Tomorrow (November 29), I'm at NYC's Strand Books with my novel The Lost Cause, a solarpunk tale of hope and danger that Rebecca Solnit called "completely delightful."
Conservatives may deride the "reality-based community" as a drag on progress and commercial expansion, but even the most noxious pump-and-dump capitalism is supposed to remain tethered to reality by two unbreakable fetters: auditing and insurance:
No matter how much you value profit over ethics or human thriving, you still need honest books – even if you never show those books to the taxman or the marks. Even an outright scammer needs to know what's coming in and what's going out so they don't get caught in a liquidity trap (that is, "broke"), or overleveraged ("broke," again) exposed to market changes (you guessed it: "broke").
Unfortunately for capitalism, auditing is on its deathbed. The market is sewn up by the wildly corrupt and conflicted Big Four accounting firms that are the very definition of too big to fail/too big to jail. They keep cooking books on behalf of management to the detriment of investors. These double-entry fabrications conceal rot in giant, structurally important firms until they implode spectacularly and suddenly, leaving workers, suppliers, customers and investors in a state of utter higgeldy-piggeldy:
In helping corporations defraud institutional investors, auditors are facilitating mass scale millionaire-on-billionaire violence, and while that may seem like the kind of fight where you're happy to see either party lose, there are inevitably a lot of noncombatants in the blast radius. Since the Enron collapse, the entire accounting sector has turned to quicksand, which is a big deal, given that it's what industrial capitalism's foundations are anchored to. There's a reason my last novel was a thriller about forensic accounting and Big Tech:
But accounting isn't the only bedrock that's been reduced to slurry here in capitalism's end-times. The insurance sector is meant to be an unshakably rational enterprise, imposing discipline on the rest of the economy. Sure, your company can do something stupid and reckless, but the insurance bill will be stonking, sufficient to consume the expected additional profits.
But the crash of 2008 made it clear that the largest insurance companies in the world were capable of the same wishful thinking, motivated reasoning, and short-termism that they were supposed to prevent in every other business. Without AIG – one of the largest insurers in the world – there would have been no Great Financial Crisis. The company knowingly underwrote hundreds of billions of dollars in junk bonds dressed up as AAA debt, and required a $180b bailout.
Still, many of us have nursed an ember of hope that the insurance sector would spur Big Finance and its pocket governments into taking the climate emergency seriously. When rising seas and wildfires and zoonotic plagues and famines and rolling refugee crises make cities, businesses, and homes uninsurable risks, then insurers will stop writing policies and the doom will become undeniable. Money talks, bullshit walks.
But while insurers have begun to withdraw from the most climate-endangered places (or crank up premiums), the net effect is to decrease climate resilience and increase risk, creating a "climate risk doom loop" that Advait Arun lays out brilliantly for Phenomenal World:
Part of the problem is political: as people move into high-risk areas (flood-prone coastal cities, fire-threatened urban-wildlife interfaces), politicians are pulling out all the stops to keep insurers from disinvesting in these high-risk zones. They're loosening insurance regs, subsidizing policies, and imposing "disaster risk fees" on everyone in the region.
But the insurance companies themselves are simply not responding aggressively enough to the rising risk. Climate risk is correlated, after all: when everyone in a region is at flood risk, then everyone will be making a claim on the insurance company when the waters come. The insurance trick of spreading risk only works if the risks to everyone in that spread aren't correlated.
Perversely, insurance companies are heavily invested in fossil fuel companies, these being reliable money-spinners where an insurer can park and grow your premiums, on the assumption that most of the people in the risk pool won't file claims at the same time. But those same fossil-fuel assets produce the very correlated risk that could bring down the whole system.
The system is in trouble. US claims from "natural disasters" are topping $100b/year – up from $4.6b in 2000. Home insurance premiums are up (21%!), but it's not enough, especially in drowning Florida and Texas (which is also both roasting and freezing):
Insurers who put premiums up to cover this new risk run into a paradox: the higher premiums get, the more risk-tolerant customers get. When flood insurance is cheap, lots of homeowners will stump up for it and create a big, uncorrelated risk-pool. When premiums skyrocket, the only people who buy flood policies are homeowners who are dead certain their house is gonna get flooded out and soon. Now you have a risk pool consisting solely of highly correlated, high risk homes. The technical term for this in the insurance trade is: "bad."
