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Fortune Magazine Sounds Alarm About Costs of Climate Impacts



The High Cost Of Climate Change

To some researchers, Katrina looks like a harbinger of much more catastrophic weather to come.


Fortune Magazine, By David Stipp, Sept. 2, 2005


To New Orleans residents, Hurricane Katrina must seem like an incredibly bad piece of meteorological luck that could only happen once in a lifetime. But to many climate researchers, it looks like a harbinger of things to come-with catastrophic regularity-as the world's atmosphere heats up.


In fact, less than a month before Katrina hit the Gulf Coast, Massachusetts Institute of Technology researcher Kerry Emanuel published a portentous paper in the journal Nature that illustrated how hurricanes' destructive potential has risen dramatically over the past few decades, in tandem with global warming. And a few weeks before Emanuel's paper, the Association of British Insurers issued an equally ominous report on the growing financial risks posed by extreme weather events due to global warming. It predicted that the U.S. may suffer losses from single hurricanes of up to $150 billion. (To put that in perspective, Hurricane Andrew racked up losses of

about $30 billion when it slammed Florida and Louisiana in 1992.)


While the great majority of climate researchers believe that global warming is real (and also that it is partly caused by human emissions of greenhouse gases such as carbon dioxide from burning fossil fuels), no one says Katrina sprang directly from the warming-that would be like arguing that a particular stock's plunge last Tuesday was caused by the onset of a bear market a year ago. But Emanuel and other experts have warned for over a decade that global warming may be creating an environment prone to more violent storms, droughts and other weather extremes, just as a bear market can pave the way for an outsized drop in a particular company's stock price.


Global warming is certainly controversial-while some researchers see evidence that it's contributing to the recent uptick in extreme storms, others argue that the number of bad hurricanes in recent years merely reflects a natural weather variation. But the science of how warmer weather induces violent storms isn't.

Hurricanes suck energy from warm waters to drive their winds. So as

sea-surface temperatures rise, the storms absorb more energy that gets pumped

out in the form of high-speed winds.


To be sure, most of the escalating property losses from hurricanes in recent years stem from the fact that more and more people are putting their homes in harm's way. From 1980 to 2003, the U.S. coastal population grew by 33 million, and is expected to swell by a further 12 million by 2015, according to the British insurers' report.  Some experts assert that this socioeconomic trend has been, and will continue to be, far more important than climate change in boosting hurricane risks. A forthcoming paper co-authored by University of Colorado researcher Roger Pielke Jr. argues that by 2050, hurricane losses due to both coastal population growth and

the rising value of coastal property will be 22 to 60 times greater than those that are potentially caused by global warming's effects. Ironically, MIT's Professor Emanuel was a co-author of that paper.  But after compiling the startling data on intensifying hurricanes, he says, "I changed my mind" and struck his name from the authors' list.


Indeed, he adds, "a lot of my colleagues are still in a state of disbelief" about his recently published data, which strongly suggest that storms are getting worse in a pattern that closely tracks rising sea-surface temperatures that are thought to be partially due to global warming.


Emanuel found that since 1949, the average peak wind speeds of hurricanes over the North Atlantic and the western and eastern North Pacific hasincreased by a whopping 50%. Such increases have huge consequences, Emanuel notes, since even a small increase in wind speed can produce dramatic increases in damage-a 50% rise in a hurricane's wind speed more than triples its destructive potential. Meanwhile the duration of the storms, in terms of the total number of days they lasted on an annual basis, rose by roughly 60%. Almost wildly understating his work's implications, Emanuel concluded that global warming and increasing coastal population "may lead

to a substantial increase in hurricane-related losses."


The British insurance association report, titled "Financial Risks of Climate Change," was similarly cautious: Rising losses from extreme weather are mainly due to the rising number and value of property in harm's way, it states, though the "trends to date (in devastating weather) are consistent with what we might expect as climate change intensifies." But the report's survey of recent weather extremes is anything but reassuring. Among other things, the study found



      * Each year since 1990, there have been at least 20 weather events categorized as significant natural catastrophes. There were only three years that bad among the 20 years preceding 1990


      * Four hurricanes that hit the U.S. last year racked up a record $56 billion in total losses over a period of just a few weeks, setting an annual record for such losses.


      * Last year 10 typhoons hit Japan, four more than the previous record, making it the costliest year ever for typhoon damage there.


      * In 2003, Europe suffered the hottest summer of the past 500 years, causing 22,000 premature heat-related deaths. Accompanying wildfires caused $15 billion of losses. Changes in the weather appear to have already doubled the chance of such hot summers.


      * The number of severe winter storms in Britain has doubled over the last 50 years.


The report also notes disturbing recent data indicating that Atlantic hurricane activity is on the rise. The data aren't clear cut-hurricane activity goes up and down in decades-long cycles related to changes in ocean currents, potentially masking a long-term rise due to global warming.  Still, the average number of hurricanes in the current "up" cycle, which began in the mid-1990s, is higher than during the previous

upswing-a indication that global warming is boosting the effects of the longstanding, natural variation in hurricane activity. Between 1996 and 2004, for example, an average of almost eight hurricanes a year formed in the North Atlantic, according to the U.S. National Hurricane Center. During the previous upswing in activity, roughly between 1926 and 1970, an average of fewer than six hurricanes formed in the North Atlantic every year. The ten-year moving average of hurricane activity in the Atlantic also is rising.


In order to calculate the financial risk of the future weather patterns, the British insurance researchers assumed a modest 6% increase in average hurricane wind speeds by 2080, based on data from the Intergovernmental Panel on Climate Change, an international group whose work represents the closest thing to the consensus wisdom on global warming. After excluding damage from storm surges (which caused most of Katrina's devastation) and the effect of increasing coastal populations, they calculated that average annual wind damage costs alone from storms would rise by 65%. (Insurance premiums would similarly rise, of course.) The insured losses from worst-case "hypercanes"-extremely powerful hurricanes-would soar to about $150 billion each (compared with $66 billion for the World Trade Center attack, the costliest disaster to date).


The British report offered a few upbeat notes:  Steps to limit carbon dioxide emissions could avoid 80% of the projected additional hurricane costs. But there are few signs that broad efforts to curb such emissions will bear fruit-the U.S., for example, has refused to sign the 1997 Kyoto Protocol, a global plan to reduce greenhouse-gas emissions.


Another recent development is perhaps even more indicative of just how effective efforts to curb emissions will be. Zurich-based insurer Swiss Re has announced that it will cover corporate directors and officers for liabilities incurred in possible future lawsuits brought against companies with high greenhouse emissions.