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Climate Change Risk Management

“Risk Management Action”

Topics and Trends
Bloomberg
February 2019

Jan W. Dash, PhD

Editor: World Scientific Climate Encyclopedia (2019)
Author: Quantitative Finance and Risk Management
Bloomberg Carbon Clock - math
Climate Change = Survival, Justice Issue
!  Science is CLEAR:
!  We are causing recent climate change, global warming
!  Survival Issue:
!  We are seeing bad impacts NOW
!  Impacts FAR WORSE if we do not act
!  Disasters are made worse due to climate change
!  Justice and Ethics Issue:
!  Poor and vulnerable - smallest effect on climate
change, but are hurt the worst by climate change
!  More humane and cheaper for preventive action now,
rather than disaster adaptation by our descendants if
we do not act robustly now

February 2019
Climate = Human Survival Issue
!  Disasters made worse due to Climate Change:
!  Increased conflict (wars/national insecurity),
!  Worse water shortages,
!  More crop failures,
!  More intense fires,
!  More droughts,
!  More flooding,
!  Severe species extermination,
!  More disease increase,
!  Worse extreme weather,
!  Higher sea level rise,
!  More severe heat waves,
!  More severe precipitation events,
!  AND possible severe economic/finance disruption (breakdown)
!  …

February 2019
ACTION: We CAN mitigate Climate
!  Climate Change Risk Management
◦  Change: All Deliberate Speed to renewables
◦  Action: All levels - local to global - needed
"  Individuals,
"  NGOs,
"  Businesses (private sector),
"  Cities,
"  States,
"  National,
"  International

February 2019
Just a few recent climate articles
!  Over 70,000 march for the climate in Brussels
!  H.R.763 - To create a Carbon Dividend Trust
Fund  
!  Climate change 'biggest global health threat' of
century, doctors warn
!  2018 Continues Record Global Ocean Warming
!  Tackle climate or face financial crash, say world's
biggest investors ($32 trillion)
!  Clean Energy Sweeps Across Rural America

February 2019
Climate Politics
!  Future of International Climate Action
◦  Climate leadership - now China, EU
◦  India and the energy equity issue
◦  Competing national agendas
◦  Steady progress in spite of US federal govt.

February 2019
U.S. Bad News, climate wrecking ball
!  Disaster at the EPA
!  Intention: withdraw from Paris Agreement
!  Climate science / risk deniers in charge at
federal level
!  Democrats take the House – oversight
will resume, no federal policy change (?)

February 2019
Sub-national US climate action

November, 2017 Copyright Jan W. Dash
Responsible climate journalism

November, 2017 Copyright Jan W. Dash
Climate Attitude ! Concern

November, 2017 Copyright Jan W. Dash
IPCC – Mitigation Report (AR5)

November, 2017 Copyright Jan W. Dash
Risk Management Action – Climate
mitigation benefit: Reduce Temperature Rise

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Worse Extreme
Weather

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Sea Level Rise

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Suffering (photos
Sandy, Katrina)

!  Union Beach, NJ New Orleans, LA

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Climate Health
Impacts

February 2019
Health Impacts vs. Climate

November, 2017 Copyright Jan W. Dash
Risk Management Action – Climate
mitigation benefit: Reduce Increasing
Security Risk (Climate = Risk Multiplier)

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Increasing
Damaged Crops

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Intensified Fires

February 2019
Risk Management Action – Climate
mitigation benefit: Reduce Water Shortages

February 2019
Risk Management Action – Climate mitigation
benefit: CO2 Reduction - Carbon Capture &
Storage

