Category Archives: Sustainable Development

Faith, Values and Clim-Ergy

This week I was invited to a meeting of a faith-based group which is planning a conference on Climate Change for communities on the Connecticut shore. The invitation was an outgrowth of a presentation I gave on the subject earlier this year.

While I was flattered to have been invited back, I was also mildly uncomfortable, as I typically am when engaging with faith based groups. I do not believe in God. I do not believe in heaven or a here-after. Though I was raised in the Judeo-Christian tradition by a family which was decidedly ecumenical in its religious composition before ecumenicism was cool, I have never felt comfortable in the modalities of religions. I am what some might call a heathen.

Yet I am a person of ‘faith’, by some home-brew definition of that term. Faith and prayer to me are very personal expressions. In the context of religions, faith and prayer too often seem to me to become commoditized and trite, and devoid of the spiritual substance that they purport to give. They become the spiritual equivalent of cereal, mistaking it for food. But that is my personal perspective, and I respect those who gain personal sustenance and value from their religious experiences that I am unable to share.

Still, I feel like a poser when venturing into these communities. As an auditor, trained in the mentality of professional skepticism, and seared by experience in some level of confessed cynicism regarding the capacity of redemption for human-kind from its multiple and serial and repetitive transgressions, I come to these gatherings with what I like to think is a pragmatism that does not fit well with the idealism to which many of the faith based communities strive. And those who have followed this blog for any length of time can appreciate that my sardonic humor might be a show stopper in these venues, but not a hit.

All of which is a long-winded digression to the main point of why I continue to inject myself into places of discomfort. Faith based communities, in my experience, remain one of the few gatherings of civil discourse in a world that is rapidly disintegrating socially and politically. This has some historical irony in that religions of the world have perhaps committed as many, if not more, atrocities against humankind in the name of God than have political entities. (I haven’t got authoritative stats on that, but I’ll throw it out for debate.) Not surprisingly, given that many religious entities are merely political and economic operations in moral robes.

So the challenge for a person of my particular persuasion is to determine how to distinguish the truly faith based communities from the religious posers who co-opt the moral garb of sanctity in order to promote an agenda, but bring no more clarity or certainty or validity to the proposition than you or I.

Enough about me.

In the evolving climate and energy (Clim-Ergy) paradigm, there are many outside the literal faith-based realm who embrace the subject as almost a secular religion. They bring a similar idealism and energy. They approach it from a principled position, and with great self-confidence and certainty that their conceived solutions are as if received from the hand of God on Mount Sinai, consolidated from two stone tablets to an iPad for portability. If their faith and idealism and energy and intellectual gifts were enough, I am confident that we would have progressed much farther on this issue by now than we have. Having observed this issue for 11 years myself, and being a somewhat impatient person with an acute sensitivity to the criticality of time, I am concerned that they do not understand the human and economic realities of this subject any better than their opposition in the climate denial community, many of whom are also in faith based communities, are willing to consider the scientific and environmental realities.

We are at a moment when a growing number of people in the climate denial faction, and a vast number in the “I-don’t-really-want-to-know-or-care” denomination are steadily embracing a ‘come-to-Jesus’ moment, if I may borrow that phrase. “Something’s happening.” They dare not acknowledge it as climate change. They decline to take responsibility in whole or in part for its manifestation. They’re paralyzed by indecision regarding what to do about it. But they’re quite sure that they don’t want to change their current modality of existence for the possibility of heading off something potentially nasty at the pass. (See California and green lawns vs. food and drinking water for illustration.)

The extremes are driving the conversation, but substantive action on a meaningful scale is not happening, or happening at unnecessary cost due to the fractious political environment. The folks who recognize the problem are almost as much of the problem as the folks who refuse to, though the former would loudly protest that proposition, and many times for the same reasons.

For example, in the course of conversation with the faith group, one participant proposed the theme of ‘sustainability’ for the conference. After 11 years, I don’t have a clear concept of what constitutes ‘sustainability’ in meaningful terms. But I am positive that the participant’s definition is not the same as Exxon-Mobil’s, or the coal miners of West Virginia, or the farmers of the Mid-West and California agribusinesses or the politicians whose next biennial contract with voters depends on an electorate largely ignorant of the nits and lice that constitute a true understanding of ‘sustainability’ in action. And much of what corporations peddle as ‘sustainability’ is merely green-wash. If they were truly ‘sustainable’, many of their products would be off the market.

So one group defines sustainability as maintaining the status quo. The other group defines sustainability as moving to a new paradigm that can be maintained because the current status quo cannot. In both instances, the partisans are driven by faith, more than anything else, that their imperfect knowledge of the situation is valid.

So, if we have two faith-based factions, each of whom are equally certain of their values, but both of whom are in conflict for sharing the same reality, what does that leave us? Historically, and all too frequently, war.

The reality is that the ‘sustainability of the status-quo’ faction is the dominant and driving faction at this time.

The reality is that Reality is steadily undermining their credibility, with each fire storm, with each drought, with each monsoon, with each progressively more frequent incursion of the sea upon the land, with each death from protracted famine, with each ravage of disease in an interconnected planet, with each struggle for non-renewable resources in a contorted world of abundant excess and deficient necessities.

