“Climate action failure” is the greatest threat to society in the coming decade, according to the World Economic Forum’s 2022 Global Risks Report, published Tuesday.
No surprise there. Climate change is a catalyst that makes most other risks more likely and more severe, including those that round out the top five on the WEF’s risk report: extreme weather, biodiversity loss, social cohesion erosion and livelihood erosion.
Unfortunately, the WEF’s prognosis on the success of world’s “climate action” isn’t positive.
“Despite the optimism surrounding the new commitments at COP, they still fall short of the 1.5°C goal set out in the Paris Agreement. Instead, they steer the world towards 2.4°C warming, with even the most optimistic scenarios only achieving 1.8°C,” Peter Giger, the chief risk officer at Zurich Insurance Group wrote in a commentary to the WEF’s findings.
But while the WEF report rightly sounds the alarm for urgent action and warns that government and businesses are still not doing enough to fend against climate change, Giger has one message that I find oddly comforting: climate adaptation will be messy, so embrace the chaos.
For the past few years, a lot of discussion regarding climate action has operated under the presumption that the transition to a net-zero world can be painless—particularly in an economic and business sense.
And while it’s best to minimize the amount of disruption experienced along the way, incidents like last year’s European energy crisis appear to have alerted more people to the fact that a revolution in global energy systems will be turbulent.
“The concept of an ‘orderly transition’ seems very unlikely given the scale of the technological, economic and societal changes needed for decarbonization,” Giger writes. “Like in other industrial revolutions, whole industries may disappear if their business models are incompatible with a net-zero future.”
Yet that doesn’t mean outdated and dying industries can’t adapt. Even oil and gas majors are very slowly realizing they should be in the business of energy, rather than sticking with hydrocarbons specifically. Shifting to net-zero will cause exceptional upheaval, but the consequences of doing nothing are inevitably more severe.
According to Swiss Re, if the world hits its Paris Agreement target of limiting global warming to under 2 degrees by the middle of the century, the global economy will still suffer a 4% shortfall in GDP due to the relative inefficiency of new systems and the loss of productivity caused by unavoidable temperature and sea level rises. If no mitigating steps are taken against climate change, and the world continues a ‘business as normal’ approach, the global economy could shed 18% of GDP.
Giger says, “There is much work to be done and time is short.”
In other news, my colleague and collaborator at Green, Inc., Katherine Dunn, had her last day with Fortune last Friday. She has left to join the Oxford Climate Journalism Network but, if you’d like to keep in touch with her goings on, you can email her at katmagdunn@gmail.com
Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett49
CARBON COPY
Solar growth
China is mobilising to fix a dire shortage in polysilicon that tripled prices and threatened to snarl the country’s solar panel industry. China is the world’s largest producer of both solar panels and polysilicon and is, Bloomberg reports, pumping billions of dollars into expanding polysilicon production, potentially tripling output production by 2023. Currently, half of China’s polysilicon production is in Xinjiang, which has exposed the industry to sanctions from the U.S., adding to supply constraints. Most of China’s new production hubs will be built outside of the region, potentially skirting sanctions. Bloomberg
Battery shock
A booming demand for lithium and cobalt, which are elements vital to battery production, has caused the price of the commodities to soar, as supply fails to keep up. Following ten years of price declines, the cost of lithium hit a record high in 2021, pricing $41,027 per tonne in China—more than five times its cost last January. The cost of cobalt has doubled in the past twelve months to over $70,000 per tonne. FT
Oil barren
The Biden administration has restricted land available in Alaska for oil and gas leasing, reducing by half a 23 million acre plot that was set aside for energy development in the 1920s. The restriction reverses a Trump-era attempt to expand oil production in the National Petroleum Reserve field. But the win for the environment will be a big hit to Alaska’s oil-dependent economy, and the state governor has criticized the federal government for “hampering domestic energy production.” WSJ
Emissions return
Greenhouse gas emissions rose 6.2% last year, as the economy began to recover from the pandemic. However, that increase comes on top of a historically low baseline: emissions in the U.S. plummeted 10% in 2020, the largest one-year drop on record. That means emissions last year are still below where they were in 2019, before the pandemic began. But the pandemic is still disrupting regular life in the U.S. and worldwide, meaning emissions will likely soar even higher if the economy returns to a pre-pandemic normal. NYT
IN CASE YOU MISSED IT
Asian real estate can be more than just a victim of climate change. It can be part of the solution, too by Kamya Miglani
Terraview is agtech for winemaking, and it’s tackling climate change for the industry by Stephanie Cain
Greenhouse gas emissions from coal surge as coal millionaire Joe Manchin blocks green legislation by Nicole Goodkind
Uranium prices surge after deadly protests in Kazakhstan, which produces over 40% of the world’s total by Bloomberg
CLOSING NUMBER
$280 billion
German insurance multinational Munich Re estimates the cost of global property and asset losses from natural disasters hit $280 billion last year—higher than the $210 billion and $166 billion lost in 2020 and 2019, respectively. The U.S. alone suffered $145 billion worth of losses last year, only $85 billion of which was insured. Hurricane Ida, which hit the Gulf Coast in August, was the most costly natural disaster, wiping out $65 billion worth of property.
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