CLIMATE CHANGE | FUTURE VIEW
The Unraveling: Five Predictions for the Decade the Climate Comes Undone
As we enter the decade, the most severe bushfires in history are tearing through Australia, forcing thousands of holidaymakers to spend New Year’s Eve on a beach with makeshift face masks and instructions to duck under the water if a siren sounds, awaiting rescue. Across the globe, there are a dozen other stories from the last month alone that show that the climate crisis is escalating. It’s hard to imagine that the start of the 2030s will be worse, but it most likely will.
While the public is calling for rapid action on climate, the political and economic systems seem stagnant. There’s probably another decade of fiddling while Rome burns before we get a critical mass behind changing our ways.
During the decade of unraveling, it will get worse — the crisis will escalate, the imperative for action unable to be ignored — and the way our economic, political, and social systems are knitted together will fall apart.
The 2020s will be a decade of despair, but also of hope. When it comes to Mother Earth: We have the technology; we can rebuild her.
Putting on my climate futurist hat, here are five predictions for the coming decade. They are just a sliver of what will change, but they are all signs that the tide is turning.
Prediction 1: Denial dies
For the billions who trust science, climate denial was always baffling and the response to it even more so: Why would you object to treating our precious planet better, even if it later turned out that the reason we started doing it was wrong? But with the cigarettes-are-good-for-you lobbyists and faux think tankers providing mountains of “evidence” to muddy the waters, climate denial was a thing.
As we enter the 2020s, it is already losing its steam. Many who initially repeated the messages that were designed to manufacture doubt have now experienced extreme weather made worse by climate change. Today, they are doubting their doubt.
The 2020s will see the effective end of denial. First-hand experience will erode the numbers of those who still deny, though they may still debate the cause and the need for change. Those holding tightly to denial, like flat earthers, will become perceived as truly fringe players, peddling conspiracies that make them the embarrassment at family reunions. Marginalized, they’ll become more emphatic, but their primary supporters, the manufacturers of doubt, will no longer be churning out new material for their arguments.
Denial dies in the 2020s as the shocking damage we have done to the planet becomes ever more visible. It will be replaced by new efforts to deflect and confuse, but claiming it is not happening will stop happening.
Prediction 2: Exploration ends
The 2020s start with the oil and gas majors beginning to question their direction. While some are publicly putting money behind decarbonization technologies, mostly it has an air of greenwashing. But there is a pivot occurring: Exploration will end in the 2020s.
Just before the 2020s began, Chevron became the fourth oil major to take a massive write off as it reassessed the value of its U.S. natural gas reserves. Its $10 billion come-to-Jesus moment signals a fundamental shift: While wildcatters who search for reserves are busy staking claims in the thawing arctic and some oil companies are bringing new reserves online throughout the world, there is less need to find more reserves. The industry is still quick to lay claim to more easily recovered fossil fuels, though the bar is rising as to which reserves are worth exploiting. The result: The economics of exploration are declining. Even commentators in oil publications are seeing that the end is nigh.
Today, there are enough reserves identified that, if all were exploited, they would put the planet on the fast track to a 4C rise in global temperatures. We are already seeing the havoc wrought by a 1C rise. Irrespective of whether the oil and gas industry has a moral backbone, with the cost of clean energy declining rapidly — solar fell by about 90 percent in the 2010s — there will be no economic incentive to develop what it has already laid claim to, much less explore for more.
Reserves will become stranded assets and, just like the wild cats endangered by habitat destruction, wildcatters will face extinction.
Prediction 3: Insurance influences
Corporations need to please shareholders looking at quarterly returns, politicians need to please donors funding reelection campaigns, but insurance companies? They please their stakeholders by avoiding risk… and they may just turn out to be the climate’s white knight.
Actuaries influence economic decisions while activists influence public opinion. Economics drive change faster than opinion, ergo, actuaries are the superheroes that we need today. They not only don’t wear capes but also would likely be mortified if the spotlight was shone on them.
The cost of insurance will change both corporate and individual decisions in the 2020s.
Already, the coal industry is seeing insurance companies flee. By refusing to underwrite the risk inherent in an industry that creates massive pollution, insurers and reinsurers are driving change. They calculate that coal is a risk too far, and that has triggered a chain reaction: Coal companies pay more to the few insurers still willing to underwrite them; higher expenses mean lower returns; and investors devalue the company because of both lower returns and higher risk. It simply doesn’t add up to invest in a liability in the making.
Over time, more carbon polluters are likely to cross that actuarial risk threshold and as the economics worsen, investors will look for sectors that aren’t responsible for creating the climate crisis.
Insurance is also impacting individuals, particularly homeowners. In 2019, homeowners in some high fire-risk areas of Northern California received notices that their home insurance policies wouldn’t be renewed while smoke from fires farther north still hung in the air. For the families affected, denial of insurance is a really big deal. By September 2019, the Mercury News quoted the state’s Department of Insurance figures that more than 350,000 homeowners had been denied renewal.
