Tag Archives: climate change

“Our Megathreatened Age”

The “Megathreats” according to Nouriel Roubini are that “economic, monetary, and financial threats are rising and interacting in dangerous ways with various other social, political, geopolitical, environmental, health, and technological developments.”

This is a long article with a lot in it, but one thing I always like to puzzle over is how real-world phenomena translate to money and financial markets. One advantage of understanding this would be to find numbers provided by financial markets that translate back to the real world, and in an ideal case maybe these could even serve as early warnings when things are really about to go seriously wrong. Anyway, this article doesn’t have all the answers, only clues, but here are a few:

  • energy and food costs – this is fairly obvious, although short-term noise may obscure any useful predictive ability
  • labor costs – tells us something about demographics and population structure
  • public debt servicing costs – maybe a more useful thing to think about than just the size of the debt or deficit, because it tells us something about the size of the debt, interest rates, and inflation together, and it can be compared to tax revenues and/or a society’s overall productive capacity. This in turn tells us something about limits to (economic) growth and the ability of a society to weather potential shocks.
  • military spending on conventional and unconventional weapons – not exactly public information, but there are some sources out there, and this tells us something both about overall global risk and about government’s priorities and ability to solve other problems
  • climate change adaptation and mitigation spending, and gap between actual spending and what is needed to meet the agreed targets – not sure exactly how to measure this, but people must be trying. We could compare this spending with measured results to get some sense of efficiency, and again it tells us something about government priorities and ability to solve long-term problems. Roubini compares climate spending to reconstruction after a war, which I find interesting: “Though a surge of investment in reconstruction can produce an economic expansion, the country is still poorer for having lost a large share of its wealth. The same is true of climate investments. A significant share of the existing capital stock will have to be replaced, either because it has become obsolete or because it has been destroyed by climate-driven events.”
  • “unfunded implicit liabilities” to deal with pandemic preparedness. Again, seems hard to measure but people are undoubtedly trying.
  • “To prevent populist regimes from coming to power and pursuing reckless, unsustainable economic policies, liberal democracies will need to spend heavily to reinforce their social safety nets – as many are already doing.” Well, not the U.S. so much. At least we are not doubling down on this, and the political cost of advocating it seems high while opposing it seems to appeal to many voters.
  • Retirement pension and health care spending, actual and estimated gap with what is needed.
  • long-term government bond rates, and “risk premia on public bonds” – tells us something about perceived risk that a government can keep up with its obligations long-term
  • mix of foreign currency reserves held by governments – somewhat obscure, but again a measure of risk that governments can meet their obligations and solve their societal problems
  • We can always measure fun things like poverty, inequality, and migration, and of course “stagflation” which I would define as real GDP growth net of inflation.

Taken together, what all this suggests to me is an analysis of government budgets, financial markets, and some demographic/migration data to see where various governments’ priorities lie relative to what their priorities probably should be to successfully address long-term challenges, and their likely ability to bounce back from various types and magnitudes of shock. You could probably develop some kind of risk index at the national and global levels based on this. And then what would you do with it? If you were a rational government, you could choose policies that reduce it. Maybe you turn everything over to the AIs and ask them to figure it out.

November 2023 in Review

Most frightening and/or depressing story: An economic model that underlies a lot of climate policy may be too conservative. I don’t think this matters much because the world is doing too little, too late even according to the conservative model. Meanwhile, the ice shelves holding back Greenland are in worse shape than previously thought.

Most hopeful story: Small modular nuclear reactors have been permitted for the first time in the United States, although it looks like the specific project that was permitted will not go through. Meanwhile construction of new nuclear weapons is accelerating (sorry, not hopeful, but I couldn’t help pointing out the contrast…)

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: India somehow manages to maintain diplomatic relations with Palestine (which they recognize as a state along with 138 other UN members), Israel, and Iran at the same time.

migration

In the U.S., it’s “secure the border”. In the UK, it’s “bring down net migration“. In the Netherlands, it’s the possible rise to power of an openly anti-Islam party. As I happen to be reading one of the Bernie Gunther novels by Philip Kerr (A Quiet Flame, 2008) set partially in 1930s Berlin with the Nazis on the cusp of power, I find all this thought-provoking and concerning. In most countries, we’ve come far enough that openly advocating discrimination against a group already in the country is not an acceptable mainstream position. But expressing open anti-immigrant nationalist views is the next best option.

