When record-breaking heatwaves cause train tracks to bend, airport runways to buckle, and roads to melt, as has happened in the United Kingdom this summer, it is likely that business performance will suffer. The frequency of these climate events is increasing, as is heat intensity, and companies clearly are not immune to the need to adapt, though their silence might make you think otherwise. Given that the problem is not going away, businesses will need to better manage extreme climate risks – but are investors sufficiently informed on the economic toll caused by the increasing frequency of extreme weather? It is becoming clearer that extreme heat can have devastating and costly effects.
Keeping cool, transporting goods, and scheduling flights as runways melted were just some of the challenges people – and businesses – have faced during the current European summer. As it became apparent that our workplaces and infrastructure might not be able to cope with extreme heat, we also saw unions call for workers to stay home. But could workers take the day off? The UK’s Health and Safety Executive stated, “There is no maximum temperature for workplaces, but all workers are entitled to an environment where risks to their health and safety are properly controlled.”
Are these rules sufficient in this new normal? Some EU countries already have upper limits, but many do not. The Washington Post reported last summer that U.S. federal action might be coming due to concerns over extreme heat for workers. While media reports have highlighted the toll of extreme climate events on workers and businesses, including in the retail sector, as companies’ sales have suffered as a result of unseasonably warm weather, there is little empirical evidence on the financial impact it can have on business. Here is where our research comes into play: How much of an impact does extreme heat have on business profitability?
Heat hitting the bottom line
We focused on the European Union and the UK because the region has a diversity of climate and weather extremes. They are a major economic force, with strong policies on decarbonizing their economies, but also rely on coal, gas, and oil for many sectors. When it is hot, these countries are forced to burn more fossil fuel to cool overheated populations, contrary to the need and desire to do the opposite.
With detailed records on heat events at a local level, we connected weather data to a large sample of private and public companies in the EU and the UK. We focused on two critical aspects of a firm’s financial performance around a heat spell (at least three consecutive days of excessive heat): The effect on profit margin and the impact on sales. We also examined firms’ stock performance, and found that businesses do, in fact, suffer financially, and the effects are wide ranging.
For the average business in our sample, these impacts translate into an annualized loss of sales of about 0.63 percent and a profit margin decrease of approximately 0.16 percent for a one degree increase in temperature above a critical level of about 25*C. Aggregated for all firms in our sample, UK and EU businesses lose almost $614 million in annual sales for every additional degree of excessive temperature.
Impact bigger than the data shows
We also found the intensity of a heat wave is more important than its duration. This financial effect might sound small, but remember, this is an average effect across the EU and the UK. The localized effect is much larger for some firms, especially those in more southern latitudes. The stock market response to extreme heat is also muted, perhaps for the same reason. We find stock prices on average dropped by about 22 basis points in response to a heat spell.
These average annualized effects include businesses’ efforts to recoup lost sales during heat spells and other climate-related events. They also consist of businesses in certain sectors and regions that appear to benefit from critically high heat spell temperatures, such as power companies and firms in northern European countries. While we show a systematic and robust result, our evidence probably further underestimates the total effects of heat waves. That is because businesses disclose very little about those effects due to lax disclosure rules and stock exchange regulations relating to extreme weather.
Financial data part of climate change
Without a doubt, better disclosure will help untangle these effects. Ideally, financial data will be segmented by climate risk and extreme heat dimensions, so investors are better able to price the risk. Regulators need to pay attention here, as investors must be able to price material risk from extreme weather. A good example is New Zealand, which is preparing to mandate climate risk disclosures with reporting periods starting in 2023. Such mandates recognize that poor disclosure of climate risk is endemic, and we do not have the luxury of time. For those businesses negatively affected by climate events, disclosing the number and cost of lost hours and the location of the damage would be helpful. However, it is not yet clear if climate disclosure standards effectively capture these risks, as companies have significant discretion about what to disclose.
It is not necessarily all about cost – some sectors might even benefit. While power companies, for example, might report increased sales from increased energy consumption, they are also constrained by the grid and the increased cost of production. And our evidence suggests there is little overall benefit to the energy sector. This does not rule out some windfall profits, so we need to understand more about both the positive and negative effects on each industry.
Finally, this July saw temperatures in the United Kingdom soar to 20*C above normal. Can businesses cope? Next time you feel the heat, pause to ask if this is also hitting the bottom line of your employer or investment portfolio.
David Lont is a Professor of Accounting and Finance at the University of Otago.
Martien Lubberink is an Associate Professor of Economics at the Victoria University of Wellington.
Paul Griffin is a Distinguished Professor of Management at the University of California, Davis. (This article was initially published by The Conversation.)
For the past year and a half, the Build Back Better agenda has been on a roller-coaster ride — and I am not talking about those easygoing kids’ rides either. I’m talking about the rides that spin you upside down and twirl you around, only to flatten out, giving the impression it’s over, and then take you for another thrilling set of twists and turns.
