What impact will climate change have on business?
26th November 2018
By Lyndsey Hall
Climate change has been on the horizon for over a century. The impact of carbon dioxide production on the Earth’s atmosphere was first recognised by scientists in the 19th Century. Over a hundred years later, as the day fast approaches when the levels of CO2 in the air will be double that before the First Industrial Revolution, the effects are being felt across the globe.
Climate change is not a concern for future generations, it is happening now. The rising temperature will be felt during our lifetime, and it could have a serious impact on your business. But which industries will be worst effected, and how can they adapt in order to survive?
The industry that will be most directly affected by climate change is, of course, the energy sector. Oil and gas companies will be forced to diversify into cleaner, more environmentally-friendly energy sources, such as solar, wind and water, if they are to survive.
Despite decades of publicly denying climate change, and millions spent on discrediting the scientists who study it, policies are being put in place worldwide to mitigate the impact of oil companies on the Earth’s atmosphere by limiting our consumption of fossil fuels.
Solar and wind farms have sprung up across the UK in recent years, covering large areas of previously agricultural or disused land with energy production plants. Unsightly as they may be, they’re the first line of defence against global warming. Globally, the deployment of solar panels has doubled every two years for the last decade, with costs decreasing by a quarter for every doubling. If this rate was to continue until 2030, the entire global energy demand could be met by solar power alone, according to a report by the Town and Country Planning Association (TCPA).
In its annual energy outlook published in February 2018, BP said it believed oil demand would peak in the next two decades, before plateauing or even falling, as consumers increasingly turn to sustainable alternatives. BP believes the number of electric cars on the road could hit 300 million by 2040, causing a dramatic drop in the demand for petrol, and forcing oil conglomerates to convert some of their oil refineries in order to manufacture other petroleum products.
The current estimate is that the mean global temperature will increase by around 3 degrees when the CO2 levels double, which could happen as soon as 2035. At that level, the loss of many coastal towns will be unpreventable as large areas of the polar ice sheets melt, resulting in a rising sea level.
Town planning has already been effected by the changing climate, as flooding increases and natural disasters such as hurricanes and earthquakes become more common. Florida, the southernmost state in the US, comprised of 1.5 million acres of wetlands, hundreds of miles of beaches, and all barely above sea level, is already looking to the future with raised seawalls and strategically positioned flood gates.
In the aftermath of Hurricane Katrina, New Orleans has taken the opposite approach to mitigating the flood risk, by scaling back the development along the water’s edge, allowing the natural vegetation to regrow and provide an ecological flood barrier.
Here in the UK, the TCPA and the Royal Town Planning Institute (RTPI) have joined forces to create a guide for town planners, politicians and communities, advising on how they can mitigate the effects of climate change on a local level. The government has pledged to reduce carbon emissions by 80% by 2050, and effective town planning is one of the ways they hope to achieve that aim. Currently, the domestic sector accounts for around a quarter of the UK’s carbon emissions, and the built environment overall is responsible for nearly half, so it’s essential we modify the way we design and build for the future.
Eco homes have become a popular option with both house builders and buyers. Built with sustainable features as standard, these so-called green homes use renewable resources and sustainable technologies to create a dwelling with as small a carbon footprint as possible.
Insurance & Finance
As you can imagine, with the probability of natural disasters increasing as a result of the rising temperature, insurance companies are under a lot of pressure.
2018 has seen some of the worst wildfires in memory, particularly in California, exacerbated by severe and widespread heatwaves and droughts. Claims based on weather-related financial losses by both individuals and businesses have increased exponentially in recent years, and the reality is they are only going to continue.
A new report by the Asset Owners Disclosure Project (AODP), which sees itself as the world’s benchmark of climate leadership in the investment system, states that “climate change poses risks for insurance companies, so do responses to it by markets, businesses, consumers and governments”. According to insurer Swiss Re, there were $144 billion of insured losses from natural catastrophes and man-made disasters in 2017, making it the most expensive year so far.
It isn’t only the direct impact of climate change that the insurance industry is facing: in the US there are several lawsuits against the oil industry by different cities and even a state – Rhode Island – over the impact of fossil fuel emissions. Local authorities argue that rising costs to improve sea defences, raise roads near coastlines and employ more firefighters to tackle wildfires are all a result of climate change, and that the oil industry should shoulder some of the cost.
Some insurance and finance firms are publicly announcing their position by withdrawing support for fossil fuel companies and investing in renewable energy. At the end of 2017, Allianz had over $5.6 billion invested in renewable energy and it plans to phase out all coal risks by 2040. Swiss Re has moved its entire investment portfolio to take account of ethical, social and governance (ESG) benchmarks, meaning a reduction of investment in the kinds of companies that cause climate change. And Axa’s new target for green investments aims to increase by $9 billion to $12 billion by 2020.
The influential report of 2018 from the New Climate Economy has estimated that the world will gain $26 trillion of benefits by 2030 if we take action to cut carbon from our energy supply and move to sustainable energy sources. Unfortunately, in many countries fossil fuels are still the cheapest option, so the incentive to reduce usage isn’t as high, particularly in areas that haven’t yet felt the effects of climate change.
