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Reward is the Missing Element in Successful Climate Mitigation Strategy


‘Risk/Reward’ is the ratio used by investors to compare the expected return of an investment to the amount of risk undertaken to capture returns.

Reward is the missing element of successful climate mitigation strategy.

Energy is the ability to do work.

For a physicist work is the movement of something against a force, like gravity.

One definition of energy is the power derived by the utilization of physical or chemical resources, especially to provide light and heat or to work machines.

Throughout history mankind has maximized reward by inventing ways of producing work that in turn has lessened the demands on physical effort to provide life’s essentials and increasingly to provide for leisure activities.

Essentially, until recently, there has been very little down side to increased energy production because as the anthropologist Leslie White said, “Other things being equal, the degree of cultural development varies directly as the amount of energy per capita per year put to work.”

Since the commencement of the Industrial Revolution, around 1750, however human activities have substantially contributed to climate change by adding CO2 and other heat-trapping gases to the atmosphere in an effort to maximize the production of energy.

Since about 1970, the date of the First Earth Day, there has been a growing appreciation that these gases are causing the Earth’s surface temperature to rise and the consequence of that rise, but it took until 2014 for the Intergovernmental Panel on Climate Change to quantify these risks in its fifth assessment report, known as WGII AR5.

These risks are:

  1. The risk of death, injury, ill-health, or disrupted livelihoods in low-lying coastal zones and small island developing states and other small islands, due to storm surges, coastal flooding, and sea-level rise.
  2. The risk of severe ill-health and disrupted livelihoods for large urban populations due to inland flooding in some regions.
  3. Systemic risks due to extreme weather events leading to breakdown of infrastructure networks and critical services such as electricity, water supply, and health and emergency services.
  4. Risk of mortality and morbidity during periods of extreme heat, particularly for vulnerable urban populations and those working outdoors in urban or rural areas.
  5. Risk of food insecurity and the breakdown of food systems linked to warming, drought, flooding, and precipitation variability and extremes, particularly for poorer populations in urban and rural settings.
  6. Risk of loss of rural livelihoods and income due to insufficient access to drinking and irrigation water and reduced agricultural productivity, particularly for farmers and pastoralists with minimal capital in semi-arid regions.
  7. Risk of loss of marine and coastal ecosystems, biodiversity, and the ecosystem goods, functions, and services they provide for coastal livelihoods, especially for fishing communities in the tropics and the Arctic and,
  8. The risk of loss of terrestrial and inland water ecosystems, biodiversity, and the ecosystem goods, functions, and services they provide for livelihoods.

In spite of these risks, it seems to me, there is precious little being said about the rewards we are willing to tender to solve these problems.

Carbon pricing is considered an economic prescription for pricing CO2 and other greenhouse gas emissions to internalize climate damage to equalize the full social cost of emissions but again this seems to me to be a stick without  carrots approach to climate change.

Politicians like to claim they don’t like to pick technology winners and losers; except for when they are subsidizing atmospheric pollution to the tune of $5 trillion annually, as likely as not for little better reason than the fact that pollution is where the money is, all the while undercutting technology that might provide what Bill Gates has called an energy miracle, which in reality will have to be the most effective of the existing energy comprises.

In most instances the costs of the risks associated with climate change are quantifiable. The Guardian tells us the World Meteorological Organization says the world is five times more dangerous and disaster prone than as it was in the 1970s because of the increasing risks brought on by climate change. In the first decade of the 21st century there were 3,496 natural disasters from floods, storms, droughts and heat waves compared to the 743 catastrophes reported during the 1970s influenced by climate change. The costs of these events added up to US$864 billion between 2000-2010 and 80% of these were the result of flooding and mega-storms. Not including the granddaddy of all risks, the $28 trillion in assets at risk in the world’s 136 port megacities due to .5 meters of sea level rise by 2050 according to a 2009 report of scientists and insurance experts assembled by the World Wide Fund/Allianz.

Since it is estimate that 93% of the heat of global warming goes into the ocean, it is reasonable to assume that technology that can temporarily sequester – for as long as at least 250 years – a significant portion, for the sake of argument the 80% of the heat that has migrated below 300 meters – the upper 300 meters is the portion with any real potential to communicate with the atmosphere in the near term – can save up to US$55 billion annually in flood and storm costs as well as over a half trillion annually in sea level escalation costs.

Between 1970-2012 as many as 1.94 million additional deaths have been attributed to global disaster with about 40% of these resulting from storms, 14% due to floods and about 35% due to drought.

