http://money.cnn.com/2006/01/17/news/economy/climate_fortune/index.htm
Cloudy With a Chance of Chaos
Climate change may bring more violent weather
swings -- and sooner -- than experts had thought.
Fortune Magazine
By Eugene Linden
January 17, 2006: 5:07 PM EST
(FORTUNE Magazine) - A disturbing consensus is
emerging among the scientists who study global
warming: Climate change may bring more violent
swings than they ever thought, and it may set in
sooner. Lately John Browne, the CEO of BP, has
been jolting audiences with a list of proposed
solutions that hint at the vastness of the
challenge. It aims at stabilizing the
concentration of carbon dioxide in the atmosphere
at about double the pre-industrial level while
continuing economic growth. To do that, carbon
emissions would have to be reduced ultimately by
seven gigatons a year. A gigaton, or a billion
tons, is even bigger than it sounds. Eliminating
just one, argues Browne, would mean building 700
nuclear stations to replace fossil-fuel-burning
power plants, or increasing the use of solar
power by a factor of 700, or stopping all
deforestation and doubling present efforts at
reforestation. Achieve all three of these, and
pull off four more equally large-scale
reallocations of capital and infrastructure, and
the world would probably stabilize its carbon emissions.
There's just one catch: Even change on this vast
scale might not stop global warming.
What if the secret behind civilization is that
we've had really good weather? Humankind has
prospered and multiplied during one of the most
benign climate eras in the history of the planet.
And the past two centuries -- which witnessed the
great expansion of the Industrial Revolution, a
sixfold increase in human population, the triumph
of the consumer society, and the rise of the
integrated global economy -- have been
particularly stable. One would have to go back
115,000 years to find a time as tranquil and warm as the present.
Even so, during the relative calm of recorded
history, climate has periodically turned angry.
And while this moodiness is but a shadow of the
cataclysmic weather violence of the Ice Ages, it
has been sufficient to shake or destroy
civilizations. A sudden cooling and drying 8,200
years ago set back the development of the first
cities in the Fertile Crescent. Some 4,000 years
ago, decades of drought accompanied by howling
winds scoured the Mesopotamian plain of the
Akkadians, the most powerful civilization of the
region. The Mayans never recovered from intense
drought in the first decade of the tenth century
A.D. And were it not for the Little Ice Age that
thwarted the expansion of Viking civilization
just six centuries ago, Europeans living in
Canada and the U.S. might be speaking Norse rather than English.
Now climate is changing again. Most scientists
recognized the reality of global warming more
than a decade ago; most also agree that humans
play a role in the changes. The consensus on
climate change has solidified to rival the
medical consensus on the dangers of smoking--but
in the matter of climate, public perception has
yet to catch up. Like the tourists on Phuket
beaches who stood and gazed at an oncoming
tsunami because it was outside their experience,
society is reacting to the coming wave of climate
change without urgency. People still believe that
the science is controversial and the threat of
climate change far off in the future; and while a
few businesses, notably major insurers, have
begun to adapt, governments are responding only
slowly, as the lack of progress at this fall's
international forum in Montreal showed.
The wave is coming, though. The last decades of
the 20th century saw an unmistakable and
extraordinary warming. During this same period,
we suffered by some measures the strongest El
Niño in 130,000 years and a swarm of
statistically extraordinary droughts, floods, and
other weather extremes. In 2005 precedents
continued to fall, as wave after wave of tropical
Atlantic storms continued right through the end
of the year. The hot ocean waters that helped
nurture storms in 2005 may also play a role in an
intense drought in the Amazon rain forest,
normally one of the wettest places on earth.
These and other weather surprises make scientists
uneasy because they resonate with a new
understanding of how climate changes. Just 40
years ago the consensus was that climate shifted
from warm to cold and vice versa, smoothly and
over many centuries. Since the early 1990s,
however, scientists have been coming to see
climate change as less like a dial and more like
an on-off switch. The transition from, say, warm
to cold is far more abrupt--taking decades, not
centuries--and far more chaotic than previously
supposed (though still not as fast as in The Day
After Tomorrow, the 2004 disaster flick in which
a new Ice Age arrived in a matter of days).
