Too big to flood? Megacities face a future of major storm risks

Bruce Stutz in the Guardian Environment Network (via Yale Environment 360): By the middle of the century, the scores of billions it cost to compensate the greater New York City area for being unprepared for superstorm Sandy may seem like a bargain. Without major adaptation measures to increase the level of storm protection beyond a 1-in-100-year event, the value of the city's buildings, transportation, and utilities utility infrastructures currently at risk from storm surges and flooding — an estimated $320 billion — will be worth $2 trillion by 2070, according to continuing studies by the Organization for Economic Cooperation and Development (OECD).

...Some of those cities with the most at-risk assets now — Tokyo, New Orleans, Amsterdam, Rotterdam, and Nagoya — will, over the next 50 years, be surpassed by Calcutta, Shanghai, Mumbai, Tianjin, Bangkok, Ningbo, and Ho Chi Minh City, booming Asian coastal metropolitan areas where trillions of dollars in economic assets will be vulnerable. So will many millions of these cities' residents, most of them poor and living in low-lying areas.

Just as banks grew "too big to fail," over the next half-century these coastal megacities may grow "too big to flood." But flood they will unless they dramatically revise their growth strategies and undertake major infrastructure projects designed to protect them from the dual threat of rising sea levels and intensifying storms, experts say.

Based on the conservative assumption that sea levels will rise by only 18 inches by 2070, the OECD finds that total assets vulnerable to flooding and storm surges of just 10 of these cities could account for some 9 percent of the world's GDP. But many climate scientists and coastal experts note that sea level rise forecasts by groups such as the Intergovernmental Panel on Climate Change did not factor in the melting of the Greenland and Antarctic ice sheets. When they are taken into account, these experts say that global sea levels could well rise 3 to 6 feet this century, leaving scores of cities and massive amounts of economic infrastructure dangerously exposed....

Employees from MTA New York City Transit worked to restore the South Ferry subway station after it was flooded by seawater during Hurricane Sandy. Photo: Metropolitan Transportation Authority / Patrick Cashin. Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license

Where are the climate change investments? A Carbon Based Original

    Markets can fall prey to inefficiencies or fail altogether. The annals of investment are replete with tales of visionary investors who find ways to exploit these failures.      Climate change, in addition to being a global emergency, is also a market failure.  In the words of climate economist Nicholas Stern in 2007, "Climate change is the greatest market failure the world has ever seen, and it interacts with other market imperfections."

    So where are the investors who are profiting from exploiting this failure?  In fact, their numbers are small, and so far their performance has not attracted other asset managers. 

    One disadvantages is that investors in climate change do not have need politicians committed to the right policies.  As Stern put it, "The first is the pricing of carbon, implemented through tax, trading or regulation. The second is policy to support innovation and the deployment of low-carbon technologies. And the third is action to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change."

    Investments in the right actions face a political headwind. Instead of a concerted three-pronged push, would-be climate investors face virulent obstruction from conservative politicians.   These politicians and their fossil fuel backers work indefatigably to thwart all measures to price carbon. They do their utmost to thwart any large-scale post-carbon investing -- witness the near-criminalization of renewable energy at the hands of congressional Republicans.  They spout fossil fuel propaganda unabated even though governments and businesses pursue hundreds of small improvements in energy efficiency, and a majority of Americans believe climate change is real.

    Hostility from politicians and lobbyists is not the only obstacle. Psychology and cognitive habits place another barrier in the way of investing profitably in climate change action.

    Most people rarely notice long-term, lumbering problems for a number of cognitive and psychological reasons.  Their time horizon is too short. The climate signal emerges too slowly from the noise to command investors' attention.

    Traders, for example, operate in the briefest of short runs, and for them, climate change has hardly any existence at all. They buy securities, hold them for just a moment. 

    Investors work with a time horizon of three months to a year.  But even this somewhat longer field of view is the blink of the climate's eye. 

    Some asset managers defy this tendency, focusing on climate and renewable energy as investments, but most other investors quickly lose interest. 

    The time horizon problem even bedevils insurance, the one industry that cares the most about climate change right now.  Insurers have an immediate and obvious stake in reducing climate risk, since clients' disaster losses determine how profitable they are. 

