14. Building systemic resilience in practice: examples from key systems

This chapter draws on contributions to the horizontal project carried out under the responsibility of the Committee for Agriculture, the Regional Development Policy Committee and the International Energy Agency.

A systemic approach to building climate resilience requires in-depth understanding of how individual systems work as well as their interactions with other systems. How such an approach works in practice thus depends on the system in question. This chapter looks at food systems, cities, and energy systems to illustrate how a systemic approach to building resilience works in practice, how synergies can exist across systems, and what policy makers can learn from the experience of other systems.

Food systems are vulnerable to a wide range of climate shocks. In 2012, for example, a historic drought in the US Midwest led to a reduction in American maize production by 13% compared to the previous year. This had major repercussions for global markets, as the US typically accounts for some 40% of global maize production (USDA, 2013[1]). Climate change can also have indirect impacts on food systems. At the end of 2019, swarms of desert locusts infested Eastern Africa, destroying over 200 000 hectares of crop and pastureland and creating acute food insecurity for two million people in the region. This infestation can be traced back to climate change: warming of the western Indian Ocean has increased the frequency and intensity of cyclones, which has created desert lakes in Saudi Arabia, a suitable environment for desert locusts to breed. Swarms of locusts then spread via Yemen and Somalia across Eastern Africa (IPCC, 2022[2]).

Food systems around the world face a “triple challenge”: ensuring food security and nutrition for a growing population; supporting the livelihoods of millions of people working along the food supply chain; and doing so in an environmentally sustainable way (OECD, 2021[3]).1 As depicted above, climate impacts can disrupt the ability of food systems to meet these objectives, underscoring the importance of building resilience within food systems.

Figure 14.1 depicts some of the pressures affecting, and emanating from, food systems. The top of the diagram represents shocks which can affect food systems, many of which are related to climate change. Climate shocks affect all stages of the food supply chain: for example, droughts and floods directly impact farm production, but also disrupt transportation. The centre of the diagram shows the five stages of the food supply chain, with the arrows connecting them representing other economic activities, e.g. trade and logistics. These connections often cross international borders: some 20% of global calories consumed have crossed at least one international border (OECD/FAO, 2021[4]), and roughly one third of agri-food trade crosses more than one border (FAO, 2020[5]).

The bottom part of the diagram highlights that food systems themselves can create pressures reducing resilience elsewhere. Food production (in particular land use and primary production) is a major source of environmental pressures including water use, biodiversity loss, eutrophication, acidification, and greenhouse gas (GHG) emissions (Poore and Nemecek, 2018[7]). Some of these in turn affect the inputs required for food production, thus creating a potentially detrimental cycle. For example, excessive water withdrawals create greater vulnerability to drought in the long run. More generally, food systems are uniquely vulnerable to climate change but also contribute an estimated one-third of anthropogenic GHG emissions (Crippa et al., 2021[8]).

Food security was defined at the 1996 World Food Summit as existing when “all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life” (FAO, 1996[9]). In line with this definition, food security is often conceptualised in terms of availability, access, and utilisation. Complete food security thus requires stability across these three dimensions.

Food insecurity is most commonly caused by problems related to access, for example due to poverty, conflict, or other barriers, rather than problems related to the physical availability of food at the global level.2 Nevertheless, the availability of food should not be taken for granted. Given population and income growth, the coming decades will see a steadily increasing demand for food while productivity growth is negatively affected by climate change (IPCC, 2022[2]). Since both food demand and supply are inelastic in the short run, even relatively small disruptions to global availability can lead to large price increases, which can reduce poor households’ access to food. Moreover, availability and access are sometimes intertwined: shocks to food production can reduce the incomes of households working in the agri-food sector (especially in low- and middle-income countries), reducing their ability to buy food.

The Intergovernmental Panel on Climate Change (IPCC) provides a detailed overview of how climate change affects the different dimensions of food security.

  • Availability. Increased heat and drought reduce productivity not only through direct effects on crop yields and animal productivity but also through negative effects on farm labour productivity and soil fertility. Increasing temperatures and precipitation changes also increase and shift crop and livestock pests and diseases, and can lead to higher post-harvest losses. Extreme events lead to crop damage, greater pest incidence, and transportation disruption.

  • Access. Climate change poses threats to agricultural income and higher costs for inputs such as water. Extreme weather events disrupt food storage and transport, and lead to higher food prices.

  • Utilisation (food quality and safety). Climate change leads to greater risks to food safety (e.g. through a greater prevalence of pathogens). Climate change also disproportionately affects nutrient-dense foods such as fruits and vegetables and fish. Moreover, increased atmospheric CO2 concentrations themselves reduce the nutritional quality of grains, and some fruits and vegetables.

  • Stability. Climate change is increasing the frequency and severity of extreme events such as droughts and heatwaves as well as the prevalence of pests and diseases; climate change and increasing ocean acidity also lead to declines in fish populations. (IPCC, 2022[2]).

It is important to note that the effects of climate change are not uniformly negative. For example, in some temperate regions a reduced number of frost and snow days will increase stability (IPCC, 2022[2]). Yet on balance it is clear that climate change increases the number, frequency, and severity of shocks to food systems.

Food systems are also a key economic engine and provide livelihoods for millions of people. The food supply chain in Figure 14.1 involves physical flows moving towards the final consumer and monetary flows moving in the other direction.

Especially in lower- and middle-income countries, food systems account for a sizeable share of economic activity and employment. As countries develop, the relative role of agriculture typically lessens, but other activities along the food supply chain often gain in importance (e.g. wholesale, processing, food preparation, retail) ( (World Bank, 2007[10]); (Barrett et al., 2022[11]) (Yi et al., 2021[12])). Climate shocks to food systems can therefore also have large economic effects. In addition, even in countries where the relative economic share of agriculture is lower, agriculture and the food industry often remain politically important, with a strong bearing on policy-making processes, including for climate change.

Most of the climate shocks affecting food security also affect livelihoods. Crop damage, post-harvest losses, and other reductions in food availability reduce revenues for farmers and others working in the food supply chain, as do disruptions in transportation.3

The essential functions of food systems (food security and nutrition, and livelihoods) are too important to rely on a “reactive” approach of dealing with shocks after they occur. A proactive approach is needed. Here, building the systemic resilience of the food system is essential to enhance its ability to prepare and plan for, absorb, recover from, and more successfully adapt and transform in response to adverse events (OECD, 2020[13]).

It is useful to refine the definition of food system resilience by specifying to which outcome it pertains (e.g. livelihoods, food security) and at what level (e.g. individual consumer or farmer; food industry or retail sector; the local, national or global levels). Some actions (e.g. better education and training for farmers) might increase resilience in more than one way, creating synergies. Other actions might improve resilience in one way while reducing it in others, creating trade-offs. For example, a farmer can use groundwater irrigation to become less vulnerable to drought, but this may reduce the availability of water for other farmers (OECD, 2015[14]).

Moreover, climate change is not the only source of shocks to food systems. It is important to build resilience to multiple shocks (OECD, 2020[13]). An efficient and effective policy approach must therefore take into account the interactions and trade-offs between different risks, private adaptation strategies (by farmers and others), and government policies. Public policies must not accidentally encourage the adoption of riskier private strategies that undermine long-term resilience.