Scientists now compare such transitions to the
flickering of a flame or a fluorescent
bulb--where the "flickers" may be quite violent,
marked by fluctuations in temperatures of more
than 18 degrees Fahrenheit in just a few years,
as well as extreme variation in wind speeds and precipitation.
The Earth's heat-distribution system has already
begun shifting massively in response to rising
levels of greenhouse gases. Precipitation
patterns, the change of seasons, storm intensity,
sea ice, glaciers, temperatures on the
tundras--all are in flux. As scientists nervously
monitor sea and air currents for signs of major
shifts, many believe that today's proliferation
of weather extremes may be the prelude to another
epochal transition--a possibility first flagged
by the great oceanographer Wallace Broecker in the journal Science in 1997.
How bad could it get? Imagine Europe suffering
floods and heat waves on a vastly greater scale
than those endured in 2002 and 2003, while
northern regions experience intermittent deep
freezes as atmospheric and ocean circulations
struggle to find new equilibrium. At the same
time, droughts and floods not seen since ancient
times would afflict some of the most densely
populated regions on earth. The probability of
drought in the American breadbasket would rise,
and along with it the possibility that the U.S.
grain surplus--which accounts for the dominant
share of world grain exports--would disappear.
A flickering climate wouldn't just clobber
countries with the wealth and technological
resources to try to cope. It would affect every
part of the planet, and in so doing reduce the
resiliency of the global community. With every
nation dealing with local emergencies, it would
be more difficult to mobilize resources to aid
victims in other areas, and there would be fewer resources to mobilize.
Municipalities around the world would struggle
under the burden of greatly increased demands on
funds to maintain and repair basic
infrastructure. Forget about safety nets--FEMA
and its ilk would be bankrupt. In the world's
tightly coupled markets, financial tsunamis would
surge through the system, leaving banks and
corporations insolvent. Financial panics, largely
absent for more than 70 years, would return with a vengeance.
Here at home, a flickering climate would impose
an enormous tax on every individual and business.
Property values in most places would plummet as
buyers disappeared and costs of insurance and
maintenance soared. The upper-middle-class
American family, today so well protected against
external shocks, would find its layers of
insulation gradually stripped away as fuel, food,
jobs, and social order became less certain.
Katrina's aftermath exposed how quickly extreme
weather can reduce an orderly society to dysfunction.
Some of the calamities that may happen--droughts
that last more than a century, an advance of
arctic zones southward, incessant and epic
storms--simply overwhelm the imagination when we
try to envision them in a world of six billion
people depending on an exquisitely balanced food
system. Earlier civilizations destroyed by
climate did not have modern technologies or
markets as a bulwark against nature's stresses.
But changing climate won't challenge only markets
and economies; it will stress the environment
too, and by decimating ecosystems, we have
undermined crucial buffers against weather extremes.
INEVITABLE SURPRISES
The storms, floods, and other weather calamities
of recent years are just a start.
Consider the "500 year" floods in the Midwestern
U.S. that caused $27 billion of damage in 1993.
Decades of development had channeled and
otherwise altered the Mississippi and other great
rivers of the Midwest, reducing their access to
floodplains that had absorbed and moderated the
effects of extreme rainfall. Without those
buffers, the rivers in 1993 rose higher than they
might have in years past. When they breached
dikes and other barriers, they spilled into the
old floodplains, now largely occupied with farms
and homes, amplifying the damage. We saw this
pattern repeated in New Orleans after Hurricane
Katrina and in the Christmas tsunami of 2004.
While the tsunami killed more than 280,000 people
and destroyed settlements over a swath of several
thousand miles, a series of powerful tsunamis in
that part of the world during the 19th century
passed with far less damage and loss of life.
They took place before protective buffers of
mangroves were destroyed, before hundreds of
millions of people moved into the potential path
of the waves, and before cars, trucks, and other
contrivances proliferated only to become
projectiles when the 2004 tsunami swept them up.
Around the world, humanity has reduced nature's
capacity to dampen extremes to an astonishing
degree: more than 59% of the world's accessible
land degraded by improper agriculture,
deforestation, and development; half the world's
available fresh water now co-opted for human use
at the expense of other species and ecosystems;
more than half the world's mangroves destroyed;
half the world's wetlands drained or ruined;
one-fifth of the world's coral reefs (including
crucial barrier reefs) destroyed and one-half damaged--the list goes on and on.
