For years, I have been telling anyone who will listen (a very small audience) that in the final analysis, insurance companies will be the arbiter of whether climate change makes the Earth unfit for human habitation. Governments can issue all the policy papers they want about climate change, corporations can bombard the press with flowery pronouncements, and the people can march in the streets carrying signs demanding change from sunup to sundown, seven days a week, but in the final analysis the only question that matters is, “Can you get insurance for that?”
Once the industry decides to stop insuring businesses that extract fossil fuels, that will be the end of coal, oil, and methane. Once the industry decides to stop insuring real estate in Florida, kiss that state goodbye. Ron DeSantis can rave and fume to his heart’s content but just like King Canute, his efforts to keep the waters from rising around him — both literally and figuratively — will be in vain.
Climate Change Is A Crap Shoot
The insurance industry is a giant poker game. It is betting it can take in more money — and use that money to make more money — than it has to pay out. It employs tens of thousands people whose sole job is to determine what the risk/reward ratio is and make certain it always favors the insurance industry. Lloyd’s of London is one of the largest and best known insurance companies in the world. It doesn’t insure individual clients, it insures the insurance companies who insure individual clients. When it speaks, mountains move, the heavens realign, and everything we thought we knew gets disrupted.
In association with the Center for Risk Studies at the University of Cambridge, Lloyd’s of London has just released a new report entitled Shifting Powers: Meeting the challenges of the geopolitical landscape. What follows is a summary of the 48-page report with input from an email from Akshat Rathi at Bloomberg Green. But it will only be a synopsis. You should read the report for yourself — if you dare. Here is the Executive Summary:
“In just the last decade, the geopolitical risk landscape has undergone something of a paradigm shift. The Western-dominant, American-led, liberally fiscal, status quo that defined the political world and economic growth for much of the second half of the 20th century no longer feels like a realistic barometer for how future events — wars, riots, elections, treaties — will play out on the global stage.
“Instead, we face a future in which multipolarity, the equal distribution of power between two or more states, changes the behavior of risks to the increasingly connected global system. Today, the price of oil, elections in South America, or the failure of an emerging economy create far-reaching effects through the globalized system. In the future, the exposure to these effects will likely only grow as the structure of our globalized economy shows very few signs of ending soon.
“Most of the last decade’s geopolitical upheavals can be directly attributed to the fallout from the global financial crisis and the austerity measures that followed. The economic havoc generated by covid-19 has reopened many of those wounds and will carry with it new rivalries as well as the hangover of national debt. In the short term, geopolitics is set to become more idiosyncratic and unpredictable, with raised tensions destabilizing societies and flowing through to international business and markets.
“All will be supercharged by rapid technological change, with the automation of labor potentially rendering millions out of work. Growing global dependency on cyber networks and digital technology across all aspects of business, government, and life would make the consequences of a potential future breakdown of critical physical and digital infrastructure catastrophic.
“In the medium term, the coming decade will most likely see an increase in great power competition, and further escalation of many of the proxy confrontations that have driven conflicts in the past few years. Finally, in the long term, the world will have to continue coping with existential risks that would dwarf covid-19 in terms of potential impacts, including nuclear proliferation, humanitarian catastrophes, and climate change-driven extreme weather events.
“Overall, the post-pandemic decade is likely to see profound changes in geopolitical configurations, domestic balances of power, and even fundamental worldviews. The first two decades of the century have proved different to what many expected, and the next one looks no less unpredictable. What currently seems certain over the next ten years is that the current crisis will not end once the vaccine rollout is completed, lockdowns lifted, and freedom of movement reestablished.”
A Green Cold War
Well, if that doesn’t keep you awake at night, I don’t know what will. Here we are at CleanTechnica nattering on about the latest battery factory from Panasonic or NIO’s plans to sell cars in Europe, when we probably should be focusing on the threats to a civil society created by the fact that the Earth is getting warmer and will continue to do so for the foreseeable future.
Bloomberg Green says the Shifting Powers report suggest the world could go down one of three pathways:
- Green Globalization, where major powers coordinate closely to implement solutions, putting the world on track to meet climate goals.
- Climate Anarchy, where self-interest takes the form of protectionism and mercantilism, pushing the world in the wrong direction on emissions.
- Green Cold War, where the world splits into two or three rival camps that create regional trade barriers, producing emissions that land somewhere between the two extremes of the first two scenarios.
It says a core assumption of the Shifting Power analysis is that no technology breakthroughs occur in the next decade. Instead, existing technologies develop at the current rates, which assumes solar power keeps getting cheaper and nuclear fusion doesn’t become a reality.
Bloomberg Green points out that what Lloyd’s of London and the University of Cambridge are saying is remarkably similar to the results of another study published in 2019 by the Payne Institute for Public Policy at the Colorado School of Mines. That study presented four scenarios:
- Big Green Deal — sees determined and concerted policies from governments driving financial markets to rapidly move capital toward carbon-free sources of energy.
- Dirty Nationalism — leads to inward-looking policies and autocracy, which results in the failure of the Paris Agreement.
- Muddling On — scenario is essentially where the world is today, renewables grow their share of the energy mix but the transformation is too slow to mitigate climate change.
- Technology Breakthrough — might mean that suddenly it’s cheaper to add storage to electric grids or pull carbon dioxide from the air. That could lead to geopolitical rivalry.
Predicting The Future Is Hard
Notice how similar that last point is to the Green Cold war scenario in the Lloyd’s of London report. Matteo Ilardo, risk researcher at the Center for Risk Studies at Cambridge University, tells Bloomberg Green the Green Cold War scenario is where the world seems to be heading, but there is still time before the world is committed to that path. If in fact the warnings of the scientific community about the risks of climate change don’t move the public, perhaps the conservative insurer’s geopolitical outlook might finally make people take global heating more seriously.
That could happen, but it’s a pretty thin reed to rely on to pull humanity’s chestnuts out of the fire. Maybe the best we can hope for is a nuclear holocaust that will wipe humans off the face of the Earth and give the planet time to heal so the next species to dominate the world can have a go at building a sustainable world. To those far-off beings — whatever they might be — we can only say, “Good luck. Would you like to buy an insurance policy?”
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