There is some rational fear of job loss and wage suppression that all this feeds on. But inequality between richer and poorer countries is somewhat clearly the root driver of migration, and climate change driven disasters and droughts are adding fuel to the fire. Add in some old-fashioned geopolitical conflict and you have a very volatile mix. The irony is that the policies needed to counteract these forces – economic and technological aid from richer to poorer countries, education, trade, reasonable guest worker programs, arms control and peace negotiations, serious emissions reduction and climate change adaptation investments to name a few – are anathema to anti-immigrant nationalist politics. So you have a feedback loop where the migration pressure drives the anti-migration political rhetoric, and the political rhetoric drives politicians and policies that increase the migration pressure.

Rationally explaining all this to enough voters to elect politicians who would break these feedback loops does not seem to be a viable option. It’s a tough one, and if I come up with the answers that have eluded a lot of smarter people than me up until now, I will let you know.

Greenland ice shelves

The floating ice shelves holding back the rest of the ice on Greenland are in worse shape than previously thought, according to this article. The article says the ice in this area is enough to raise global sea level by about 2 m. From a quick skim, I didn’t get a sense of how long the authors think that might take to happen, other than “long term”.

rolling the DICE

The Intercept has a long take-down of William Nordhaus’s DICE climate change economic model. Well, it’s not just this journalist, who may not have past middle school algebra for all we know, in this openly left-leaning publication taking him down, it’s Joseph Stiglitz, Nicholas Stern, and Herman Daly among others. So despite some unnecessarily inflammatory language, I found the article to be a good summary of where this debate stands.

The basic take-down is that Nordhaus’s model ignores those “fat tail” tipping point scenarios, and is basically just extrapolating recent data far into the future in a linear manner, without consideration of true system dynamics. I might agree, but I can also see the point Nordhaus himself makes that our global society is doing much less than even his somewhat conservative model would recommend. Scientists sometimes deserve to be accused of “paralysis of analysis” – because there is some controversy, politicians and corporate leaders can rationalize continuing to do nothing. When in reality, all the economists and scientists cited here, who vehemently disagree with each other, all agree that our global society is doing too little too late to avert catastrophe. If our leaders would do what Nordhaus is recommending, it would be a huge step in the right direction, and then we could have a useful debate about whether we have done enough or still need to do more. We are nowhere near that point so this is quite literally an academic debate. If the more catastrophic scenarios people are talking about were moving the politicians in the right direction, that would be one thing, but I am not convinced. I think seeing the experts argue with each other just gives the politicians excuses. And we KNOW most of them failed elementary school arithmetic.

flesh eating bacteria: worry or not worry?

If you are one of the people who gets flesh eating bacteria, it is horrible. This article is about a person who got a minor scrape in the Gulf of Mexico, lost her leg, and was lucky to live. But here are the numbers:

Cases of V. vulnificus are rare. Between 150 and 200 are reported to the Centers for Disease Control and Prevention every year, with about 20% resulting in death. Most are in states along the Gulf of Mexico, but, in 2019, 7% were on the Pacific Coast. Florida averages about 37 cases and 10 deaths a year.

But a rise in cases nationally and the spread of the disease to states farther north — into coastal communities in states such as Connecticut, New York, and North Carolina — have heightened concerns about the bacterium, which can result in amputations or extensive removal of tissue even in those who survive its infections. And warmer coastal waters caused by climate change, combined with a growing population of older adults, may result in infections doubling by 2060, a study in Scientific Reports warned earlier this year.

Alternet, orignally in Tampa Bay Times

My heart certainly goes out to this person, the other 149-199 people per year who get this, and the other 299 to 399 per year who may get it by 2060. I am going to continuing worrying most about things that kill tens or hundreds of thousands of people each year. And I am going to keep in mind that being so fearful of the outside world I become a couch potato would also be very risky for my health.

what if everything we thought we knew about the green revolution is wrong?

The story I have always accepted about the green revolution is that the world avoided famine by learning to manufacture and dump enormous quantities of fossil fuel-derived synthetic nitrogen fertilizer on crops. This came at an enormous environmental price, but saved literally billions of people. To the extent I have ever questioned this, I have wondered if there are any good alternatives to this system going forward, given the world’s enormous human population, and whether the system is sustainable (in the dictionary sense of can we continue to feed the world’s population this way even accepting the high environmental price) for the long term.

This article questions the mainstream story of the green revolution. The tag line of this website/blog is “ecosocialism or barbarism”, so I am not saying it is 100% credible, I am just saying I found it thought-provoking and the ideas/claims are worth digging into.

Meanwhile, the government urged Indian farmers to grow nonfood export crops to earn foreign currency. They switched millions of acres from rice to jute production, and by the mid-1960s India was exporting agricultural products.

Borlaug’s miracle seeds were not inherently more productive than many Indian wheat varieties. Rather, they just responded more effectively to high doses of chemical fertilizer. But while India had abundant manure from its cows, it produced almost no chemical fertilizer. It had to start spending heavily to import and subsidize fertilizer.