November, 2017 Copyright Jan W. Dash
Risk Management Action – Climate
mitigation benefit: Reduce Financial/
Economic Crisis Risk
!  Managetransition risk from fossil fuels to
renewable energies
◦  Resolve supply/demand imbalances
◦  Electric grid improvements (HVDC network)
!  Myriad severe climate impacts
◦  Supply chain disruptions …
!  Descendants over-leveraging to cope
!  Etc etc etc
February 2019
SUMMARY
!  Risk Management Action: Climate
Mitigation benefits
!  Adaptation when necessary
!  Long road toward resolving problems
that global warming/climate change poses
for humanity.
!  The main problem is staying below the
carbon budget necessary for a livable
world, plus economic development
and equity.  
February 2019
-2-
!  Whilethe US federal government is
currently mired in an ignorant and
obstructive stance, sub-national US
entities are stepping up vigorously,
possibly enough to fulfill the US NDC
commitment under the Paris Agreement
(We Are Still In).

February 2019
-3-
!  Investors are stimulating business to
calculate climate risk and act to mitigate
climate risk.
!  The concept of risk management of
climate change in the presence of
uncertainties is becoming more
understood and accepted.
!  Uncertainties: Bad or Catastrophic?

February 2019
-4-
!  The transition to a renewable energy
economy, necessary for climate change
mitigation, and with $10 T opportunities
◦  Difficult, Underway, Unstoppable.
!  Fossil
fuel companies with stranded
assets, powerful contrarian ideologues,
right-wing media spreading climate
disinformation are big obstacles.

February 2019
Climate Summary

February 2019
Climate Change Risk Management – Formal

November, 2017 Copyright Jan W. Dash
Ch. 53: Climate Change Risk Management

November, 2017 Copyright Jan W. Dash
Climate Risk Management

November, 2017 Copyright Jan W. Dash
Action – Assess: Uncertainty – risk
management takes into account

February 2019
JOBS in Climate Risk Management?
◦ YES YES YES
◦ “Climate Risk Management is the future
of risk management”
"  Corporations
"  Wall Street
"  Governments
"  Academia

December, 2018 Copyright Jan W. Dash 33
Assn. Climate Change Officers

November, 2017 Copyright Jan W. Dash
Scenarios for Climate Risk
!  “Long term” to 2050, 2100 and beyond
!  Model climate physical impacts forward
!  Model economics (GDP …) forward
!  Model risk mitigation strategies forward
!  Model uncertainties (human, parameter)
!  Bayesian scenarios with given final state
!  Groups of scenarios

November, 2017 Copyright Jan W. Dash
Discount Rate
!  Ubiquitous, consequential
!  Lots of choices; What to Choose?
◦  Hurdle rate? Credit dependent
◦  Ethical – why should our grandchildren pay
for today’s credit spreads?
◦  Business cycles: recent rates near zero
◦  Models for rates: tied to growth assumption
!  Policy – forward state, no discounting

November, 2017 Copyright Jan W. Dash
Social Cost of Carbon SCC
!  Proxy for the CO2 cost to society
!  Impact response to unit increase of CO2
!  Models - SCC results differ
◦  Previously US govt. averaged 3 SCC’s
!  Present federal policy – SCC canceled

November, 2017 Copyright Jan W. Dash
Integrated Assessment Models
!  Economic model + Climate model
!  Economic model: Linear perturbative
◦  Standard assumption, but is it realistic?
!  Climate model:
◦  Temperature change is OUTPUT, not input
◦  Both human and natural causes are input
!  Different
models – different coverage
!  Model output varies with forward time

November, 2017 Copyright Jan W. Dash
Climate Models vs. data: Human + Natural
agrees, ok. Natural only disagrees, NOT ok.

