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Climate change, what risks Albania

2024-02-03 09:22:46Biznes SHKRUAR NGA REDAKSIA VOX

Climate change, what risks Albania

The year 2023 was confirmed as the warmest calendar year according to global temperature records dating back to 1850. This year had a global average temperature of 14.98 degrees Celsius or 0.17 degrees more than the next year with the highest value, which is 2016.

Temperatures in Europe were above average for 11 months during 2023 and September was the warmest month on record. These are some of the indicators that the Copernicus Climate Change Service, the Earth observation component of the European Union's Space program, published in the first days of January.

The alarm that this is not the last year with these indicators, but the first year on a dangerous ground, has turned the attention and the need for reflection on climate change in the headlines of international institutions.

Albania, like a good part of the countries, was affected last year by heat waves with high temperatures, making it clear that, like everyone, we will suffer the consequences. Indicators of climate change have started to manifest earlier in our country in the average annual rainfall, their intensity or the presence or absence of snow.

In the narrow aspect, the countries are reflecting with measures on mitigating the risks that come from climate change, while at the international level they have joined initiatives where the results achieved remain in question.

Is Albania ready today to face the dangers of climate change? What are the sectors affected and what measures can be taken to mitigate the effects?

National Energy and Climate Plan and objectives

In 2021, the government adopted a special Energy and Climate Plan, which lays out the path to 2030. The key focus in this document appears to be more related to energy and achieving the security of supply objective than to climate elements, but of course some measures have an impact in that aspect as well, such as the use of fossil fuels.

The plan envisages the increase of investments in solar energy, the expansion of "hydro" capacities, the expanded use of gas, for which, until now, even though the projects are practically numerous, there is no concrete element.

Subsidy in function of reducing decarbonization related to sectors such as transport, where there is an effort towards green lines as well as measures in the agricultural sector.

In itself, the plan has summarized the national objectives in five dimensions. First is decarbonization, second is energy efficiency, third is energy security, fourth is the internal energy market and fifth is research, innovation and competitiveness.

For the issue of energy and climate, an interministerial group is in operation that coordinates the measures and reports on the progress.

Response institutions, where we are today with emergencies

The increase in the intensity of rainfall, where in a short period of time the amount of rain that has fallen is high, has increased the risk of flooding in the country. Floods are becoming more and more frequent in cities, where the capital is no exception.

In the same way, extreme temperatures promote fires which, in recent years, have become a problem, even in the summer of 2022, the intervention of the European Civil Defense Mechanism was requested due to the inability to cope with this emergency.

At that time, in two months, more than 200 fire stations were activated in 42 municipalities of the country. What is the panorama of the National Civil Defense Agency today? In an interview for "Monitor", this institution admits that the legal framework is almost complete, where a good part of the main documents and by-laws have been approved.

Some others are still in process. Meanwhile, in the national disaster risk reduction strategy, Albania has also included the element related to climate change.

"The consideration of climate change has directly influenced the Risk Assessment document through: the simulation of longer-term scenarios for risk measurement or the re-evaluation of the coefficients in the scoring system that list the risk.

This impact is given by the main factors: temperature, precipitation and sea level rise (SLR). For example: The predicted changes in rainfall patterns in the winter, autumn and spring months increase the risk of river floods", the Agency underlines.

Based on this, the Agency's focus has been on investments in order to reduce risk, intervening in bridges, roads, landslides and counting several dozen projects in the years 2022-2023. Meanwhile, the local government units with which the Agency has several projects in process are also engaged in the aspect of reaction in the institutional link.

"The exchange of information and the readiness of the constituent units of AKMC in relation to local government structures has facilitated the fulfillment of work processes and is bringing more efficient coordination in terms of creating a database of losses from disasters.

In parallel with the strategic planning processes, we are also increasing our response capacity, modernizing and strengthening the capacity for our Fire Protection and Rescue service. A number of projects with a focus on operational strengthening will start implementation during this year", AKMC underlines.

Agriculture, crops that "threaten" climate change and measures

Agriculture is one of the sectors directly affected by climate change. This has to do with both the change in temperatures and productivity of certain crops under the effect of these developments, as well as the pests or diseases that threaten them.

The Ministry of Agriculture and Rural Development told "Monitor" that the impacts are not such as to force the review of the product map in the country, but impacts on specific crops as an effect of temperatures are expected.

At least 9 of the 10 hottest years since 1850 occurred in the decade 2011-2020. From 1980-2020, the average annual temperature of the Tirana area has increased by almost 2℃.

The historical data of the last 30 years show an increase in the number of days with temperatures above 35℃, and of nights with temperatures above 20℃.

"Hot springs are expected to have negative effects on yields, especially during the summer or during the spring in the olive culture," the Ministry underlines. In conditions where high temperatures or other phenomena related to climate change cannot be stopped, the Ministry of Agriculture has focused on a series of measures, first of all a project that is being supported by the World Bank

"We have discussed and are implementing with the World Bank a special component worth 29 million euros, which is directed precisely to reducing the effects of climate change and increasing the effectiveness of the use of water resources throughout the country.

Thus together with the World Bank we will build for the first time the Digital Platform for Climate Smart Agriculture.

This platform collects information on the type of soil, hydrometeorological data, agricultural practices (use of fertilizers, pesticides, irrigation, etc.) and aims to guide farmers to more sustainable agricultural practices", - affirms MBZHR.

It is also foreseen to intervene in 12 thousand 300 ha in the irrigation and drainage infrastructure and we will integrate technological innovations with renewable energy, reducing the carbon footprint of agriculture.