Here is a perfect example of what I mean. Last week, I reached out to Joe Britton, executive director of the Zero Emission Transportation Association (ZETA), a federal coalition focused on advocating for 100 percent electric vehicle (EV) sales by 2030 with corporate members including Tesla, Rivian, ABB and EVgo. I wanted to speak with Britton, given the news at the time out of Capitol Hill that the Build Back Better bill was completely dead in the water again and all that remained was a health care spending deal. ZETA has been at the frontlines of all things federal EV policy since launching in late 2020, so there’s no one better to speak to than Britton and his team. Then just like a roller coaster, prior to my interview, news broke that Build Back Better was not fully dead, and Sen. Joe Manchin, who has held up much of the progress on passing a meaningful bill, supports moving forward on some version of a bill after negotiations with Sen. Chuck Schumer. Oh, and now the bill was no longer called the Build Back Better Act, but instead is The Inflation Reduction Act of 2022.
If you take Manchin at his word, then apparently he was never really out of the deal, despite media reports to the contrary. “Remember when I told you I didn’t walk away? I never walked away. I’ve never walked away from anything,” Manchin said in an interview with Punchbowl News after announcing a deal has been struck on the new bill.
In this piece, I don’t plan to recap the well-documented twists and turns of Build Back Better. Instead, I want to look ahead and help make sense of what transpired these past few days because this may be the planet’s best shot at meaningful climate policy passing in the U.S. Even as I write this, I would be lying if I said I am not holding my breath on whether Congress will be able to pass it.
Specifically for climate, the bill sets aside $369 billion for energy security and climate change compared with the previously allocated $550 billion.
While we are nowhere close to what President Joe Biden initially proposed in 2021, passing this legislation will put the U.S. on a path to roughly 40 percent emissions reduction by 2030, short of the original U.S. goal of 50 percent by 2030 that is needed to meet net zero by 2050 — but a whole heck of a lot better than nothing at all.
As it stands, the bill will bring in $739 billion and will invest $433 billion in energy security and climate change along with an Affordable Care Act extension.
The previous version of the bill passed by the House last year included a total $1.75 trillion.
Specifically for climate, the bill sets aside $369 billion for energy security and climate change compared with the previously allocated $550 billion.
The bill includes several incentives for EVs, including maintaining the $7,500 purchase incentive but removing the tax credit cap after automakers hit 200,000 EVs sold. Removing the cap would make GM and Tesla vehicles once again eligible. Additionally, the incentive moves to the point of sale instead of applying as a federal tax credit.
A few firsts: The legislation also includes $4,000 for used EVs and up to $40,000 for commercial trucks that weigh more than 14,000 pounds.
For those interested, here is the one-pager on all the various spending breakdowns and the full text for all my fellow policy nerds. Also, make sure to check out GreenBiz’s recent piece on the The Inflation Reduction Act of 2022 and its impact on climate tech by our own Leah Garden.
Given my incredible conversation with Britton, and how helpful it was to dive deeper into the legislation, we have decided to publish the full interview, edited for length and clarity:
Vartan Badalian: When I first reached out a couple of weeks ago to schedule this interview, we were in a much different place compared to now. A lot has transpired over these last couple of days. It is like a 180-degree turn on Capitol Hill. We first thought all hope for meaningful federal climate policy was lost after Sen. Joe Manchin signaled he would not support any bill that focused on climate. It now appears climate is back in, and Build Back Better is called The Inflation Reduction Act of 2022. Please walk us through what transpired over these two weeks to get us here.
Joe Britton: Well, there is the inside baseball kind of answer that [Senate Majority Leader Chuck] Schumer felt like he was clear that the deadline was August, and Manchin felt like the deadline was Sept. 30. So they had a little bit of a conflict on, was there time to push this past August or not. So there was a little bit of just timing. Manchin is the energy chairman, so he recognizes that climate change is worth addressing. … So I don’t think he intended necessarily to kill the climate provisions in the way that those conversations had appeared. I think it was basically a recognition that, all right, we’re disagreeing over dates, and that is not a justification for giving up on climate change and emissions reduction. So they just continued the conversations and figured out a way to agree on things that were under consideration.
Badalian: From an EV and climate perspective, what is and is not in this bill compared to the previous version? What should consumers and company fleets be aware of? I know there is a slight change to the EV tax credit compared to before, correct?
Britton: There is a lot [different]; they are different bills. If you stack this bill up against previous aspirations for Build Back Better, you are sort of disappointed in certain areas, certainly. But on the EV side, the new EV credit is probably the biggest change. So in the House bill, they had the $7,500 base credit for EVs if you purchased a new vehicle, but they also had an extra $500 for domestic content, and then another $4,500 if it was manufactured with union labor. We kind of identified that the union adder was going to be a problem for many political reasons, so it came out. So it is now the $7,500 base credit. The thing that is most interesting about the new credit is that there is embedded in there, maybe not direct, but certainly indirect industrial policy. So for half of the credit, you [the automotive company] need to make pretty serious strides on reshoring critical minerals. So $3,750 of the $7,500 is dependent on the next 2½ years, for the automotive company to reshore critical mineral supply chains and pull them out of China. That can be in North America and also allies that we [the U.S.] have free trade agreements with. Like Australia, Chile, and others. But that is going to be difficult to do. You cannot just take the vehicles in the supply chains that we have today and assume eligibility, I think there will be a lot of work to reshore minerals. For the other half, $3,750, you [the automotive company] have to have your battery components not sourced from China. And so again, that is going to be a challenge, it will force manufacturers to reach and do things a little differently. Thankfully, we have done a lot on batteries.