    A growing number of property and casualty firms are focused on climate change. They are cutting their own emissions, taking climate into consideration in their portfolios, spelling out and communicating the risks of climate change, and even trying to influence policy. 

    Does this mean we should put our money in climate-savvy insurers?  Sometimes the industry does well, but the nature of the risk business prevents them from reaping extravagant payoffs. 

    The time horizon of insurers is one year -- policies are renewed every twelve months, usually in January.  Their judgment of their portfolios' risks only needs to be correct enough for a year. 

    Skill at assessing risk is only one part of the insurance business. The other half is investing. Insurers invest the premiums they take in, resulting in some of the largest asset pools in the world.  Their bias is conservative and short-term, since they might face large losses that could force them to unwind their portfolio in a hurry. In short, an insurer that has an acute understanding of climate risks has a better chance for staying in business, but it won't perform like a boom stock.

    Between the difficulty of thinking long term and fierce political opposition, sound climate investing has languished. That's alarming because all of us have a stake in stopping greenhouse gas emissions and reducing the harshness of its impacts. It should be profitable to do so.

Dunes at Gran Canaria, shot by Marc Ryckaert (MJJR), Wikimedia Commons, under the Creative Commons Attribution 3.0 Unported license

Protecting New Jersey from future storms could cost billions

James M. O'Neill in NorthJersey.com: The price of protecting New Jersey from rising sea levels and the devastation of future storms is breathtaking, making it seem at times that the problem is insurmountable.

Some options that have been floated include $7.4 billion to buy all 13,300 structures in the Passaic River basin at risk of being flooded by a catastrophic storm, or $2.7 billion for a tunnel to protect Wayne and other towns by guiding storm runoff out to Newark Bay.

While the huge engineering projects garner much of the attention, some experts argue that less glamorous, lower-priced and smaller-scale initiatives replicated over a wide area can often produce dramatic results. Many of these strategies — from rebuilding beaches and dunes that have been scoured away by waves, to improved building codes that help structures withstand storms — have already proved effective in New Jersey.

The specifics of certain proposals can be debated, but most agree something needs to be done. Just in the past year or so, the state has been hammered by unusually intense storms that have caused damage in very different ways. Sandy pounded the Jersey Shore and the state’s electrical grid while swamping Moonachie and Little Ferry as well as the region’s largest sewage treatment plant. In August of 2011, Hurricane Irene caused historic flooding along the Passaic River. The October snowstorm of 2011 downed trees and put much of North Jersey in the dark.

“The results of Sandy were devastating and it wasn’t even a Category 1 hurricane when it hit,” said Lisa Auermuller, a watershed coordinator at Rutgers University’s Institute for Marine and Coastal Sciences. “Storms are likely to be more severe over time. And with sea level rise, even regular tides are going to be higher. Some shore communities are already seeing that.”...

Soldiers assist residents displaced by Hurricane Sandy in Hoboken, N.J., Oct. 31, 2012. The soldiers are assigned to the New Jersey National Guard. US Army photo

Norway fund tightens rules to protect forests

Reuters: Norway's $650 billion sovereign wealth fund has started asking companies it invests in to minimize their impact on rainforests, green groups said on Friday, welcoming a shift they hoped would make it rethink some deals. The fund, one of the world's biggest investors, made the changes to its guidelines in September without fanfare.

"We hope this will mean Norway stops investing and pulls out of many companies that are damaging rainforests," said Nils Hermann Ranum, spokesman of the Rainforest Foundation Norway.

Environmentalists have in the past accused Norway of investing uncritically in industries that threaten forests, such as palm oil, oil and gas, cattle ranching, logging, pulp and paper and hydropower dams. A central bank official did not comment on the specific accusations but said the fund, which manages the country's surplus oil revenue, had a long-running policy of not investing in companies that damaged the environment.

The fund's guidelines, posted online, said Norway "expects companies to manage risk associated with the causes and impacts of climate change resulting from greenhouse gas emissions and tropical deforestation."

The companies had to provide information on the impact of their work on forests over time and how it complied with international standards to protect forests, according to the rules. The fund's guidelines had referred to global warming in the past, but it was the first time they had mentioned rainforests, said the green groups....

A foggy forest in Telemark, shot by Ernst Vikne, Wikimedia Commons via Flickr, under the Creative Commons Attribution-Share Alike 2.0 Generic license