On September 27th, The Intergovernmental Panel on Climate Change, a United Nations-sponsored scientific body created in 1988 to examine the causes and effects of climate change, released a report (put together by an independent group of 800 scientists) that everyone knew was coming. The whole thing, really, can be summed by a few excerpts:
It is extremely likely that more than half of the observed increase in global average surface temperature from 1951 to 2010 was caused by the anthropogenic increase in greenhouse gas concentrations and other anthropogenic forcings together.
The atmospheric concentrations of carbon dioxide (CO2), methane, and nitrous oxide have increased to levels unprecedented in at least the last 800,000 years. CO2 concentrations have increased by 40% since pre-industrial times, primarily from fossil fuel emissions and secondarily from net land use change emissions.
When the IPCC says it's "extremely likely" that humans are contributing to climate change, the organization means that there's a 95% chance of that being the case (that's still 5% wiggle room, which is space to fit a lot of climate deniers). That's approximately the same confidence that scientists have about cigarettes being harmful to human health.
And according to the new IPCC report--the first of a series of climate change reports that will be released over the coming year--humans only have 30 years left until our "carbon budget" is spent. In other words, we have 30 years to fix this mess before warming irrevocably climbs past 2 degrees C, dramatically increasing the risk of sea level rise, fires, flooding, and all the other nasty side effects of climate change.
But who's actually paying attention to what the IPCC says? It's tempting to just say that the IPCC is preaching to the choir--and in some ways that's true.
Just a few hours after the report was released, I received an email from the conservative Heartland Institute, which was upset that "Over the history of the IPCC, each report has expressed a higher level of alarmism and a higher level of confidence in its certainty that man-made global warming will be harmful." The Heartland Institute instead directed my attention to a different climate change report created by a climate denial group with a name that sounds suspiciously like the IPCC: the Nongovernmental International Panel on Climate Change (NIPCC).
That's a bait and switch tactic that may work with some people, but probably not the business communities with the potential to be most affected by climate change. One of those communities, obviously, is the insurance industry.
"From the perspective of insurers, they're operating in an increasingly uncertain environment which is of course impacted by climate change, and based on the contents of the report should be of significant concern for how they plan and shape their business going forward," explained Lara Mowery, the Managing Director and Head of Global Property Specialty at Guy Carpenter & Company (a global risk and reinsurance specialist) during a conference call about the report. She cited the 2011 Thailand floods as an example of what could happen in the face of future climate disasters, when something like flooding closes hundreds of factories and creates parts shortages around the world.
Oil and gas companies are also probably scrutinizing the latest report. If the news about our dwindling carbon budget triggers policy changes--the IPCC writes that humans can burn less than one sixth of all fossil fuel reserves before going over the carbon budget--they may never get to extract a big portion of the oil and gas left in the ground. Mindy Lubber, the president of Ceres, wondered on the conference call: "What is the value of their company if some percentage of their assets gets stranded?"
Nick Robins, the head of HSBC's Climate Change Centre of Excellence, believes that the last IPCC report, released in 2007, spurred the investment community in general to really think about how climate change can affect different asset classes. "Many corporate strategies were conceived on the back of the last IPCC report. Now is a good time to revitalize commitments that corporations are making," he said. The problem, as reported in a recent U.N study, is that most CEOs of major corporations don't think that environmental sustainability is key to business success.
That makes no sense, of course. The Global Challenges Foundation ran the numbers on the IPCC report and came back with this comparison (explained in a press release):
The IPCC’s calculation of a 1.8% risk of warming to 6 degrees C or more (if GHG rise to 450 parts per million) is equivalent in probability terms to more than 1480 fatal plane accidents per day--540,000 a year, compared to the actual figure of about 30 per year. This level of risk would not be tolerated for flying, the experts argue, and in terms of climate change, requires much greater mitigation than currently foreseen.
In any case, risk mitigation is just about the only thing corporations and governments can hope for at this point, unless there is suddenly a dramatic swing in human sentiment about climate change. In a New York Times interview, Myles R. Allen, a University of Oxford scientist and one of the IPCC report authors, said that he doubts we'll stop ourselves from going over the Earth's carbon budget: It is "is technically doable, but at the moment we’re not going in the right direction."
[Image: Timer via Shutterstock]