We have 700-gigawatt hours of battery manufacturing announced in the U.S. now, so certainly there are huge incentives put in place to reshore more of that for the future. But the bill also does not just say, “Here are some new targets,” and leaves it up to manufacturers to just figure it out. It also puts a lot of resources behind helping manufacturers do that. So there is $10 billion in battery and advanced manufacturing to help manufacturers reshore, there is $20 billion in loan authority, there is $2 billion for automotive facility retooling — so it is helping to support manufacturers to achieve these metrics. So the way I have been describing it is that they are tough metrics: They are going to require some real effort on the supply chain side, and it will take some time to do. But if we get it right, not only will we be making eligible vehicles and accelerating transportation electrification, but we will be creating jobs for minerals, batteries, components, parts and everything else. So, it is an incentive that has industrial policy baked in it.
Badalian: So it changes the current incentive for the $7,500 where it now puts more onus on the automotive company to make themselves eligible, whereas before the only major onus was whether the company had sold 200,000 EVs or not to be eligible.
Britton: So while it requires some difficult supply chain management and manufacturing changes to reshore and pull out of China, many of these manufacturers had already hit the cap [200,000 consumer sale cap]. Without this bill, they had zero chance of offering a consumer incentive period. So that cap is now gone under this bill, and instead of the cap, it makes contingent your eligibility based on the metrics discussed. So, against a baseline where you [the automotive company] had no credit, having a credit that, albeit is conditional and may take some work, I think folks are going to see and endeavor to make the $7,500 credit available to their consumers. And so it will create some manufacturing and critical mineral supply chain changes, but for good reason, and hopefully, those changes will be good for the American worker too.
Badalian: And there is also a component for fleets right? So there is a truck incentive as well that is pretty sizable — up to $40,000.
Britton: Yeah, it is a 30 percent investment tax credit, that one is big and that one is new. … The other is the used EV credit, which I think is a really big game-changer. 70 percent of Americans are not in the market for a new car. And so this will now make a used EV credit available at $4,000 to folks that are looking to purchase a used car. Previously we had left out 70 percent of the market, and now those people are eligible for a used EV credit, so that is a big deal.
The other one that is a really big deal is a $35 per-kilowatt-hour battery production tax credit. So, if you take, for example, a 100-kilowatt-hour battery, Tesla Model X and some others meet that, there is a $3,500 value that goes to the manufacturer to produce that battery in the U.S. So if you think about that $3,500 plus the $7,500 vehicle consumer incentive if you are doing this work in the U.S., and you can secure your supply chains, pull them out of China, you might have $7,500 for the consumer and $3,500 for the manufacturer. And all of a sudden there is [$10,000] or $11,000 in value to reach and surpass price parity with gas-powered vehicles. So that is a big, big change.
Badalian: This is not the only thing that will positively impact the automotive industry, correct? The Senate recently passed the CHIPs+ Act, which will increase the production of critical semiconductor chips in short supply (which is causing supply chain delays). Walk us through the importance of this bill for the EV industry.
Britton: So this is interesting… one of the biggest chokepoints we face in supply chain constraints has been the chip shortage, so being able to invest $50-plus billion in chip manufacturing in the U.S. will again restore some of those manufacturing jobs and capabilities, … Also, if we didn’t have a domestic supply chain for chips, we may have fallen prey to some of the manufacturing bases in Asia that were just not gonna make them available. So it was a real vulnerability for us [the U.S.]. So that investment will boost volume and supply domestically, but ideally, do it at a price competitive point. So that [CHIPS+ Act] combined with this bill [The Inflation Reduction Act of 2022] is going to be an enormous accelerant for transportation electrification.
The other thing that we didn’t mention going back to the reconciliation bill [The Inflation Reduction Act of 2022], that we have been working on for months and months is the U.S. Postal Service electrification. Previously, Postmaster [Louis] DeJoy came out and said 10 percent of the fleet might be electric under his plan. We spent a lot of time and I testified before Congress, challenging the assumptions that they use. [After all the advocacy, the U.S. Postal Service] recently committed 40 percent of the fleet to be electric. So we got them to quadruple their commitment.
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But there is also $3 billion in this bill to further electrify the U.S. Postal Service fleet. So that’s a big deal. One of the estimates was that it was going to cost $6 billion to electrify the Postal Service fleet. So if you think about the 40 percent they’ve already committed to plus another $3 billion, you can envision getting the 90 to 100 percent fleet electrification for the Postal Service. The other thing is that they are also sending $15 million to the postal inspector general to conduct oversight on the postmaster, to ensure that they are doing this in the right way.
Badalian: What do you see as the timeline for moving The Inflation Reduction Act of 2022 forward?
Britton: Well, Plan A is that they start voting [Wednesday or Thursday]. And it then goes to the president’s desk next weekend. So that is Plan A. But, Congress and politics are not without twists and turns. So it is not a slam dunk. And there will be a lot of work to do between now and then. But that is the goal.