But it gets worse: people who decide not to buy policies as prices go up may be doing their own "motivated reasoning" and "mispricing their risk." That is, they may decide, "If I can't afford to move, and I can't afford to sell my house because it's in a flood-zone, and I can't afford insurance, I guess that means I'm going to live here and be uninsured and hope for the best."
This is also bad. The amount of uninsured losses from US climate disaster "dwarfs" insured losses:
As carbon emissions continue to accumulate, more people are put at risk of climate disaster, while the damages from those disasters intensifies. Vulnerability will drive disinvestment, which in turn exacerbates vulnerability.
Also: the browner and poorer you are, the worse you have it: you are impacted "first and worst":
As Arun writes, "Tinkering with insurance markets will not solve their real issues—we must patch the gaping holes in the financial system itself." We have to end the loop that sees the poorest places least insured, and the loss of insurance leading to abandonment by people with money and agency, which zeroes out the budget for climate remediation and resiliency where it is most needed.
The insurance sector is part of the finance industry, and it is disinvesting in climate-endagered places and instead doubling down on its bets on fossil fuels. We can't rely on the insurance sector to discipline other industries by generating "price signals" about the true underlying climate risk. And insurance doesn't just invest in fossil fuels – they're also a major buyer of municipal and state bonds, which means they're part of the "bond vigilante" investors whose decisions constrain the ability of cities to raise and spend money for climate remediation.
When American cities, territories and regions can't float bonds, they historically get taken over and handed to an unelected "control board" who represents distant creditors, not citizens. This is especially true when the people who live in those places are Black or brown – think Puerto Rico or Detroit or Flint. These control board administrators make creditors whole by tearing the people apart.
This is the real doom loop: insurers pull out of poor places threatened by climate disasters. They invest in the fossil fuels that worsen those disasters. They join with bond vigilantes to force disinvestment from infrastructure maintenance and resiliency in those places. Then, the next climate disaster creates more uninsured losses. Lather, rinse, repeat.
Finance and insurance are betting heavily on climate risk modeling – not to avert this crisis, but to ensure that their finances remain intact though it. What's more, it won't work. As climate effects get bigger, they get less predictable – and harder to avoid. The point of insurance is spreading risk, not reducing it. We shouldn't and can't rely on insurance creating price-signals to reduce our climate risk.
But the climate doom-loop can be put in reverse – not by market spending, but by public spending. As Arun writes, we need to create "a global investment architecture that is safe for spending":
Public investment in emissions reduction and resiliency can offset climate risk, by reducing future global warming and by making places better prepared to endure the weather and other events that are locked in by past emissions. A just transition will "loosen liquidity constraints on investment in communities made vulnerable by the financial system."
Austerity is a bad investment strategy. Failure to maintain and improve infrastructure doesn't just shift costs into the future, it increases those costs far in excess of any rational discount based on the time value of money. Public institutions should discipline markets, not the other way around. Don't give Wall Street a veto over our climate spending. A National Investment Authority could subordinate markets to human thriving:
Insurance need not be pitted against human survival. Saving the cities and regions whose bonds are held by insurance companies is good for those companies: "Breaking the climate risk doom loop is the best disaster insurance policy money can buy."
I found Arun's work to be especially bracing because of the book I'm touring now, The Lost Cause, a solarpunk novel set in a world in which vast public investment is being made to address the climate emergency that is everywhere and all at once:
There is something profoundly hopeful about the belief that we can do something about these foreseeable disasters – rather than remaining frozen in place until the disaster is upon us and it's too late. As Rebecca Solnit says, inhabiting this place in your imagination is "Completely delightful. Neither utopian nor dystopian, it portrays life in SoCal in a future woven from our successes (Green New Deal!), failures (climate chaos anyway), and unresolved conflicts (old MAGA dudes). I loved it."
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
It turns out that more women die due to natural disasters than men.
I’m sure all of you had many different reactions, ranging from “duh, women are weaker” to “that can‘t be true”. But it is true, and it’s got little to do with women’s physical constitution.
Take the 2004 Tsunami in South- and South-East-Asia. More women died than men, and it’s largely attributable to girls not learning to swim and climb trees because those are considered “male activities”. Take a different tsunami on the Indonesian coast. Again, it was mostly women that died, but this time because the men were out at sea. In case that confuses you as much as it does me, tsunamis build most of their height as they approach the coast. In any case, women were home in their coastal villages, tending to their dependents, cooking and the likes, and this division of labour made them more vulnerable.
