Managing catastrophic climate risk – the six step plan

Guest Post by Ian T. Dunlop.

Ian was formerly a senior oil, gas and coal industry executive. He chaired the Australian Coal Association in 1987-88, chaired the AGO Experts Group on Emissions Trading in 1999-2000 and was CEO of the Australian Institute of Company Directors from 1997-2001. He is a CPD fellow and is currently researching policy responses to climate change. He is deputy convener of the Australian Association for the Study of Peak Oil.

The various reports of the Garnaut Review (i, ii, iii) contain extensive discussion on the risk implications of anthropogenic climate change, in particular differentiating between risk and uncertainty (iv). The Review emphasises the potential for extreme outcomes, noting that the latest science suggests the extent and impact of climate change may be occurring faster than previously anticipated, certainly faster than the median IPCC (v) estimates upon which most current policy proposals are based. It notes that, due to inherent complexity, much climate science is difficult to assess in terms of quantifiable probabilities, and hence is positioned toward the uncertainty end of the risk-uncertainty spectrum (vi).

These extreme outcomes would represent catastrophic failure at both a national and a global level, albeit the word catastrophe is rarely mentioned by the Review, apart from reference to the recent catastrophic climate change scenario developed by CSIS in the US (vii, viii). Catastrophic failure may be defined as “a sudden and total failure of some system from which recovery is impossible”.

The latest scientific information which has become available since the release of the IPCC 4th Assessment Report in 2007 suggest that the risks posed by climate change are now significantly worse than indicated in that Assessment; inter alia:

• Rapid summer melt of Arctic sea ice, far greater than IPCC projections
• Accelerating growth in human carbon emissions, above worst IPCC projections
• Decline in natural carbon sinks
• Large increase in projected sea level rise
• Increased response to climate forcings, hence potentially greater temperature increases
• Potential tipping point for loss of ice sheets lower than expected
• Increased ocean acidification
• Initial indications of Arctic seabed methane hydrate emissions

Despite the predictable resurgence of climate scepticism as the time for real action nears, political and corporate leaders nationally and globally now claim to have crossed the threshold in accepting that climate change is serious and requires urgent action. The Garnaut Review, to its credit, has gone far further than any other Australian study in acknowledging the dangers of extreme outcomes and the looming risk of climatic tipping points. International leaders are issuing similar warnings (ix, x, xi). In parallel, scientists re-iterate ever more urgently the need for rapid action (xii), most recently that the target for atmospheric carbon concentrations has to be reduced to less than 350ppm CO2 if dangerous climate change is to be avoided (xiii, xiv), rather than the 450-550ppm CO2e range currently favoured politically. Intelligence communities worldwide are factoring the implications of climate change, combined with energy security, into their strategic assessments – “business-as-usual is now an environmental security threat”. Medical authorities are planning for the public health impact that climate change will bring (xv). Leading international organisations are increasingly attempting to quantify the probabilities of catastrophic climate change (xvi), no longer casting it as high impact / low probability, but viewing it as having increasingly higher probabilities of occurrence.

Put bluntly, the potential for catastrophic impact from anthropogenic climate change is increasing rapidly. Strangely, the official Australian response largely ignores these warnings.

The Federal Government’s CPRS Green Paper (xvii) sets out proposals for the mechanics of an emissions trading scheme without defining the targets which are a pre-requisite for realistic system design and its serious assessment. Regrettably, it has committed to compensate established emitters before the size of the emission reduction task ahead has been defined. The preliminary indications are that the government’s concept of an emissions target for Australia will be around a 60% reduction by 2050 relative to 2000 levels. This was conceived in the build-up to the 2007 election without consideration of the latest science and is far from the 90-95% reduction now being indicated. The latter objective would leave minimal capacity to fund the compensation being promised, compensation for which there is no justification particularly in circumstances of catastrophic change.

Corporately, in contrast to the stated public rhetoric of numerous industry sectors to be active players in meeting the climate challenge, the entire debate is about rent-seeking – compensation, decelerating the introduction of any climate change response, and government support for offsetting emissions technology research (xviii), despite the fact that major corporates have been well aware of the likely introduction of carbon pricing for at least two decades. There is minimal discussion about action and solutions, particularly the enormous business opportunities they present. Critical carbon emitters, such as the coal industry, whilst publicly accepting that climate change must be addressed, demand the right to continued expansion on the premise that carbon sequestration will solve the emission problem in due course. Given that this technology is 10-20 years away from large-scale commercial application, which even then is not guaranteed, and that science is suggesting we are already in the zone of dangerous climate change, it is hard to see any justification for expanding unconstrained carbon emissions in the interim, other than short-term commercial cynicism in total disregard of the consequences. Arguments that “if we do not supply coal, others will, and of poorer quality with worse environmental implications” no longer have credibility in a world facing the risk of catastrophic failure.