Badalian: How soon can we expect the revived EV incentive to be ready and available to consumers and companies?
Britton: Well, there is an implementation period, so I think Treasury and IRS probably have to put out some guidance. So there will be some different junctures. But what I would recommend is, come next weekend, we will have some finality on the policy and we have gone through the amendment process. And then ZETA will be putting a lot of work into public awareness, working fleet operators, and those that might want to buy a commercial heavy-duty EV and certainly a consumer-facing vehicle. So we will have the material and the content to know where the policy lands, and then folks should start to see how and where they might be eligible.
Badalian: Beyond The Inflation Reduction Act of 2022, what more does the U.S. need federally to achieve 100 percent EV sales by 2030, or are we now on track?
Britton: So I think it is a three-pronged approach. We get in place the right federal policies, which this bill is directionally a huge accelerant. … So that is the federal policy. No. 2 is the manufacturers produce product and segment offerings that more and more Americans can see working for their families, which they are doing. The third is a huge public affairs campaign. Not every American has the time or bandwidth to unpack the credits and eligibility. … There needs to be a huge public affairs campaign aimed at bringing to communities all across America the benefits of electrification. Go into those families and say that electrification is good for you, it is good for your family, you will save money at the pump, and you will be catalyzing domestic manufacturing and jobs in your community.
Climate change-induced natural catastrophe events have resulted in an increase in claims paid by Australian property insurers and consequently pushed their loss ratio up from 66.1% in 2019 to 84.6% in 2021, according to a new report from GlobalData.
The loss ratio is expected to remain above the 80% levels over the next five years, impacting the profit margins of the insurers.
The report, ‘Australia General Insurance: Key Trends and Opportunities to 2026’, estimates the paid claims of Australia’s property insurance segment to increase at a compound annual growth rate of 4.0% from AUD6.0 billion ($4.5 billion) in 2021 to AUD7.3 billion ($5.5 billion) in 2026.
Ashish Raj, Insurance Analyst at GlobalData, said: “Due to various geographical reasons, Australia is prone to natural catastrophes, and the frequency of such events has increased recently. In the last two years, the country has suffered wildfires, floods, cyclones, and earthquakes which have resulted in a significant increase in property insurance claims.”
“High Nat-Cat led losses along with the slowdown due to the COVID-19 pandemic has compelled property insurers to increase premium significantly in the last couple of years. In fact, some buyers have been billed a renewal price increase of more than 300%.”
The floods that occurred in February 2022 heavily impacted New South Wales and Southeast Queensland, resulting in 118,000 property damage claims amounting to AUD1.8 billion ($1.3 billion), as of 10 March 2022. The floods in the two states in March 2021 led to 107,844 claims of worth AUD1 billion ($748.7million).
The premium rate is expected to rise further over the next few years which can make property insurance more expensive for many policyholders.
The expected increase is likely to have a negative impact on the property insurance segment, leading to underinsurance and even non-renewal of policies in the long-run. According to the Climate Council of Australia, 4% of properties will become uninsurable by 2030.
Four times since 1900, human civilization has suffered global catastrophes with extreme impacts: World War I (40 million killed), the 1918-19 influenza pandemic (40-50 million killed), World War II (40-50 million killed), and the COVID-19 pandemic (an economic impact in the trillions, and a 2020-21 death toll of 14.9 million, according to the World Health Organization).
These are the only events since the beginning of the 20th century that meet the United Nations’s definition of global catastrophic risk (GCR): a catastrophe global in impact that kills over 10 million people or causes over $10 trillion (2022 USD) in damage.
These reports, endorsed by United Nations Secretary-General António Guterres, make the case that the combined effects of disasters, economic vulnerabilities, and overtaxing of ecosystems are creating “a dangerous tendency for the world to tend toward the Global Collapse scenario. This scenario presents a world where planetary boundaries have been extensively crossed, and if GCR events have not already occurred or are in the process of occurring, then their likelihood of doing so in the future is extreme … and total societal collapse is a possibility.”
Human civilization has evolved during the Holocene Era, the stability of which is now threatened by human-caused climate change. As a result, global catastrophic risk events from climate change are growing increasingly likely, the U.N. May 2022 reports conclude. There are many other potential global catastrophic risk events, both natural and human-caused (Figure 2), posing serious risks and warranting humanity’s careful consideration. But the report cautions of “large uncertainty both for the likelihood of such events occurring and for their wider impact.” (Note that there is at least one other type of Global Catastrophic Risk event the report omits: an intense geomagnetic storm. A repeat of the massive 1859 Carrington Event geomagentic storm, which might crash the electrical grid for 130 million people in the U.S. for multiple years, could well be a global catastrophic risk event.)
Five types of GCR events with increasing likelihood in a warmer climate
1) Drought The most serious immediate global catastrophic risk event associated with climate change might well be a food-system shock caused by extreme droughts and floods hitting multiple major global grain-producing “breadbaskets” simultaneously. Such an event could lead to significant food prices spikes and result in mass starvation, war, and a severe global economic recession. This prospect exists in 2022-23, exacerbated by war and the COVID-19 pandemic.