Nature does not alert us to all her tripwires.
Perhaps that's why in recent years the
unprecedented has become increasingly ordinary.
When pushed past a certain magnitude, the damage
of natural events increases exponentially, and
that threshold falls as natural buffers are
eliminated. Research led by MIT climatologist
Kerry Emmanuel suggests that hurricanes have
doubled in intensity during the past 30 years as
the oceans have warmed. Hurricane Katrina surged
to its immense power when the storm passed over a
deep layer of 90-degree Fahrenheit water in the
Gulf of Mexico. Hurricane Rita transfixed
meteorologists when it strengthened from Category
2 to 5 in less than 24 hours while moving over
those same hot seas. And in October, Wilma bested
that by strengthening from tropical storm to
Category 5 hurricane in a single day.
Since we are dismantling natural buffers just at
the point when we really need them, it's tempting
simply to conclude that humanity has a
self-destructive streak. The explanation, of
course, is not masochism but a collective failure
of imagination--compounded by the fact that we
are only now learning to weigh the threat. There
are no models to estimate the economic impact of
rapid changes in temperatures, storm tracks,
precipitation, and so on. In a 2001 report
entitled "Abrupt Climate Change: Inevitable
Surprises," the National Research Council, the
principal operating unit of the National Academy
of Sciences, noted that most modeling of impacts
has been confined to cases in which changes are
gradual and moderate. Modeling the effects of
abrupt change is a lot harder, but the study
makes a couple of important points.
First, economies can minimize the effects of a
gradually changing climate if people recognize
the threat and respond. With abrupt climate
change, however, things happen so rapidly that
neither markets nor ecosystems have time to
adapt. Moreover, a dynamic market economy with
capacity to respond to intermittent crises by
spreading risk and reallocating assets may be
unable to respond when crisis is ubiquitous and risks loom everywhere.
Second, even gradual climate change would pose
immense challenges. Tim Barnett, an oceanographer
at Scripps Oceanographic Institution, took part
in a study of the likely effects of climate
change on the Los Angeles area. Surprisingly, he
says, even modest decreases in rainfall during
what he called a "best-case scenario for future
climate change" (a gradual and small change,
decades in the future) could reduce available
water for the area by 50% by 2050. The region has
limited storage capacity for water and relies on
the winter snowpack that builds up in the Sierra
Nevada and the Rockies for water during the dry
summer months. Under even modest climate-change
scenarios, however, the snowpack would be smaller
and would melt earlier. The region would dry up before its driest months.
Angelinos wouldn't necessarily go thirsty.
California has plenty of agricultural water that
could be diverted to human needs. The ancillary
effects would be harder to manage. Farm output
would be reduced, and water shortages could idle
hydroelectric plants. Drought also makes trees
more vulnerable to pests, such as the pandora
moth that afflicts ponderosa pine. Dead trees are
tinder for wildfires, like the ones that
destroyed hundreds of homes in Southern
California in 2003. Such impacts would roil the
economy. Consider how increased fire risk and
other effects of acute water scarcity might
affect housing prices or the job market.
Keep in mind that the 50% reduction of available
water was a best-case scenario. And while the
richest state in the world's richest nation has
some ability to weather a drought, such shifts
would not be occurring in isolation. The changing
climate that brought drought to Southern
California would also be affecting weather
throughout the American West and beyond--damaging
property, disrupting agriculture, and spurring migrations.
PREMIUM HELL
You're in unsure hands.
The terrorist attacks of 9/11 opened insurers'
eyes to a catastrophic risk that they had been
assuming for free. Their reaction provided a
foretaste of how the global market might react to
abrupt climate change. Following 9/11, insurers
stopped writing policies that automatically
included coverage of terrorist attacks. A number
of major construction projects had to halt
because banks would not finance them without
terrorism coverage. Ultimately Congress passed
and President Bush signed a law shifting
responsibility for $100 billion in damage from
future terrorist attacks to the U.S. government,
and the construction projects got rolling again.
As climate change starts inflicting losses,
insurers will again pull back, shifting financial
risk to businesses and homeowners, the banks that
finance them--and finally to taxpayers. In
Florida, huge increases (up to 40%) in insurance
rates are already making it harder for people to
sell homes, according to the South Florida Sun Sentinel.
