IG PARTNERS VIEWPOINTS n.12 – The return of climate change

Recent findings and the extreme events connection

Of late, however, a number of recent studies might pave the way for a change in attitudes.
A recent paper by the Berkeley Earth Surface Temperature (Best), which has used over 14 million observations from nearly 45,000 sites dating back to 1753, concluded that humans were almost completely responsible for the warming of 1.5° C of the land over the last 250 years. On the surface this looks like the non-finding of the century except that the study was funded also by climate sceptics and claimed at least one convert in prof. Richard Muller, a physicist and former sceptic. Yet a new research, however massive and rigorous, confirming what most scientists and the informed public already knew is unlikely to have substantive practical repercussions.
Of greater impact might be a study by the American Meteorological Society, probably the first of its kind, where several extreme events in 2011 were considered, namely:

• The floods in Thailand
• The drought in Eastern Africa
• The Texas drought
• Remarkable European temperatures: warmest spring and autumn in France vs. record cold in the UK in December 2010

• Warm autumns (2009, 2011) an cold winters (09/10; 10/11) in Central England

  The conclusions of the 21 scientists and researchers involved from 11 Universities and specialized institutions from 6 countries (USA, UK, Canada, Australia, France and Holland) are that, with the exception of the Thai floods, climate change appears to be at a minimum partly responsible for the extreme events analyzed. Climate change theory has been predicting it for quite a while. In this case, however, scientists were able to ‘demonstrate’ or at least strongly suggest a specific linkage. A recent paper by James Hansen, a leading climate scientist, has examined the distribution of temperatures in June-July-August from 1951 to 2011. It clearly shows, when each decade is examined, that the mean temperature is increasing and that the days with temperatures over the lower limit for extreme heat to set in, are increasing in each decade. Today, at any time, extreme events can be found in 8% of the world. The causality for a heating world is not analyzed here, but the relationship between a hotter world and more extreme events is proven.
  The 7 July issue of The New Scientist had the link between climate change and extreme weather as the main theme summarizing several recent studies, including those mentioned earlier. The telling caption was ‘Our weather is not only becoming more extreme, it’s becoming even more extreme than anyone expected’.

  Climate change and agriculture

  For once the scientific evidence has gone hand in hand with current concerns and popular perception. The severe drought in the middle of the US in the summer of 2012 has dominated not just the agricultural and commodity worlds. It has moved the number of Americans believing climate change to be a reality from slightly over 50% to 70% in a few months. More to the point, it has raised climate change to the status of prime suspect in an event with potentially strong immediate economic consequences. We are no longer worrying primarily about the ‘storms of our grandchildren’. We are concerned with the sudden rise in the price of corn, soybeans and wheat and their relative scarcity! (Tab.1)

  

  To be fair the impact of climate change on agriculture has been the object of many studies in recent years. Examples:

  • An analysis of the relations between climate trends and global crop production has been published on Science in July 2011. Like many such studies it is very detailed, analyzing key regions of the world, and the impact of temperature and precipitation changes in each. It concluded that yields of corn and wheat have fallen on average globally by 3 to 4% between 1980 and 2008, whereas those of rice and soybeans have increased. The study also showed that while yields in the US have been reasonably stable, they have reduced sharply for corn in China and Brazil and for wheat in Russia.

  • In June of 2012 the much discussed Environmental Protection Agency (EPA) showed that while corn yields have been increasing thanks to technological advances, extreme weather events in specific years would cause dramatic albeit temporary reductions.

  • The food gap, a 2011 report of the Universal Ecological Fund estimated that the impact of both changes in climate and water availability, and the concomitant population increase would lead by 2020 to a global deficit in wheat, rice and maize whereas soybean would show a surplus. The report includes very detailed projections by major country for each crop.

    These and other similar reports appear to have had a modest impact, possibly because they are hyper-technical, of limited scope and yield sometimes contradictory results. US farmers’ attitudes this summer were best summed up by the Missouri farmer quoted in the FT: ‘It’s more God and nature dictates than a man made event’. After all, so long as the insurers and the government pick up the tabs, why confuse the issue with man’s interference? The problem is that insurers and government will face increasing costs and will have to take measures to reduce losses and payouts including lower benefits and increased premiums. The new scientific evidence might hopefully be channeled into studying preventative measures through more practical modeling.

  Possible impact

  The recently established scientific link between specific extreme events and climate change however should at a minimum raise the level of attention paid to long term climate trends. In view of the fact that current efforts are unlikely to keep CO2 levels below 350 ppm and hence future temperatures below an increase of 2° C, are we also likely to see a surge in the level of subsidies?

