Climate Change, Part II: Risk Management

by futurist Richard Worzel, C.F.A.

This is the second of three parts in an overview of the future of climate change. The first part can be found here.

In this section, I’m going to focus on three things relating to climate change: A working definition of risk; the nature and magnitude of the risks we are running; and their potential costs. In the third, and final, installment, I’ll talk about what we may be able to do to manage or deal with climate change risks.

A working definition of risk

I’ve described my definition of risk in other blog posts, and it is substantially different from the conventional view of either risk managers or investment professionals. My definition is that risk is the cost of being wrong about something. The example that I use is walking a plank.

If you take a broad, sturdy, wooden plank, and place it on the grass in the middle of an open field on a calm day, you probably would have no problem walking across it, and would consider the risk involved to be negligible. But if you put that same plank across a chasm several hundred feet deep, and walk across it on a calm day, then this simple, riskless task becomes much different. So what’s changed? The task is the same, but the cost of being wrong – of making a mistake – is much higher, therefore the risk is higher.

So, this leads to the questions: How might we be wrong? And what are the costs if we are?

What are the risks of climate change?

Emotionally, we expect tomorrow will be like today, so our fundamental risk is that tomorrow will be very different from today. Let’s look at the ways in which climate might be different, and how we might be wrong.

First, we are likely to experience more frequent bouts of extreme weather. Take, for example, the heat wave that hit Europe in the summer of 2003, credited with causing between 22,000 and 45,000 deaths:

“That summer in France and Italy was completely outside the envelope [of normal temperature ranges] – it was by far the warmest since temperature records began in 1851, and probably the warmest since 1500.

“One can’t say that global warming caused the heat wave, any more than one can conclusively attribute a particular lung cancer to the victim’s smoking two packs of cigarettes a day. But one can say … that global warming made such a heat wave at least twice as likely as before—and that if CO₂ emissions continue to grow on their present course, such heat waves will be more common than not by mid-century in Europe, and will be considered freakishly cold by century’s end.”[1]

This comes from a book, Fixing Climate, published in 2008 by Dr. Wally Broecker of Columbia University’s Lamont-Doherty Earth Observatory. Dr. Broecker has been called the grandfather of climate science, and he’s in his 80’s. He’s been studying climate change since the 1950s, but continues to work because it fascinates him. He is beyond politics, cannot be bribed, and could retire any time he wanted if someone were to try to threaten or interfere with his research. He is, in short, the perfect scientist for a contentious debate because he has zero interest in anything but the truth.

And the essence of what Broecker says is that the probability of extreme weather events will go up as climate changes, from rare, to frequent, to commonplace. And that’s one of the risks we are running: more and more frequent extreme weather events, eventually becoming routine or even the norm. And we can see quite clearly the nature of these risks, and their costs by recent extreme weather events.

In March of 2012, the United Kingdom experienced droughts and a heat wave. Then, the jet stream shifted, and the U.K. saw the wettest April in 100 years, with extensive flooding. Heavy rains and flooding continued through May and June, with early June being the wettest in 150 years. The U.K. Meteorological Office issued its highest alert warning on July 7th, following extensive and damaging flooding on June 27th and 28th. All told, the flooding cost hundreds of millions of pounds in damage, scores of public events were canceled, insurance claims amounted to more than £1.3 billion, and the U.K. insurance industry announced that unless the government were willing to back-stop the industry in some way, they would cease issuing flood insurance for 200,000 homes.[2]

In late July of 2010, wildfires broke out in western Russia due to the highest temperatures ever recorded, which caused approximately $15 billion in damages.[3] But this was eclipsed in 2012 by wildfires in eastern Russia, provoked by the hottest Siberian summer in 170 years, and destroying 74 million acres of taiga.[4]

And the weather hits just kept on coming: Hurricane Sandy, also called Superstorm Sandy, caused an estimated $75 billion in damages in seven countries, including major flooding in coastal parts of the U.S. eastern seaboard. In May of 2012, “a tornado of virtually unheard of size and ferocity tore through a small city in Oklahoma, leaving 24 people dead.”[5] In 2013, southern Alberta, including Calgary, experienced catastrophic flooding, described by the Alberta government as the worst in the province’s history.[6] And in November of 2013, Typhoon Haiyan hit the Philippines, with the highest winds ever reported, and leaving a guesstimated 10,000 or more people dead, and many thousands more injured.

Rising sea levels

But extreme weather is not the only risk we are running with climate change. The first, and most obvious, other risk is that sea levels are rising. At the moment, they are rising at a rate that most people would consider to be glacial: about 3.2 millimeters per year. But this rate, observed over the past 20 years, is roughly twice as fast as the speed of the 80 years before them.[7]

Why is sea level rising? It turns out that there are actually three reasons. The first is that water expands as it warms, and about half of the increase in sea level over the past century is due to warmer oceans. The second reason is the melting of glaciers. Glaciers have been melting back for about a century, but recent years have seen warmer summers and less snowfall, which means that glaciers are melting faster, and hence, contributing more to the increase in sea levels.

