Saturday, June 20, 2015

The End Is Nigh

Business-as-usual guarantees the end-of-the-world-as-we-know-it: our current way of life is not sustainable according to new models being developed at Anglia Ruskin University’s Global Sustainability Institute (GSI), through a project called the ‘Global Resource Observatory’ (GRO).

Lloyds released a report for the insurance industry assessing the risk of a near-term “acute disruption to the global food supply.” Research for the project was led by Anglia Ruskin University’s GSI, and based on its GRO modelling initiative. The global food system, the authors find, is “under chronic pressure to meet an ever-rising demand, and its vulnerability to acute disruptions is compounded by factors such as climate change, water stress, ongoing globalisation and heightening political instability.”

Lloyd’s scenario analysis shows that food production across the planet could be significantly undermined due to a combination of just three catastrophic weather events, leading to shortfalls in the production of staple crops, and ensuing price spikes. In the scenario, which is “set in the near future,” wheat, maize and soybean prices “increase to quadruple the levels seen around 2000,” while rice prices increase by 500%. This leads to rocketing stock prices for agricultural commodities, agricultural chemicals and agriculture engineering supply chains:
“Food riots break out in urban areas across the Middle East, North Africa and Latin America. The euro weakens and the main European stock markets lose 10% of their value; US stock markets follow and lose 5% of their value.”
The scenario analysis demonstrates that a key outcome of any such systemic shock to the global food supply — apart from “negative humanitarian consequences and major financial losses worldwide” — would be geopolitical mayhem as well as escalating terrorism and civil unrest.

The purpose of exploring such scenarios is to prepare insurers for possibilities that are now more likely than previously assumed. The Lloyd’s report points out:
“What is striking about the scenario is that the probability of occurrence is estimated as significantly higher than the benchmark return period of 1:200 years applied for assessing insurers’ ability to pay claims against extreme events.”

That leading insurance companies are now attempting to factor in potential losses from such crises is a major step forward in pushing the financial sector to recognise the dark-side of the current system of fossil fuel dependence.
The report concludes:
“A global production shock of the kind set out in this scenario would be expected to generate major economic and political impacts that could affect clients across a very wide spectrum of insurance classes.” It would have “major consequences for companies’ investment income,” with the potential to “generate losses that span many years.” It would also result in political instabilities that take “decades to resolve” while imposing “greater restrictions on international business.”

The Foreign Office’s food resilience Task Force began to come together late last year. An FCO document from February 2015 for a Task Force workshop throws light on its rationale, direction, and participants. “The taskforce is looking at plausible worst case scenarios of disruption to the global agri-food system, caused by extreme weather events,” the document explains. Taskforce projects aim to “improve understanding of how changing extreme weather events (severity, type, frequency, geographical impact) may impact on global food security” and to “identify how market and policy responses may exacerbate or ameliorate these effects.” Of particular concern to the FCO’s taskforce is to determine “how large shocks in agricultural production could occur (e.g. floods, droughts, wind storms),” how these would translate into “crop reductions,” and “how society responds to high food prices or limited local availability.”

GSI’s Director, Dr. Aled Jones, delivered a detailed presentation on the modelling work done so far, what it implied, and where it was leading. Dr. Jones was previously Deputy Director of the Programme for Sustainability Leadership at the University Cambridge, where he was Director of the British government’s flagship Chevening Fellowships Economics of Climate Change Programme, supported by the UK Foreign Office to deliver the FCO’s Strategic Framework. Jones also chairs a working group of the UK government’s Department for Energy and Climate Change’s Capital Markets Climate Initiative (CMCI).

“The financial and economic system is exposed to catastrophic short-term risks that the system cannot address in its current form,” Dr. Jones explained. By successfully modeling the “impact of climate-induced drought on crop failures and the ensuing impact on food prices,” he said, the model can then be recalibrated to “experiment with different scenarios.”
He continued “We ran the model forward to the year 2040, along a business-as-usual trajectory based on ‘do-nothing’ trends — that is, without any feedback loops that would change the underlying trend. The results show that based on plausible climate trends, and a total failure to change course, the global food supply system would face catastrophic losses, and an unprecedented epidemic of food riots. In this scenario, global society essentially collapses as food production falls permanently short of consumption.” Jones added “This scenario is based on simply running the model forward. The model is a short-term model. It’s not designed to run this long, as in the real world, trends are always likely to change, whether for better or worse.”
 He was asked “What you’re saying is that if there is no change in current trends, then this is the outcome?”
Jones nodded “Yes”.

In other words, simply running the Agent-Based Model forward cannot generate a reliable forecast of the future. For instance, no one anticipated the pace at which solar and wind energy would become cost-competitive with fossil fuels. And the fact that governments and insurers are now beginning to scope such risks, and explore ways of responding, shows how growing awareness of the risks has the potential to trigger change. Whether that change is big enough to avoid or mitigate the worst is another question. Either way, the model does prove in no uncertain terms that present-day policies are utterly bankrupt. British and US government agencies are taking seriously longstanding scientific data showing that a business-as-usual trajectory will likely lead to civilisational collapse within a few decades — generating multiple near-term global disruptions along the way.

The question that remains is: what we are going to do about it?

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