But is the alternative camp any more credible? They are offering to take us to a promised-land yet unproven on the scale that it must exist to replace our current reality. They are standing on a platform of science that it riddled with internal contradictions, critical gaps in knowledge, and hidden agendas of human motives of which science is no more immune than any other human agenda, as science has been through the ages. It is populated with some who have never run a lemonade stand, but confidently presume to advocate for doing away with the grid. It is led by others who have created some small success on a local level and believe that it can somehow be extrapolated to the planet, without a clue as to what that entails organizationally, resource-wise or politically. Yet others see this as an eternal cause through which to define their personal importance, and try to bend it to their own psychological need in the name of saving humanity. There are some who will strive mightily to advance wind energy in someone else’s neighborhood or view-shed, financed by someone else’s money. And somewhere in the din of all these conflicting profiles, there are some, generally quiet and persistent and pragmatic, who work diligently below the radar to make some substantive progress in the midst of the human circus.

Neither side in the Clim-Ergy paradigm is totally right or totally virtuous, though both will insist they are, and therein lies the problem. The issue is devilishly complex. Both factions are similarly complex. And both factions, in my view, share an all too human inclination to simplify the complexity to a level they can comprehend and take comfort in. Regrettably, dumbing an issue down to one’s comfort zone does not solve the issue, although it may temporarily sustain some level of self-esteem.

* * *

In approaching this meeting, I took a trip down memory lane through my eleven years of engagement with this issue, reflecting what I had invested in it, how I had approached it, and what I had accomplished. I have invested a considerable amount of time. I would not change radically how I approached it. But I recognize that I have accomplished little of what I hoped for. That is because accomplishing what I had hoped for ultimately requires bringing other people to a shared perspective, a shared set of values, an alignment of interests that can achieve what none of us can alone.

With this self-assessment in mind, I approach the faith community with some ambivalence; prepared to point out those ideas that I believe will prove counter-productive, but wary of sapping their enthusiasm and idealism with a pragmatism that may be mistakenly (or possibly correctly) perceived as cynicism and negativity.

Still, my concern is that the faith community too often believes that it will succeed by bringing the community to its point of view when in all likelihood that strategy will be modest in success and inadequate to need. The faith community, defined broadly, is more fragmented than it would like to admit. It exists in a world that is becoming more secular by most statistical accounts, suggesting that religion, if not faith, is losing its relevance to the broader populace. To persist in the notion that faith alone can drag the non-believing to a faith-based common ground defined predominantly by faith is an exercise in Einstein’s definition of insanity.

This manifests itself to me in the sincere response of one participant to the meeting who advocated:
“…connecting with the head is fine and will get some people to do some things, but connecting with the heart is where real change happens.”

I would counter that ‘head or heart’ is not a binary choice; the two must inform each other, and advance together. In my line of work, I do autopsies on loads of initiatives driven by the heart or the gut, but from which the head was apparently AWOL. And I have seen too many instances in which the head ruled without the heart to no positive purpose.

I would suggest that the Indiana legislature reversed its faith based position on the LGBT community not out of a change of heart but out of a cerebral calculation of the economic impact of its supposedly ‘moral’ position.

I would suggest that the South Carolina legislature voted to take down the Confederate flag not out of moral outrage for the carnage associated with it, or moral outrage for what the flag had come to represent for too long, but out of pragmatic calculation that the symbol’s optics will cost the State more in tangible and intangible ways from the people who detest it than it benefits from the people who still revere it. This calculation was no doubt more readily achieved in the wake of and with an eye to the Indiana experience.

I believe that the success of the Pope’s recent encyclical, yet to be verified in results, will be due to his effort to reach beyond the incantations of faith to incorporate the teachings of science and speak to the human conditions that transcend religious and philosophical boundaries. This is the true essence of communication: not merely to tell you what I want you to know in terms that I embrace, but to tell you what I want us to share in terms that we can both embrace.

So I become yet again concerned when a participant says:

“We are a group of religious folks, so we should embrace that aspect. People are waiting, anxiously, for the religious community to take the lead on this from a moral, ethical and theological standpoint.”

Again, I do not doubt the sincerity in which this belief is held by the individual and many others in the faith based community, but I question if they have a firm grasp of where the faith-based community stands in the esteem of a world ripped apart by faith-based conflicts, and abused by merchants of faith acting in ungodly ways in God’s name.

This is not to disparage faith based groups as a whole, but simply to point out that their franchise as a whole has been tattered by the abuses of too many among them. That franchise may be overvalued, but it is not without value.

What I believe the faith community can do is to be the facilitator of a community-wide discussion of shared values, not its values; and build the common ground of values that is so desperately needed and so desperately lacking. It should not try to promote its values as a focus so much as to strive to find the common values that all segments of the society can embrace, and build on those with its own contribution as well as others’.

Many of the values issues that underlay Clim-Ergy are at the core of other social, economic and political issues as well. It occurred to me as I approached this meeting that the real need is for human society at whatever level, parish, village, region, state, nation, planet to work toward the shared values on which it can build a shared future. It is audacious of me, to use a polite term, to suggest as I did to this group that before they contemplate a conference on climate change per se, they might want to explore the underlying core of generic values that we must begin to embrace and share in order to come to terms with Clim-Ergy, and our many other challenges. That process could begin next Sunday or Saturday or Friday night.