The next sections discuss broad approaches to food systems resilience in more detail. These are not mutually exclusive, and indeed often overlap.

A wide range of actions can improve the resilience of agricultural production to climate shocks (IPCC, 2022[2]). These include actions by farmers themselves (e.g. changing the type and composition of crops and livestock; adjusting planting dates; investments in irrigation; using different crop rotations, etc.). Other actions require more coordinated efforts (e.g. R&D in improved crop varieties and breeds with greater resistance against extreme weather conditions; creating greater landscape-level biodiversity; provision of climate and weather information).

Actions that build resilience of production also tend to build resilience of livelihoods (Ignaciuk, 2015[15]). As such, it is often in farmers’ best interest to invest in adaptation. This stands in sharp contrast with climate mitigation actions, where individual farmers bear the cost but benefits are spread globally.

There is a strong, though imperfect, correlation between the private and public benefits of investing in adaptation. Some actions help build the resilience of farmers’ livelihoods but do not build resilience for production. This is the case for insurance products or exiting the sector in favour of other economic activities. Conversely, some actions could help build the resilience of production at a global level but without reducing uncertainty or volatility for an individual producer. For example, a greater diversity of crop varieties and livestock breeds at a global level could help build resilience to future shocks, but could still reflect a pattern where individual producers are highly specialised in one crop variety or livestock breed and hence subject to the same production risks as before.

In other cases, adaptation efforts by individual farmers might have positive externalities, e.g. through positive spillover effects on neighbouring farms or by generating knowledge about which strategies are most effective in a specific context. Identifying and harnessing these positive externalities should be prioritised (Ignaciuk, 2015[15]). Governments can play an important role through public and semi-public R&D as well as research on risks and vulnerabilities. Providing accurate and detailed information can help private agents make well-informed adaptation decisions. Training, education and extension services can similarly help farmers and others take more effective adaptation action.

Another important area for government action is to remove policies that discourage investments in adaptation. For example, some countries have distortions in input and output markets that lock farmers in to certain activities (by subsidising or stimulating production of certain crops over others). Poorly designed insurance schemes can also impede adaptation (by reducing incentives to change current practices) or even create maladaptation (by inducing farming in risky locations or with risky practices which otherwise would not be undertaken) (Ignaciuk, 2015[15]).

Investments in “no regret” policies that build resilience, such as R&D, account for only a small share of total support to agriculture or fisheries. For example, across the 54 countries covered by the OECD Agricultural Policy Monitoring and Evaluation 2022 report (OECD, 2022[16]), total support to agriculture was more than USD 817 billion per year in 2019-21, but only 13% of this went to investments such as R&D, biosecurity, or infrastructure, which could help build resilience and achieve sustainable productivity growth. Instead, the bulk of support tries to raise farm revenues through higher prices, subsidies, or direct payments. In many countries these policies stimulate the production of specific commodities, thus reducing farmers’ incentives to diversify or adapt.

Other policies can work against adaptation. For example, in many countries agricultural water use is not correctly priced, which, in the absence of quantitative restrictions, potentially contributes to over-reliance on irrigation and overuse. While there has been improvement in recent years, many countries are still far from meeting international commitments such as the OECD Council Recommendation on Water (2016) and the G20 Agriculture Ministerial Action Plan on water and food security (2017) (Gruère, Shigemitsu and Crawford, 2020[17]).

Higher incomes and better safety nets can be a powerful way of building greater food security. Household income is an important determinant of food access: where incomes are extremely low, even cheap food may be out of reach for many people. According to FAO estimates, even in the early 2000s, when international food prices were at all-time lows, more than 800 million people were undernourished (FAO, 2022[18]). By contrast, income growth typically leads to a decrease in childhood stunting, an indicator of chronic childhood malnutrition (Headey, 2013[19]). Recent research has shown that the cost of a healthy and nutritious diet exceeds per capita income for at least 1.6 billion people, while in high-income countries this cost represents only a fraction of income. While the cost of a healthy and nutritious diet itself varies by country, the main driver of affordability is income (Hirvonen et al., 2020[20]) (Bai et al., 2021[21]).

In addition to broad-based economic growth, better social safety nets could strengthen resilience against climate-related impacts on food security. In OECD countries, responses to food insecurity typically focus on livelihood assistance (such as increasing universal social security payments or providing cash transfers) or food assistance programmes (such as providing meals, food vouchers or food parcels to food insecure households) (Giner and Placzek, 2022[22]). While these policies themselves could be strengthened, they also provide useful lessons for low- and middle-income countries looking to create a stronger safety net to help citizens cope with climate-related shocks, e.g. higher food prices caused by disruptions to production.

In the context of farm-level resilience, OECD work has identified three layers of risks (OECD, 2009[23]), (OECD, 2011[24]); (Glauber et al., 2021[25]). Each layer requires a different response:

  • First, normal variations in production, prices and weather do not require any specific policy response: such frequent but relatively low-impact risks can be directly managed by farmers as part of their normal business strategy, for example by diversifying production or adapting their production technologies.

  • At the other extreme, infrequent but catastrophic events can cause significant damage and can affect many or all farmers over a wide area, for example a severe and widespread drought or the outbreak and spread of a highly contagious disease. These will usually be beyond farmers’ or markets’ capacity to cope with and governments may need to intervene in such cases. Government action for these risks can include both ex ante efforts (e.g. to reduce disaster risk, or through the provision of public insurance) and ex post interventions (e.g. ad hoc assistance after a natural disaster strikes).

  • Between the normal and the catastrophic risk layers lies a layer of “marketable risk” (e.g. hail damage) which can be managed through insurance and futures markets or through co-operative arrangements between farmers.

One effect of climate change is to modify the pattern of risks by increasing the frequency and severity of more extreme events. If countries continue with a business-as-usual approach to risk management, costs for governments will rise as they shoulder a growing share of the risk management burden.

For this reason, the division of labour based on the risk type should not be interpreted too rigidly, as all stakeholders have some role to play in managing various types of risks. For example, even for catastrophic risks farmers may be able to take proactive measures to reduce their exposure; and governments could also provide weather and market information to make it easier for farmers to deal with normal risks. These are two examples of broader strategies – building on-farm resilience capacity and the provision of public goods and no-regret policies – which can help build resilience across the risk spectrum. Figure 14.2 summarises these insights.

Trade has an important role to play in facilitating adjustments of food systems to climate change (Guerrero et al., 2022[26]); (Gouel and Laborde, 2021[27]); (Janssens et al., 2020[28]). While food production in a single country is vulnerable to many possible shocks, at a global level the supply of food is typically much less volatile. International trade thus often acts as a “risk pooling” mechanism, enabling countries to rely on international markets in the face of domestic shocks (Brooks and Matthews, 2015[29]). (Burgess and Donaldson, 2010[30]) provide a striking illustration of this mechanism at the intra-regional level in the context of colonial India. Prior to the spread of railroads in India, local rainfall shortages had large effects on famine intensity. As railroads spread, however, this link between local weather and famine disappeared almost completely. Such improvements in infrastructure (transportation and storage), as well as transparency regarding supply, demand, stocks, and prices, can contribute to the effectiveness of trade as a mechanism for coping with shocks. While the “portfolio diversification” aspect of trade leads to lower volatility, at the same time openness to trade also exposes countries to international price shocks. On balance, studies have concluded that although large international price spikes do occur occasionally (as occurred in the wake of Russian’s war of Ukraine), the “buffering” effects of trade typically dominate (Brooks and Matthews, 2015[29]).

