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Opinion | The Heat Is Already On

Last week Stuart Kirk, the head of responsible investing (!) for HSBC’s asset management division, gave a talk titled “Why investors need not worry about climate risk,” in which he declared that it’s no big deal: “Who cares if Miami is six meters underwater in 100 years? Amsterdam has been six meters underwater for ages, and that’s a really nice place. We will cope with it.”

Kirk has reportedly been suspended, although the Financial Times also reports that his theme and content had been “approved internally” before the talk. Still, his self-immolation may be helpful in making a crucial counterpoint: Investors — and, more important, human beings — need to worry about climate risks right now. For climate change isn’t something that will happen decades in the future; its effects are happening as you read this. And while we may “cope with it” for a while, there will come a point when we can’t — and the scale of catastrophe will be immense.

There are several forms of climate denialism. Kirk simply offered one version — still unforgivable from someone who’s supposed to be a risk manager — which goes, “Hey, what’s the big deal if the planet gets a degree or two warmer?”

With apologies to climate scientists, who know that I’m about to perpetrate a vast oversimplification, and further apologies for my D.I.Y. artwork, I present a schematic explanation of why that argument is all wrong.

Weather fluctuates, and extreme weather events happened even before mankind began burning vast quantities of fossil fuels. For a particular location — say, northern India — the distribution of temperatures might have looked something like this:

I’m assuming — again, a huge oversimplification — that there’s some critical temperature that represents a danger point. The shaded area represents the frequency with which that threshold would have been exceeded before the fossil fuel era.

Now imagine that a buildup of greenhouse gases raises average temperatures, shifting the probability distribution to the right. Even if the average temperature — the peak of the bell-shaped curve — remains below the danger level, the frequency of episodes of dangerously high temperatures may dramatically increase:

It’s not just temperature, of course; it’s all the side effects of the temperature rise. Climate change increases the frequency of destructive storm surges, severe droughts and more.

Once you understand this point, you realize that the effects of climate change are all around us. Last week, for example, an extraordinary heat wave struck much of southern Europe, fortunately after I did my cycling trip in Portugal:

Such heat waves have happened before, but climate change has made them increasingly common. According to one estimate, the record-breaking heat wave that struck India and Pakistan this spring was 30 times more likely than it would have been without human-caused climate change.

Or consider the megadrought now afflicting the Western United States:

There have always been Western droughts. But this one, which has now gone on for more than two decades and has reduced water levels in key reservoirs to record lows, is the worst in at least 1,200 years.

So climate change isn’t an issue for the distant future. Its effects are happening already, although there’s surely much worse to come.

But will we, as HSBC’s Kirk asserted, “cope with it”? For a while, yes.

Modern societies — certainly high-income countries like America, and even lower-middle-income nations like India — have far more capacity to deal with problems than preindustrial societies. They can aid hard-hit regions; they can adapt their agriculture and living arrangements to changing weather; they can probably preserve the appearance of more or less normal life for years to come.

But there’s a well-known proposition in my original academic home field of international economics known as Dornbusch’s Law, named after the Massachusetts Institute of Technology economist (and my mentor) Rudiger Dornbusch: “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” Rudi was talking about currency crises, but his rule applies to other crises too.

What I fear — and, alas, expect — is that for years, maybe even decades, to come we’ll avoid the worst-case scenarios for climate disaster. Famines may kill millions, but not tens of millions, because food will be rushed in when crops fail. Incidents in which wet-bulb temperatures, a measure of heat and humidity combined, pass the limits of human endurance will remain rare for a while. Residents of cities swamped by storm surges will be rescued.

Thanks to human ingenuity, we’ll cope — until we can’t, because the scope of the crisis will exceed even modern society’s ability to adapt. I think of our response to changing climate as being like a rubber band that can be stretched a long way until it suddenly snaps. And then the megadeaths will begin.

I wish I was being hyperbolic, but I think I’m just being realistic.

The tragedy here is that the climate crisis is eminently solvable. Among other things, progress in renewable energy has been so dramatic that even a fairly modest policy push could still lead to a large reduction in greenhouse gas emissions.

But none of this can happen without participation from the United States, and rational climate policy in what is still the world’s essential nation is being held hostage by people more concerned with imaginary threats from critical race theory and swarming immigrants than with the rapidly changing fate of the planet.


About renewable energy.

Sigh. No Build Back Better, which would have addressed climate change, wouldn’t have been inflationary.

Even if Jeff Bezos claims otherwise.

A blast from my own past: My first significant published paper was basically about Dornbusch’s Law.

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