Applying the lessons from COVID-19 to climate change
If our eyes have been opened by the experience of the pandemic, maybe we can better anticipate the exponential harms caused by climate change?
Even for those of us who have been in the risk management sector for a while, I think COVID-19 represents our first experience with a rapidly growing exponential harm.
Going back to the first months of 2020, the advancing pandemic saw numbers of those infected and dying doubling, unremittingly, every three or four days. Projecting out a month or two, it was feared that without any intervention, fatalities were set to rise into the hundreds of thousands.
There is a now well-understood measure of the average number of new cases attributed to each infected individual — the regularly published “R” reproduction number. An R figure above 1 corresponds to COVID-19 infections accelerating. This R value, a parameter previously only known to epidemiologists, is the root cause of the exponential growth.
Many elements of the COVID-19 pandemic have parallels with the threat from climate change. Both have extraordinary systemic impacts. Both bring chronic and acute impacts on human health. For both, the cost of containment will be very high. A 2018 study calculated the expected annual global losses from pandemics to be $500 billion — or 0.6% of global income.
For the climate crisis, the Intergovernmental Panel on Climate Change (IPCC) has estimated costs at between 0.2 and 2% of global income.
What can the insurance and risk management industry take from this new understanding of COVID-19 — an exponentially growing risk — and apply to climate change?
Climate change risks
If our eyes have been opened by the experience of the pandemic, maybe we can better anticipate the exponential harms caused by climate change? Unpacking the risks from climate change includes many individual perils, components and situations, some of which are profoundly non-linear. And instead of biological reproduction powering geometric growth (that R value), we have “positive feedbacks,” or processes in which the products of an action cause more of that action to occur.
For example, there is more warming and more feedback at higher latitudes. The melting of the Greenland ice sheet, which covers 660,000 square miles, leads to a reduction in elevation and albedo (reflective power), raising the surface temperature, and increasing the rate of melting. The rate of ice loss has increased almost tenfold between the mid-1990s through to the period 2012-2017, implying a doubling time of about six years.
Meanwhile, since the late 1970s, the minimum annual (September) extent of Arctic sea ice has been shrinking at an average of 13.4% each decade, halving in area every 45 years. As sea ice melts, the albedo of the surface reduces sharply since less sunlight is reflected into space, and so the surface water grows warmer and further melts the ice pack.
But positive feedbacks are not just found at high latitudes. Reductions in foliage because of dead trees in California bring higher temperatures, leading to more trees dying. Meanwhile, from a combination of increased exposure and rising hazard, the costs of wildfires in California have been doubling approximately every six years since the late 1980s.
Over the past 150 years, after adjusting for inflation, the U.S. economy has grown at a 1.83% annual compound growth rate, doubling every 40 years. Since 1950, the increment in atmospheric greenhouse gases has doubled about every 25 years.
But as economic growth gets delinked from greenhouse gas emissions, thanks in part to the expansion of renewable energy, we can hope, at least, that this exponential increase has now slowed. Look at the exponential growth in renewable energy capacity. For solar photovoltaic (PV), since 2006 there has been exponential growth as capacity doubled every three or four years; by 2019, there had been 27% annual growth over the previous four years. World wind power capacity has been doubling every three years since 2000.
Some actions have been more accidental. In the 1970s, 58,000 large dams stopped sea-level rise and overall reduced the rise by 12%, but drowned forests have led to increases in emissions. Raised carbon dioxide levels lead to faster growth of vegetation, while warming has expanded forests at high latitudes, absorbing more carbon dioxide. Other actions drive in the wrong direction. Increased temperatures lead to more air conditioning installations that lead to more emissions in energy production, further raising temperatures. Perhaps all air conditioning should be required to be solar-powered?
Getting used to rapid exponential increase
The underlying “rapid exponential increase” is why, last February, politicians in Europe and the Americas were initially unable to appreciate the gravity of the situation when they first saw statistics of the new coronavirus, as they were not familiar with such accelerating deterioration. All of us have had to get smarter at grasping the interaction between more person-to-person contact, rising COVID-19 case rates, ICU bed capacity, and corresponding death rates. Actions taken to reduce human contact, such as closing shops and bars, and wherever possible requiring people to work from home have had demonstrable impacts in reducing the R value. But at the same time, these actions have caused economic damage, especially to certain sectors of small- and medium-sized enterprises.
Instances of exponential increase are also the reason that our leaders may fail to appreciate the accelerating consequences of climate change. Even while the doubling times for components of climate change are around a thousand times slower than a new wave of COVID-19, there is no conceivable lockdown — or vaccine for that matter — that will prevent the ice sheets from melting faster or chill California heatwaves.
But with our collective experience of COVID-19 giving an understanding and appreciation of the impact of exponential growth, maybe it is time to elevate the status of what is a climate emergency. We will need regular communication: clear metrics on current and future climate perils, what are the main drivers of physical damage and human displacement where we are heading, and the benefits in risk reduction of alternative adaptation initiatives. With many governments announcing ambitious carbon-neutral policies, capitalizing on our nascent risk awareness and mitigation capabilities built from the pandemic could galvanize global efforts to tackle another global threat that is also growing exponentially: climate change.
Join RMS for the all-virtual Exceedance 2021 (May 4-6) including dedicated keynotes and sessions on climate change and much more. Register now for your complimentary pass.
Robert Muir-Wood (Robert.Wood@rms.com) is chief research officer at Risk Management Services. He works to enhance approaches to natural catastrophe modeling, identify models for new areas of risk, and explore expanded applications for catastrophe modeling. Robert has more than 25 years of experience developing probabilistic catastrophe models. He was lead author for the 2007 IPCC Fourth Assessment Report and 2011 IPCC Special Report on Extremes, and is Chair of the OECD panel on the Financial Consequences of Large Scale Catastrophes.
He is the author of seven books, most recently: ‘The Cure for Catastrophe: How we can Stop Manufacturing Natural Disasters’. He has also written numerous research papers and articles in scientific and industry publications as well as frequent blogs. He holds a degree in natural sciences and a PhD both from Cambridge University and is a Visiting Professor at the Institute for Risk and Disaster Reduction at University College London.
Keep reading…