Trade can only play this buffering role if countries refrain from using policy instruments that undermine international markets. When global food prices increase, major exporting countries are often tempted to impose export restrictions or outright export bans in an attempt to stabilise domestic prices. This leads to even greater upward pressure on prices in the international market. In 2006-2008, when food prices were increasing rapidly, several major grain-exporting countries adopted export restrictions or bans. Some importing countries reacted by reducing pre-existing import restrictions such as tariffs (Jones and Kwieciński, 2010[31]). The result was additional upward pressure on world prices. Some 45% of the increase in international rice prices in 2006-2008 and almost 30% of the increase in international wheat prices was likely due to these kinds of trade policy responses rather than initial market conditions (Martin and Anderson, 2011[32]). As climate change leads to more frequent extreme weather events affecting agricultural production, countries may be tempted to resort to export restrictions to protect domestic consumers from price increases. Yet as the experience of 2006-2008 shows, the net result might be to create even greater volatility in international markets.

Openness to trade may not be sufficient to deal with severe international shocks (such as high prices of fertilisers in the wake of Russian’s war on Ukraine) and as a result, as in other sectors, there has been debate about whether perceived vulnerabilities to global food supply chains are outweighed by perceived advantages of relocalising production. Countries need mechanisms to manage such risks; however, import restriction policies are not an effective way of doing so. Work by the OECD has identified “keys to resilient supply chains”,4 many of which are relevant to food supply chains. Importantly, this work highlights that an effective approach should look at possible risks along the whole supply chain, not merely its international aspects; and that governments should not try to handle all risks, only those that are too big for private actors to handle alone – echoing the lessons for farm-level resilience discussed above.

Another policy approach to building the resilience of food systems is public stockholding, or ensuring that redundancies are kept aside in order to address potential shocks. There are three major types of public stocks: i) emergency stocks held for use in humanitarian emergencies (e.g. caused by natural disasters); ii) social safety net stocks that distribute food at subsidised prices to help food insecure households; and iii). buffer stocks to protect producers from sudden drops in producer prices and/or protect consumers from sudden consumer price spikes (Deuss, 2015[33]).

Climate change may increase the need for emergency stocks to be used in humanitarian emergencies. Such stocks are recognised as one option for disaster preparedness, alongside climate adaptation. Social safety net stock schemes are more akin to food assistance programmes. In developing countries, the importance of public stockholding programmes may be greater, as the relative number of the vulnerable poor is generally larger than in developed countries. At the same time, while food assistance in general can be an effective way of dealing with shocks to food systems, the performance of public stocks as a food assistance policy should be compared with other possible instruments, including providing income support or building a broader social safety net.

Buffer stocks, by contrast, aim to buy and sell in order to influence market prices. The goal of existing schemes has often been to reduce price volatility. As climate change increases the frequency and severity of shocks to food systems, and hence possibly price volatility, the political demand for buffer stock schemes may grow in coming years. However, it is not clear whether buffer stocks actually reduce domestic price volatility. Even when they do, it is at a high cost. First, these schemes are almost always implemented through other policy instruments such as price regulations, trade restrictions, and import and export monopolies, creating economic inefficiencies. Second, even though these schemes in theory should buy low and sell high, this often does not work in practice and countries end up with a fiscal deficit and/or excessively large stocks. Third, the accumulation and release of stocks can create instability in global markets (Deuss, 2015[33]) (OECD, 2018[34]). A greater reliance on buffer stocks in response to climate change could thus worsen, rather than improve, the resilience of food systems.

An important consideration in the resilience of food systems is that any intervention to improve one objective may create synergies and trade-offs with several others (OECD, 2021[3]). For example, modelling suggests that green set-aside payments may help with mitigation but could reduce adaptation, while investments in adaptive capital (e.g. drainage) might help with adaptation but could negatively affect mitigation (Lankoski, Ignaciuk and Jésus, 2018[35]). Actions may also improve the resilience of only some actors at the expense of others. Conversely, some actions (e.g. better education and training for farmers) might increase resilience in more than one way, creating synergies. This calls for coherent policies that strengthen, or at least do not actively counteract, each other.

Because of these synergies and trade-offs, it is important to take a systems view to building resilience (see also Chapter 4) (OECD, 2021[3]). In the context of food systems, one interesting example is the use of a territorial approach to food security and nutrition (OECD/FAO/UNCDF, 2016[36]). Historically, food security and nutrition policy has often been developed in a top-down fashion, designed and implemented at the national level without much consideration for (or involvement of) local stakeholders, resulting in one-size-fits-all outcomes. Moreover, policies have often taken a sectoral approach (focusing almost exclusively on agriculture). A more bottom-up and multisectoral approach, where different levels of government and different policy communities (agriculture, poverty, education, public health, etc.) work together, may be more effective.

Policy making for resilient food systems also means keeping a long-term focus in mind and planning for a range of possible scenarios and adverse events, including various climate change scenarios. Identifying possible trends and risks, and thinking through possible consequences and how to deal with them can be done through participatory processes involving policy makers, researchers, farmers, other industry leaders, and the financial sector (OECD, 2020[13]). This improved understanding not only helps in developing better policies but can also help individual stakeholders to better prepare themselves.

Finally, building resilience in food systems is also made difficult by disagreements over facts, interests, and values (OECD, 2021[3]). Many areas of food systems are characterised by evidence gaps, including on trade-offs and synergies, and on policy effectiveness (Deconinck et al., 2021[37]). In other areas, vested interests may be successful at blocking policy reforms; a large literature has documented these political economy pressures in agricultural and food systems policy (Swinnen, 2018[38]).

Understanding these dynamics is helpful in making policies themselves resilient to future shocks. Building on earlier work by OECD and others, (OECD, 2021[3]) identifies policy processes that can help navigate around these obstacles. Strategies include building a shared understanding of the facts (for example, through scientific advisory bodies and stakeholder input into regulatory impact assessments); balancing diverging interests (for example, by creating a more level playing field through greater transparency, or by providing compensation); and overcoming differences over values (for example, through deliberative democracy approaches).

Even where policies improve overall outcomes, they may impose costs on specific interest groups. Shocks to food systems may then lead to calls for relaxing or abolishing these policies, threatening the resilience of the policies themselves. For example, in the wake of Russian’s war on Ukraine, several countries have considered relaxing environmental constraints on agriculture to boost output. As the discussion in this section has shown, however, if food security is the objective, several other policy instruments can be used, such as providing financial assistance to consumers to cope with higher food prices and specific support to countries facing high food import bills. Policy makers should keep in mind that once measures are relaxed they may be hard to reinstate, and that relaxing these environmental constraints may at any rate provide only marginal relief to the current pressures, at significant costs to biodiversity and other environmental goals (OECD, 2022[16]).