I have faith in the faith community’s capacity to facilitate change, but to do so, it must see itself more as a facilitator and collaborator than a leader. Sometimes, the best leadership is from within and behind, and not up front.
* * *
In closing, I am reminded of my favorite line from Oedipus Rex:

“When wisdom brings no profit, to be wise is to suffer”

…to which this accountant would add:

When prophets bring no wisdom, there can be no profit.

Whatever may be the core of our faith, we must be courageous to constantly test its wisdom against its fulfillment in improving the human condition.

Onward

20150711

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Resilient, Sustainable or Unsustainable?

I have a bone to pick with academics regarding the hijacking of common words in the English language (or probably any other language for that matter) for their own arcane purposes.  There seems to be a tendency, as in other cases in our narcissistic society, to take something of common property and twist it to make it one’s own.  Being an accountant, and therefore trained in the art and science of splitting hairs on seemingly mundane issues, I take offense to this and feel compelled at times to say ‘Enough!‘.

The issue at hand is the discussion of responsive strategies to storm surge and sea level rise, in which the terms ‘resilience’ and ‘sustainability’ have taken on prominence, and are too often used as synonyms for each other, which they are not.  But the mangling of meaning is not only relevant to storm surge, or other facets of climate change, but business continuity, healthcare, the military, technological evolution, the economy in general, life itself.  So, maybe it’s worth taking a few moments to split a hair or two.

First, let us acknowledge that the English language in particular is a living thing, which means that it is also an evolving thing (for those who believe in evolution in all its forms). That means that change is inevitable, if not good, in meaning.  But the point of language is to communicate, and to that end, each word, each little vessel of meaning, should hold reasonably constant over some period of time, or we have babble.

In the context of sea level rise and storm surge (and let’s throw in drought and water depletion and wildfires) the terms ‘resilient’ and ‘sustainable’ have been used interchangeably to define the goal of public policy to move a condition of exposure beyond current vulnerability to a status of future safety and endurance.  The goal is good. But the criteria for attaining that goal require a parsing of the two terms.

In general usage by us common folk of modest educational attainment (and ratified by Merriam-Webster and various and sundry other chroniclers of lexicon) resilience means the ability to bounce back from adversity of some kind, to return to prior form.  Sustainability refers to the ability to maintain form or status or state of being over time and against opposing forces or influences of degradation. Not the same things.

Because we live in a world of competing forces, sustainability generally requires a component of resilience, because all beings or entities face attack in various forms by hostile forces of nature.  In the human analog, I sustain by eating and sleeping well, properly clothing and housing myself against the elements and educating myself in the proper use of language so as to communicate my needs, wants and value to others.  But when my normal mode of function is impaired by illness, my body reserves, my immune system, my health insurance and my family support system, (my various resources of resilience), return me to a state of sustainability…if I have any and all of these necessary to the particular threat.  Unfortunately, short of the end-game of death, there may become situations which are unsustainable, in which no amount of resilience can RETURN AND MAINTAIN me to sustainable health and function.

It is the alternative state of unsustainability which makes the distinction between resilience and sustainability vital, as we are now seeing on the New Jersey and New York shores in the aftermath of Sandy, or the mountain-sides of California and Arizona and Colorado in the aftermath of wildfires, or in little Texas towns run dry by fracking in competition with drought, or in communities on the Elbe and Danube which have had their third ‘100 year flood’ in twenty years, and are finding their resilience to the frequency of such events eroding; or the ability of Microsoft and Apple to fend off disrupters of their various business models from beyond the borders of the hegemony they have long enjoyed; or the US military being drafted for another misadventure when it has not fully recovered from our past mis-adventures.  The list can go on.

Sustainability must include a capacity of resilience because we live in a world of uncertainty and much of that uncertainty poses risks to our status quo.  Resilience often means conserving some portion of resource (cash on hand) or expending some portion of resource (insurance premiums, redundant and distributed operations) or deploying some capacity (distributed operations, the internet) or forming mutual alliances/dependencies to guard against known and unknown hazards that would otherwise render us unsustainable.   Resilience inevitably involves a cost of some kind, a diversion of effort or resources from activities that we might prefer to do with those resources, activities that might further advance our primary purpose/mission rather than merely guard our flanks.

Sustainability is about keeping the enterprise going in a preferred direction or state of being.  It is rarely static, despite to our antipathy for change, because the environment around us is constantly changing and demands response. It is in the nature of that environmental response, whether natural or social or economic or technological, that the distinction between the sustainable and the unsustainable is ultimately determined.  As we know on a human scale, when a cancer metastasizes beyond the capacity of medicine to contain and the body to fight, no amount of resilience by any definition will sustain the unsustainable.  The same is true of parts of the Jersey Shore and perhaps the cotton fields of West Texas, and our involvement in the Middle East, etc.

Stated differently, but hopefully without adding confusion, sustainability is about pro-action to advance primary goals; resilience is about pro-action to position one for reaction and recovery, if necessary.