The odds of such a food crisis will steadily increase as the climate warms. The author of this post presented one such scenario in an op-ed published in The Hill last year, and insurance giant Lloyds of London detailed another such scenario in a “food system shock” report issued in 2015. Lloyds gave uncomfortably high odds of such an event’s occurring—well over 0.5% per year, or more than a 14% chance over a 30-year period.
2) War In his frightening book Food or War, published in October 2019, science writer Julian Cribb documents 25 food conflicts that have led to famine, war, and the deaths of more than a million people – mostly caused by drought. For example, China’s drought and famine of 1630-31 led to a revolt that resulted in the collapse of the Ming Dynasty. Another drought in China in the mid-nineteenth century led to the Taiping rebellion, which claimed 20-30 million lives.
Since 1960, Cribb says, 40-60% of armed conflicts have been linked to resource scarcity, and 80% of major armed conflicts occurred in vulnerable dry ecosystems. Hungry people are not peaceful people, Cribb argues, and ranks South Asia – India, Pakistan, Bangladesh, and Sri Lanka – as being at the most risk of future food/water availability conflicts. In particular, nuclear powers India and Pakistan have a long history of conflict, so climate change can be expected to increase the risk of nuclear war between them. A “limited” nuclear war between India and Pakistan, 100 bombs dropped on cities. would be capable of triggering a global “nuclear winter” with a death toll up to two billion, Helfand (2013) estimated.
3) Sea-level rise, combined with land subsidence During the coming decades, it will be very difficult to avoid a global catastrophic risk event from sea-level rise, when combined with coastal subsidence from groundwater pumping, loss of river sedimentation from flood-control structures, and other human-caused effects: A moderate global warming scenario (RCP 4.5) will put $7.9-12.7 trillion dollars of global coastal assets at risk of flooding by 2100, according to a 2020 study by Kirezci et al., “Projections of global-scale extreme sea levels and resulting episodic coastal flooding over the 21st Century.” While this study did not take into account assets that inevitably will be protected by new coastal defenses to be erected, neither did it consider the indirect costs of sea-level rise from increased storm surge damage, mass migration away from the coast, salinification of fresh water supplies, and many other factors. A 2019 report by the Global Commission on Adaptation estimated that sea level rise will lead to damages of more than $1 trillion per year by 2050.
Furthermore, sea-level rise, combined with other stressors, might bring about megacity collapse – a frightening possibility with infrastructure destruction, salinification of fresh water resources, and a real estate collapse potentially combining to create a mass exodus of people, reducing the tax base of the city to the point that it can no longer provide basic services. The collapse of even one megacity might have severe impacts on the global economy, creating increased chances of a cascade of global catastrophic risk events. One megacity potentially at risk of this fate is the capital of Indonesia, Jakarta, with a population of 10 million). Land subsidence (up to two inches per year) and sea-level rise (about 1/8 inch per year) are so high in Jakarta that Indonesia currently is constructing a new capital city in Borneo. Plans call for moving 8,000 civil servants there in 2024, and eventually move 1.5 million workers from Jakarta to the new capital by 2045.
4) Pandemics As Earth’s climate warms, wild animals will be forced to relocate their habitats and increasingly enter regions with large human populations. This development will dramatically increase the risk of a jump of viruses from animals to humans that could lead to a pandemic, according to a 2022 paper by Carlson et al. in Nature, “Climate change increases cross-species viral transmission risk.”Bats are the type of animal of most concern.
Note that in the case of the 1918-19 influenza GCR event, a separate GCR event helped trigger it: WWI, because of the mass movement of troops that spread the disease. The U.N. reports emphasize that one GCR event can trigger other GCR events, with climate change acting as a threat multiplier.
Figure 3. Predicted change in surface temperature 51-100 years after a failure of the Atlantic Meridional Overturning Circulation. Catastrophic cooling is predicted to affect Northern Europe, the edge of arctic sea ice reach northern France, and temperatures in the U.S. fall 1-2 degrees Celsius (1.8-3.6°F). Sea ice edges are shown in bright blue; the sea ice edge would remain virtually unchanged in the Southern Hemisphere, but advance significantly equatorward in the Northern Hemisphere, reaching northern France. (Image credit: modified from Orihuela-Pinto et al., 2022, Interbasin and interhemispheric impacts of a collapsed Atlantic Overturning Circulation, Nature Climate Change, https://doi.org/10.1038/s41558-022-01380-y)
5) Ocean current changes Increased precipitation and glacial meltwater from global warming could flood the North Atlantic with enough fresh water to slow down or even halt the Atlantic Meridional Overturning Circulation (AMOC), the ocean current system that transports warm, salty water from the tropics to the North Atlantic and sends cold water to the south along the ocean floor. If the AMOC were to shut down, the Gulf Stream would no longer pump warm, tropical water to the North Atlantic. Average temperatures would cool in Europe by three degrees Celsius (5.4°F) or more in just a few years – not enough to trigger a full-fledged ice age, but enough cooling to bring snows in June and killing frosts in July and August, as occurred in the famed 1816 “year without a summer” caused by the eruption of Mt. Tambora. In addition, shifts in the jet stream pattern might bring about a more La Niña-like climate, causing an increase in drought to much of the Northern Hemisphere, greatly straining global food and water supplies.