Political and corporate leaders continue to emphasise the need for the developing world to join in the emissions reduction task as a pre-condition for Australia taking strong, early action. But no serious initiatives to encourage the developing world to do so have been put forward, either here or overseas. Little wonder that Chinese and Indian leaders at the July 2008 G8 Summit were dismissive of the developed world’s emission reduction commitments (xix).

Finally, the Garnaut Review in its “Targets and Trajectories Supplementary Report”, adopted a pragmatic view in contrast to the principled position put forward in its “Draft Report”. Having strongly made the point that extreme outcomes are in prospect, it then bases subsequent recommendations on incremental change from business-as-usual, rationalised on a priori perceptions of the art-of-the-possible. Thus the prospect of achieving early global agreement to limit atmospheric carbon emissions to 450ppm CO2e is discounted as unrealistic and initial planning built around a global 550ppm CO2e target is suggested (xx), with the proviso that a 450 ppm CO2e target, or lower, be re-considered if global negotiations progress more rapidly. Implicit in this approach is the desire to protect Australia’s economic position, and trade-exposed industries, until other nations adopt more stringent emissions reduction targets – in short to only gradually traverse the global “prisoner’s dilemma” as and when others make similar commitments.

This approach must also be seen against the Garnaut Review Terms of Reference, which require the Review “to take account of (a) core factor”, namely “the weight of scientific opinion that developed countries need to reduce their greenhouse gas emissions by 60% by 2050 against 2000 emission levels if global greenhouse gas concentrations are to be stabilised to between 450 and 550ppm by mid-century.” That scientific opinion has been superseded by more recent information.

These attitudes are fundamentally inconsistent with a world confronting the risk of catastrophic failure from climate change, and indeed with the public rhetoric of the key players themselves. So how should catastrophic risk be addressed if the dangerous consequences really are to be avoided, rather than just lip-service paid to the principle?

First, the philosophy of pragmatic, incremental change from “business-as-usual” is not tenable. This must be replaced with a normative view of the targets required to avoid catastrophic consequences, based on the latest, considered, science. Action is then determined by the imperative to achieve the target, not by incremental, art-of-the-possible, change from business-as-usual. This will involve both mitigation – avoiding the unmanageable, and adaptation – managing the unavoidable.

The target for stabilisation of atmospheric carbon to avoid dangerous consequences is now a concentration of less than 350ppm CO2. Many will dismiss this as unattainable given that current concentrations are 385ppm CO2; it will require not only the rapid curtailment of emissions, but the re-absorption of some carbon already in the atmosphere. However it is only unattainable when viewed with a business-as-usual mindset, influenced by established vested interests. When real emergencies loom, as at present, then remarkable change is possible, but only with a paradigm shift in thinking. There are numerous historic precedents, for example national mobilisations pre-WW2, the Marshall Plan for the reconstruction of post-war Europe, the Apollo Project etc (xxi).

Second therefore, is a need for such a paradigm shift in thinking, to regard the climate change challenge as a genuine global emergency, to be addressed with an emergency global response.

Third, climate change, and its potential to trigger catastrophic failure, must be thought of differently from conventional economics, operational risk assessment and cost benefit analysis. The use of an Irreversible and Catastrophic Harm Precautionary Principle, and a Principle of Intergenerational Neutrality (xxii), are particularly appropriate in developing solutions to the climate change tipping point scenarios now being articulated by leading scientists. Under these circumstances, we should be prepared to pay a great deal to maintain societal, environmental and economic flexibility for both current and future generations. In so doing, we should recognise the following pertinent facts:

• Whilst quantitative analysis, in assessing costs, benefits and expected values of courses of action, can be helpful, the major factors inevitably have to be considered on a qualitative, moral and ethical basis. Where quantitative analysis is applied, an objective view should be taken of both costs and opportunities, rather than the bias toward costs which typifies most current analysis.
• A catastrophe carries with it the potential for the social amplification of risk, in that the impact is often far wider than the immediate consequences. For example, the harm done by the 9/11 attacks far exceeded the immediate deaths on the day. In the aftermath, many people switched to driving long distance rather than flying, the switch producing almost as many deaths as the attacks themselves, simply because driving is more dangerous than flying. This must be borne in mind in weighing the consequences, particularly for events at a global scale.
• The potential for catastrophe also suggests the need to create a margin of safety, or insurance, against its occurrence. This is particularly so when, as with climate change, the immediacy of the problem is not obvious. Carbon emissions remain in the atmosphere for decades. We have already seen a warming of around 0.8oC relative to pre-industrial times, with a further 0.6OC being inevitable as a result of the lag effect of historic emissions. However non-linear climatic responses are already evident at current levels of warming with the potential to trigger tipping points far earlier than previously suggested (e.g., Arctic sea ice melt).
• A margin of safety can be “purchased” by the use of scenario and real option thinking to maintain flexibility (xxiii). For example sensible risk management, given climate change lag and the escalating probability of catastrophic impact, strongly suggests early and rapid action to curtail emissions, not the gradual incremental response now being advocated.
• In taking steps to reduce catastrophic risk, it should be borne in mind that those steps will impose risks of their own which must be anticipated and addressed where possible. The same applies to the lack of action.
• Irreversibility, particularly if occurring on a global scale as with climate change, suggests that special precautions should be taken that go well beyond those that might apply if irreversibility were not a problem.
• Irreversibility is a particularly relevant consideration for new investments which might adversely compound future climate change impact. For example new coal-fired power stations and coal export facilities being built without a guaranteed means to secure the carbon emitted make no sense in current circumstances. Once built, it will be extremely difficult to shut them down – far better to withhold approval until carbon sequestration can be guaranteed.

Fourth is the need for genuine global leadership. Current responses reflect the dominance of managerialism – an emphasis on optimising the conventional political and corporate paradigms by incremental change, rather than adopt the fundamentally different normative paradigm needed to contend with the potential for catastrophic failure. In practical terms, leadership means committing today to rapid emission reductions, irrespective of “prisoners dilemma” considerations, and actively promoting concrete proposals to involve the developing world. For example via the Contraction and Convergence concepts mooted in the Garnaut Draft Report, but well in advance of the UNFCCC 2009 Copenhagen meetings. The conditional approaches recommended by both business, government and the Garnaut “Targets & Trajectories” Report almost inevitably becoming self-fulfilling barriers to progress globally. A nexus-breaker is urgently needed, and Australia is ideally placed to provide it, with the potential for considerable national benefit.

Fifth, it must be acknowledged that climate change, though difficult, is only one of a number of critical, interrelated, issues now confronting the global community, as a result of population pressures and economic growth, which threaten the sustainability of humanity as we know it. The immediate pressure point is the convergence of climate change with the peaking of global oil supply, water and food shortages.

Rather than viewing these issues separately in individual “silos” as at present, an integrated policy approach is essential if realistic solutions are to be implemented. For example, some peak oil estimates suggest that, due to declining production from existing oil reservoirs and limited potential for new discoveries, even at high oil prices, global oil supply may reduce by up to half by 2030, raising major questions as to who receives the available oil and our ability to make rapid substitution (xxiv, xxv).

Australia is particularly exposed in this regard, with only around 50% oil self-sufficiency. Thus we may well be attempting to transform our society to a low-carbon footing in the face of acute oil shortages; given our dependence on oil, early planning for this eventuality is essential. We will not be able to fall back on more extensive use of our coal resources in the absence of safe carbon sequestration technology (xxvi), and that is unlikely to be available.

It is unfortunate that the Garnaut Review thus far has ignored the potential impact of peak oil (xxvii), which may be the most critical factor affecting our transition to a low-carbon society. The International Energy Agency, at the behest of the G8, is focusing on the integrated climate change/energy security challenge and is expected to publish a major review of global oil supply prospects, and the climate change implications, as part of their 2008 World Energy Outlook released on 12th November 2008 (xxviii). This analysis, along with that referred to above, should be essential input to Australian policy development.

A further consideration is the need to incorporate greater resilience into Australian society to withstand and recover from the changes ahead (xxix).

Sixth, there needs to be an honest articulation of the catastrophic risks and the integrated sustainability challenge we now face, with extensive community education to develop the platform for commitment to the major changes ahead, albeit community thinking is in many respects more advanced than political or corporate attitudes to these issues. This must include a more mature and responsible political approach, as catastrophic risk cannot be handled realistically with current adversarial attitudes.