More than 1,000 miles from New Orleans, in Cape
Cod, Mass., a far-flung echo of Katrina has been
the 20% rise in reinsurance costs (reinsurers are
financial institutions that backstop insurance
companies). The increase prompted Hingham Mutual
Group, a property and casualty insurer, to drop
coverage for 6,500 commercial properties.
Customers left in the lurch have a fallback in
FAIR (short for Fair Access to Insurance
Requirements), a program mandated by various
states and run by insurers. But Massachusetts's
FAIR plan recently requested big rate increases,
arguing that past weather patterns may no longer
be a guide to estimating future climate risks.
That rationale was "unprecedented," a team of
industry experts noted in a report entitled
"Availability and Affordability of Insurance
Under Climate Change"; it's a vivid example of
how insurance has difficulty adapting to changing climate.
For insurers the hazards of climate change become
more concrete each year. Andrew Dlugolecki, a
risk analyst at the Tyndall Center for Climate
Change Research in Britain, recently estimated
that if climate gradually warms, the chances of
the industry getting wiped out by weather-related
catastrophes will rise from about one in 100
worldwide today to nine in 100 by 2050. A
ninefold increase in the risk of collapse places
a heavy burden on insurers, but the risks may be
far greater than that. Asked in 2003 how climate
change that's abrupt and chaotic might affect
those odds, Dlugolecki speculated that the risk
of catastrophic weather-related losses rises to
about nine chances in 100 by as early as 2010. To
insure a property or business affected by that
degree of risk, a carrier would have to charge
annual rates as high as 12% of insured
value--most businesses and individuals start
self-insuring (industry-speak for dropping their
coverage and taking their chances) when premiums reach 3% of value.
Already the pain of weather-related insurance
risks is being felt by owners of highly
vulnerable properties such as offshore oil
platforms, for which some rates have risen 400%
in one year. That may be an omen for many
businesses. Three years ago John Dutton, dean
emeritus of Penn State's College of Earth and
Mineral Sciences, estimated that $2.7 trillion of
the $10-trillion-a-year U.S. economy is
susceptible to weather-related loss of revenue,
implying that an enormous number of companies
have off-balance-sheet risks related to
weather--even without the cataclysms a flickering climate might bring.
Corporate leaders could soon feel the heat too.
In 2004, Swiss Reinsurance, a $29 billion
financial giant, sent a questionnaire to
companies that had purchased its
directors-and-officers coverage, inquiring about
their corporate strategies for dealing with
climate change regulations. D&O insurance, as it
is called, insulates executives and board members
from the costs of lawsuits resulting from their
companies' actions; Swiss Re is a major player in D&O reinsurance.
What Swiss Re is after, says Christopher Walker,
who heads its Greenhouse Gas Risk Solutions unit,
is reassurance that customers will not make
themselves vulnerable to global-warming-related
lawsuits. He cites as an example Exxon Mobil: The
oil giant, which accounts for roughly 1% of
global carbon emissions, has lobbied aggressively
against efforts to reduce greenhouse gases. If
Swiss Re judges that a company is exposing itself
to lawsuits, says Walker, "we might then go to
them and say, 'Since you don't think climate
change is a problem, and you're betting your
stockholders' assets on that, we're sure you
won't mind if we exclude climate-related lawsuits
and penalties from your D&O insurance.' " Swiss
Re's customers may be put to the test soon in
California, where Governor Arnold Schwarzenegger
is pushing to restrict carbon emissions, says
Walker. A customer that ignores the likelihood of
such laws and, for instance, builds a coal-fired
power plant that soon proves a terrible bet could
face shareholder suits that Swiss Re might not want to insure against.
TURNING DOWN THE HEAT
How business can take action--and why it needs political backup.
As businesses begin to recognize the dangers of
climate change, markets will help economies
adjust, pricing the risks and shifting resources.
Yet markets have blind spots: They typically
underprice long-term or novel risks. In the case
of climate change, where large-scale actions must
be taken lest change hit with full force, a
purely market-based response would be too little,
too late. To address the risks, governments need to get involved.