A simple example may illustrate the distinction.  In a low-lying shoreline area vulnerable to storm surge and eventual sea level rise, purchasing flood insurance for a residential property provides an element of resilience against damage from storm surge.  Raising a residence to FEMA standards enhances sustainability of the basic living areas and critical utilities against storm damage.  But when sea level rise inundates the property and adjoining land on a regular basis, rendering the property unsustainable by norms of public health and safety, no amount of resilience can sustain its status and value.

In the aftermath of Katrina, many voices criticized the Army Corps of Engineers for only rebuilding levees to a Category 3 hurricane standard, when it is reasonable to assume that New Orleans is an ideal and highly probable candidate for a Cat 5 at some time in its future. Separately, but related, when the Connecticut Task Force to Preserve Long Island Sound asked the Corps what standard of projected sea level rise the Corp plans for, the respondent said that it generally looks in the range of one to two feet over several decades, because beyond that the costs of defense escalate tremendously.  It should be noted that the US Navy has chosen a probable global sea level rise projection of three feet by the end of the century.

The point of the above is that, implicit in the Corp’s decision to build only to a Cat 3 specification, is likely the judgment that construction of a stronger levee system would be irrelevant to collateral circumstances that would render such defenses inadequate in themselves, and New Orleans unsustainable. Sea level rise is likely an element of that judgmental calculation.

But if that is the case, it is important for many other parties to understand that, including the energy sector and Midwest farming and manufacturing sector that depend on facilities in New Orleans directly, and their broader respective markets.  If a Plan B is needed for the day when the CAT 3 storm levees no longer sustain New Orleans, and the damage done by sea level rise or storm surge is beyond the capacity of resilience, particularly in the face of repetitive major loss, somebody had better start working on alternatives now, because New Orleans is by no means alone, and there will be many others lining up at the teller’s window to borrow on an uncertain future.

To summarize the above succinctly: No amount of Resilience can Sustain the Unsustainable. Hence the imperative for distinction between Resilience vs. Sustainability, and Sustainability vs. Un-sustainability.

Or, to borrow from the wisdom of the great philosopher, Kenny Rogers, ‘you gotta know when to hold ’em; know when to fold ’em; know when to walk away; know when to run’.

Splitting hairs?  Perhaps.  On the other hand, once you’re bald…end-game.

Meanwhile, I urge academics to respect common language for its broadly shared meaning, and pick a dead language like Latin (or Greek, in keeping with the status of its economy) to re-purpose to their special needs.

Onward.

20130919

End-game: Flood Insurance and Coastal Retreat

On September 4th,  I had the privilege of addressing the Connecticut Legislature’s Shoreline Preservation Task Force, an outgrowth of Governor Malloy’s Two Storm commission following Storms Irene and Albert, and made more urgent by Sandy. The link above will connect you to the on-demand video of the meeting, courtesy of CT-N.  I should add that I was the opening act for Jamie Springer who gave a very interesting presentation on New York City’s Resilience Plan.

The objective of my presentation was to clarify what I believe are critical distinctions between storm surge and erosion on the one hand, which are among the Task Force’s more immediate focus as a result of the three storms, and sea level rise on the other, which is more gradual and distant in perceived impact at present, but in many instances poses greater long-term impacts, and more importantly, requires difficult decisions today that will impact and be impacted by future events of a highly contingent nature.

Having spoken of ‘end-games’ in a prior post, an article on escalating flood insurance rates in the wake of Storm Sandy brought to the fore a battle, or more appropriately guerilla warfare, in which I have been personally engaged over the past few years: coming to grips with the prospects of low-lying coastal areas in the face of long-term sea level rise. Individuals and communities are struggling with the prospect that their neighborhoods may not be sustainable in the long run, by any means, or within the means that they can afford.  Yet in many cases, they appear paralyzed by the seemingly long-term nature of the threat, and attitudes of denial by some for understandable psychological attachments to a past, and lack of a compelling precedent to make the long-term threat imperative in the present.

There is growing controversy over the impending rate increases for flood insurance as a result of the 2012 Biggert-Waters Act which sought to put flood insurance on a sound actuarial basis, and relieve it of subsidies and claims in excess of premiums that have accumulated $26 billion in deficit for the program over the years.  The prospective rate increases are staggering in absolute terms for some property owners.  Relative to the modest incomes of many who will be impacted, they will be devastating.  Not everyone who lives on the shore is rich. But what are the options?  And what is the end-game?

The inclination among many people not directly affected by sea level rise is to defer concern about sea level rise to a later date, and to deal with the more immediate risk of storm surge.  The other inclination is to view the two as the same, and believe that defenses which mitigate the impacts of storm surge will work for sea level rise as well.  Both inclinations are mistaken.