Conclusion. The Garnaut Review emphasises that Australia, as a hot dry country surrounded by less robust developing countries, is more exposed than other developed countries to the risks of anthropogenic climate change (xxx). As the science evolves and it becomes clear that the risk of catastrophic climate change is growing rapidly, Australia becomes even more exposed. For all the reasons advanced in the Review, this implies that Australia has even more reason to take a genuine leadership role in triggering global initiatives to avoid catastrophic consequences. Unfortunately this will not be achieved by the incremental policy formulations currently being proposed.

A different approach is required, based on a normative definition of emission reduction targets determined from the latest science, then working backwards to define the action required to achieve those targets. Action must be structured in the context of an emergency response, incorporating the concepts of an Irreversible and Catastrophic Harm Precautionary Principle, and a Principle of Intergenerational Neutrality.

The first priority of responsible government is to address major threats to national security. Climate change and the related issues of peak oil and energy security are arguably the greatest threats to national security Australia will face in the next decades, with potentially catastrophic implications. The legitimacy of any Federal Government now depends on its preparedness to acknowledge these realities and take the serious action required.

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“There is nothing more difficult to handle, more doubtful of success, and more dangerous to carry through than initiating change. The innovator makes enemies of all those who prosper under the old order, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is lukewarm partly from fear of their adversaries, who have the existing laws on their side, and partly because men are generally incredulous, never really trusting new things unless they have tested them by experience.”

Niccolo Machiavelli, The Prince, Ch.6 1514

References

i Garnaut Review, Interim Report February 2008

ii Garnaut Review, Draft Report June 2008

iii Garnaut Review, Targets & Trajectories – Supplementary Draft Report September 2008

iv ibid Draft Report P25

v Intergovernmental Panel on Climate Change

vi ibid Draft Report P27

vii ibid Targets and Trajectories, P6

viii “The Age of Consequences: The Foreign Policy and National Security Implications of Global Climate Change”, Centre for Strategic and International Studies, Washington DC, November 2007

ix “This is an emergency and for emergency situations we need emergency action”, Ban Ki-Moon, Un Secretary General, 7th November 2007

x “ — putting these two things together, the short term and medium term security of our oil markets, plus the climate change consequences of this energy use, my message is that, if we don’t do anything very quickly, and in a bold manner, the wheels may fall off. Our energy system’s wheels may fall off —— within the next seven years”, Fatih Birol, Chief Economist, International Energy Agency, 7th November 2007

xi “World leaders need to take action on the energy crisis that is taking shape before our eyes.—We need to act before crisis turns into catastrophe.”, Mohamed El Baradei, Director General, International Atomic Energy Agency, Financial Times, London, 24th July 2008

xii “Although dangerous climate change is already with us, we still have a good chance of being able to cope with it if we stay below 450ppm CO2e. This is the number we have to aim for. Any higher, and the risk of catastrophic climate change becomes just too great”, P98, The Hot Topic, Gabrielle Walker & Sir David King, 2008

xiii “Target Atmospheric CO2: Where Should Humanity Aim?”, Hansen, Sato, Kharecha et al, NASA Goddard Institute for Space Studies, 2008

xiv John Schellnhuber, Director, Potsdam Institute, The Guardian, 15th September 2008

xv “Global Climate Change – Looming as Health Risk Factor No.1?”, A.J.McMichael, ANU, Canberra, August 2008

xvi “Global Risks 2008”, World Economic Forum, January 2008

xvii “Carbon Pollution Reduction Scheme”, Australian Federal Government, July 2008

xviii “Modelling Success – Designing an ETS That Works”, Business Council of Australia, August 2008

xix G8 meeting, Hokkaido, Japan 9th July 2008

xx ibid Targets and Trajectories, September 2008

xxi “Climate Code Red”, Philip Sutton & David Spratt, July 2008

xxii “Worst Case Scenarios”, Cass R. Sunstein, Harvard University Press, 2007

xxiii “Scenarios, Real Options and Integrated Risk Management”, K.D.Miller & H.G.Waller, Long Range Planning 36, 2003, P93-107

xxiv Association for the Study of Peak Oil, 2007 Base Case

xxv “Crude Oil – The Supply Outlook”, Energy Watch Group, October 2007

xxvi “Implications of “Peak Oil” for Atmospheric CO2 and Climate, P.A.Kharecha & J.E.Hansen, NASA Goddard Institute for Space Studies, March 2008

xxvii ibid Draft Report, Chapter 20

xxviii World Energy Outlook 2008, International Energy Agency, Paris

xxix “Rapid and Surprising Change in Australia’s Future – anticipating and preparing for future challenges and opportunities on the way to a sustainable Australia”, Australia 21 Monograph, October 2007

xxx ibid Draft Report, P2