  I very much doubt it. To start with, renewables are by now an established reality in the world of energy, and therefore viewed as requiring less help13:

  • In 2010 total renewables accounted for 16.7% of energy consumption worldwide. True, half of it was the burning of traditional biomass but a solid 8.2% was attributable to ‘modern’ renewables, and that is more than 3 times the contribution of nuclear (Table 2). They account for over 20% of the world electricity production in 2011.

  

  • The yearly growth rate of renewables in 2006-11, when the world has been stalling, is very impressive: 58% for solar PV, 27% biodiesel, 26% wind. In 2011 investments in new renewable capacity (257 bln $) were 17% higher than 2010 and 60% above 2009 levels.

  • In the EU in 2010 ten countries (3 Scandinavian, 3 Baltic, Austria, Portugal, Slovenia and Romania) had a renewable share of final energy of over 20%; leader Sweden exceeded 45%.

  • The number of countries with specific policy targets for renewable energy and energy efficiency keeps growing and has now reached 118, while they were just 14 in the year 2000, to which one should add subnational entities such as US states, Canadian provinces and even cities which have their own targets.

  • Manufacturing costs have gone down everywhere, most notably in solar PV.

    Secondly, as the recession continues and the current majority view focuses on austerity and debt reduction, the witch-hunt for wasteful expenses will continue. The new scientific evidence and the increase in extreme weather will, if anything, help to resist attacks on continuing renewables’ funding. But finding the political consensus to reduce CO2 further is hard. As the search for growth and new jobs intensifies, all stigma is gone for fossils. Shale gas is viewed almost as environmental when it substitutes coal, since it has a much lower CO2 per unit. Politicians can go further however, as is the case with Mitt Romney, who, as Massachusetts Governor wanted to close an aging coal fired plant because ‘it kills people’, but as a Presidential candidate is now fully behind coal development for achieving North American Energy independence14.

    Moreover it is increasingly difficult to have a worldwide consensus on incentives for renewables and efficiency. Indeed treaties aimed at curbing global warming of the ‘UN and EU variety’ are unlikely to strengthen as almost thirty years of experimentation in this area have proven that bringing the world to agree to anything is next to impossible.

    The perspectives are better for smaller agglomerates; after all the cities of Vaxjo in Sweden and Rajkot in India have their own targets of CO2 reductions, as have the better known Madrid, San Francisco, Stockholm and Tokyo. Barcelona mandates 60% of solar hot water in all new buildings and major renovations, Adelaide operates public electric buses with 100% solar electricity and Boulder, Colorado, imposes a carbon tax on all fossil fuel electricity. A consensus may be achieved even at level of the individual nation-state including large ones. China is taking very seriously the climate change consequences, and so do Germany, the Scandinavian countries and Japan. The EU does its best to keep in line the unruly 27 with some impact and its carbon trading scheme will supposedly join in with the Australian one by 2015! Bringing the US in line appears implausible at this stage, but obviously not impossible.

    The more likely and gradual impact would be the broader acceptance of the basic tenets of climate change science and consequently a greater propensity for drawing conclusions for individual businesses and funding specific impact studies and practical models helping to cope with climate changes. As we have seen agriculture is a primary target but it is not by any means the only domain.

    Probably the one industry with more at stake is the insurance industry, which is most directly hit by extreme weather. It is not a surprise that the world’s leading reinsurer, Munich Re, claims to have the world’s largest database for catastrophes and extreme events (Table 3). It has pledged 2.5 bln $ of its own funds to invest in renewables, it has supported many measures of climate mitigation and has adapted several policies to fit environmental needs.

    

    Another very interesting area is the melting of the Arctic ice which can lead to new transport routes, numerous possibilities for oil&gas explorations and mining and the opening up of new areas for agriculture. Hopefully we’ll be able to avoid drastic consequences such as those hypothesized by Irvin Studin claiming that ‘the melting of the polar ice signals the end of the Pax Arctica’! By contrast one would expect studies by governments and private companies to multiply to achieve a far more detailed understanding of the level of existing resources, the difficulties of getting at them, the timing of the melting which would allow arctic navigation routes to open. And there are many other areas: health, where species migration can be a major source of illnesses; fishing, as the oceans being among the entities most impacted by climate change; tourism and real estate.

    A recent survey by Mercer, the second of its kind, covering 42 institutional asset owners, primarily pension funds, and 51 asset managers, collectively totalling over $ 12 trillion in 2011, showed that all asset managers and 57% of owners were assessing climate risks and opportunities and that the trend was upwards. How well, how deep, how seriously we do not know, but the survey hints that already now the largest financial corporations are taking the issue quite seriously in defining their policies.

    The Great Recession had put climate change in the back burner, but the weather is forcing it on the front burner again. And we should count our blessing that solar sunspots appear to be on the low side and certainly inferior to the first half of the last century; if and when that reverses, life could become quite difficult on Planet Earth! On balance the return of climate change as an issue – and as a source of jobs – is quite likely.

    September 3rd 2012