A quote from HUD’s recent Hurricane Sandy Rebuilding Strategy contains this critical passage:

FEMA is providing information about current risk based on historic conditions, including new ABFE maps for parts of coastal New York and New Jersey. Using the best available scientific information to address flood risk, including ABFEs, has immediate, short-term benefits to communities, but does not account for increasing flood risk resulting from future sea level rise. In order to reduce vulnerability and increase resilience further into the future, long-term decisions such as where to locate new developments or critical infrastructure should incorporate information on future risk, such as sea level rise projections.218   [Page 193]   [Emphasis added]

In other words, people in certain low-lying areas who are buying, building new, raising or rebuilding according to FEMA maps, and FEMA insurance standards for storm surge mitigation, are doing so without guidance relevant to progressive sea level rise.  In some cases, sea level rise could be end-game for certain properties and neighborhoods within twenty to thirty years, or sooner with frequent, if not daily, flooding.

An informal and unofficial discussion with a FEMA official last month confirmed the report’s words.  He noted that FEMA is in the process of studying sea level rise projections, but they might not be incorporated into maps for another five years because of the complex policy issues involved.  I might add that the ‘complex policy issues’ involve no small amount of heated politics, as witnessed in the surrender of the North Carolina legislature to real estate interests that succeeded in suppressing the use of sea level rise projections in land use planning and regulation.

Let’s take storm surge first.  Many shoreline property owners who were impacted by Sandy are raising homes to meet FEMA standards and avoid more severe increases in premiums. But not all are able to afford either the restructuring of their properties or the alternative prospect of astronomical flood insurance premium increases.  What is their end-game?  They have two choices.

–   They can ‘go bare’, uncovered by flood insurance and pray that Connecticut or any other vulnerable coast-line  is not hit again for the duration of their natural lives; or

–  they can sell, probably at some significant sacrifice to their hopes and expectations, and possibly at a loss if they’re still carrying a mortgage.  I refer to this as Darwinian Economic Displacement, DED, a survival of the economic fittest.

That brings us to the next end-game for the successors to such properties.  Presumably, they buy with the expectation that they will:

a)  cover their mortgage, if they need one, and

b)  preserve, if not enhance, their equity.  As we all know, ‘they’re not making more shoreline property’.  (In fact, they’re making less of it.)

But there’s a potential problem down the road.  In thirty or forty years (or quite possibly less), when they may wish to sell this piece of paradise on a dynamic shoreline, it may become obviously more threatened by gradual sea level rise and associated increases in storm damage than it appears today when the only flood they are confronting is a stack of  closing papers sitting in front of them, awaiting interminable signatures.  Will the property hold its value?  That’s a long-term question that requires an immediate decision.  Or as we might say in financial terms: ‘what is the net present value of future climate change impacts on this property purchase.  I suspect that not enough people in this position are thinking in these terms….yet.

The person who chooses to buy shoreline property today must ask four questions:

1)  What will be my total cost of ownership during my intended term of occupancy (mortgage, insurances, costs to repair or rebuild from repetitive storm damage)?

2)  Will this property sustain within my timeline of intended commitment and at least preserve my equity position to that end-point; and (here comes the kicker)

3a)  Will the person contemplating purchasing from me at that point share my view of value as the starting point to his/her own subsequent time horizon; or

3b)  will that follow-on time horizon be sufficiently truncated by the progression of circumstances, that my realizable value, and therefore my net present value, will not meet expectations?

And finally…

4)  Am I feelin’ lucky?

Because none of us know the future.

So even the DED-heads who choose to replace current residents on the shore in the delusion of superior economic staying power must face the prospect that sea level rise in the long term will render them to comparable circumstances.

I have advocated persistently that communities must consider the possibility of strategic retreat from vulnerable shoreline areas that cannot be defended by other strategies and tactics from repetitive storm damage or sea level rise. In political circles, this has raised opposition from quarters fearing the exercise of eminent domain, and government intrusion on private property rights.

But there is another end-game involved in such cases that property owners and governments are inclined to ignore. No property exists in isolation. It is connected to the broader community by community infrastructure.  While a given property owner may wish and choose to hold on to the front door knob of his shoreline estate until the waves pull it from his dead fingers, the larger community and its institutions may not share the same commitment to sustaining doomed infrastructure that is maintainable only at excessive cost, and repetitive loss.

Municipal government has two exposures to inundation:

–  impairment/loss of tax-base and associated revenue;

–  impact on operating and capital budgets.

These impacts will require municipal governments and their supporting taxpayer/voters to begin thinking long-term about end-game strategies long before these impacts are imminent so that the impacts are less profound if and when they arrive.

Strategic retreat, therefore, is not just an individual property owner issue; it is a community issue.  And many affected communities are not yet engaging the issue because it seems too distant.  ‘We’ll be dead before that happens’, is the frequent refrain.  Except, we likely will not.  Though sea level may be projected to rise to 4 to 6 feet by the end of the century, many areas of the Connecticut coast (and many others) may be subject to daily or frequent tidal inundation in as little as 30 years, and more severe and frequent damage from storm surges before then.  Time is not on our side, and in some areas, end-game is within the personal planning horizon, like it or not.

There are no formulas, no scientific studies, no sure-fire preventive strategies to render such decisions mechanically and reliably.  When all the best information is compiled, investing in the shore today is ultimately a judgment call, with a factor of luck thrown in.  But that judgment should be predicated on the best information available, without bias, and with an appreciation of its weaknesses.

We are still a long way from the kind of discussions that need to occur, and the information needed to inform them.  We still have time to plan, but not time to waste.