With the Earth's atmosphere already warming
dramatically, we are probably stuck with some
form of climate change. Yet the energy economy is
still in the process of squeezing rather than
easing the pressure on the trigger. China and
other emerging economies are ramping up their
consumption of fossil fuels, while the U.S.,
which is the world's largest producer of
greenhouse gases, continues to resist international efforts to rein them in.
In November and December, delegates from scores
of nations convened in Montreal to negotiate
emissions-control goals for greenhouse gases in
the years following the expiration of the Kyoto
treaty in 2012. But days of haggling produced
nothing more than a resolution to discuss the
issue further in coming years. (The U.S. and
Saudi Arabia were the last to agree even to that.)
By itself, the Kyoto treaty will have minimal
impact on the global-warming threat. Very few of
the 160 countries that ratified the treaty (which
went into force last February) will meet the
targets of reducing emissions 5% below 1990
levels by 2012. The U.S. rejected the treaty, and
China, which is likely to surpass the U.S. as a
greenhouse-gas producer in the coming years, is
not governed by its provisions. Says Elliot
Diringer of the Pew Center for Climate Change:
"Unless there is continued action after Kyoto
expires, it will have been nothing more than a
blip" in the buildup of carbon in the atmosphere.
Up to now, the primary objection by the Bush
administration and other opponents of reducing
greenhouse gases has been economic impact. The
unknowns of climate change have made projecting
costs and benefits an economist's guessing game.
For instance, in 2002 the White House Council on
Environmental Quality cited estimates by the
federal Energy Information Administration that
achieving Kyoto's goals would erode U.S. economic
output by $400 billion in 2010. That estimate was
the worst of seven scenarios examined by the EIA;
another put the cost at only $7 billion to $12
billion by 2010. Other studies, like a recent one
sponsored by HSBC and entitled "Carbon Down,
Profits Up," cites dozens of companies, cities,
and regions that have found reducing carbon
emissions to be profitable, in part because
carbon reduction is often synonymous with increased efficiency.
But as the weather grows worse, such exercises
will become moot. The ambitious proposals that
BP's John Browne has been talking about--building
nukes by the hundreds, for example--would
stabilize the concentration of carbon dioxide in
the atmosphere at 500 parts per million by 2050,
vs. 380 ppm today. Yet even that might not be
enough to prevent climate chaos. Says Chris
Mottershead, a distinguished advisor at BP:
"Nobody knows whether climate's tipping point is
at 400 ppm, 700 ppm, or if there is a tipping
point." Science does know, however, that today's
concentration of carbon dioxide is higher than
any in 650,000 years; past climate flips took
place with far less carbon in the air. What's
more, BP developed its proposals with physicist
Robert Socolow and ecologist Stephen Pacala,
professors at Princeton University who worked
with models of gradual, not abrupt, climate change.
Despite the daunting gap between present actions
and what's required, plenty more can be done.
Politics enables markets: An international
agreement limiting carbon that includes the U.S.
and the developing nations would supply the
discipline necessary for carbon markets to
flourish. (Carbon trading lets developed
countries achieve emissions-reduction targets by
paying to reduce emissions in developing
countries.) According to an upcoming study of
carbon markets by Ecosystem Marketplace, a
website devoted to popularizing environmental
derivatives, the carbon market in Europe has
already surpassed $4 billion in trading value as
utility, industrial, and insurance companies experiment with this new tool.
If U.S. politicians eventually conclude that
action on the scale of the BP plan is necessary,
they could jump-start change by redirecting the
purchasing power of federal, state, and local
treasuries--more than $1 trillion a year. Once
government at all levels commits to purchasing
clean technologies, making efficiency
improvements, and using alternative energy where
possible, this massive spending would provide
economies of scale that would help speed the
commercialization of new technologies as well as
prepare society for the shift away from fossil
fuels. Equally sensible would be to reduce
subsidies and tax advantages that abet the waste of fossil fuels.
Such proposals have been on the table since the
early 1990s. Many are even more salient today. By
not taking action on greenhouse emissions, we are
betting our well-being that climate change poses
little threat. If we are wrong, we will meet our fate.
This article has been adapted by the author from
his new book, The Winds of Change: Climate,
Weather, and the Destruction of Civilizations
(Simon & Schuster); see also eugenelinden.com.
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