A study published in August 2021 looked at eight independent measures of the AMOC, and found that all eight showed early warning signs that the ocean current system may be nearing collapse. “The AMOC may have evolved from relatively stable conditions to a point close to a critical transition,” the authors wrote.
Figure 4. A pteropod shell is shown dissolving over time in seawater with a lower pH. When carbon dioxide is absorbed by the ocean from the atmosphere, the chemistry of the seawater is changed. (image credit: NOAA)
6) Ocean acidification The increased carbon dioxide in the atmosphere is partially absorbed by the oceans, making them more acidic. Since pre-industrial times, the pH of surface ocean waters has fallen by 0.1 pH units, to 8.1 – approximately a 30 percent increase in acidity. Increased acidity is harmful to a wide variety of marine life, and acidic oceans have been linked to several of Earth’s five major extinction events through geologic time.
Under a business-as-usual emission scenario, continued emissions of carbon dioxide could make ocean pH around 7.8 by 2100. The last time the ocean pH was this low was during the middle Miocene, 14-17 million years ago. The Earth was several degrees warmer and a major extinction event was occurring.
7) A punishing surprise In 2004, Harvard climate scientists Paul Epstein and James McCarthy conclude in a paper titled “Assessing Climate Stability” that: “We are already observing signs of instability within the climate system. There is no assurance that the rate of greenhouse gas buildup will not force the system to oscillate erratically and yield significant and punishing surprises.” Hurricane Sandy of 2012 was an example of such a punishing surprise, and climate change will increasingly bring low-probability, high impact weather events – “black swan” events – that no one anticipated. As the late climate scientist Wally Broecker once said, “Climate is an angry beast, and we are poking at it with sticks.”
Figure 5. An 18 km-high volcanic plume from one of a series of explosive eruptions of Mount Pinatubo on June 12, 1991, viewed from Clark Air Base. Three days later, the main eruption produced a plume that rose nearly 40 km, penetrating well into the stratosphere. Pinatubo’s sulfur emissions cooled the Earth by about 0.5 degree Celsius (0.9°F) for 1-2 years. (Photograph by David H. Harlow, USGS.)
Volcanic eruptions: A decreasing likelihood in a warming climate
Climate change can also be expected to reduce the likelihood of one type of global catastrophic risk event: the impacts of a massive volcanic eruption. A magnitude-seven “super-colossal” eruption with a Volcanic Explosivity Index of seven (VEI 7) occurred in 1815, when the Indonesian volcano Tambora erupted. (The Volcanic Explosivity Index is a logarithmic scale like the Richter scale used to rate earthquakes, so a magnitude 7 eruption would eject ten times more material than a magnitude 6 eruptions like that of Mt. Pinatubo in the Philippines in 1991.)
The sulfur pumped by Tambora’s eruption into the stratosphere dimmed sunlight so extensively that Northern Hemisphere temperatures fell by about 0.4-0.7 degree Celsius (0.7-1.0°F) for 1-2 years afterward. The result: the famed Year Without a Summer in 1816. Killing frosts and snow storms in May and June 1816 in Eastern Canada and New England caused widespread crop failures, and lake and river ice were observed as far south as Pennsylvania in July and August. Famine and food shortages rocked the world.
Verosub (2011) estimated that future eruptions capable of causing “volcanic winter” effects severe enough to depress global temperatures and trigger widespread crop failures for one to two years afterwards should occur about once every 200-300 years, which translates to a 10-14% chance over a 30-year period. An eruption today like the Tambora event of 1815 would challenge global food supplies already stretched thin by rising population, decreased water availability, and conversion of cropland to grow biofuels.
However, society’s vulnerability to major volcanic eruptions is less than it was, since the globe has warmed significantly in the past 200 years. The famines from the eruption of 1815 occurred during the Little Ice Age, when global temperatures were about 0.9 degree Celsius (1.6°F) cooler than today, so crop failures from a Tambora-scale eruption would be less widespread than is the case with current global temperatures. Fifty years from now, when global temperatures may be another 0.5 degree Celsius warmer, a magnitude seven eruption should be able to cool the climate only to 1980s levels. However, severe impacts to food supplies still would result, since major volcanic eruptions cause significant drought. (To illustrate, in the wake of the 1991 climate-cooling VEI 6 eruption of the Philippines’ Mt. Pinatubo, land areas of the globe in 1992 experienced their highest levels of drought for any year of the 1950-2000 period.)
Unfortunately, the future risk of a volcanic global catastrophic risk event may be increasing from causes unrelated to climate change, because of the increasing amount of critical infrastructure being located next to seven known volcanic hot spots, argued Mani et al. in a 2021 paper, “Global catastrophic risk from lower magnitude volcanic eruptions.” For example, a future VEI 6 eruption of Washington’s Mount Rainier could cost more than $7 trillion over a 5-year period because of air traffic disruptions; similarly, a VEI 6 eruption of Indonesia’s Mount Merapi could cost more than $2.5 trillion.