Onward.

20130910

Climate Change Impacts: Risk Assessment Trumps Scientific Uncertainty

The science of climate change appears at the moment to be in a bit of a muddle. But the risk assessment of climate change is beginning to clarify in critical industries and institutions.

The scientific muddle surrounds deviations of some observed conditions from model predictions; specifically, the correlation and causation of increases in atmospheric CO2 emissions to atmospheric warming.  While the reason for an apparent divergence has been credibly attributed to a hypothesis of accelerating warming in deeper regions of the oceans, this hypothesis is not likely to be proven or disproved with sufficient data for some time.

This touches on a fundamental challenge of science in the public arena.  While our various media have no problem rushing to judgment on the basis of utter speculation, science done properly requires a measured pace, defensible methodology, and opportunity for independent verification, none of which happen in a 24/7 news cycle.  To gain a greater appreciation of where the science is, I recommend a recent interview in Der Spiegel with climate scientist  Hans von Storch.

Dr. Von Storch states unequivocally his conviction that climate change is real and is subject to human influence, but he has also been known to take his peers to task for advocating their concerns beyond the hard science that can support them. Der Spiegel did its best to put  Von Storch to the point on recently reported statistical discrepancies between global warming and the rise in CO2 emissions.  Dr. von Storch addressed many of the questions with a studied neutrality; he recognized the questions yet to be resolved in climate science but emphasized that anomalies in the climate change models do not in themselves negate the validity of climate change. They reflect the inevitable refinement of scientific theory that comes with inquiry and observation. The broad theory of climate change remains credible in many of its aspects. It is the underlying mechanics that need further exploration, refinement, and reconciliation to an integrated whole, and that takes time.

Political and economic communities, by comparison, seek greater certainty in shorter time spans.  Here, the current dilemmas in the climate change dialogue pose frustration for public and business officials, even though risk is an inherent part of their economic and political environment on a good day. But, while the scientific debate churns on, the economic imperatives are beginning to coalesce in some quarters into uneasy but growing consensus.

*   *   *

The Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 is a good place to start.  It recognized that, whether one believes in Climate Change or not, the cumulative losses of progressively more severe weather events are taking a financial toll that can no longer be ignored, (though some would like to defer the proposed insurance rate increases just a bit longer).  And then along came Sandy to put a rather large exclamation point on that thought in bold.

A report from the Geneva Association, an insurance industry group, makes a critical point that global warming/climate change (by whatever other euphemism or rhetorical dodge, like ‘extreme weather’) has reached a statistical milestone of criticality that can no longer be ignored, or managed based on historical trends alone:

“Historical data-driven (or climatological) approaches to estimate the background risk of different events will fail in a non-stationary environment as they don’t adequately incorporate recent changes. Even if some of the changes might not be significant yet, risk estimation has to include the consequences of what current physical understanding can tell us about the implied changes of the observed ocean warming. New methods in risk estimation, such as scenario-based approaches and tail risk modelling, are becoming an  essential part of the insurance business with a variety of different applications, such as capital requirement determination, pricing and/or risk mitigation.”

This statement is critical from this industry because it not only reinforces the thrust of Biggert-Waters; it should send a warning to other financial intermediaries and governments of the need to project forward and plan forward and not merely manage the climate progression with an eye solely on the rear-view mirror.

However, another report from CERES indicates that the insurance industry worldwide is significantly unprepared to deal with the financial consequences of climate change. It conducted its second annual survey of insurance industry preparedness for risk exposures of climate change.

“The answer, unfortunately, has not changed since our first report analyzing the insurance industry’s readiness in September 2011 concluded: “not very.” The implications are profound, for the insurance industry is a key driver of the national and global economies. If climate change undermines the financial viability of the insurance industry, it will have a devastating impact on the economy, as well.”

Only 13 out of 184 insurance companies have a comprehensive plan to address climate change as it will impact their operations administratively or from an underwriting and investment perspective. Many consider it an extension their normal underwriting and investment management processes. While this may be true in certain qualitative respects, it ignores the order of magnitude and the possible variance from traditional statistical patterns that are critical to decision-making, as noted in the quote from the Geneva Association’s report.

When we talk about economic resilience to catastrophes, the insurance industry is a critical player. Katrina, Irene and Sandy have already illustrated the weaknesses of our current system operating within its traditional parameters.  While the storms have been within the industry’s economic capacity to handle, the administrative processes of rapid and reliable response have been disheartening in many cases, and have been a major element inhibiting resilient response for many communities, businesses and individuals. If we add to this condition a failure to build adequate reserves for future trends, we worsen an undesirable situation.

This was further confirmed in a warning by the Geneva Association, which noted that parts of the UK and the State of Florida are now regarded as uninsurable, with more likely to follow. It further noted:

“…insurers warn premiums have been kept artificially depressed in the short-term because capital has flocked to the sector in the face of historic low-interest rates.”