Another development is the transition to solar energy supply for about 1/3 of the needs of hydropower, by installing 27 solar panels, with an installed power of 2000 kWp, annual energy production of 2740 mWh.

"Within the WBIF (Western Balkans Investment Framework) grants, we are carrying out the feasibility study for the improvement of flood protection in the rivers Ishëm, Erzen, Shkumbin, Seman and Vjosa, to determine through specific projects the measures that will be taken in each of the cases. Soon, we will start a safety analysis of the reservoir dams with a pre-feasibility study for about 430 dams", the Ministry underlines.

Climate change endangers infrastructure, Albania 147 million USD damage per year

The average annual damage to infrastructure resulting from natural disasters is becoming more and more alarming.

A government document estimates that the average value is 147 million dollars, and this includes floods, earthquakes or landslides that affect the road network and bridges, but the former take the main part.

"Albania's road and bridge infrastructure is sensitive to climate change and natural disasters, mainly floods and earthquakes. Average annual damages are estimated at $147 million per year, with a catastrophic event, such as a 1-in-100-year earthquake, for example, causing more than $2 billion in damages.

River floods are a major natural hazard in the primary road network in Albania and account for 84 percent of the total AED (average annual damage), compared to 11 percent from landslides and 5 percent from earthquakes," Albanian institutions estimate.

Some major arteries in the infrastructure are constantly affected by floods and their economic importance makes the damage even greater in cases of blockages. Two are the main roads that the documents mention and are part of corridor 4 and 5.

"Under the strategic network, Corridor 4 (Tirana-Durrës) and Corridor 5 Durrës-Vlora, are the most critical roads in Albania. These corridors are still vulnerable to flood events and the annual damage could be around 13 million euros, due to the high volume of traffic and the economic importance of these corridors and is expected to increase under different climate change scenarios.

Taking into account the entire national road network, bridges and canals are the key infrastructure, which are the most vulnerable and the most exposed elements, an average annual damage of 18.7 million euros is estimated," the document states.

ARRSH underlined in a summary of the bridge project being implemented with the help of the World Bank that there is a clear and urgent need to increase the resilience of Albania's road infrastructure to climate, change and natural disasters (eg, earthquakes, floods) and landslides, strong wind storms, etc.).

Climate change, BSH strategy: Six sectors that expose banks

The importance that the issue of climate change has taken has not escaped the attention of the Bank of Albania. A few months ago, this institution presented what was called "Strategy - Action Plan - For the administration and supervision of climate-related financial risks in the financial sector". In this paper, the bank analyzes climate-related financial risks, looking in detail at the channels through which this risk is transmitted.

"Banks are exposed to climate-related financial risks through two main channels, physical risks and transition risks.

Physical risks stem directly from climate change, while transition risks arise from the response – by policymakers, innovators or consumers – to prevent and/or combat climate change,” the document states.

The bank underlines that physical risks will increase, both in intensity and frequency, in Albania during the coming years. Therefore, according to her, the identification, measurement and monitoring of these risks by financial institutions will be an inevitable activity in the following years and therefore, their inclusion in the actions of the Bank of Albania.

But which are the sectors that can be affected by climate change and therefore, this will be transmitted in a chain effect to other sectors related to them?

Noting the environmental and economic profile of Albania, and the projections, which show an increased risk of the frequency, intensity and unpredictability of natural and hydrometeorological damages (such as: storms, floods, heat waves, fires), in Albania are identified some economic risks.

These risks are mostly related to the impact of climate change on the agricultural sector, energy, water resource management, transport and coastal areas. Climate risk is likely to exert pressure on health and social protection networks," the strategy states. Dwelling in more detail, the bank underlines that out of six sectors, the one with the highest exposure in the banking sector is construction.

"The only sector with the most significant exposure for Albanian banks to transitory risk is the "Construction" sector, which includes residential and business buildings, leasing activities and real estate. The weight in the total exposure is around 15-19%, with an increasing trend over time", BSH assesses.

Meanwhile, the extraction and processing industries have a weight of 14-19% with a downward trend. The exposure of "Agriculture", which is considered to be highly sensitive to the climate, is below 2% and stable in the observed time period.

Another sector with high sensitivity to the climate, the "Transport" sector is around 2-3% and stable in the observed time period.

BSH's risk assessment plan

Considering the sensitivity brought by the topic of climate change, the Bank of Albania has reflected in its strategy some of the measures it plans to take in this direction.

Such are from raising the capacities within the bank as it pertains to the modeling and analytical aspects to the assessment and measurement of risk or the preparation of a methodology for a top-down assessment of transitory risks.

Likewise, BSH anticipates that after the preparation of a stress test methodology for the assessment of transitory risks, during the second half of 2024, the Department of Financial Stability will perform the first top-down stress test for the assessment of transitory risks.

Following this, according to the action plan, the second half of 2025 will be dedicated to the first physical hazard resistance test, which will help to examine the methodology and provide the first quantitative results on the effects of physical hazards in the banking sector.

As for the second-tier banks, the document underlines that the Supervisory Department will engage in issuing a guide with regulatory expectations for climate risk, in order to encourage banks to include climate risks in their risk management/administration framework.

"This guidance should be principle-based and non-binding for banks, and will serve as a basis for supervisory dialogue.

It will increase banks' awareness of climate risk and set some expectations on how banks should integrate climate risks into the overall risk management framework, under the current prudential framework," the document states. MONITOR


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