Cities are at increased exposure to climate risks (IPCC, 2022[39]). They concentrate people, infrastructure, and economic activities, and this concentration comes with risks. Cities are home to more than half the world’s population and their inhabitants are the most exposed to climate shocks such as floods, storms, and heatwaves. Low-income and socially marginalised urban populations, which may include the elderly and children, often live in areas that are prone to climate change hazards or that are ill-equipped to face climate risks. Pregnant and breast-feeding women in these areas are also especially vulnerable. As such, they are more likely to be affected by climate shocks, and have a lower capacity to recover from them (OECD, 2017[40]). For example, in the United States, a recent study found that extreme heat is disproportionately affecting Black and Hispanic workers, who are more likely to live in areas where air pollution is already increasing childhood asthma diagnoses (United States Environmental Protection Agency, 2021[41]; Adrienne-Arsht Rockefeller Foundation Resilience Center, 2022[42])

The urban heat island effect – a phenomenon that results from high building density, heat from human activities, building materials and limited vegetation – has a significant impact on temperatures in cities. Its intensity varies depending on the population size and climate zone. Between 2017 and 2021, almost half of OECD cities experienced urban heat island effects of more than 5°C and even more than 7°C in some cases. Cities with more than 250 000 inhabitants are on average 3°C warmer than their surrounding areas, with temperatures almost twice as high as in cities with fewer than 100 000 inhabitants (Figure 14.3). Policy frameworks to address urban heat island challenges must take specific local contexts into account.

Sea-level rise also impacts cities disproportionately. It is estimated that 75% of the world’s largest urban agglomerations are located in coastal zones. Two-thirds of cities with more than 5 million inhabitants are located in low-lying coastal areas, which are especially exposed to risks of a changing climate (OECD, 2021[43]). By 2050, over 570 low-lying coastal cities are projected to face sea-level rise of at least 0.5 metres (C40, n.d.[44]). Average global losses from floods could reach USD 52 billion by 2050 in 136 of the world’s largest coastal cities, even in the absence of climate change (OECD/Bloomberg, 2014[45]).

Despite their particular vulnerability to climate change, cities are an essential part of the solution to addressing climate change and its impacts. First, they are responsible for critical policy domains that influence climate outcomes. Many of the domains that fall under the jurisdiction of cities – land-use planning, zoning, water provision, sanitation and drainage, housing construction, urban renovation, regulation, economic development, public health and emergency management, transport, environmental protection – are directly vulnerable to climate change impacts. At the same time, they also represent opportunities to develop adaptive capacities and strategies, making cities well-positioned to integrate different policy sectors relevant for climate action on the ground. Second, cities generate a large share of climate-significant investment that goes towards the implementation of mitigation and adaptation strategies. In OECD countries, subnational governments are responsible for 69% of climate- and environment-related public investment (OECD, 2019[47]) (IPCC, 2022[39]) (OECD, 2022[48]).

Against this backdrop, geographical scale becomes a key element in understanding and addressing the complexity of climate shocks and their impacts. The complexity of urban climate dynamics is related to urban systems and to cities as an open system themselves. A city can be conceived of as an urban system in which multiple systems interact, but also as part of a wider open system in which many cities and other systems influence each other.

Climate change affects many interconnected systems in cities, including economic systems (e.g. production, jobs), social systems (e.g. housing, health, education), ecological systems (e.g. vegetation, water basins) and urban infrastructure systems (e.g. transport, energy, water and sanitation).

Recent major climate shocks in cities around the world illustrate the variety of climate impacts and the varying effect of these impacts on specific locations and people:

  • In 2022, Europe experienced one of the hottest summers in history. The extreme heat led to record-breaking temperatures – reaching 40°C for the first time – in several cities including Nantes (France), Rome (Italy) and London (UK). Outcomes ranged from increased mortality and health issues to infrastructure breakdowns and electricity blackouts, which were exacerbated by the urban heat island effect (OECD, 2022[46]). Between July and August 2022, the extreme heat caused around 4 500 deaths in Germany, more than 1 000 in Portugal, 4 000 in Spain, and more than 3 200 in the UK (WHO, 2022[49]). The heatwave also heavily affected urban infrastructure. For instance, London’s Luton Airport had to restrict flights after its runway melted in July 2022 (Rodas, Lombardi and Ledesma, 2022[50]).

  • Extreme cold in 2021 in the US state of Texas left more than 10 million urban residents without electricity at its peak. With energy infrastructure not built to withstand such a freeze, the cold created cascading effects on services that rely on electricity, including drinking water treatment and medical services. Water and electricity outages forced hospitals to relocate patients. They also affected boilers and heating. Water pipes in residential buildings froze and then burst upon thawing causing additional damage. Moreover, storm conditions created significant obstacles to transportation, access to workplaces, and provision of emergency services. This disrupted food supply and closed down grocery stores, worsening underlying food insecurity. All these combined effects caused economic losses of around USD 130 billion in Texas and USD 155 billion in the country as a whole (Busby et al., 2021[51]). The impacts of the extreme cold compounded existing vulnerabilities. For example, homeless shelters were already out of capacity due to COVID-19 restrictions, with shortages then exacerbated by power failures and burst pipes (Pezenik and Ebbs, 2021[52]).

  • A massive flood in Pakistan in 2022 left one-third  of the country under water and affected 33 million people. Half of the districts (first tier of local government) in the country declared themselves “calamity hit”, including cities in the Sindh province such as Mehar, Qambar, Larkana, Sukkur, Sehwan, and Khairpur Nathan Shah. (Bhargava et al., 2022[53]) (Union, 2022[54]). The impacts of the flood cascaded into different sectors including education, healthcare, and energy and transport infrastructures, leading to total economic losses of about USD 15.2 billion. Preliminary research suggests that the flood was a compounding crisis that started with the phenomenal heatwave experienced in April and May 2022. During that period, temperatures reached above 40°C for long periods in many places. In the city of Jacobabad, the temperature reached 51°C. Such unusual and extreme heat melted glaciers in the northern mountainous regions, increasing the amount of water flowing into tributaries that eventually make their way into the Pakistan’s Indus River. - which crosses the country from north to south, flowing through towns, cities and large swathes of agricultural land along the way (Mallapaty, 2022[55]).

Cities are home to 3.5 billion people, accounting for 48% of the world population, and this number is estimated to reach 55% by 2050 (OECD, 2020[56]). As the urbanisation trend continues, the impacts of climate change are likely to increase and become much more complex. Furthermore, climate-induced migration can generate additional pressures on urban systems such as energy, water and sanitation, transport, and housing. A recent study found that climate disasters caused by weather-related hazards in 2021 triggered the displacement of 30 million people, more than three-quarters of new displacements recorded worldwide (Internal Displacement Monitoring Centre, 2021[57]). With many of those displaced moving to urban centres, cities need to be better prepared to accommodate increasing numbers of migrants (Khanna, 2022[58]).

The various impacts of major climate shocks illustrated above can be characterised by type of shocks (floods and storms, heatwaves, droughts, biodiversity losses, and sea-level rise) and by type of impacts (direct/single impacts, indirect, cascading and compound impacts, and impacts across places and/or people) (Table 14.1).

While climate shocks affect social, ecological and health systems (Table 14.1), shocks in other systems (e.g. financial or health crises) also affect climate challenges. The COVID-19 pandemic started as a public health crisis before escalating into an unprecedented social and economic crisis, demonstrating the complex interaction of different systems. It also demonstrates how over-emphasis on efficiency and cuts in public expenditures over the past years (e.g. health infrastructure and staff) has jeopardised the resilience of key systems to shocks, allowing failures to cascade from one system to others (OECD, 2020[60]).