A reasonable inference from this statement would be that when interest rates rise, capital may seek better returns elsewhere unless insurance rates rise as well; and if exposures continue to rise as well at an accelerating rate, the insurance industry will either be caught short in capacity, or more likely will withdraw coverage to stay within its underwriting capacity.  Either way, the industry will likely raise rates significantly where it is still willing to underwrite (think of health insurance as an analogy), and the economy will lose critical financial liquidity which the insurance industry provides for resilience.

Reports such as CERES’ and the Geneva Association’s are important in recognizing that, while we do not yet have the answers to the climate puzzle that scientists are diligently working on, neither do we have the luxury of waiting for them. A recent statement from the World Bank added emphasis to this observation.

“Places such as Bangkok, Jakarta and Ho Chi Minh City are now considered “hot spots” that will bear the brunt of the impact as sea levels rise, tropical storms become more violent, and rainfall becomes both more sporadic and — in the rainy season — more intense.

Bank officials said this week that those effects are not considered a distant risk anymore, but rather are a near certainty “in our planning period” of the next 20 years or so.”

While the World Bank’s focus is on developing countries, the challenges they are addressing affect the globe in the same time frame.

Business and government must begin to plan across a wider range of contingencies and to a more distant time horizon consistent with the expected impact life-cycle of their decisions. But in this very statement is embedded an irony.  While we may project that sea level rise may reach four feet or whatever by 2100, it will reach a point of significant impact much sooner, and require responsive action. Given the complexity and number of exposures, and the challenges of planning and consensus-building, critical impacts which may occur as soon as twenty years from now will require us to begin planning and building responsive capacity now to meet the more likely near term, and anticipate the less certain long term.

*   *   *

Returning to the Der Spiegel interview, von Storch believes that:

“the more serious effects of climate change won’t affect us for at least 30 years. We have enough time to prepare ourselves.”

I would like to think he is right, but I don’t.  There are two categories of concern; one scientific, and one managerial.

In the scientific category, there are two issues other than the divergence of atmospheric warming from CO2 emissions that beg for clarification. One is, if the oceans are warming at deeper levels than previously believed, does this mean that the capacity sea level rise is greater than anticipated, and how might that affect the acceleration of rise over time? Will it hasten it?

The second issue comes from a somewhat muted reference in the USGS release projecting an increase and acceleration of sea level rise on the Atlantic coast.

“The report shows that the sea-level rise hotspot is consistent with the slowing of Atlantic Ocean circulation. Models show this change in circulation may be tied to changes in water temperature, salinity and density in the subpolar north Atlantic.”

If this is referring to a possible slowing or shut-down of the Thermohaline Conveyor, that poses a whole other set of interesting scenarios, many of which would affect the UK and northern Europe, but some might affect the US east coast, such as the possible influence of the current in steering hurricanes away from the east coast,….or not.  I remember when we convened a workshop on Climate Change for municipal officials in 2004 that this possibility was seen as serious-but-remote. It is apparently no longer remote.  Is it still serious? Pure speculation on this accountant’s part. Outside my skill set, except for the possible economic consequences.

In the managerial area of concern, I will repeat a skepticism voiced in prior posts.  There are two aspects to the Climate Change challenge.  One is figuring out what nature will deliver; the other is the issue of how we will respond, or what I call ‘capacity to act’.  While we wait for science to sort out answers to the first part, experience suggests to me that society as a whole has demonstrated decisively that we are unwilling to recognize the severity of the problem, and therefore unwilling to act to positive effect. Our capacity to act is at best questionable.

Dr. von Storch may have a good handle on the natural science end of the issue, but he is disturbingly complacent about the social and economic and political science end.

We can all have our opinions, but nature will have the final word.

Or, to borrow a baseball analogy that I recently read:  “Mother Nature always bats last; and she’s not limited to 9 innings.”

Onward

20130705

A Hot Tip: Polar Melt

As I sat back this morning, perusing dispatches from the theater of the absurd, a crazy idea sublimated from the media morass.

Picture a Harvard dropout, dual major in environmental sciences and politics.  One morning, he arises experiencing a cerebral methane emission (CME): The Greenland Ice Sheet is melting. The West and Midwest US are frying for lack of water. Water is becoming the ‘New Oil’ in terms of scarcity and value.

We don’t have a problem of scarcity. Simply a problem of bad distribution!

The Answer is Obvious! We do a reverse of oil and gas production!.  We tap into the Greenland water table and capture the flow of Ice-melt.  Load it on tankers. Ship it to Louisiana and pump it into a pipeline heading north to the Ogallala aquifer.  It will serve the water market in the same way that Cushing serves the oil market.  The same way.

He’ll tap venture capitalists (not this juvenile ‘crowd-funding’ stuff, because this will take real money), and prepare for an IPO that will dwarf Facebook, because, contrary to his fellow alum’s fantasy, not everyone needs Facebook, but everyone needs water.

The new company will be named Polar Melt. Its Trademark will hype a grinning polar bear in a Speedo and Shades holding a surf board. The motto: ‘Polar Melt….It’s All Good’.

It will buy up drilling rights in Greenland and horizontally drill the water table in the entire land-mass. It will build off-shore terminals to load the water. It will commission a tanker fleet to transport the water to markets.  And let’s not forget Saudi Arabia here. They can afford to pay a premium. And Japan too, now that some of its groundwater is tainted in the aftermath of Fukushima, And there’s China, 1.3 billion people and counting!

