Fortune Article on Ecological Resilience: Cloudy With a Chance of Chaos

Eugene Linden a journalist, who has recently published a book on climate change – The Winds of Change: Climate, Weather, and the Destruction of Civilizations, in Jan 2006 wrote an article Cloudy With a Chance of Chaos in the US business magazine Fortune. In it he discusses how ecological degredation has lead to a decline of ecological resilience.

Around the world, humanity has reduced nature’s capacity to dampen extremes to an astonishing degree: more than 59% of the world’s accessible land degraded by improper agriculture, deforestation, and development; half the world’s available fresh water now co-opted for human use at the expense of other species and ecosystems; more than half the world’s mangroves destroyed; half the world’s wetlands drained or ruined; one-fifth of the world’s coral reefs (including crucial barrier reefs) destroyed and one-half damaged–the list goes on and on.Nature does not alert us to all her tripwires. Perhaps that’s why in recent years the unprecedented has become increasingly ordinary. When pushed past a certain magnitude, the damage of natural events increases exponentially, and that threshold falls as natural buffers are eliminated. Research led by MIT climatologist Kerry Emmanuel suggests that hurricanes have doubled in intensity during the past 30 years as the oceans have warmed. Hurricane Katrina surged to its immense power when the storm passed over a deep layer of 90-degree Fahrenheit water in the Gulf of Mexico. Hurricane Rita transfixed meteorologists when it strengthened from Category 2 to 5 in less than 24 hours while moving over those same hot seas. And in October, Wilma bested that by strengthening from tropical storm to Category 5 hurricane in a single day.

Since we are dismantling natural buffers just at the point when we really need them, it’s tempting simply to conclude that humanity has a self-destructive streak. The explanation, of course, is not masochism but a collective failure of imagination–compounded by the fact that we are only now learning to weigh the threat. There are no models to estimate the economic impact of rapid changes in temperatures, storm tracks, precipitation, and so on. In a 2001 report entitled “Abrupt Climate Change: Inevitable Surprises,” the National Research Council, the principal operating unit of the National Academy of Sciences, noted that most modeling of impacts has been confined to cases in which changes are gradual and moderate. Modeling the effects of abrupt change is a lot harder, but the study makes a couple of important points.

First, economies can minimize the effects of a gradually changing climate if people recognize the threat and respond. With abrupt climate change, however, things happen so rapidly that neither markets nor ecosystems have time to adapt. Moreover, a dynamic market economy with capacity to respond to intermittent crises by spreading risk and reallocating assets may be unable to respond when crisis is ubiquitous and risks loom everywhere.

Second, even gradual climate change would pose immense challenges. Tim Barnett, an oceanographer at Scripps Oceanographic Institution, took part in a study of the likely effects of climate change on the Los Angeles area. Surprisingly, he says, even modest decreases in rainfall during what he called a “best-case scenario for future climate change” (a gradual and small change, decades in the future) could reduce available water for the area by 50% by 2050.

More than 1,000 miles from New Orleans, in Cape Cod, Mass., a far-flung echo of Katrina has been the 20% rise in reinsurance costs (reinsurers are financial institutions that backstop insurance companies). The increase prompted Hingham Mutual Group, a property and casualty insurer, to drop coverage for 6,500 commercial properties. Customers left in the lurch have a fallback in FAIR (short for Fair Access to Insurance Requirements), a program mandated by various states and run by insurers. But Massachusetts’s FAIR plan recently requested big rate increases, arguing that past weather patterns may no longer be a guide to estimating future climate risks. That rationale was “unprecedented,” a team of industry experts noted in a report entitled “Availability and Affordability of Insurance Under Climate Change”; it’s a vivid example of how insurance has difficulty adapting to changing climate.

Corporate leaders could soon feel the heat too. In 2004, Swiss Reinsurance, a $29 billion financial giant, sent a questionnaire to companies that had purchased its directors-and-officers coverage, inquiring about their corporate strategies for dealing with climate change regulations. D&O insurance, as it is called, insulates executives and board members from the costs of lawsuits resulting from their companies’ actions; Swiss Re is a major player in D&O reinsurance.

What Swiss Re is after, says Christopher Walker, who heads its Greenhouse Gas Risk Solutions unit, is reassurance that customers will not make themselves vulnerable to global-warming-related lawsuits. He cites as an example Exxon Mobil: The oil giant, which accounts for roughly 1% of global carbon emissions, has lobbied aggressively against efforts to reduce greenhouse gases. If Swiss Re judges that a company is exposing itself to lawsuits, says Walker, “we might then go to them and say, ‘Since you don’t think climate change is a problem, and you’re betting your stockholders’ assets on that, we’re sure you won’t mind if we exclude climate-related lawsuits and penalties from your D&O insurance.’ “

Interesting to see a discussion of ecological resilience thinking in a mainstream business magazine, but it is too bad that it didn’t discuss any methods of building ecological resilience – rather focussing on social responses.

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