India did see a wheat boom after 1967, but there is evidence that this expensive new input-intensive approach was not the main cause. Rather, the Indian government established a new policy of paying higher prices for wheat. Unsurprisingly, Indian farmers planted more wheat and less of other crops.

https://climateandcapitalism.com/2023/10/11/how-not-to-feed-a-hungry-planet/

So even if we continue with the current system, will the planet’s biophysical limits push back at some point? Synthetic fertilizer contributes to global warming emissions both through the industrial process required to fix nitrogen gas from the air and from releases from farms (nitrogen dioxide, tractors, cows, livestock, etc. All other things being equal, heat drives down grain yields. And all other things are not equal, because drought, flooding, and salinization are in the mix. Then we have nutrient-laden runoff poisoning the oceans.

On the plus side, we hear there is a demographic transition that could at least reduce the growth rate in the number of new mouths to feed. This is partly due to improving living standards particularly for women and children, but improving living standards also mean people want to eat more meat and processed food and not just bowls of grain. Meat substitutes are coming along (Chicky Nobs anyone?), so there is a lot going on.

Food is where the climate change sh**, er, rubber meets the road.

August 2023 in Review

Most frightening and/or depressing story: Immigration pressure and anti-immigration politics are already a problem in the U.S. and Europe, and climate change is going to make it worse. The 2023 WEF Global Risks Report agrees that “large scale involuntary migration” is going to be up there as an issue. We should not be angry at immigrants, we should be angry at Exxon and the rest of the energy industry, which made an intentional choice not only to directly cause all this but to prevent governments from even understanding the problem let alone doing anything to solve it. We should be very, very angry! Are there any talented politicians out there who know how to stoke anger and channel it for positive change, or is it just the evil genocidal impulses you know how to stoke?

Most hopeful story: Peak natural gas demand could happen by 2030, with the shift being to nuclear and renewables.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: There are a number of theories on why “western elites” have not been (perceived to be) effective in responding to crises in recent years and decades. Many have to do with institutional power dynamics, where the incentives of the individual to gain power within the institution do not align with the stated goals of the institution. Like for example, not killing everyone. The possible silver lining would be that better institutions could be designed where incentives aligned. I have an alternate, or possibly complementary, theory that there has been a decline in system thinking and moral thinking. Our leaders aren’t educated to see the systems and or think enough about whether their decisions are on the side of right or wrong.

Are markets underestimating climate risk?

This sprawling Naked Capitalism article says yes, basically because investors don’t consider the long term. But if it were really true that most investors are not aware or not correctly valuing the risk, a small minority of investors should in theory be able to make money on that and bring markets back into equilibrium. Maybe the “long term” is just too long for mortal human investors to consider? But corporations and other institutions like pension funds are not mortal humans. Fossil fuel companies could try to exploit these opportunities to hedge their bets while they continue to cast doubt on the science and technology needed to get out of the mess.

How would an investor exploit other investors’ underestimation of climate risk, if this actually exists? Short-sell companies insuring homes, businesses, and lives in coastal and fire-prone areas? Buy construction and engineering companies that will get our tax money to clean up after disasters? Military and security contractors who build walls and detention camps (a morbid thought, but mass migration driven by climate panic seems likely to hit us at some point). Clean energy? Nuclear energy? It’s hard to guess and time these things – basically comes down to luck, and there are always going to be people with deeper pockets and political influence to keep us small-time investors from getting ahead. Diversifying across asset classes and internationally, and not having all our savings tied up in our houses, still seem like the best options for us little people.

Venice flood protection

The Italian government has completed an $8 billion coastal flood protection system. It is interesting because it is submerged under normal sea conditions and can be raised when a storm is coming in.

Youtube

$8 billion sounds like a lot of money, but perhaps it is not to protect a major coastal city and international cultural treasure. The U.S. Army Corps of Engineers has spent $14 billion to protect New Orleans and is undertaking a projected $31 billion project to protect Houston (and projections have a way of running over). These are guaranteed to be far uglier projects than the Venice one. These U.S. cities may have “benefitted” from being the first to be devastated by coastal storms in the climate collapse era. Do we really think the U.S. Congress will not pony up even more enormous sums to protect New York, Washington D.C., and San Francisco when the time comes? They will. Cities with major military bases like Norfolk, Virginia and San Diego might make the cut. Smaller but still major cities with less political clout may have more trouble getting their fair share. Boston and Miami might make the cut. Major cities with less political clout, like Philadelphia and Baltimore, might not make the cut. And all this money Congress will find to protect major urban areas, while it will have some economic multiplier effect, will be money not spent on other priorities.