In cities, the COVID-19 pandemic generated not only socio-economic impacts, disproportionately affecting people, firms and places, but a wide range of environmental ones. These threaten or slow the progress of cities towards building systemic resilience to climate change. At the same time, the COVID-19 pandemic has shown the potential of cities in building long-term resilience by using a systems approach. Cities were hit hardest by the pandemic but they were also at the forefront of the response. They played a key role in implementing nation-wide measures and providing laboratories for innovative, bottom-up recovery strategies (OECD, 2020[61])

The examples discussed above illustrate the complexity and uncertainties of climate risks in cities. This underlines the need for applying a systems approach to building resilience. As discussed in Chapter 4 of this report, the OECD defines resilience from a systems point of view as the capacity of a system to recover in the midst of shocks and stresses over time.

Due to the inherent complexity of a systems approach, it is important for policy makers to have a clear understanding of what such an approach would entail and how it could be applied in the urban policy context. Figure 14.4 offers a framework for policy makers to better understand and build systemic climate resilience in cities.

Complex interactions take place across policy and governance scales and often imply trade-offs between policy objectives (Bai et al., 2017[62]). However, current policy practice often ignores the complexity of urban systems by designing and implementing measures that serve individual systems (e.g. transport, water management) instead of considering the interactions between or among them. Climate shocks can add more complexity and uncertainty to how different systems interact in cities. Systemic climate resilience in cities thus requires a better understanding of the interaction between various dimensions, enabling policy instruments to address multiple objectives together, generating synergies and co-benefits and minimising trade-offs. Cities should explore interactions between the impacts of climate shocks and other societal challenges such as health, social marginalisation and labour productivity. Proper identification of such interactions would allow cities to prioritise climate actions that also benefit other social objectives. For example, greening urban spaces can boost cities’ resilience to extreme weather while providing health benefits.

Systemic resilience in cities means a better understanding of diverse types of impacts, in particular, cascading and compounding impacts of climate change. Cascading impacts in cities are observed when a climate shock damages buildings and urban infrastructures and leads to a disruption of services such as transport, energy, water, and food provision, resulting in impacts that are significantly higher than the initial impact. Compounding impacts in cities are observed when the impacts of a climate shock interact with pre-existing inequalities and vulnerabilities of urban residents, thereby exacerbating the impacts. For instance, this occurs when low-income households living in homes without adequate insulation are hit both by extreme cold weather and an increase in energy prices. As the cascading and compounding impacts of climate change on other systems span a wide range of policy areas, assessing each type of risk and identifying solutions to minimise their negative impacts is critical. This can help increase preparedness for diverse types of climate impacts, and develop better adaptation and resilience policies.

The unevenly distributed impacts of climate change across places (e.g. low-lying areas, urban centres) and people (e.g. vulnerable population groups) are particularly visible in cities. The impacts extend beyond the administrative boundaries of individual cities. Building systemic climate resilience in cities requires renewed appraisal of the scale at which climate shocks should be addressed and with which actors.

This also demands a better understanding of the asymmetric climate impacts across urban, peri-urban, and rural residents (particularly the most vulnerable) to facilitate place-based and targeted responses to specific needs. For example, policy responses to address urban climate resilience should account for the fact that cities concentrate more migrants than other regions (OECD, 2022[63]). Therefore, all levels of government have an important role in developing resilience strategies at different geographical scales, including regional, metropolitan, local and neighbourhood.

Complex interactions across systems in cities involve a wide range of urban and rural actors – not only governments, but also the private sector, civil society, local communities, city networks, etc. Co-ordination mechanisms for climate-resilient planning and investment across multiple sectors and among national, regional and local governments are often lacking or not clearly defined. Local communities are not always offered opportunities to engage with the early stages of disaster risk management strategies and frameworks, although they are the first responders in the event of a disaster. This underlines the need for policy co-ordination to align goals and incentives across different levels of government and across society at large. Systemic resilience in cities requires diverse urban actors to collaborate, identify and implement appropriate solutions to address the complex interaction of climate and other economic, social and health systems.

A key policy option is to prioritise investment in integrated urban development by breaking sectoral silos and encouraging horizontal co-ordination. Local governments are well positioned to implement integrated urban development, with a growing number of cities integrating complementary measures (Box 14.1). To carry out such investments, subnational governments can use a mix of public sources of revenue including grants, subsidies, user charges and fees, and tax revenues, as well as external sources including loans, loan guarantees, and bonds, among others. The OECD Compendium of Financial Instruments for Subnational Climate Action5 provides an overview and analysis of some climate-related public revenue sources provided to subnational governments from national governments, and state governments in federal countries. It includes grants, climate funds and loans, as well as information on contractual arrangements as an innovative way to link funding to climate action.

Given the growing uncertainty underlying local climate risks, climate and urban development policies need to be better equipped to address such uncertainty. This requires assessing all dimensions of climate risks, including how they may cascade or compound with other climate and non-climate risks and across different geographical scales. In turn, this can help policy makers set their policy priorities, and design and implement their climate action more effectively. However, in practice, although climate risk and vulnerability assessments are increasingly becoming a common exercise at the city level, such assessments do not always cover different systems (e.g. economic, social) or different geographical scales (e.g. regional, national and international).

Against this backdrop, some cities are increasingly using systems approaches for the development of their resilience strategies. In 2022, Paris, France started a process to review its Resilience Strategy and is currently carrying out several new climate risk assessments, including on social and environmental fragility. Similarly, Rotterdam, Netherlands analysed seven major crises (climate, biodiversity, pollution/natural resources depletion, inequality, cyber, health and unknown and potential crisis) to expand the scope of its resilience strategy from solely climate risks to economic, social, energy, ecological and digital readiness.

Urban and rural areas are spatially and functionally interconnected and dependent on each other through, for example, their labour markets, production and consumption of food and energy, and water management. Without co-ordination with neighbouring communities and towns, a city alone cannot address climate-related hazards. Leveraging the spatial continuity and functional relationships between urban and rural areas, is thus a key strategy to build systemic climate resilience. However, better definitions of geographical scope are needed. For example, the OECD-EU Functional Urban Area (FUA) looks at the economic and functional extent of cities based on people’s daily movements (Dijkstra, Poelman and Veneri, 2019[65]). These tools can help subnational governments coordinate policy actions at the relevant scales.

Systemic resilience requires engagement from a wide range of stakeholders, in particular, local communities affected by specific policy measures. Resilience measures can create tensions among communities. For example, policies to conserve ecosystem services that limit or prevent specific land uses (e.g. housing) may be interpreted by citizens as a barrier to urban development. When planning resilience policies and strategies, policy makers need to ensure that there is a shared understanding of the problem, a shared vision, and shared responsibility among affected citizens.

To overcome such potential tensions, policy making should implement participatory approaches to guide national and local adaptation planning and implementation. In addition to overcoming tensions, such participatory approaches can help cities draw on community knowledge, including from vulnerable groups that are disproportionally affected by climate change. Community engagement can help governments identify the specific needs of each community; target/adapt policy responses more effectively; and fairly distribute the costs and benefits of climate adaptation actions. When securing citizen/community participation in adaptation and resilience planning, governments can also build a sense of ownership and garner community support (e.g. for the maintenance of green roofs).