But the third one poses the greatest risk: ice loss from Greenland and Antarctica. Greenland ice covers 1.7 million square kilometers (660,000 sq. mi.), and is generally more than 2 kilometers (1.2 miles) thick. If this ice sheet were to melt or slip into the ocean, sea levels around the world would rise by an estimated 7.2 meters, or about 24 feet.[8]

The numbers for Antarctica are vastly more substantial: the Antarctic ice sheet covers about 14 million square kilometers (5.4 million sq. mi.), and contains more than 60% of all the fresh water on Earth. If it were to melt or slip into the ocean, sea levels would rise perhaps by as much as 70 meters, or about 230 feet.[9]

In both cases, the risk of the ice sheets melting is remote: it would probably take thousands of years for this much ice to convert to water. The much greater risk is that the ice will slide off the land and into the oceans, which would raise ocean levels as much as if they did melt, like dropping ice cubes into a drink. That could happen, in whole or in part, if there’s enough melt-water from the ice sheet that finds its way beneath them to accelerate their slide towards the sea.

So, is this happening? Perhaps. A number of the Greenland glaciers were moving at a rate of about 13 meters (43 feet) per day in the 1990s, but almost tripled in speed, to 36 meters (120 feet) per day in the period 2001-05. A similar trend has been observed in parts of Antarctica. These are very short time periods in geological terms, and therefore not statistically significant. But they are worrying.[10]

Other effects

Adding carbon dioxide concentrations to the atmosphere adds carbon to seawater, which creates carbonic acid and increases the acidity of the ocean. Likewise, increasing water temperatures will decrease the amount of oxygen dissolved in the oceans. These two effects could interfere with the growth of plankton, which are the foundation of the ocean’s food chain, and hence with the largest mass of life on Earth, leading to a potential die-off in much of the life in the oceans. Note that I say “could” in discussing this. We are in uncharted territory, and don’t know what will finally happen. But that ignorance is no excuse for complacency.

Beyond this are the effects on agriculture and other activities affected by climate and weather. It would seem, and some argue, that global warming would be good for farming, as it would help plants grow. That may be true, but farming is about more than just warmth: there are three potential disadvantages of warming for farmers. First, it may disrupt rainfall cycles. The Great Plains in the U.S., and the Prairies in Canada, are quite dry, close to being deserts in some places, but get enough precipitation at the right times to enable them to be two of the greatest grain producing regions of the world. If rainfall patterns shift, that may cease, as illustrated with the Dust Bowl phenomenon in the 1930s.

Second, warmer temperatures mean more pests. Cold winters kill off both diseases and insects that harm plants. Hence, warmer temperatures imply greater costs for pest control.

And third, farmers and other weather-related occupations have investments in plant and equipment appropriate to the current climate. If climate shifts appreciably, they will need to change their equipment, incurring potentially significant capital costs.

One more risk: speed

So, to summarize, we are likely to experience a steadily rising incidence of extreme weather conditions, leading to unprecedented losses of property and life. We are seeing sea levels rising at apparently accelerating rates, which will affect coastal cities and populations through direct land loss, through erosion, and through increased damage caused by higher storm surges. Ocean life may be significantly or even dramatically affected, which could affect the Earth’s entire biosphere. And farming and other weather-related activities may be harmed in unpredictable ways.

These potential costs run into the tens or hundreds of trillions of dollars, and would likely bankrupt us. In truth, we don’t know how high they may be – again, we have no precedents to go by.

But there’s another risk: speed. If we have several centuries to adjust to a gradually warming climate and gradually rising oceans, we can adapt. But if things happen quickly, we won’t have that luxury. So part of what we need to consider is how fast changes are likely to happen.

Here we do have some evidence to go on. First, climate is a chaotic system. Chaos theory is a branch of mathematics, and indicates that such systems tend to remain in states of equilibrium for long periods, then move abruptly to a different state. Theory would imply, therefore, that rather than a long, slow adjustment period, climate changes can happen quite quickly, and the geological record seems to support this view.[11]

Which brings me to the most recent significant climate change humanity has experienced: the onset of the so-called Little Ice Age in the 17th Century. After almost 500 years of moderate temperatures, temperatures in the Northern Hemisphere started to cool around 1550, then abruptly plummeted around 1620 with catastrophic effects. The Bosporus, the strait that divides Europe from Asia, froze for the only time in recorded history. The Great Canal, connecting Beijing and southern China, dried up for the only time in history. The year 1641 was the 3rd coldest ever recorded in the Northern Hemisphere; 1642 was the 28th coldest, and 1643 as the 10th coldest. And the winter of 1649 was the coldest ever recorded in China.

David Frum, an author and conservative columnist, recently recounted these and other facts in a review of a book by historian Geoffrey Parker entitled Global Crisis. Frum sums up Parker’s conclusions in two particularly chilling comments, first saying that Parker

“…synthesizes the horrifying violence that erupted across Eurasia during the coldest and hungriest years of the Little Ice Age: the overthrow of China’s Ming Dynasty and conquest of the world’s most populous country by invaders from Manchuria; civil wars in Iran and northern India; the collapse of Ottoman power; pogroms against the Jews of Ukraine, the worst mass killing of Jews between the Crusades and the Holocaust; New England’s merciless war upon the Pequot Indians; the destruction of Poland, till then Europe’s largest state; the Fronde rebellion in France; the English civil war; Oliver Cromwell’s rampage through Ireland; the successful Portuguese and doomed Catalonian rebellion against the Spanish Empire — all of it accompanied by pestilence and famines, culminating in the last great bubonic plague epidemic in European history in the 1660s.”[12]

And the second comment deals with the speed with which climate changed: “In the 17th century, the catastrophe arrived astonishingly fast—in one human lifetime—and human beings adapted by dying in droves.”

This is the most recent, and most relevant, example of climate change that humanity has experienced. And although the Little Ice Age involved cooling rather than global warming, the parallels are terrifying: climate can change abruptly, with deadly consequences.

So what can we do about it? That’s the topic of the third, and final, installment on climate change.