From Global Drivers to Strategic Risks

Since the Industrial Revolution the world has undergone an unprecedented transformation, largely a result of human activity. To the point, as proposed by Paul Crutzen, that we are now arguably in a new geological epoch – the Anthropocene 1, where humanity is the dominant force in world evolution.

The changes have been particularly marked since WW11 as the developed world has enjoyed rapidly rising standards of living and wealth creation. But in the euphoria created by this good fortune, we have failed to recognize that the global drivers behind it have been gradually turning into major strategic risks; that is risks to external to any institution which have the potential to fundamentally change that institution, for better or worse, whether it be at the level of business models or national security. In essence, they reflect an increasing gulf between narrow self-interest and the common good.

As population rises from 7 billion today toward 9 billion by 2050, and possibly 10 billion by 2100, the inevitable logic of exponential growth in both population and consumption is now hitting the limits of global ecosystems and resource availability. The immediate pressure points are energy security, climate change, biodiversity loss, water and food availability, issues which along with the related matter of financial instability, are converging rapidly in an unprecedented manner. But these are only the tip of the broader global sustainability iceberg; further constraints and limits are fast becoming evident as major developing countries, particularly China and India move up the growth escalator.

This situation is not unexpected; it has been anticipated for decades going back before the 1972 publication of “The Limits to Growth”. In the meantime the developed world has created a political and capitalist system which has proved incapable, so far, of recognising that the most important factor for its own survival is the preservation of a biosphere fit for human habitation.

The aftermath of WWII bred statesmen and women in both government and business intent upon creating a better world, re-building society, avoiding further conflict and genuinely prepared to take a long-term view. The results were far from perfect, but that vision did provide the foundations for the increasing prosperity the West has enjoyed ever since.

But with prosperity came complacency; the assumption that growth within a finite system can continue indefinitely. Hardly surprising, given that power and influence accrue to those who prosper under capitalism, and that technology until recently has enabled us to push back or ignore any physical limits. Enormous political and personal capital is now vested in preserving the status quo. As a result, our institutions have become predominantly short-term focused; politically due to electoral cycles and corruption of the democratic process; corporately due to perverse subsidies and incentives, particularly the bonus culture which became the norm through the 1990’s. Managerialism – “doing things right”, replaced leadership – “doing the right things”, statesmen all but disappeared, ethical standards deteriorated, so that we now find ourselves uniquely ill-equipped to handle the long-term challenges which lie ahead.

As London Financial Times columnist Gillian Tett put it recently: “Just as the past four years have raised questions about the way modern finance works, they are raising profound questions about our systems of government: we have no institutions to plan for the future, nor institutions that can quickly respond to a crisis. This is one of the reasons faith in so many public institutions is collapsing, alongside faith in the bankers. It’s why you’ve got this Occupy Wall Street protest.”

The upshot is a series of escalating crises, most recently the 2008 Global Financial Crisis (GFC), which is now cascading into a multitude of other crises as global leaders desperately attempt to reboot an outmoded 20th Century system of economic growth.

The developing world had been intent on slavishly following our example. However in the last decade that began to change as the reality of pollution, resource scarcity and increasing inequity hit home, and it became obvious that the developed world model has serious flaws.

The limits we now face are global, rather than regional, and cannot be circumvented as we have done in the past. What was workable in a relatively empty world of 2-3 billion people post-WWII is not workable in today’s full world of 7 billion, let alone the 9 or 10 billion to come. Humanity today requires on average the biophysical capacity of 1.5 planets to survive 7. If everyone lived at US levels, we would require 5 planets, at Australian levels around 4 planets. This cannot continue indefinitely as we are fast destroying the global “commons” of clean air, water and the fertile soil and oceans on which we depend for our food supply and life support.

Our ideological preoccupation with a market economy, based on political expediency and short-term profit maximization, is rapidly leading toward an uninhabitable planet, as sustainability issues of theoretical concern for decades manifest themselves physically, particularly in regard to climate and energy.

Source for graphic: Global Footprint Network

Implications of Arctic Permafrost Thaw

Of the many “Elephants in the Room” in the climate change debate, none are larger than the potential release to atmosphere of carbon dioxide and methane contained in the Arctic permafrost. Preliminary findings from the latest research, discussed at the American Geophysical Union’s (AGU) annual conference in San Francisco in December 2011, highlighted the extreme risks that humanity is now exposed to from global warming.

