As COP27 has staggered to a halt, it’s time to revise your climate change scenarios. Keeping the increase in global temperature to 1.5˚C now seems to be an unlikely outcome, with 2˚C to 2.5˚C looking far more probable and worse still possible. COP26 chairman Alok Sharma described the outcome as “1.5˚C on life support”; António Guterres, secretary general of the UN, warned: “Our planet is still in the emergency room”.
Climate Action Tracker’s most recent projections suggest 1.8˚C as the “optimistic” scenario.
At COP26 in Glasgow last year, countries agreed to return each year to strengthen their carbon emission commitments, a process known as the ratchet. At COP27, some countries tried to renege on the 1.5˚C goal, and to abolish the ratchet. A resolution to cause emissions to peak by 2025 was taken out. The new UK PM’s initial intention not to attend COP27 was met with a chorus of disapproval, so he did feel it necessary to at least do the basic minimum and show up.
Instead, the over-production of fossil fuel continues. In 2030, oversupply of liquefied natural gas (LNG) could reach 500 megatonnes equivalent to almost five times the EU’s 2021 Russian gas imports, and double total global Russian exports. This oversupply of fossil gas could lead to excess emissions of at just under two gigatonnes of CO2 a year in 2030, well above emission levels consistent with the IEA Net Zero by 2050 scenario (2022).
The impacts of climate change were very apparent in 2022. The floods in Pakistan affected 33 million people, one in 7 of the population; they killed over 1,600 people and 800,000 livestock.
According to World Bank recent research, climate change could drive 216 million people to migrate within their own countries by 2050, with hotspots of internal migration emerging as soon as 2030. Climate change will cut crop yields, especially in the world’s most food-insecure regions. At the same time, agriculture, forestry, and land use change are responsible for about 25% of greenhouse gas emissions.
An Imperial College study showed that coastal erosion is increasing. Some rock cliffs are already crumbling, and within the next century, rock coast erosion rates could increase tenfold. At sites in Yorkshire and Devon, this will cause rock coast cliffs to retreat by at least 10-22 metres inland.
There is a danger of a fatalistic view taking over – “it’s all going so badly we won’t be able to do anything”. This view must be continually challenged, as every 0.1˚C change makes a difference.
The one achievement of COP27 was the establishment of the principle of a “Loss and Damage” fund to help developing countries deal with the impacts of climate change. However, none of the developed countries committed to a specific sum of money for this fund, and that will be subject to continued negotiations. Some research suggests that by 2030, climate-related losses could reach $580bn per year. There was nothing in the Chancellor’s “Autumn Statement” to contribute to that. An innovation here was to look to the private sector to contribute, either voluntarily or more likely through various levies on polluting industries.
So what might the various scenarios mean financially?
In over 2˚C cases, more extreme weather events, droughts, fires, floods, storms will lead to:
- Migration increasing, with massive economic dislocation
- Increased insurance claims with some properties uninsurable
- The abandonment of some areas – not just in Africa, but along rivers and coastlines (the Welsh village of Fairbourne is already due to be wiped off the map)
- Funding “Loss and Damage” – governments, taxing carbon emissions from certain industries – the potential for demands on this fund to escalate dramatically is huge.
But even the most optimistic scenarios have financial implications. As well as many weather impacts already “baked in” by previous emissions, there will be “transition” costs:
- Re-engineering the national grid
- Insulation costs, heat-pump installation
- “Stranded” fossil fuel assets – oil and gas assets sitting on companies’ books, but unusable
- Opportunities in new technologies.
So whatever your current assumptions about climate change, it’s very likely that the outcome could be different. Your planning should start now.
Written by Huw Williams, SAMI Principal
The views expressed are those of the author(s) and not necessarily of SAMI Consulting.
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