January 28, 2013

Davos: Talking Champagne on a Sinking Titanic

Jim Harris

I am in Davos at the World Economic Forum (WEF) where the top issues that world leaders must address are: unstable global economy, eurozone fragility; and financial system instability. Climate change only ranks as the 7th issue. To me, it’s like a group of business leaders and “experts” on the sinking Titanic discussing the fragility of champagne sales. I am deeply concerned about the Alice-in-Wonderland perception of the environment’s big picture.


Later in the day the temperature rose to 15ºC, at 3 p.m. setting a new record according to Environment Canada.

It is deeply disturbing that we experience +15ºC in the middle of winter. And I am disturbed listening to the media commentary about how wonderful this warm weather is. A friend mentioned that the Magnolia tree in their neighbourhood was showing signs that it was about to bud. If this Spring weather continues in the middle of winter it will bud. And its flowering will be killed off with the inevitable return of winter weather.

The stability and predictability of the seasons is defined as “security” by many Aboriginal peoples. The changing of the weather on a global scale is bringing unprecedented, disastrous changes in human experience.

When I hear on the radio or in media how wonderful this mild weather is, I despair. Because to me it’s like people dancing as the Titanic is sinking, unaware of the impending consequences. And so the band played on… Yes, It is deeply disturbing. And frankly depressing.

In 2012 the sustained early spring-like weather during winter followed by the return of cold weather had a disastrous consequence for Niagara Apple growers as the trees budding were killed off by frost.

Wildly variable weather is having drastic economic consequences:

Munich Re, the largest re-insurance company worldwide, estimates that the final damage from Hurricane Sandy will top $50 billion — of which only half of the losses are insured. Never before has New York been hit by a Hurricane.

The drought that plagued the U.S. in the summer of 2012 was the worst since the 1930s. The consequence for farmers was devastating as the drought was combined with record-breaking heat. The consequence? An estimated $75-150 billion loss — making it the costliest natural disaster in U.S. history.

Australia has been plagued in January by the worst ever heat wave in Australian history — setting a new record of 40.3°C, for the highest national average temperature. The result? Wildfires have raged across Australia. And the temperatures have become so hot the country’s Bureau of Meteorology was forced to add a new color — deep purple — to heat maps to show areas that have exceeded all-time heat records. And it’s not just the interior of Australia that’s baking — on January 18, Sydney set a new a record-breaking 46.4ºC (115.5ºC).

Over the last 20 years, Greenland and the Antarctic have lost 4 trillion tons of ice.

Colony Collapse Disorder (CCD) is a phenomenon not well understood but colonies of bees are dying off. Causes are thought to be pesticides and cellphone tower radiation. The death to honey bees in North America would kill $15 billion of commercial agricultural crops.

So here’s my point: Just how many apocalyptic signs are required before global leaders get serious about preventing climate change and the preservation of natural capital? Apparently the answer is more.

I am in Davos at the World Economic Forum (WEF), which formally began Monday night. The top issues that world leaders must address, according to a survey of 1,500 experts in academica, business, civil society and governments conducted for WEF, are unstable global economy, eurozone fragility; and financial system instability. Climate change only ranks as the 7th issue — and then only for Climate Change Adaption, not urgently preventing the change in the first place.

To me it’s like a group of business leaders and “experts” on the sinking Titanic discussing the fragility of champagne sales. I am deeply concerned about the Alice-in-Wonderland perception of the big picture of what is happening to our world.

As one of my heroes, Thomas Berry, said: the earth economy is primary, the human economy a derivative. Bankruptcies in the earth economy are immediately followed by bankruptcies in the human economy. In other words, when there are no more Cod on the Grand Banks, Newfoundland fisheries go bankrupt.

In a ground breaking analysis in 1997 Robert Costanza and his colleagues estimated that the value of eco-services that the world’s eco-systems provide was $33 trillion— for instance the value of pollination that bees provide for free; the value that trees and plants provide by turning CO2 back into O2; and the value the hydrological cycle provides by raining — just to take a few examples. By comparison, the global cumulative national product was $18 trillion. In other words the value of the natural world far, far exceeds the value of the human economy.

Increasingly unpredictable, unstable, extreme weather events will drive increasing economic catastrophes. So if global leaders are concerned with economic stability, addressing economic fragility and building economic resilience, they should start with addressing the more fundamental issue first.

Signs of Hope

There are reasons for hope. One WEF report calls for $14 trillion of green investment in green technology and retrofitting.

The McKinsey Study Reducing US Greenhouse Gas Emissions: How Much at What Cost? highlights how 40 per cent of the CO2 cuts that were required to meet the Kyoto targets were highly profitable. I interviewed the senior partner in charge of the study — Jon Creyts. He pointed out that if the profit from these high ROI projects were invested in the next least cost solutions we could have got all the way to achieving the goals at zero cost to society!

Focusing on energy efficiency is not only highly profitable but will spur innovation, job creation and help businesses, homeowners and society as a whole cut costs and create energy and economic security. This is the point of a report entitled More Bang for Our Buck: How Canada can Create More Energy Jobs and Less Pollution. Every $1 million invested in oil and gas only creates two jobs, while by contrast investing in energy efficiency creates 15 jobs, and has the economic benefit of insulating business and homeowners from the inevitable rise in energy prices.

Another McKinsey study: The Case for Investing in Energy Productivityhighlights that the internal rate of return (IRR) for investing in energy efficiency is 17 per cent. I like to note that by comparison the returns for investing in the stock market over the long term is 10 per cent and real estate 16 per cent — the two vehicles that we’ve been told create the best long term results.

Globally, oil and gas receive $557 billion a year in subsidies according the International Energy Agency (IEA) and $700-800 billion a year according to the head of the United Nations Environment Program. Why are global governments subsidizing the most profitable industry in the world? Why are governments literally subsidizing climate change? I thought that subsidies were supposed to be for new emerging industries, not highly profitable, mature ones.

And so I question how relevant the discussions are at Davos when world leaders are addressing symptoms, rather than the root causes of the challenges we face. And our economic system is liquidating natural capital and recording it as income.

Jim Harris is in Davos at the World Economic Forum for the launch Corporate Knights’ Global 100 — the ranking of the 100 most responsible firms with a market cap of $2 Billion or more which are doing the best job of charting a sustainable path based on 12 key performance indicators. For more information see http://www.global100.org/ You can follow his live tweeting from Davos at @JimHarris

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