The Arctic has been warming 2-3 times faster than the global average, one consequence being that the volume of Arctic sea ice has reduced dramatically, by around 80% in summer since 1979, far faster than expected. If current trends continue, the Arctic may be sea ice-free in summer by around 2015, and all year by around 2030. This would likely lead to further positive warming feedback as the ice albedo effect diminishes, accelerating melt of the Greenland ice sheet, ultimately contributing several metres of sea level rise.

Such warming would also accelerate thawing of the Arctic permafrost, which contains twice as much carbon as the atmosphere. Releasing that carbon would accelerate global warming past tipping points which create a climate far less conducive to human evolution. The permafrost, along with clathrates on the seabed, contain large quantities of methane, with a warming potential twenty five times greater than carbon dioxide.

CO2 and methane release in the Arctic has been observed for some time, but the latest findings suggest this may be accelerating rapidly. The AGU discussion prompted a flurry of scientific commentary on the implications – whether the acceleration is real, whether the cause is anthropogenic or natural, whether the release mechanism might be abrupt or gradual. It is too early to understand the full implications. The complete scientific analysis of the latest evidence will be available later this year, but the preliminary findings should be a wake-up call to us all.

In risk management terms, these observations emphasise, as never before, the need for emergency action to reduce human carbon emissions. If permafrost thawing is allowed to accelerate, we may have little means of stopping it. Over time, this would be catastrophic, probably leading to global mean temperature increasing well over 4oC compared to pre-industrial levels, with a global carrying capacity of 1 billion people rather than the current 7 billion.

Our inaction today may well be guaranteeing such an outcome, which is why emergency action is needed now. This highlights the total inadequacy and empty rhetoric of the so-called “ Platform for Enhanced Action” agreed at the Durban UNFCCC Climate Conference last December. Waiting to negotiate an agreement by 2015, for implementation from 2020, meaning it will have little effect for years afterwards, when human emissions are at an all-time high accelerating faster than ever, the permafrost thaw is most likely accelerating rapidly and none of the supposed technological fixes for human emissions, such as carbon capture and storage, are working, is nothing less than suicidal.

The critical flaw is our inability, or refusal, to address risk and uncertainty realistically. The scientific community gives increasingly urgent warnings on the mounting evidence of anthropogenic warming and the need for rapid emission reductions. At the same time they rightly set out the uncertainties involved, but those uncertainties relate less to the fundamentals, far more to the impact of the warming (eg there is no doubt warming is occurring, the uncertainty is whether it will be a 4°C or a 7°C temperature increase). Officialdom chooses to ignore these warnings, preferring policy based on “political realism”, shorthand for hoping the problem will go away. Business, supposedly the experts on risk management, should take leadership, but have abrogated any responsibility, given that realistic action will require a fundamental redesign of the economic system, undermining established vested interests. The result is that nobody is seriously addressing the strategic risks to which we are exposed.

Conventional politics is incapable of handling this issue. Leadership is totally lacking within the political and corporate worlds; global and national institutions are failing here, as they are failing to address the financial crisis – on both counts economic growth is the problem, not the solution. The priority for 2012 must be to develop new mechanisms which, with community support, go around conventional politics and vested interests. Climate change is now a far bigger risk than any financial crisis and yet the real effort devoted to managing it is miniscule in comparison.

Realism needed on Carbon Capture and Storage

Sequestering say 20% of current global CO2 emissions requires an industry around 170% the size of the world oil industry. Carbon Capture and Storage (CCS) may make a significant contribution to addressing climate change, but:

  • not in the short term, to prevent atmospheric carbon concentrations above 450ppm CO2e
  • not at the scale to be the global panacea for coal & gas
  • Extremely dangerous to put all our eggs in the CCS basket, as we are doing
  • Irresponsible to lock-in carbon-ready facilities before viability of CCS at scale is proven
  • Research should be accelerated to prove its real potential we need to keep all our options open, but be objective !

We must have consistent industry & government commitment, support and funding, not lipservice, recognising we need an emergency response if we are serious about addressing climate risk.

CCS is a classic case of Moral Hazard.

The world’s leaders are counting on a fix for climate change that is at best uncertain and at worst unworkable

The Economist, 5th March 2009

Source for graphic: The Ecological Wealth of Nations, Global Footprint Network, 2010