If we build the infrastructure fast enough, we can offset the impact of glacial melt on sea level rise, diverting the cost of climate change adaptation into more productive economic endeavors, like the next IPad, or expanding the Netflix franchise in Africa, or more space tourism in Virgin Galactic!

Of course, this enterprise won’t be without its challenges. To accomplish this would require major transportation and distribution infrastructure, requiring a major energy consumption. But, not a problem. We’re becoming the new Saudi Arabia of hydrocarbons. It supports the new Exxon-Mobil of hydrology.

“But that will only create a positive feedback loop, accelerating further global warming and melt!”, the critics cry.

…and that will assure increased supply to a warming planet in need of more water.

“But converting that ice (think sequestered water) into potable water will add it to the hydrological cycle as an active component of weather, increasing precipitation and flooding!”, they retort.

…There’s no proof that such would be statistically significant, and the benefits would greatly outweigh the risks. Besides, it will offset the permanent loss of water used in fracking that must be permanently sequestered deep in the earth to prevent deadly pollution of ground water (until it doesn’t due to geological dynamics that we have yet to discover because the fracking phenomenon hasn’t matured sufficiently to reveal its unintended consequences).

*  *  *

The CME emerges into a viable play. Boy-Wonder is featured on CNN as yet another Harvard prodigy too smart to stay for the degree. Goldman Sachs takes the company public. The stock grows exponentially. The Federal government wakes up to the phenomenon eventually and the Departments of Agriculture, Commerce, Defense, Interior, State, Transportation, the Environmental Protection Agency, Food and Drug Agency, Homeland Security, all vie for oversight. Congress stonewalls the process in order to let free enterprise flourish, add jobs and rescue the economy from its drought of tax revenue.

Meanwhile, Murphy has been on the sidelines watching the whole circus, knowing that timing is everything, and there’s no need to rush his intervention until the time is right. At the peak of the stock frenzy, while the Midwest is turning to dust and the imperative of The Venture is obvious even to the most cynical of minds, Boy Wonder realizes that he can’t commission enough new tankers to transport the potable water to market.  Building a pipeline from Greenland to North America is out of the question.  Too long. Too costly.

But….what if we ‘repurpose’ some oil tankers?  Who would know?  We just flush them out really, really well, put the Polar Bear logo on the bow.  And any residue would be so minute as to escape detection.

And so the sub-strategy is launched, and succeeds until greed demands more.  And then some enterprising investigative reporter notes an unexplained shortage in the world tanker fleet for transport of hydrocarbons. And his investigative report leads environmentalists to test water distributed to the Ogallala, to discover that there are traces of hydrocarbon, the chemical fingerprint of which DOES NOT resemble output from the Tar Sands (you remember, that other pipeline).

The stock plummets.  The Feds rush in to investigate. A major federal bailout of municipal water authorities purchasing from the Ogallala Aquifer endeavors to contain the health and safety fall-out, while the Justice Department and EPA sue for damages. And the investigative reporter unfortunately stumbles into a swimming pool at a New Orleans hotel, having had one cocktail too many, and is recovered by the morning crew.

Meanwhile, a Chinese company buys up the stock and takes over the operations, redirecting the flow of ‘product’, because it’s an upgrade in quality from sources in the homeland, and besides, Tibet has been squeezed dry.

Five years later, Boy Wonder is being measured for a new suit, appropriate to his C suite in a federal institution. He is convicted based on extensive correspondence supplied to the Justice Department by the NSA. That 128 bit encryption just ain’t what it used to be.  Worse yet, the Federal prisons aren’t what they used to be, since they’ve now been outsourced to a private contractor.

And he reminisces about the good old days back at Harvard Square, and wonders what might have been.

*  *  *

Was it all just a dream?

Or is it tomorrow’s headline?

The absurd is just a day away.

Onward.

20130304

The False Economics of Fossil Fuels

Reading Bernard Weinstein’s letter in the Time’s November 2 edition, I am reminded that we continue to fail to grasp the failure of our supposedly 'free market system' to effectively price key commodities, if that is in fact its intent, and not merely a philosophical mantra.  Let us begin with the first sentence of Mr. Weinstein's letter:

 “As “Future of Solar and Wind Power May Hinge on Federal Aid” (Energy, special section, Oct. 26) points out, the renewable power industry has become addicted to federal subsidies and probably can’t stand on its own without them.”

We can acknowledge that the renewable energy industry is addicted to federal subsidies at present and for the foreseeable future.  But let us apply Mr. Weinstein’s metaphor of addiction fairly.  Society is addicted to fossil fuel dependent energy.  If we are the junkies, Big Oil and Coal are the pushers.

 

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SOTU: The speech I wish Obama had given

President Obama's State of the Union Speech had many promising elements, but ultimately failed when it desperately needed to succeed. It's primary failure was in obsessing on a future too vague. Its corollary failure was in presenting energy investment as a virtue rather than an existential necessity. He could have done better, because no doubt he knows better.  And in the context of SOTU, Carol Browner's departure seems hardly a surprise.

What follows is the speech I wish he had given:

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