Removing fossil fuel subsidies and pricing carbon by charging emitters of carbon dioxide are two possible ways of making fossil fuel usage less desirable. However, sustainable energy is still prohibitively expensive in many parts of the world, particularly countries that are still in the early stages of economic development. The Green Climate Fund is just one not-for-profit that funds projects in developing countries, redistributing capital to build low-carbon, climate change-resilient infrastructure that may not be affordable without their support.
In the UK, the impact of severely cold weather on the healthcare system is well-known, with elderly and vulnerable people needing more care in hospitals over the winter months, and a tragic increase in the number of deaths as a result of every cold snap and snowfall. Until the summer of 2018, it was rare for warmer weather to have a large impact on our healthcare system. But after several weeks of consistently high temperatures, there has been a stark rise in the number of Britons being treated for heatstroke, dehydration and other heat-related conditions this year. In fact, the Royal College of GPs (RCGP) announced that the number of people visiting their GP because of heatstroke reached its highest level in five years this summer, and the London School of Economics (LSE) predicts that more than 1,000 Britons will die this year as a result of complications brought on by the summer weather.
According to the LSE, “Many of these deaths could have been prevented if government departments and agencies had listened to the advice of experts and improved the shockingly poor flow of information to the public about the rising risk of heatwaves due to climate change. There is evidence that many people perish each summer in the UK because they do not understand that the frequency of heatwave conditions are increasing.”
In some cases, the warm weather exacerbated an underlying condition and expedited an inevitable death, most commonly from respiratory conditions or stroke. However, it was also found that many of the deaths could have been prevented if people’s homes were better ventilated, and windows were fitted with shutters or blinds.
The RCGP has joined other businesses denouncing fossil fuels by withdrawing its financial investment in them, and is an active member of the UK Health Alliance on Climate Change, which advocates for responses to climate change that protect and promote public health.
The NHS is a world leader in sustainability, reducing its carbon footprint by 10% since 2007 and reaping cost savings and the benefits of greater efficiency, thanks to a number of small measures taken up across the country by hospitals, treatment centres and GP practices. Installing LED lights, recycling food, double-sided printing and many other simple changes have helped the health service mitigate its impact on the environment. With as much as 5% of road traffic in England at any one time being on NHS business, and the health and care sector as a whole responsible for around 40% of public sector carbon emissions, every little helps.
The United Nations (UN) has released a report highlighting which areas of the planet will see an impact on agricultural output by 2050 as a result of climate change. According to the study, West Africa and India are likely to see a reduction in production as temperatures rise, whereas Canada, Russia and the United States could see an increase. Parts of Finland could even soon be warm enough to produce cereal.
Adapting crops to the changing weather and implementing methods of protecting and preserving the plants and animals will be essential if agricultural businesses are to remain productive in the long term. Technology could provide the answer, however the cost of this may be prohibitive, especially to farmers in regions of lower economic development.
Unfortunately, whilst the main product of farming is an important, if not essential, resource for our survival, the bi-product of carbon emissions is contributing heavily to our atmospheric problem. Agriculture accounted for 10% of the EU’s total greenhouse-gas emissions in 2012. According to the European Environment Agency (EEA), “a significant decline in livestock numbers, more efficient application of fertilisers, and better manure management reduced the EU’s emissions from agriculture by 24% between 1990 and 2012.” But there’s still a long way to go.
Between 2001 and 2011, global emissions from crop and livestock production actually grew by 14%. This increase was due to a rise in total agricultural output worldwide, mainly in developing countries. Recommendations from the EEA for reducing emissions and boosting efficiency include “a better integration of innovative techniques into production methods, such as capturing methane from manure, more efficient use of fertilisers, and greater efficiency in meat and dairy production (i.e. reducing emissions per unit of food produced”.
Meat and dairy have the highest global footprint of carbon, raw materials, and water per kilogramme of any food. As a result, the UK government has recently mooted the idea of a red meat tax, increasing the price of meat products in an effort to reduce consumption and mitigate the impact of the industry on not only the environment, but our health service as well.
An alternative solution for some farms may be to convert the land over to sustainable energy production, however this may not be possible for many businesses, due to location, financial reasons, or the land being rented rather than owned.
Climate change is the greatest threat the human race has faced in millions of years, but it isn’t just that. It’s also an opportunity. A chance for us to make a change. To create thousands of new, high value jobs. To advance technology and science out of necessity, rather than curiosity. If we tackle it head on together, we can limit the negative impact of climate change and look forward to a brighter, cleaner future.
Want to know what you can do personally to reduce your carbon emissions? Keep an eye out for our upcoming blog post on How to reduce your carbon footprint.
What impact do you expect the changing climate to have on your business? Has your industry already felt the effects of global warming and the government’s attempts to mitigate it? Leave a comment or chat with us on Facebook and Twitter.