Commentary
Complex systems like human cultures are resilient, but are also chaotic and unstable, and vulnerable to sudden collapse when multiple shocks occur. Jared Diamond’s provocative 2005 book, Collapse: How Societies Choose to Fail or Succeed, described flourishing civilizations or cultures that eventually collapsed, like the Greenland Norse, Maya, Anasazi, and Easter Islanders. Environmental problems like deforestation, soil problems, and water availability were shown to be a key factor in many of these collapses.
“One of the main lessons to be learned from the collapses of the Maya, Anasazi, Easter Islanders, and those other past societies,” Diamond wrote, “is that a society’s steep decline may begin only a decade or two after the society reaches its peak numbers, wealth, and power. … The reason is simple: maximum population, wealth, resource consumption, and waste production mean maximum environmental impact, approaching the limit where impact outstrips resources.”
Some of Diamond’s conclusions, however, have been challenged by anthropologists. For example, the 2010 book, Questioning Collapse: Human Resilience, Ecological Vulnerability, and the Aftermath of Empire, argued that societies are resilient and have a long history of adapting to, and recovering from, climate change-induced collapses. But a 2021 paper by Beard et al., “Assessing Climate Change’s Contribution to Global Catastrophic Risk,” argued, pointed to “reasons to be skeptical that such resilience can be easily extrapolated into the future. First, the relatively stable context of the Holocene, with well-functioning, resilient ecosystems, has greatly assisted recovery, while anthropogenic climate change is more rapid, pervasive, global, and severe.”
To paraphrase, one can think of the nine planetary boundaries as credit cards, six of those nine credit cards charged to the hilt to develop civilization as it now exists. But Mother Nature is an unforgiving lender, and there is precious little credit available to help avoid a cascade of interconnected global catastrophic risk events that might send human society into total collapse, if society unwisely continues its business-as-usual approach.
Avoiding climate change-induced global catastrophic risk events is of urgent importance, and the UN report is filled with promising approaches that can help. For example, it explains how systemic risk in food systems from rainfall variability in the Middle East can be reduced using traditional and indigenous dryland management practices involving rotational grazing and access to reserves in the dry season. More generally, the encouraging clean energy revolution now under way globally needs to be accelerated. And humanity must do its utmost to pay back the loans taken from the Bank of Gaia, stop burning fossil fuels and polluting the environment, and restoring degraded ecosystems. If we do not, the planet that sustains us will no longer be able to.
Bob Henson contributed to this post.
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Increasingly chaotic weather around the world can be attributed to climate change, a top NIWA scientist says.
Dr Sam Dean, NIWA’s principal climate scientist, told Q + A’s Jack Tame on Sunday that extreme weather events have been intensified by the changing climate.
“The risk is double what it would’ve been without climate change and the intensity is about 10% more.”
In recent weeks, parts of Europe and North Africa have seen record-breaking heatwaves, which have caused devastating wildfires and even melted airport runways in London.
Dr Dean says some of the heatwaves were “very unlikely, if not impossible” to have occurred if it hadn’t been for climate change.
Back in New Zealand, there are concerns that rising temperatures will create fire conditions similar to those in Australia, where bushfires caused widespread damage.
2021 was the hottest year in New Zealand on record, according to NIWA.
“I think for all of us, fire is a scary thing that can be truly destructive and terrifying,” Dr Dean said.
He says areas on the east of the South Island and Central Otago are particularly vulnerable.
“The risk of the kind of fire in places that we live is going to increase if we don’t mitigate.”
Dr Dean says the cost of the impacts from climate change far outweigh the costs of implementing mitigation strategies.
“We’re looking at how those costs are going to increase in the future.
“That provides motivation for spending money now to mitigate against potential damages… social and financial costs.”
In the game’s impact statement, Ubisoft said Skull and Bones (opens in new tab) will use in-game events to challenge the player with environmental issues such as how the demand for shark fins is affecting the ocean.
“Much like our own oceans, this world provides many resources to benefit them on their adventure but also opens the possibility of exploitation,” Ubisoft writes in its application for Skull and Bones (opens in new tab). “Our first activation will address resource exploitation, showing what happens in the game world and the real world when the demand for sharks’ fins results in the overfishing of sharks. Players will have the choice to contribute to marine wildlife protection and comprehend the destructive nature of the shark fin trade.”
Riders Republic (opens in new tab), on the other hand, will have an event from the moment the game begins that sees the sky go orange throughout the entire game because of wildfires, with players equipped with gas masks by default. As part of the game, they will have to reduce the risk of fire spreading and identify the most fragile and flammable areas of Sequoia National Park (thanks, NME (opens in new tab)).
The Playing For The Planet Alliance was launched in 2019 during the Climate Summit at UN Headquarters in New York in recognition that its alliance members reach “more than one billion video game players” combined. Members include Bandai Namco, Creative Assembly, Microsoft, Niantic, Sony, and Sega, amongst others.
The Green Game Jam itself saw Hay Day secure two awards, with other award winners including Riders Republic, Brawlhalla, June’s Journey, Imagine Earth, TerraGenesis, and Carbon Island.
