and clear guidelines for compensation payments (Slycan Trust, 2019).
Risk mapping, risk reduction, risk transfer, and other risk management mechanisms are vital for the NDCs of developing countries (Kreft, Soenke; Schaefer, Laura; Behre, Eike; Matias, Denise, 2017). In Sri Lanka, risk management is addressed by a cross-cutting loss and damage sector as well as sectoral commitments for other priority sectors, with a focus on risk assessment and risk reduction.
In order to implement cost-effective long-term risk management strategies in the NDCs, Sri Lanka could build on its insurance commitment to include a broader set of CDRFI measures, for example catastrophe bonds, contingent credit, and emergency funds. To achieve resilience whilst providing financial protection for the country, a clear and comprehensive set of CDFRIs and a strategy to utilize those instruments would be advantageous. Sri Lanka could also denote the refinement of budgetary systems to create financial mechanisms to finance adaption investments and mobilize resources toward disaster risk management. Establishing a resilience baseline in Sri Lanka’s NDCs to decide the cost-effectiveness and viability of investments, financing targets, and risk financing options can help materialize future climate impacts accordingly with the Paris Agreement objectives (Ahmed, Seifert, & Kreft, 2020).
The ongoing NDC review process in 2020 offers an important opportunity for civil society, NGOs, the private sector, and other stakeholders to provide input for the development of their country’s NDCs and push for the integration of a comprehensive risk management strategy.
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Central Bank of Sri Lanka. (2019). Economic and Social Statistics of Sri Lanka 2019.
Department of Census and Statistics. (2019). National Accounts Estimates of Sri Lanka 2018.
GIZ. (2020). Tool for Assessing Adaptation in the NDCs. Retrieved from https://www.adaptationcommunity.net/nap-ndc/tool-assessing-adaptation-ndcs-taan/taan/
Kreft, Soenke; Schaefer, Laura; Behre, Eike; Matias, Denise. (2017). Climate Risk Insurance for Resilience: Assessing Countries‘ Implementation Plans. Munich Climate Insurance Initiative/DIE/United Nations University.
Ministry of Mahaweli Development and Environment. (2016). National Adaptation Plan for Climate Change Impacts in Sri Lanka: 2016 – 2025.
Ministry of Mahaweli Development and Environment. (2016). Nationally Determined Contributions.
SLYCAN Trust. (2019). Climate Change and Agricultural Insurance in Sri Lanka. Retrieved from http://slycantrust.org/knowledge-resources/climate-change-and-agricultural-insurance-in-sri-lanka
SLYCAN Trust. (2019). Policy Gaps and Needs Analysis for the Implementation of NDCs on Adaptation and Loss and Damage in Sri Lanka. Retrieved from http://slycantrust.org/knowledge-resources/policy-gaps-and-needs-analysis-for-the-implementation-of-ndcs-on-adaptation-and-loss-and-damage-in-bangladesh-nepal-and-sri-lanka
UNFCCC. (2020). Interim NDC Registry. Retrieved from https://www4.unfccc.int/sites/ndcstaging/Pages/Home.aspx
UNFCCC. (2020). Nationally Determined Contributions (NDCs). Retrieved from https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement/nationally-determined-contributions-ndcs
SLYCAN Trust is a non-profit organisation registered in Sri Lanka. It focuses on climate change, sustainable development, biodiversity conservation, animal welfare, and social justice. SLYCAN Trust specializes in multi-actor partnerships in implementation of project activities including the government of Sri Lanka, civil society, academia, youth, media, and the private sector. At global level, the organization has experience working in many countries and with UN actors, especially the UNFCCC Secretariat, through collaborative activities.
Contribution by Slycan Trust