“Every action has an equal opposite reaction"…
...said Isaac Newton, or more recently, Thomas Jefferson in Lin Manuel Miranda's blockbuster musical "Hamilton". Both total geniuses in my view (I mean Newton and Miranda). As a scientist and a musician I am a huge fan of both. The jury is still out on Jefferson... Anyway, climate action or inaction can have a HUGE reaction thanks to the complexities of our atmospheric and oceanic circulation and that's before you bring in geopolitics and economic markets. Fresh from this week's Westminster Energy Forum I wanted to reflect on the conversation and share some optimism.
At least annually, delegates of the WEF are presented with the latest climate science from EU Copernicus European Centre for Medium-range Weather Forecasts. For the last 3 years at least, it's been really grim viewing. With 2024 officially the warmest year on record and the last 11 years all the warmest on record, we are now at the point where the global annual average temperature will exceed +1.5 C on pre-industrial levels sometime in 2029. To put this into context, when the Paris agreement was made, this was expected to be some time in the 2040s. Pretty scary, huh? In some cases, positive action has led to negative reactions. Improved air quality across Europe is brilliant for health but not so brilliant for climate change as there are fewer aerosol particles in the lower atmosphere to seed clouds. Therefore more solar radiation is reaching the Earth's surface. This only highlights the importance of understanding cascading risks and feedback loops to avoid unintended consequences. In positive news however, the majority of governments and civil society are concerned about climate change and the multiple benefits of simple design interventions are more widely understood. Think Paris, where significant sums of money has been spent on greening the city and the benefits for biodiversity, mental and physical health and climate change adaptation have far outweighed the cost. Positive action - and arguably a larger positive reaction. What is now totally clear is that the cost of climate inaction is vastly higher than the cost of action. Every fraction of a degree matters now and we will only regret reaching net zero emissions later.
The emphasis appears to have shifted in the investment community from net zero as a business risk management strategy to a focus on resilience and security. Hardly surprising with what is going on in Ukraine and the Gulf region with access to energy and critical minerals being weaponised for political gain. There was a noticeable shoulder slump when this information was shared but we all perked up again when hearing the good news that even the USA is ploughing ahead with investing in clean energy at pace, particularly solar. And even better news that this is no longer due to incentives (scrapped by the current administration) but because technology has improved and costs continue to drop. The business case is there! Investment in carbon capture projects also continues to increase. Key themes were familiar: the need for government support and consistent policy and the critical importance of grid upgrades to allow projects to get on line fast. Other concerns were affordability for consumers meaning that governments, under political pressure due to the high cost of living, need to hold their nerve and commit to the transition despite higher costs to the public in the short term.
Insurance is probably the keystone of the energy transition. Without insurance there is no funding and no projects can be delivered. There was a plea and call to action to heed the early warning signs from the insurance industry, which is usually miles ahead in terms of predicting the reactions from our actions. Insurance is innovating and grasping the opportunity to accelerate action through insuring the energy transition and infrastructure projects we need to be delivered quickly. However, we must work hard to adapt our data models to try to better understand the complex and cascading risks related to the changing climate. When the world is acting beyond the limits of known modelling scenarios, we need to react fast and deploy our best brains (and AI) to model new scenarios and provide the evidence we need for insurance and funding. Where insurance penetration is low, it is a real hindrance to development. You get a general economic slowdown and it's much harder to build resilient communities.
The overarching theme was collaboration. It's wonderful to know that academic institutions like the University of Cambridge are bringing together the insurance industry, developers, academics and other experts to work through knotty problems. In other good news, the Energy Independence Bill has been published. But oh no, we have a leadership challenge to come so policy consistency might be out of the window... Ever an optimist though, I do believe that if we work together and meet each other where we are, understand others' challenges and goals, we can still yet act together to get on top of climate change. Inaction just is not an option.