Climate change on financial agenda - a tragedy of the horizon?

Credit: Desmond Tutu Peace Foundation

It is important that we recognise our financial stability is highly dependent on environmental stability. “The growing international consensus that climate change is unequivocal” said Mark Carney, the governor of the Bank of England, in his speech to the insurance market Lloyd’s of London last month. He reassured his statement with solid research evidence on environmental change (speech by Carney, Bank of England):

• In the Northern Hemisphere the last 30 years have been the warmest since Anglo-Saxon times; indeed, 8 of the 10 warmest years on record in the UK have occurred since 2002
  
• Atmospheric concentrations of greenhouse gases are at levels not seen in 800,000 years;
  
• The rate of sea level rise is quicker now than at any time over the last 2 millennia.

Also on insurance industry:

• Since the 1980s the number of registered weather-related loss events had tripled
  
• Inflation-adjusted losses for the insurance industry had increases five-fold to $50 billion (£33 billion) a year

Carney also warned that the current rate of climate change will eventually lead to financial instability in three ways, including physical risks such as increasing insurance claims from natural hazards; liability risks that arise from compensation responsibility; and transition risks caused by revaluation of assets caused by the adjustment to lower-carbon economy, which all ultimately lead to lower standard of living, unless the world’s leading countries are willing to adjust their current and future carbon emissions (speech of Carney, Bank of England).

Climate change is impacting the world economy beyond the field of insurance. Dynamic weather conditions hamper ecosystem services to function properly and therefore create food and water security problems; people are migrating to or investing in countries which are more economic resilient to exogenous shocks such as natural disaster (countries that are prone to natural disasters are likely to experience intensified cases under the impact of climate change), causing global impacts on property assets, international migration and political stability. These all have effects on the world’s financial stability and thus, our living standards and well-being (the guardian).

Although reducing GHGs emissions or altering fossil fuel economics suggested in The G20 Seoul Summit Leaders’ Declaration might help to slow down global warming, environmental stability maintenance requires regular management not only on climate change, but also on the other eight Earth systems as well (Earth Systems). Other anthropogenic activities such as deforestation and overfishing are proved to be the drivers of environmental degradation, which also leads to ecosystem services malfunction and environmental change. As such, the world financial institutions should not confine their solution scope only to carbon emissions, but also to take responsibility of their exploitative activities in the wild nature, applying market incentives to environment conservation for instance, before the “recent weather events proved to be the new normal”.

Stable Earth System or safe operating space for humanity

What is environmental stability and why is it important to us? I guess it would be good to have a recap of the nine ‘stable Earth Systems” before going deep into the discussion. 

Credit: Young and Steffen (2009) 

Prior to the Holocene, global climate was very abrupt and unstable, large shifts in a range of globally-important biogeochemical parameters have been associated with planetary-scale ecological change. Not until we arrived the age of Holocene, when these parameters fluctuated within a narrow band, the planet has developed into a safe operating space for humanity.

So how do we define “safe”? The nine planetary boundaries or “Earth Systems” created by a group of scientists from various disciplines - climatologists, ecologists, oceanographers, land-use specialists, hydrologists and others - would have answered the question. With all nine systems are operating below the safe limit, the environment is then considered to be stable and favourable for social and economic development (IGBP Magazine, Issue 74) 

The nine planetary boundaries identified by scientists. The blue circle shows the safe limit for each planetary system. The red wedges indicate the best estimate of the current situation. Three boundaries have already been crossed, including climate change, the nitrogen cycle and biodiversity loss. 
Credit: Rockström et al. (2009) Nature

Does this mean that we can continue to achieve our human needs and desires such as economic growth, as long as these thresholds are not crossed? The evidence so far suggests yes. There are ways to describe such balanced development between socioeconomic development and ecological preservation by the restorationists, including ‘win-win ecology’, ‘reconciliation ecology’, ‘futuristic restoration’, etc., all conclude to one underlying human-centered assumption - human will continue to develop the Earth but will do so in a way that satisfies human needs for resources and beauty while also satisfying the needs of other species. After all, we are striving to create a ‘safe operating space for humanity’ (Allison 2007).

City development and environmental stability

I came across some concept art earlier from a digital artist, Nivanh Chanthara (Chanthara's Space) and found them quite interesting and inspiring, and so they go like this: 

This reminds me of Howl’s Moving Castle, which Howl has built to block himself out from the war outside, and to seek his piece of childhood “Everland”. Are we all not doing the same, consistently encroaching to the undeveloped rural, avoiding the urban and environmentally decaying inner city? 

Inner cities urban problems - overcrowding, pollution, etc. (Pictures from: http://duster132.deviantart.com/)

Chanthara gets his inspiration from the overcrowding inner city of Hong Kong, and that the most astonishing part is that he has never set foot on this piece of land, despite his ability to draw out most of the core urban problems that many Hong Kongers would have agreed. Not surprisingly, these problems (i.e. overcrowding, land-use conflicts, pollution, etc.) apply to all inner cities around the world.

It is quite controversial when we are actively promoting environmental protection and ecological importance while still allowing encroachment into the undeveloped rural for all sorts of anthropogenic activities, in this case, urban encroachment to create more land for development and city expansion, better residence environment, etc. This sounds like yes, we have been doing terrible in urban development in the past, and so we would like to do it right this time, exploiting the environment in a more responsible and sustainable way. However, the inner city will not simply fade away with city expansion, and the city system is likely to repeat itself. 

Johan Rockström from the Stockholm Resilience centre and colleagues suggested in their article ‘A safe operating space for humanity” (Nature, International weekly journal of science) that our civilisation is deeply reliant on environmental stability - ‘as long as society knew what was coming up it could plan for the future’. Advancement in agricultural activities led to rapid increase in global population, which provided the excuse to exploit the environment further for economic and social development. As such, both economic growth or societal stability is based on environmental stability.

Will the city future be what Chanthara has predicted in his artwork? We don’t know. But surely, if we continue to overexploit the environment systems for economic benefits, we will soon subject ourselves to a catastrophic climatic and environmental shift on a global scale, which the environment may become more volatile than ever before or humans may not be resilient enough to inhabit.