Although National Adaptation Plans and Strategies (NAP/NAS) are unlikely to guide adaptation processes at the city level, it is important for cities to be aware of their goals, targets and priorities and reflect them in city-level adaptation plans (UN-Habitat, 2019[67]). Similarly, efforts should be made to align adaptation targets in Nationally Determined Contributions (NDCs) and action taken at the local level. It is essential that national governments coordinate action and ensure policy alignment, taking into account territorial disparities in climate risks.

National governments can use the NAP, NAS and NDC processes to engage regions and cities, clarify the roles and responsibilities of each level of government, and align national and subnational climate adaptation targets and policy instruments to achieve the targets. To do this, various national-level authorities and different levels of governments need to be consulted in the NAP, NAS and NDC formulation process. Some countries are already advancing these localisation processes (Box 14.3.

In addition to consulting subnational governments in national adaptation planning, effective coordination across government levels will also require aligning policies and funding structures across sectors, as well as with private actors. While national governments have a key role to play in setting and implementing national policy and investment frameworks for climate adaptation and resilience, subnational (regional and local governments) hold competences in many policy areas that are key for climate adaptation and resilience, such as land use, water and disaster risk management. Establishing institutional frameworks for effective co-ordination and integration can result in better policy outcomes.

A means of engaging both national and local governments (and other relevant stakeholders) is through the development of joint climate actions, for instance, in the form of partnerships, contracts or joint programmes. Such actions can include common targets, allocation of roles and responsibilities, and financing arrangements (Box 14.4). Similar arrangements can be made to promote knowledge sharing across and within levels of governments (e.g. capacity-building programmes, city-to-city collaboration programmes).

Climate change is putting global energy infrastructure at risk. More frequent and intense extreme weather events can affect energy supply by damaging assets and infrastructure for fuel supply, power generation, transmission and distribution. Rising temperatures can damage oil and gas production in arctic regions and reduce power generation and the efficiency of power plants. Changes in hydrological patterns with more frequent droughts and floods have critical impacts on mining, biofuel production and hydropower generation, which are all heavily dependent on water availability. Wildfires can damage electricity grids and refineries in some areas while reducing solar power generation. Tropical cyclones can also destroy overhead electricity lines and poles; prompt automatic shutdown of wind power plants; and damage refineries in coastal areas.

Some of the major energy supply disruptions seen in 2022 resulted from extreme climate events. Heatwaves in Europe raised electricity prices to a record-breaking level with soaring cooling demand (Bloomberg, 2022[75]). Massive floods from monsoon rains and glacial melt in Pakistan damaged power stations and gas pipelines (Arab News, 2022[76]). A record-breaking 13-year drought in Chile is severely reducing the production of copper, which is used in key clean energy technologies such as solar photovoltaics (PV), wind, electricity networks and battery storage (Euronews, 2022[77]). Hurricane Ian in the United States and Cuba destroyed electricity networks, leaving over 13 million people in the dark for hours to weeks (CNN, 2022[78]).

Oil and gas refineries are facing growing risks of climate impacts. Over 25% of refineries are exposed to tropical cyclones and over 10% are under threat of intense tropical cyclones (above Category 3) (IEA, 2022[79]). In August 2021, for instance, Hurricane Ida shut down around 96% of crude oil production and 94% of natural gas production in the Gulf of Mexico, which accounts for 47% of total petroleum refining capacity and 51% of natural gas processing capacity of the United States (EIA, 2021[80]). The strong winds, torrential rains and associated landfall of the hurricane prompted the evacuation of 288 offshore oil platforms and curtailed production from at least nine refineries (SPG Global, 2021[81]) (EIA, 2021[80]) As a result, US crude oil production fell by 1.5 mb/d (around 14% of total daily production), and exports fell by 698 000 b/d in the week of Hurricane Ida, raising oil prices to their highest levels in three years, with an increase of 10% in the following month alone (Forbes, 2021[82]). Hurricane Ida also affected several oil and gas pipelines in Louisiana, causing widespread power outages. In the two weeks after Ida, the National Oceanic and Atmospheric Administration issued a total of 55 spill reports, demonstrating that the concentration of pipelines, platforms and wells in the area have become increasingly affected by tropical cyclones (CNBC, 2021[83]) (New York Times, 2021[84]).

In some oil production sites, such as western North America and southern Australia, wildfires are a major threat to energy infrastructure. In May 2016, wildfires in northern Alberta, Canada halted production in the oil sands and cut Canada’s daily oil production by as much as 1mb/d (Bush and Lemmen, 2019[85]) (Canada Energy Regulator, 2017[86]). In 2017, a wildfire in California burned through six oil fields (Fractracker Alliance, 2018[87]). Given that climate change could increase the probability of wildfires in certain regions, wildfires may disrupt oil production more frequently by forcing pre-emptive shutdowns and loss of stored resources. According to IEA analysis, more than half of the world’s refineries are currently exposed to more than 50 fire weather days per year (according to the Fire Weather Index, a meteorologically based index to estimate fire danger). One-quarter of refineries are experiencing meteorological conditions favourable to wildfires for over 200 days per year. More than 10% of refineries are under the risk of wildfires during the entire year (IEA, 2022[79]).

Rising temperatures could also have adverse impacts on oil and gas pipelines and ports. In the United States, for instance, roughly 14 000 km of active oil and gas pipelines are not sufficiently monitored against extreme weather events (U.S. Government Accountability Office, 2021[88]). Temperature rise resulting from climate change may influence the integrity and reliability of existing oil and gas pipelines, leading to expansion in pipelines and increased risk of rupture. Increasing temperatures leading to ice and permafrost melt could threaten fossil fuel transport and storage in the Arctic region, which is heating twice as fast as the global average (IPCC, 2021[89]). In Alaska, permafrost thaw and subsequent ground instability could lead to an estimated USD 33 million in damages to fuel pipelines in a high-emissions scenario (RCP 8.5) by the end of the century. To address this problem, the Alaska Department of Natural Resources has approved the use of about 100 thermosyphons to keep the permafrost directly below the pipeline frozen and prevent further damage to the pipeline’s support structure (NBC News, 2021[90]).

Electricity systems are also under increasing pressure from climate change impacts. These range from shifts in generation potential and output, and physical damage to electricity grids to the increasing likelihood of climate-driven outages.

Tropical cyclones, which have increased in intensity over the last four decades, are already one of the major causes of climate-induced disruptions in some countries. In Japan, for instance, Tropical Cyclone Faxai destroyed the country’s biggest floating solar plant (13.7 MW) in 2019 by tearing the modules off and causing fires (EnergyTrend, 2019[91]). In Puerto Rico, Tropical Cyclone Maria destroyed a 100 MW solar PV system near Humacao in 2017 (Krantz, 2020[92]). In Malawi, Tropical Cyclone Idai caused two major hydropower plants to go offline due to flooding and excessive debris, prompting widespread disruption in electricity supply for several days (IEA, 2020[93]). In the Philippines, Typhoon Odette (Rai) broke distribution and transmission lines, and deprived more than 3 million families of electricity (Inquirer, 2021[94]). In 2023, 29% of nuclear power-installed capacity, 19% of wind, 15% of solar PV, 14% of hydro and 11% of grids are exposed to tropical cyclones. Eighteen percent of nuclear, 12% of wind, 6% of solar PV, 7% of hydro and 5% of grids may face major tropical cyclones above Category 3 (with a higher wind speed of over 177km/h) (IEA, 2022[79]). Climate projections show that the intensification of tropical cyclones may continue in the coming decades if GHG emissions are not mitigated, exposing more power plants.

