The day the dam broke--a Carbon Based original

    On December 26 in a local church, a neighbor read several stories by James Thurber.  One of these was "The Day the Dam Broke," which recounts a stretch of two hours in 1913 when sudden rumors of a failed dam in Columbus, Ohio, provoked a mass panic.  Thurber says, "The fact that we were all as safe as kittens under a cook stove did not, however, assuage in the least the fine despair and the grotesque desperation which seized upon the residents of the East Side when the cry spread like a grass fire that the dam had given way." 

    To comic effect, Thurber dwells on the terror that erupts instantly and the citizens' shamefaced return to their lives when no waters appear.  (Actually, a similar theme crops up in a number of Thurber stories, such as, "The Night the Bed Fell Down.")

    Residents fled east to avoid the rushing waters of the Scioto River. There were none. Authorities worsened the alarm.  Soldiers patrolling the streets announced that the dam had NOT failed.  Everyone heard as, "The dam has NOW failed.

    But were the citizens of Columbus so irrational to flee? Dams do break, and it's usually disastrous when they do.  In fact, in a real dam break, everyone downstream must act quickly to reach higher ground.  Thurber observes that everybody ran because the starting the cars of that era required a crank, and presumably that took too much time with an inundation gushing at one's heels.  

    The irrational part lay in not bothering to check for water, even after some minutes.  But coastal dwellers today, if they heard a tsunami warning, would remember the horrifying YouTube videos of the Aceh tidal wave coming ashore in 2010.  They would flee in an instant. I know I would.

    Nothing in Thurber's story considers the dam's soundness and its state of repair, or the quality of its management.  But presumably, after the panic of 1913, the leaders of Columbus probably checked the dam and made inquiries into what they could do to prepare for an actual dam break.  But that's a much less amusing story.

    This is how everyone wants climate change to turn out -- a hasty alarm that we slink away from when its foolishness is revealed. But of course, that doesn't fit the climate change pattern.  Evidence from direct observations, the paleoclimate record, and climate models all corroborate anthropogenic global warming.   This means intensified water cycles, more weather-related disasters, and a variety of other effects.

    What's more pertinent is speed. Climate change as a whole does not suddenly appear full blown. It builds slowly and on any given day doesn't impinge on people's minds or their lives. A catastrophe right in front of us grabs all our attention, but sorting out the climate signal it contains is not so obvious, nor is it the most pressing task when the waters are rising. 

    The analogy between Thurber's story and climate change would be even better if there were a well-funded movement in Columbus whose goal was to stop any effort to maintain the dam. Actually, something similar has happened to infrastructure in the United States, as state and local governments have allowed bridges, roads, dams, water treatment plants, and so on to fall into disrepair.  Decades of skimped maintenance has resulted in degraded service and outright failures.  The American Society of Civil Engineers gives US infrastructure a "D," and estimates a five-year investment of $2.2 trillion will be necessary to bring everything into good repair.

    We have time to prepare for slow-moving risks.  The cry of denialists notwithstanding, it's worth spending money today to avoid a catastrophe tomorrow.  Of course, we've already lost decades in the battle against climate change, thanks to fossil fuel industry's propaganda onslaught.  But there is still plenty we could do, and we will need to spend decades at it.

    Not long after our neighbor finished his Thurber reading, a sleeting snowstorm began, and was still underway a day later.  But everyone returned to their homes in an orderly way.

Thurber's own illustration for "The Day the Dam Broke"

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

Slow-onset disasters take toll

IRIN: In southwestern Bangladesh, recent large-scale water-logging - stagnant flood water that fails to recede - threatens agriculture and public health for years to come. It is a crisis in the making, highlighting the risks slow-onset natural disasters pose to poor countries, and how ill-prepared officials are to respond - even with ample early warning.

“At first glance, one would expect that, the slower the onset of a disaster, the better prepared we should be to mitigate its impacts,” UN Special Representative of the Secretary-General for Disaster Risk Reduction Margareta Wahlström told IRIN. “What we often find, instead, is that we [are] far too late to react.”

Last year, residents in Thailand had months of flood warnings, beginning in July 2011, as flooding upcountry triggered by a tropical storm slowly wound its way south. Flooding persisted in some areas until mid-January 2012. But even with ample warning, the disaster killed at least 628 people, affected more than 13 million people and damaged 20,000sqkm of farmland.

Khurshid Alam, former head of livelihoods and disaster reduction at ActionAid’s office in Bangladesh, said slow-onset disasters receive less media attention and are less dramatic than flash floods or cyclones. “The persistent water-logging of the Satkhira region in the country’s southwest is currently the most significant slow-onset disaster plaguing the country.”…

A village in the Satkhira district, in the Sundarbans, shot by C.S. Sprung, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license