But it’s not just disasters. It’s everyday things. Like women cooking over open fires in badly ventilated huts, which makes them more likely to die from exposure to black smoke. Or women being responsible for fetching water, an increasingly burdensome task as water becomes more scarce. Or women being less likely to own their land, making it harder for them to adopt climate resilient agricultural strategies like agroforestry, besides having worse access to information on such techniques.
Let me be very clear though. This doesn’t mean all women - it depends on socio-economic status, local context, age, marital status, health, and much more. In some cases, men are more vulnerable because they are more likely to work outdoors, some widowed men are burdened with the tasks their wives used to complete, and such. And what about everyone who doesn’t fit neatly into the female / male categories? Because we are talking about gender here, and the social norms and attitudes that go with it.
Still, we live in a world in which more women than men are poor, have worse access to resources, take care of children, the elderly and the sick, fetch fuelwood and water and such, whcih makes them more vulnerable to climate change. That should be reflected in our efforts to increase climate resilience, because resilience means resilience of everyone. Nobody is safe until everyone is safe should extend far, far beyond the big C.
Sources:
Photo by Kevin Freyer
E. Neumayer, T. Plümper (2008). The Gendered Nature of Natural Disasters: The Impact of Catastrophic Events on the Gender Gap in Life Expectancy, 1981–2002. Retrieved from https://www.tandfonline.com/doi/pdf/10.1111/j.1467-8306.2007.00563.
WHO (2016). Changement climatique, genre et santé. Retrieved from https://apps.who.int/iris/bitstream/handle/10665/204177/9789242508185_fre.pdf?sequence=1&isAllowed=y
UN Women (2016). Leveraging Co-Benefits Between Gender Equality and Climate Action for Sustainable Development. Retrieved from https://unfccc.int/files/gender_and_climate_change/application/pdf/leveraging_cobenefits.pdf
J. Lau, D. Kleiber, S. Lawless, P. Cohen (2021). Gender equality in climate policy and practice hindered by assumptions. Retrieved from https://www.nature.com/articles/s41558-021-00999-7
The Biden administration on Thursday began a process to amend federal procurement rules to require the U.S. government - the world's largest buyer of goods and services - to factor the risks of climate change into its contracts.
Excerpt from this story from Reuters:
The Biden administration on Thursday began a process to amend federal procurement rules to require the U.S. government - the world's largest buyer of goods and services - to factor the risks of climate change into its contracts.
The administration put out a notice of proposed rulemaking seeking input over 60 days from federal contractors on an amendment to the Federal Acquisition Regulation to ensure it "minimizes the risk of climate change."
The rulemaking process carries out an executive order by President Joe Biden in May that seeks to help slash greenhouse gas emissions through the supply chain and make it more resilient to the impacts of climate change.
“Today’s action sends a strong signal that in order to do business with the Federal government, companies must protect consumers by beginning to mitigate the impact of climate change on their operations and supply chains," said Shalanda Young, acting director of the White House Office of Management and Budget.
This infographic realised for Carbon Tracker accompanies an analyst note on the Energy Transition. The study by Kingsmill Bond finds that the energy transition tipping point for policy makers is coming. Renewables solve the energy trilemma because they are now cheaper than fossils, cleaner than fossils, and enhance energy security
What’s the single word that fossil fuel giant ExxonMobil’s flagship environmental reports to investors and the public tie most closely to climate change and global warming?
According to newly published research from Harvard science historian Naomi Oreskes and Harvard research associate Geoffrey Supran, it’s a simple four-letter word, one that carries overtones not only of danger, but also — crucially — of uncertainty: risk.
Oreskes and Supran argue in the peer-reviewed study published in the journal One Earth, that by repeating that word over and over as it discusses climate change ExxonMobil continues to connect climate change to uncertainty, even in its most carefully worded and most scrutinized discussions of the topic.
That tiny word is one sign of a massive change underway in how fossil fuel companies talk about climate change in places where it’s no longer considered credible to contest climate science. Instead, Oreskes and Supran write, ExxonMobil’s statements subtly shift responsibility for climate change onto the shoulders of consumers, while avoiding the need to describe in detail the risks that are posed by climate change.