Another rapidly increasing climate risk is heavy precipitation and floods. In 2080-2100, over 55% of installed capacity of hydropower, coal power, nuclear power, gas power and electricity grids are projected to be exposed to more than a 10% increase in one-day maximum precipitation compared to 1850-1900 in a low-emissions scenario (SSP1-2.6). Under a high-emissions scenario (SSP5-8.5) the share soars to over 90% (IEA, 2022[79]). Although power plants are generally equipped with flood protection structures that work in most cases, severe floods could prompt disruptions, including pre-emptive shutdown. For example, five gas-fired power stations in Sylhet, Bangladesh, were shut down pre-emptively when flood water engulfed the stations in June 2022 (Business Insider, 2022[95]). Increased river flow in the aftermath of record rainfall from Hurricane Florence prompted a shutdown of the L.V. Sutton natural gas power plant in the United States because the excessive water flow brought waste into the plant’s cooling lake (Wall Street Journal, 2018[96]). Excessive rainfall and floods can also halt project development. Viet Nam’s Thua Thien Hue hydropower project in 2020 and Lao People's Democratic Republic (Lao PDR)’s Xe-Pian Xe-Namnoy Dam in 2018 were halted after landslides resulting from excessive rainfall (IEA, 2021[97]).

Meanwhile, some power systems are projected to face a drier climate, which may raise potential risks of water shortage to some electricity generation technologies such as hydro, oil, gas and nuclear power. Globally, around one-third of existing thermal power plants using freshwater cooling are located in areas of high water stress. This share is set to increase as the changing climate turns today’s low-risk sites into high-risk ones (IEA, 2021[98]). Some thermal power plants in South Africa and the United States are currently exposed to water shortages so are switching to dry or hybrid cooling systems (IEA, 2022[79]). Hydropower plants in drought-prone regions, such as the Mediterranean and southern Africa, are also experiencing disruptions owing to droughts. For instance, the power supply in Zambia, where more than 80% of electricity supply comes from hydro, is significantly affected by declining water availability attributable to more frequent droughts and a shorter rainy season. In February 2016, the water level of the Kariba Dam, one of the biggest electricity sources for Zambia and Zimbabwe, dropped to near-record lows (12%), prompting blackouts and power rationing. This occurred again in August 2019, with the Kariba station forced to cut output and impose daily blackouts (IEA, 2020[93]).

In addition to water shortages, climate change poses challenges to electricity supply. Higher temperatures could lead to lower voltages and less electricity generation, as solar PV and wind power plants generally work best in a 25°C environment or lower. Extreme heat can increase electrical resistance in circuits, damage battery cells and lower the viscosity of lubrication oil for wind turbine gearboxes, causing grinding in the gears. As such, electricity generation from solar PV and wind turbines could significantly drop or even stop under extreme heat. For instance, if surface temperature goes above 35°C and raises solar panel temperature to 70°C, solar PV efficiency can drop by 13.5-22.5%, leading to a notable reduction in generation output if no adaptation measures and technological enhancements are undertaken. Extreme heat can also damage power lines, poles and substation equipment while causing the thermal derating of overhead lines.

Heatwaves leading to higher intake or discharge water temperatures can challenge conditions for water cooling water necessary for thermal power plants. High intake water temperatures can reduce operating efficiency and maximum generation capacity, and by regulation are forbidden in some countries. In France, for instance, heatwaves in June and July 2019 forced the power utility Électricité de France to curb or entirely stop output of some nuclear reactors based on government regulations that power generation must be cut when water temperatures rise above 28°C (ASN, 2019[99]).

As with oil and gas power production, wildfires also pose threats to power systems, particularly solar PV and the electricity network. Over 60% of today’s solar PV plants and around 50% of electricity networks are located in regions with more than 50 days of fire weather per year. Around one-quarter of solar PV and some 18% of electricity grids are exposed to more than 200 fire weather days annually (IEA, 2022[79]). Wildfires can cause physical damage to solar PV plants and significantly reduce solar power generation by emitting large amounts of smoke particulates into the atmosphere and absorbing solar radiation. In the United States, roughly 50% of all claims for solar asset damage owing to extreme weather were caused by wildfires (PV Magazine, 2021[100]). Wildfires in September 2020 in the United States were considered responsible for a 10-30% decrease in solar power generation during peak hours (Juliano et al., 2022[101]). Wildfires can also cause multiple simultaneous faults in various parts of the electricity grid such as lines, poles and substation equipment, while derating overhead lines. In Australia, wildfires in 2019-2020 caused unplanned power outages, mainly because flames damaged transmission and distribution lines. In New South Wales alone, the two main electricity suppliers reported the destruction of 4 000 power poles, leaving 158 000 people without electricity (Department of Premier and Cabinet (New South Wales), 2020[102]).

Several factors influence energy demand related to climate change. Higher cooling requirements in buildings may result in higher electricity demand during summer peak hours, adding additional stress to the electrical infrastructure. At the same time, milder winters may result in a decrease in the amount of energy needed to heat buildings. Depending on the overall temperature increase, world energy consumption is projected to rise by 7–17% by 2050 as a result of climate change. The severity of this effect varies by region, with developing economies in the tropics seeing the majority of the rise in energy consumption. Rising temperatures cause cooling degree days (CDD) to increase and heating degree days (HDD) to decrease. Under a high-emissions scenario (SSP5-8.5), CDDs are projected to increase by 732 days between 2081-2100 with respect to 1850-1900. Increases in global energy demand increases as a result of the noticeable increase in cooling demand are projected to offset a decline in heating demand. As much as two-thirds of all households are projected to own an air conditioner by 2050 as a result of rising average temperatures, expansion in building floor areas, improved living standards and policies to broaden access to essential energy services. The projected growth in peak electricity demand for cooling is expected to put significant stress on electricity systems (IEA, 2022[79]).

Increased frequency or intensity of extreme weather events can increase energy demand in some industries, for example by increasing the demand for building supplies needed for reconstruction of damaged infrastructure (e.g. cement, iron and steel). Long-lasting droughts can also raise energy needs in some regions by increasing the usage of energy-intensive desalination of seawater for drinking, farming, cooling of power plants, and other uses. On the other hand, more frequent and severe precipitation events may increase demand in the chemicals industry owing to increased fertiliser production needs. Such climate-related stresses may increase the demand for synthetic nitrogen fertilisers, which are currently used in approximately half of the world’s food production and are projected to increase by nearly 40% by 2050, mainly driven by the need to increase food production due to economic and population growth (IEA, 2022[79]).

As climate change impacts all means of energy supply and demand, it is necessary to take a systemic view of the climate resilience of energy systems. A climate-resilient energy system implies the ability to anticipate and prepare for changes in climate, adapt to and withstand slow-onset changes in climate patterns, continue to operate under immediate shocks caused by extreme weather events, and restore the system’s function after climate-driven disruptions.

