She doesn’t quiet say it, but Hayashi implies that efforts to reduce carbon emissions have failed. And since those efforts have failed, we have to deal with two crises that are sneaking up on us right now: an economic crisis and a disaster management crisis.
Climate change threats are being neglected to tackle short term economic stresses but it would be wise to invest in climate change adaptation now.
The world is facing an unprecedented dual crisis. But with economic and environmental stresses playing out over different timeframes, deep-rooted biases in the way we judge risks may mean we are too preoccupied with firefighting short-term economic problems to tackle longer-term climate threats.
That is one of the key messages to emerge from the Global Risks 2013 report, published by the World Economic Forum. The report is based on an annual survey in which experts share their perceptions of how global risks may unfold over a 10-year time horizon.
Highlighted concerns left no doubt that the continuing fallout from the financial crisis of five years ago is likely to dominate leaders’ attention over the coming decade. Growth prospects remain relatively weak, and intense pressure on public finances is set to continue.
Meanwhile, experts rated the systemically most important environmental risk to be failure to adapt to climate change – in contrast to last year, when rising greenhouse gas emissions topped the results. This reflects a wider shift in recent conversation on climate change, from the question of whether our climate is changing to “by how much” and “how quickly”.
The transition can be seen in a spate of recent reports on climate adaptation efforts. Examples of adaptation initiatives include flood defences for coastal cities, strengthening the capacity of critical infrastructure to survive freak weather events, and researching crop varieties which are more able to withstand swings between extremes of drought and flood.
While the numbers involved vary widely according to different climate change scenarios, it is clear that the costs of investing in adaptation measures and curtailing greenhouse gas emissions are greatly outweighed by the likely future costs of failing to do so. One recent report by Mercer estimates the economic costs of climate change as likely to fall between $2tn and $4tn and (£1.25tn and £2.5tn) by 2030. In addition, we are observing nascent trends of climate change-related litigations, which could compound the cost of climate change significantly.
Logic dictates that it would be wise to bear the costs of investing in climate change adaptation now, rather than shouldering the greater future costs of climate-related disasters. However, humans suffer from several well-established cognitive biases which may hold us back from doing so.
The term “hyperbolic discounting” refers to the tendency to give immediate costs and benefits disproportionately more weight than delayed ones. Researchers have also found that we place too much emphasis on recent personal experience when estimating the future likelihood of a given risk occurring – for instance, taking out flood insurance immediately after a flood, and letting it lapse after a few years without a flood.
The cumulative effect of such cognitive biases is that we tend to find reasons to persuade ourselves that it is not necessary to focus on risks which are perceived to be long term, creeping and relatively uncertain. And while some degree of climate change is now inevitable, there remains great uncertainty about its likely extent and local manifestations.
The latter is especially significant, as climate adaptation is inherently local.