And that, for the record, is a lot to gloss over — not just in terms of what scientists predict about the future, but in terms of what climate change has already played a role in bringing about. Last year, for example, tied with 2016 as the “warmest” year on record, according to NASA — 2020 brought a brutal drumbeat of climate-linked calamities, including a record-obliterating wildfire season on the West Coast that memorably turned skies orange and red and an extraordinarily intense Atlantic hurricane season.
The way that ExxonMobil talks about climate change, the paper suggests, lets the company thread a very specific rhetorical needle, communicating two ideas that fundamentally benefit their interests. “On the one hand, ‘risk’ rhetoric is weak enough to allow the company to maintain a position on climate science that is ambiguous, flexible, and unalarming,” the researchers write. “On the other, it is strong enough—and prominent enough, in [New York Times] advertorials and elsewhere—that ExxonMobil may claim that the public has been well informed about [anthropogenic global warming].”
And if that approach feels a little familiar, maybe that’s because it’s very similar to the tactics used by another industry in the past: Big Tobacco. “Akin to early, tepidly worded warning labels on cigarette packages, ExxonMobil’s advertorials in America’s newspaper of record help establish this claim, sometimes explicitly: ‘Most people acknowledge that human-induced climate change is a long-term risk,’ a 2001 advertorial states (emphases added),” the paper continues. “‘The risk of climate change and its potential impacts on society and the ecosystem are widely recognized,’ says another the following year.”
After hurricanes, mortgage lenders offload more of their vulnerable loans to Fannie Mae and Freddie Mac, whose rules prevent them from saying no.
Say somebody has a nice house on the coast. Not a mansion, just a nice, comfortable house. Maybe for retirement. Along comes the oceans, rising up, particularly with moon tides, first making puddles, then eroding the foundations. Next comes a storm, not necessarily a hurricane, that floods coastal communities, including this nice house. Or maybe a tropical storm or hurricane comes along, with its coastal surge and intense rainfall. House wrecked or seriously damaged. Insurance, if the homeowners even have insurance, has a high deductible. Homeowners can’t afford to fix the nice house, so they walk, and the mortgage goes into default. 2008 all over again, but this time caused by extreme weather that we knew, and the homeowners knew, and the lending banks knew, was coming. Who pays for that defaulted mortgage? We do, the taxpayers, because federal housing agencies have insured the mortgage.
Excerpt from this New York Times story:
Banks are shielding themselves from climate change at taxpayers’ expense by shifting riskier mortgages — such as those in coastal areas — off their books and over to the federal government, new research suggests.
The findings echo the subprime lending crisis of 2008, when unexpected drops in home values cascaded through the economy and triggered recession. One difference this time is that those values would be less likely to rebound, because many of the homes literally would be underwater.
In a paper to be released Monday, the researchers say their findings show “a potential threat to the stability of financial institutions.” They warn that the threat will grow as global warming leads to more frequent and more severe disasters, forcing more loans to go into default as homeowners cannot or would not make mortgage payments.
“We’re talking about a loss that’s going to be borne by United States taxpayers,” said Amine Ouazad, a professor in the department of applied economics at HEC Montreal and one of the paper’s authors. He added that with between $60 billion to $100 billion in new mortgages issued for coastal homes each year, “we’re not talking about a small number.”
Mr. Ouazad, along with his co-author Matthew Kahn, a professor at Johns Hopkins University, examined the behavior of mortgage lenders in areas hit by hurricanes between 2004 and 2012, each of which caused at least $1 billion in damages. They found that, after those hurricanes, lenders increased by almost 10 percent the share of those mortgages that they sold to Fannie Mae and Freddie Mac, government-sponsored enterprises whose debts are backed by taxpayers.
Selling mortgages to Fannie and Freddie allows banks to avoid the financial risk that homeowners will default on the mortgages. Hurricanes increase that risk: Mr. Ouazad and Mr. Kahn found that the odds of an eventual foreclosure rise by 3.6 percentage points for a mortgage originated in the first year after a hurricane, and by 4.9 percentage points for a mortgage originated in the third year.
The regulations governing Fannie and Freddie do not let them factor the added risk from natural disasters into their pricing, which means banks and other lenders can offload mortgages in vulnerable areas without financial penalty. That increases the incentive for banks to make the loans and then move them off their books, the authors said.
Thinking about retiring in Las Vegas? Here's the water math nobody shows you
What if the retirement destination you're eyeing has a hidden countdown? The numbers on Las Vegas water are real, spelled out with federal data and 20-year cost projections – and they might change your whole plan. Dive into the full picture