Beleaguered by setbacks and delays, Skull and Bones was originally revealed at E3 2017, and we’ve seen and heard surprisingly little since then beyond getting delay announcements in 2018 and then again in 2019.
As part of Green Game Jam 2022, Ubisoft is set to be one of several studios spearheading efforts to promote the fight against climate change with special in-game events.
Green Game Jam was started in 2020 by Playing for the Planet, a UN-led initiative that strives to “inspire young people to learn and act in support of the environment” by collaborating with the gaming industry.
In addition to the sales of a tree-themed in-game charity item for the Brawlhalla World Tree Initiative and an exclusive Charity Pack within Assassin’s Creed Valhalla, two other Ubisoft titles will soon debut some dramatic “activations” to players.
Riders Republic’s Phoenix Project has won the Media’s Choice Award in the @P4PAlliance Green Game Jam this year! 🌐 The Phoenix will rise later on! 🔥 Project Rebirth is right around the corner. Stay tuned and get your green thumb ready! 🌲 🌳#RidersRepublicpic.twitter.com/sPteMowNT0
Riders Republic, Ubisoft’s arcade-y extreme sports sandbox released this past October, will invite players to join forces to prevent Sequoia National Park from burning down in-game unannounced.
“We will be promoting strategies to reduce wildfire frequency and size as well as have an emotional impact on players regarding the consequences of wildfires,” Ubisoft gameplay director Boris Maniora wrote. “The live event won’t be announced to players proactively. Instead, they will be immersed immediately in the consequences of wildfires on the outskirts of the map when booting the game.”
Some specific details shared about the Riders Republic event were:
The Riders Republic event, which secured the Media’s Choice Award for Green Game Jam 2022, is said to be taking place later this year or early 2023.
Another in-game climate change event that Ubisoft has been working on is for Skull and Bones, the studio’s long-anticipated pirate adventure title.
“Our first activation will address resource exploitation,” Ubisoft Singapore senior gameplay programmer Wong Yi wrote, “showing what happens in the game world and the real world when the demand for sharks’ fins results in the overfishing of sharks. Players will have the choice to contribute to marine wildlife protection and comprehend the destructive nature of the shark fin trade.
“Like our current societal challenges, changes need to be collaborative, raise awareness and encourage others to learn of and consider additional ecological causes that need attention.”
This in-game activation is said to be categorized as one of the seasonal live events in Skull and Bones. As players contribute to the community challenges, rewards will be unlocked for all players depending on the overall level of participation.
Additionally, Yi announced Ubisoft’s plans to partner with marine conservation NGOs “to show players that their in-game actions can have a meaningful impact on the oceans that have inspired their game world.”
“We hope that this further instills in our players greater motivation to take part in real-world community challenges that reward humanity.”
Ubisoft has announced that in-game events in both Riders Republic and Skull & Bones will be used to highlight real-world environmental issues.
Beginning in late 2022, the first live event will take place in Riders Republic and deal with forest fires.
There will be no warning (to simulate the immediacy of forest fires), the sky will change to an ominous shade of orange, and players will need to team up in order to save endangered sequoia trees from the blaze.
Certain areas of the map will become inaccessible, and you will be able to pinpoint the location of each conflagration by the smoke on the horizon.
You can read our full thoughts on Riders Republic in our review.
Skull & Bones, meanwhile, will have an event focusing on the consequences of overfishing. While we don’t have a firm release date for the long-in-development title, we should hear more soon, and it is rumoured to be released in October.
What do you think of Ubisoft’s idea of adding live events to highlight these issues? Let us know in the comments section below.
Riders Republic and Skull and Bones will have in-game events aimed at tackling climate change.
Ubisoft is using two of its virtual offerings to highlight some very real issues. In collaboration with Playing for the Planet (opens in new tab), the company will host in-game events in Riders Republic and the long-awaited Skull and Bones designed to raise awareness about the impact that climate change is having on our world.
As reported by Axios (opens in new tab), sometime in late 2022 or early 2023, Riders Republic players will find parts of the game world ablaze. According to Ubisoft, the event won’t be announced ahead of time. Instead, you’ll log in one day and suddenly be met with an orange sky and “fire smoke” fog throughout the entire game. You’ll be equipped with a gas mask, but some areas will be off limits due to their proximity to the blaze. As well as highlighting the dangers of wildfires, the event will encourage cooperation as players will have to work together to prevent Sequoia National Park from burning to the ground.
Similarly, Ubisoft is using its pirate-themed adventure Skull and Bones, which is rumoured to be launching in November, to host events highlighting the problems facing our oceans, such as overfishing. “Players will have the choice to contribute to marine wildlife protection and comprehend the destructive nature of the shark fin trade,” the company says.
Ubisoft isn’t the only one taking environmental issues seriously. In collaboration with the Arbor Day Foundation, PlayStation launched the Play and Plant (opens in new tab) program for Horizon Forbidden West, which saw it plant a tree for every player who unlocked the ‘Reach the Daunt’ trophy during the game’s first few weeks on sale.
Don’t miss out on the best upcoming titles with our new games 2022 guide.
The loss ratio is expected to remain above the 80% levels over the next five years, impacting the profit margins of the insurers.
