EU-MACS Coordinator: Prof. Adriaan Perrels,

About EU-MACS Project

Constraints and enablers of CS market can be understood within a larger conceptual framework

Failure to understand the needs and capabilities of users is not trivial

Until recently practically all outlooks, surveys and inventories conducted by national, EU and WMO agencies with backgrounds in (upstream) climate services provision tended to emphasize the vantage point of climate data generation and deployment. This prevailing orientation seriously hinders the capability to appreciate how climate risks and opportunities fit into the wider risk portfolio that the actual or potential climate service user is facing. Eventually, this may have non-trivial consequences for the effectiveness of investments in risk reduction in various sectors, when sources of uncertainty (climatic, climate modelling, and climate observation related and other ones) are not appreciated in a comprehensive way. During the realization we have observed marked improvements in a much broader and end-user inclusive approaches to development and provision of climate services, as for example demonstrated in the infographic of the Global Framework for Climate Services

There is a need to lower translation and search costs

A complicating feature is that many potential users may not have systematic risk management approaches that would integrate climate risks to other aspects of risk management. The use of climate services may follow from regulatory obligations, such as in the case of land use planning, but the risk framework – if any – of such a policy area may be patchy, making it difficult to identify the appropriate bundle of climate services. Regardless of whether there is an integrated risk framework the potential end-user may lack skills to properly judge alternative climate services products, as well as to anticipate possible uses of similar products. This hints at the needs of supplementary consultancy, information provision and articulation of expectations in the climate services field, where it remains to be assessed how to effectively and fairly organize such supplementary information and advice. Summarizing, these obstacles can be referred to as transaction and search cost. As above mentioned, the lowering of transaction cost often requires also measures outside the realm of economics, such as regulatory changes, education, and awareness raising.

Standardization to promote recognizable terminology

There is a fairly large non-unified set of terms used in climate services development and delivery. Lack of harmonization in terminology contributes to the confusion among prospective users and thereby slows down uptake through various mechanisms. This obfuscating terminology includes the very term ‘climate services’ itself, of which the interpretation varies between ‘nothing else than climate data’ and ‘anything that contributes to better coping with climate change, climate variability, and climate policy’. Furthermore, the different main categories of climate services (seasonal, adaptation oriented, classic statistical) imply major differences in the nature of the products.
Also the distinction in providers and users of climate services is not optimal, since many midstream and downstream providers of climate services are both users (of climate services produced more upstream) and providers (of their own climate services). In other words the position in the value chain is as important for typecasting the climate services product as the notion user or provider and the main type of climate services (seasonal, adaptation related, ..). For these reasons also the term ‘purveyor’ has been suggested, for all actors other than those in first segments of the value chain. Instead, it may be more appealing to prospective users to name ‘climate services’ by a more precise function these fulfil, e.g. ‘climate scenario specific flood risk maps’.

Lack of awareness and/or incentives

In quite some sectors, such as in tourism and in financial service, potential users may not be aware of the availability of climate services or the option to co-develop tailored climate services. Furthermore, such actors may perceive that their main risks are in other domains or that climate risks can be easily absorbed by means of insurances and intelligent pricing schemes. Similarly, there may be no clear picture of what the risk constitutes. Initiatives and policies to improve risk transparency and accountability can alleviate these obstacles and offer drivers for uptake.

Exclusivity of the value added information can be a burden

Although less easy to assess than the benefits of weather and seasonal projections, also climate services (at least in the narrower sense of climate change projections or close derivatives) are likely to generate societal benefits exceeding many times their costs, provided that they are rightly understood and used (Clements et al 2013; Anderson et al 2015). Therefore, policy frameworks, provision modes and ethical issues are deeply intertwined. In particular, the extent to which climate services-generated benefits can be straightforwardly monetized varies greatly, thereby hinting at roles for both public and private climate service providers.
Private sector users are willing to pay for value added generating services usually in exchange for the exclusivity of the information. This is efficient for society under normal operations. Yet for disruptive risks (e.g., resulting from natural hazards) information should be shared so as to enable upkeep of societal resilience. There is evidence (e.g Tompkins and Eakin 2012) that private actions based on climate information could generate benefits in the public sphere. In this case the coordination and the commitment of private actors is essential, although the benefits of private actions do not directly accrue back to the private actors. In such cases the public-private exchange needs clear regulation and sometimes options for compensation so as to minimize ethical biases. Ethics in climate services is also related to quality assurance of data and communication of uncertainties tuned to capabilities, knowledge and vulnerabilities of users.

Four main types of drivers of CS market can be distinguished

A part of the demand for climate services is born out of legal obligations, e.g. to account for climate change effects in urban and infrastructure planning. On the other hand in the private sector the degree of acknowledgement of climate change as an element of risk assessment is varying greatly, with additional challenges owing to limitations in capability and in sector relevant climate information (i.e. leading to the perception of no relevant signals observed yet). For a start we distinguish four main types of drivers for the use of climate services, being: (1) legal obligations explicitly specifying that information on climate risks should be integrated in decision making or practices (such as in urban planning and permitting), (2) implied motivations owing to market led or legislative accountability for damage and/or malfunctioning (such as failure minimisation in networks), (3) proactive opportunity seeking (such as ski slope snow management as constituting element of a ski centre’s marketing strategy), and (4) science and curiosity. Only the fourth category is not directly driven by (broad scoped) risk management, but scientific interest in the use of climate services is in turn directly or indirectly driven by questions pertaining to risk management. From this categorization it can be inferred that legislation can help to create demand for CS, but is by no means the only driver.

Acknowledging common interest appears to support climate services market

From a technical, economic and regulatory point of view the emergence of climate services ties in with general trends in (1) opening of public sector datasets for use by third parties, stimulated by the INSPIRE directive (de Vries et al 2011), and (2) creation of cooperative public-private information networks (e.g. regional resilience management, health care, comprehensive logistics management, etc.) (Klievink and Janssen 2014). The actual implementation of such facilities appear to be often more driven by acknowledging common interests than by the original legal initiation of the process (Klievink et al 2012), even though the adoption of new legislation may have an incubator function for innovations.