Most homeowners are able to find an alternate insurer after a few calls, and those who can’t find coverage are able to turn to the state as the insurer of last resort. But it comes at a price: An insurance bill three to four times higher. And that will impact the value of the home.
The 2020s will see more and more homeowners unable to get traditional insurance. Along with homes considered a fire risk, homes at sea level will be harder or impossible to insure, and already there have been stories of homeowners in the UK whose homes are deemed worthless, and of towns that are stopping maintenance of coastal infrastructure. Homeowners with a worthless asset stay, unable to afford to relocate, awaiting the day when their home becomes uninhabitable.
For companies and individuals affected, actuaries will feel more like villains than heroes, but their superpower of making risk visible will be one of the largest drivers encouraging climate action in the 2020s.
Prediction 4: Capital chooses
It’s not a secret in the renewable energy industry that it’s boring… at least as far as investors are concerned. Utility-scale solar and wind farms are such predictably safe investments with correspondingly unsexy returns that they attract the most conservative pension funds. Yet, viewed more broadly, climate solutions offer the largest wealth-creation opportunity on the planet, according to Jigar Shah.
Those looking for higher returns have always looked to the edge of emerging technologies and in the 2020s, those emerging technologies will increasingly be focused on preventing, mitigating, or reversing climate change. Capital’s beginning to rediscover clean tech, and everyone from fossil fuel behemoths to tech billionaires is seeking the first climate unicorn that will grow their wealth while helping the planet, but there’s a long way to go.
Now that solar and wind are too tame, much of the investment in climate solutions will go to early-stage software companies that optimize carbon-producing systems or implement carbon-free technologies. These range from sensor companies that make the electric grid more efficient to sophisticated software to balance energy storage’s role in the energy system.
Hard-tech still struggles to access the capital it needs: Just ask companies working on a compelling carbon capture technology, a better battery, a cleaner cement, or a mightier mousetrap. Venture capital and private equity funds shy away from technology that takes five to ten years to prove out when they can bet on software that makes it or breaks it in an 18-month timeframe. Project financiers shy away from backing startups’ first commercial projects. It’s still just plain hard.
A new category of cleantech that I think of as earth-tech is also emerging. There will be demand for investments in developing and scaling technologies that harness natural systems to address climate change. Earth-tech will include methods to optimize carbon capture by prairies, forests, and oceans, products that decrease livestock methane emissions, alternatives to meat and seafood, and climate-resistant agricultural systems such as vertical farming. A carbon market could help fund the implementation of these technologies, but in its absence, there will still be those willing to invest in having nature help us turn the tide.
As the need for climate solutions becomes more urgent, investors will choose solutions that offer strong returns. By the end of the 2020s, today‘s emerging technologies will be commercially viable and today’s existing technologies will be scaling at the speed of solar. And we all will be richer for it.
Prediction 5: Hope happens
By nature, I’m a pessimist. And with all of the tragedy writ large on the earth, I, like many others, am struggling to be optimistic. For those watching the crisis unfold, it’s hard not to sink into depression, the scale of disasters too extensive, the speed of escalation too rapid, the players too slow to move.
The climate crisis is also a crisis of confidence. It’s hard to accept that political and business leaders are continuing to fail the planet. It’s hard to trust that our largest institutions will do what’s needed when we see them shrug responsibility.
Even if the 2020s don’t bring the change of all the systems that we need to change, there are reasons to hope. The end of denial, the move away from fossil fuel exploration and the movement of capital away from uninsurable risk and towards climate solutions are all reasons to hope. The biggest reason to hope, however, is that we already know what to do, we simply need to start doing it. OK, “simply” is an overstatement, but it can be done.
Global organizations like the United Nations with its Sustainable Development Goals are thinking about changes that developing and developed nations need to make; climate solutions research organizations like Project Drawdown have prioritized the technologies that will slow, stop, and eventually reverse the carbon imbalance; policy think tanks like Energy Innovation have defined the regulatory hurdles to overcome; countless clean tech accelerator programs like Free Electrons are bringing new solutions to market; and companies like Grid Alternatives are training the workforce we need to make the transition possible. Add to that the countless organizations that are pulling the levers they control, from local government to state regulators and even to whole countries like New Zealand, and there are a lot of small changes happening. Bottom line: There are many reasons for all of us who feel helpless to have hope.
As we look to the 2020s, we face a challenge that needs to be looked at holistically and systematically, and it’s frustrating but fair to recognize that much of the decade will be frittered away with disjointed efforts that don’t add up to the scale of action needed. I wish it would happen sooner, but it may not be until the end of the decade when many of the largest barriers to change will unravel. But we’ll end the 2020s ready and very well equipped to rapidly re-craft a future that is compelling.