Business-as-usual guarantees the
end-of-the-world-as-we-know-it: our current way of life is not sustainable
according to new models being developed at Anglia Ruskin University’s Global
Sustainability Institute (GSI), through a project called the ‘Global Resource
Observatory’ (GRO).
Lloyds released a report for the insurance industry
assessing the risk of a near-term “acute disruption to the global food supply.”
Research for the project was led by Anglia Ruskin University’s GSI, and based
on its GRO modelling initiative. The global food system, the authors find, is
“under chronic pressure to meet an ever-rising demand, and its vulnerability to
acute disruptions is compounded by factors such as climate change, water
stress, ongoing globalisation and heightening political instability.”
Lloyd’s scenario analysis shows that food production across
the planet could be significantly undermined due to a combination of just three
catastrophic weather events, leading to shortfalls in the production of staple
crops, and ensuing price spikes. In the scenario, which is “set in the near
future,” wheat, maize and soybean prices “increase to quadruple the levels seen
around 2000,” while rice prices increase by 500%. This leads to rocketing stock
prices for agricultural commodities, agricultural chemicals and agriculture
engineering supply chains:
“Food riots break out in urban areas across the Middle East,
North Africa and Latin America. The euro weakens and the main European stock
markets lose 10% of their value; US stock markets follow and lose 5% of their
value.”
The scenario analysis demonstrates that a key outcome of any
such systemic shock to the global food supply — apart from “negative
humanitarian consequences and major financial losses worldwide” — would be
geopolitical mayhem as well as escalating terrorism and civil unrest.
The purpose of exploring such scenarios is to prepare
insurers for possibilities that are now more likely than previously assumed.
The Lloyd’s report points out:
“What is striking about the scenario is that the probability
of occurrence is estimated as significantly higher than the benchmark return
period of 1:200 years applied for assessing insurers’ ability to pay claims
against extreme events.”
That leading insurance companies are now attempting to
factor in potential losses from such crises is a major step forward in pushing
the financial sector to recognise the dark-side of the current system of fossil
fuel dependence.
The report concludes:
“A global production shock of the kind set out in this
scenario would be expected to generate major economic and political impacts
that could affect clients across a very wide spectrum of insurance classes.” It
would have “major consequences for companies’ investment income,” with the
potential to “generate losses that span many years.” It would also result in
political instabilities that take “decades to resolve” while imposing “greater
restrictions on international business.”
The Foreign Office’s food resilience Task Force began to
come together late last year. An FCO document from February 2015 for a Task
Force workshop throws light on its rationale, direction, and participants. “The
taskforce is looking at plausible worst case scenarios of disruption to the
global agri-food system, caused by extreme weather events,” the document explains.
Taskforce projects aim to “improve understanding of how changing extreme
weather events (severity, type, frequency, geographical impact) may impact on
global food security” and to “identify how market and policy responses may
exacerbate or ameliorate these effects.” Of particular concern to the FCO’s
taskforce is to determine “how large shocks in agricultural production could
occur (e.g. floods, droughts, wind storms),” how these would translate into
“crop reductions,” and “how society responds to high food prices or limited
local availability.”
GSI’s Director, Dr. Aled Jones, delivered a detailed
presentation on the modelling work done so far, what it implied, and where it
was leading. Dr. Jones was previously Deputy Director of the Programme for
Sustainability Leadership at the University Cambridge, where he was Director of
the British government’s flagship Chevening Fellowships Economics of Climate
Change Programme, supported by the UK Foreign Office to deliver the FCO’s
Strategic Framework. Jones also chairs a working group of the UK government’s
Department for Energy and Climate Change’s Capital Markets Climate Initiative
(CMCI).
“The financial and economic system is exposed to
catastrophic short-term risks that the system cannot address in its current
form,” Dr. Jones explained. By successfully modeling the “impact of
climate-induced drought on crop failures and the ensuing impact on food
prices,” he said, the model can then be recalibrated to “experiment with
different scenarios.”
He continued “We ran the model forward to the year 2040,
along a business-as-usual trajectory based on ‘do-nothing’ trends — that is,
without any feedback loops that would change the underlying trend. The results
show that based on plausible climate trends, and a total failure to change
course, the global food supply system would face catastrophic losses, and an
unprecedented epidemic of food riots. In this scenario, global society
essentially collapses as food production falls permanently short of
consumption.” Jones added “This scenario is based on simply running the model
forward. The model is a short-term model. It’s not designed to run this long,
as in the real world, trends are always likely to change, whether for better or
worse.”
Jones nodded “Yes”.
In other words, simply running the Agent-Based Model forward
cannot generate a reliable forecast of the future. For instance, no one
anticipated the pace at which solar and wind energy would become
cost-competitive with fossil fuels. And the fact that governments and insurers
are now beginning to scope such risks, and explore ways of responding, shows
how growing awareness of the risks has the potential to trigger change. Whether
that change is big enough to avoid or mitigate the worst is another question.
Either way, the model does prove in no uncertain terms that present-day
policies are utterly bankrupt. British and US government agencies are taking seriously
longstanding scientific data showing that a business-as-usual trajectory will
likely lead to civilisational collapse within a few decades — generating
multiple near-term global disruptions along the way.
The question that remains is: what we are going to do about
it?
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