A systemic approach to energy sector resilience requires action by all stakeholders. Energy suppliers, consumers and authorities are key actors, while science communities, international organisations, civil society and businesses in other sectors all have important roles to play.

Energy suppliers have primary responsibility for and direct interest in protecting their own assets and providing reliable energy services to their customers. The IEA recommends five priorities for energy suppliers to improve climate resilience and identifies climate risk and impact assessments as the first step (IEA, 2022). Although more energy-related companies are conducting climate risk and impact assessments and disclosing the results following the guidelines of the Task Force on Climate-related Financial Disclosures (TCFD), many of these assessments remain incomplete. As of 2020, only 44% of the 267 energy companies participating in the TCFD submitted climate-related metrics, which include information on the physical risks of climate change (TCFD, 2021[103]).

Energy suppliers have a number of options for enhancing the resilience of energy systems. For example, they can implement physical system hardening (e.g. floodwalls for generation assets, improved electricity networks with underground lines or galvanised steel poles, enhanced reservoir capacity of hydropower and coastal barriers against sea-level rise) that can help energy systems withstand climate impacts. They can also consider switching to more water-efficient and heat-resilient production processes, such as using alternative water sources (e.g. wastewater, seawater, produced water); dry or hybrid cooling systems for thermal power plants; innovative cooling technologies for solar PV; and better design of wind power turbine ventilation.

In addition, energy suppliers can diversify the energy supply chain so that they can continue operation despite shocks to one production site. For instance, in North Africa, where hydropower is likely to see a significant drop in generation output and an increase in variability, raising the share of other power generation technologies would help enhance climate resilience (IEA, 2020[93]). Better climate monitoring systems with innovative technologies (e.g. smart metering, real-time monitoring devices, unmanned aerial vehicles, high-resolution video cameras with automatic alert systems, and Internet of things (IoT) solutions supported by satellite imagery) can help energy suppliers minimise damage from climate impacts and fix problems rapidly (IEA, 2022[79]).

Energy consumers can contribute to climate resilience by adopting demand-side measures in the main end-use sectors (e.g. buildings, industries, transport). Although demand-side measures may seem to have only indirect impacts on the resilience of the energy system, they actually play a key role in enhancing the flexibility of demand and managing peak load in power systems. Energy consumers can ensure climate resilience by adopting climate proofing in the design of key infrastructure and when conducting regular performance assessments. They can also help energy systems better cope with climate change impacts by changing their behaviour patterns and shifting to energy-efficient alternatives. For instance, smart ACs and thermostats, cool roofs and a shift to more energy-efficient transportation help manage electricity demand in summer during peak hours. In addition, nature-based solutions such as green roofs and restoration of riverbed and coastal wetlands can reduce risks from heatwaves and floods. Energy consumers can also consider using alternative materials which will be more resilient to extreme weather events and gradual changes in temperature (IEA, 2022[79]).

Energy authorities, including national and subnational governments and regulators, have a critical role to play in building energy-sector climate resilience by establishing an enabling policy and market environment. Energy authorities can facilitate action on the part of energy suppliers and consumers by addressing barriers such as high up-front costs versus long-term benefits; uneven distribution of costs and benefits; and limited knowledge and awareness about climate impacts and risks. In addition, monopolistic market conditions may require greater policy and regulatory measures to enable climate resilience actions and investments among energy suppliers. Energy authorities can catalyse actions by enhancing knowledge about climate risks and impacts. For instance, the United States’ Climate Resilience Toolkit and a guide for climate change vulnerability assessments support electricity utilities in assessing vulnerabilities to climate change and offer a portfolio of resilience solutions.

Establishing appropriate policy frameworks and mainstreaming climate resilience into relevant regulations, standards and guidelines are also crucial. A policy framework that provides clear goals, strategies and commitments while setting clear responsibilities for various actors encourages actions for climate resilience. The European Union has required that climate risks be considered in environmental impact assessments since 2014 and provides a guidance document to raise understanding of climate change adaptation (EU, 2022[104]). In addition to EU-level requirements, some European countries (e.g. Spain, Italy) and the United Kingdom have conducted climate change risk assessments and developed adaptation programmes for the entire or certain parts of the energy sector.

In addition to providing clear policy frameworks, energy authorities can support energy stakeholders by mobilising public financing and investment, and providing adequate risk-sharing mechanisms to facilitate private financing. For example, public investment played a major role in financing rehabilitation and modernisation of the Yacyretá hydropower plant, funded by the governments of Paraguay and Argentina (IEA, 2021[105]). Energy authorities also have a major role in ensuring an efficient and co-ordinated disaster risk preparedness and response system. Once a disaster occurs, energy authorities connect recovery efforts among various actors to minimise the magnitude of interruptions and restore normal operation as quickly as possible (IEA, 2022[79]).

In summary, climate impacts pose clear risks to energy systems at the supply and demand levels. Given energy system interlinkages, addressing these risks requires a systemic approach. Figure 14.5 below summarises different actions various energy system stakeholders can take in order to enhance resilience, categorised in four areas.6 The table illustrates that building resilience remains a complex endeavour, with individual measures by themselves unlikely to suffice. Rather, co-ordination across groups of actors and encompassing the whole spectrum of resilience areas will be necessary to address climate risks in the energy system.

The examples detailed in this chapter highlight the complexity of building systemic resilience. Each system has different particularities, involving different actors, at different spatial scales, and with different needs. Climate impacts are not evenly distributed across systems, meaning that careful risk assessment is required both across and within systems boundaries. Perhaps most importantly, systems are not static, but evolve dynamically in tandem with broader global events. As such, strategies to build systemic resilience must be able to react and adapt to global changes, as for example in the transition to net-zero emissions.

Considering the examples given, a few overarching lessons emerge. First, building systemic resilience requires an understanding of how each system functions, the interactions between systems components, the stakeholders and institutions involved, and how these relate to other systems. In particular, policy actions should aim to harness synergies across systems and avoid trade-offs. Second, systemic resilience requires a better understanding of climate risks and how these are distributed across space, time and people. In particular, policy actions should be targeted to specific needs to be most effective. Finally, building systemic resilience requires broad co-operation across government levels, economic sectors and communities. Only a comprehensive and inclusive approach to policy making will ensure that systemic resilience efforts are truly effective.

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Notes

← 1. The term “food systems” refers to all the elements and activities related to producing and consuming food, and their effects, including economic, health, and environmental outcomes.

← 2. The problem of access to food is not confined to poor countries, but understanding the true extent of food insecurity in OECD countries is difficult in part because most OECD countries do not routinely measure food (in)security, and those who do rarely use internationally comparable methodologies and instruments (Giner and Placzek, 2022[22]).

← 3. There may be distributional effects, however. For example, lower output in one region due to drought may push up global food prices, benefitting producers elsewhere.

← 4. https://www.oecd.org/trade/resilient-supply-chains/

← 5. https://www.oecd.org/regional/compendiumsubnationalrevenue.htm

← 6. As defined by the IEA (IEA, 2022[108]), the climate resilience of an energy system depends on its ability to prepare for changes in climate (readiness); to adapt to and withstand the slow-onset changes in climate patterns (robustness); to continue to operate under the immediate shocks from extreme weather events (resourcefulness); and to restore the system’s function after climate-driven disruptions (recovery).

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