The World Health Organization estimates between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, from malnutrition, malaria, diarrhea and heat stress and the direct damage costs to health (i.e. excluding costs in health-determining sectors such as agriculture and water and sanitation) will be between US$ 2-4 billion/year by 2030.

The UN Green Climate Fund is intended to be the main fund for global climate change financing in the context of mobilizing US$ 100 billion by 2020 but how these funds will be allocated or what are the concrete results these dollars are expected to produce is somewhat of a mystery; especially as the fund pertains to sea level rise.

To my mind the problem is typified by the recent Bloomberg report that developers have bid a record low 2.99 cents a kilowatt-hour for a 800 megawatt solar project for the Dubai Electricity & Water Authority; proclaiming the project now undercuts coal-fired electricity in the Gulf emirate.

By contrast an October 2015 Nature Climate Change article says, Future temperature in southwest Asia is projected to exceed a threshold for human adaptability.

Cost seems to me a meaningless metric when you render an environment inhabitable so we need to reward technology that can reduce ocean thermal loading, atmospheric and ocean CO2 concentrations and reduces ocean acidification; all within the range of existing fossil fuel costs.

It seems to me Gail Tverberg makes the similar argument in reverse in her post $50 Oil Doesn’t Work. She points out that when the price oil falls from $100 per barrel to $50 per barrel, the incomes of many people are adversely affected, which is a huge negative with respect to world economic growth.

To my mind it is the price of the services that mitigate climate change that has to grow to meet the demand for these services in order for the world’s economy to grow. For this to happen we need to be proactive about climate mitigation instead of just being fixated on the price of carbon.

For too long now it seems to me risk has been the only option on the table with little thought to the  potential for reward as a significant motivating influence on climate change and the global economy.

Jim Baird's picture

Thank Jim for the Post!

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Roger Arnold's picture
Roger Arnold on June 1, 2016

Jim, what you’re writing about here is probably the most difficult and fundamental problem there is in the realm of economics and sociology: the problem of external costs. It’s often hard to get people to even see them in the first place, especially if the costs are of a nature relating to scale. Many practices that are perfectly innocuous — or at least tolerable — in a sparsely settled environment only become problematic when too many people in a fixed area follow them. Then you get into “tragedy of the commons” situations — the classic example being destruction of unregulated public grazing lands when too many people run too much livestock on them. Or the destruction of ocean fisheries when they’re too heavily harvested.

Even when we recognize the costs, intellectually, it can be hard to do address them. As consumers, we go for the best bargains. If two products seem otherwise comparable, we’ll buy the one with the lower price. If that lower price was achieved through what economists call “uncaptured external costs”, chances are we’ll still go for it. It’s always easy to rationalize things that are in our short-term interest (e.g., paying less for a product we need or fancy). That characteristic makes it hard for producers to voluntarily adopt responsible practices that would raise the cost of their products, even if they wanted to.

In general, it’s possible to forgo short term interest if it’s our own personal long term interest that’s at stake. That’s called “delayed gratification”. But when it’s our gain vs. the long term interest of society, forgeddaboudit!

Is the situation hopeless? I’d like to think not. There are plenty of examples where we’ve managed to forge institutions that look out for the long term interests of society. It requires recognition of the problem — which we mostly have in the case of global warming. But it also helps a lot to have at least the passive acquiescence of incumbent interests that would be hurt by the change. It’s so easy to spread doubt and block meaningful change when one has a strong motive and access to PR technology. But there are signs that opposition may be weakening.

The young, at least some segments among them, do seem to be fed up with the consumerist culture that the country has been floating along on for so long. Hard to say what will come of that. I had great hopes in the 1960’s and the early 1970’s, and look how that turned out. But when it begins to seep in that it’s really a matter of our own survival at stake, maybe the need to put value to society above personal greed will come through.

Roger Arnold's picture
Roger Arnold on June 1, 2016

(duplicate post deleted. Not sure how that happened)

Jim Baird's picture
Jim Baird on June 1, 2016

Beautifully said Roger; as always.

Proud to have such a friend.

Jim Baird's picture
Jim Baird on June 1, 2016

Roger, all the while Reuters reports “World factories stuck in low gear on sluggish demand.”?

Seems to me there is no end of untapped demand to effectively solve climate change with all kinds of upside economic potential on the other side.

It is as if there is a collective death wish?

I still don’t get it.

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