November, 2017 Copyright Jan W. Dash
Climate models include ALL effects

November, 2017 Copyright Jan W. Dash
ADAGE integrated model

November, 2017 Copyright Jan W. Dash
Climate Value at Risk
!  Future climate risk assessment paradigm
!  Include many climate + economic
scenarios
!  Include uncertainties
!  Assess risk at specified confidence level
!  Preliminary calculations have started
◦  Dietz …

November, 2017 Copyright Jan W. Dash
Time Scales
!  Climate impacts are occurring today
!  Climate impacts will get worse, the
amount depends on human response
!  Climate risk time scales: years
!  Risk horizon: Year 2100 (not so distant)
!  N.b. Geologic time scales give some
information, but need to be careful.
◦  Human-induced climate change much faster

November, 2017 Copyright Jan W. Dash
DATA DATA DATA
!  Becoming more and more sophisticated
!  Oceans: Argo floats (submarine robots)
!  Land: Direct measurements (urban, rural)
◦  Temperature differences used
!  Satellites
◦  Don’t measure ground temperature
◦  Emissions measurements - are the future
!  Data need cleaning
◦  MSSA ? (See my papers on SSRN)
November, 2017 Copyright Jan W. Dash
Bloomberg Carbon Clock

November, 2017 Copyright Jan W. Dash
Recent Global Warming is due to Human
Generated Greenhouse Gases CO2...
20,000 years
of data;
CO2 spike
is recent,
continuing.

IPCC 2007
Science Vol I

2/1/19 Copright Jan W. Dash 46
Extreme temperatures Increasing
(latest is purple curve, heating up)

2/13/13 47
CO2 changes vs. origins

November, 2017 Copyright Jan W. Dash
CLIMATE RISK MANAGEMENT
ACTION
!  WHAT CAN WE DO?
!  RISK MANAGEMENT ACTIONS
RAMPING UP QUICKLY
◦  YOU MAY ALREADY BE ACTING
!  NEED PORTFOLIO OF ACTIONS
◦  NO SILVER BULLET EXISTS
!  LIST OF ACTIONS:

February 2019
Risk Management Action – join
groups like Citizens’ Climate Lobby

February 2019
Risk Management Action – Support:
We Are Still In

February 2019
Risk Management Action – Participate in
civil demonstrations: People’s Climate March

February 2019
Risk Management Action – Artists :
Ex: “Solartopia”, Pete Seeger

February 2019
Risk Management Action - Blog:
Climate Portal climate.uu-uno.org

February 2019
Risk Management Action – Support
climate heroes: Michael Mann

February 2019
Risk Management Action - Learn:
Climate Education

February 2019
Climate Encyclopedia (2019)
!  Publisher: World Scientific
!  Editor: Jan Dash
!  Case Study Approach
!  Facilitate Climate Communication
!  Focus: Finance, Economics, Policy
!  Audience: General
!  3 Volumes + Electronic
!  Libraries

February 2019
Risk Management Action – Promote
reliable sources: Real Climate

February 2019
Risk Management Action – Promote
reports: Risky Business

February 2019
Risk Management Action – Support
climate lawsuits: Database

February 2019
Juliana case (Youth vs. US govt.)

November, 2017 Copyright Jan W. Dash
Risk Management Action – Go to
Conferences: Paris

February 2019
Action – Support goals: Paris NDCs +3.5oC,
better than BAU (but FAR above 2oC goal)

February 2019
Action – Promote: Emissions of all countries
must decrease by 2050 if +2oC in 2100

February 2019
Action - Promote: Scenarios CO2 for 1.5
degree target world 2100

February 2019
Action – Publicize: “Climate 2nd highest
risk”, Davos World Economic Forum

February 2019
Risk Management Action – Divest:
Stranded Assets, Carbon Bubble

February 2019
Action: Promote Justice and Survival
SDGs - All tied to Climate Action #13

February 2019
Action – Promote Intergenerational
Equity: Child’s letter COP21

February 2019
Action – Promote Climate Justice:
Small Island Nations Threatened + …

February 2019
Risk Management Action – Support:
Business climate action

February 2019
Risk Management Action – Support:
Business Climate-Related Disclosures (M.
Bloomberg)

February 2019
Risk Management Action -
Support: Price on Carbon

February 2019
Risk Management Action – Support
policies promoting: Solar Energy

February 2019
Risk Management Action – Support policies
promoting: Research (e.g. Batteries)

February 2019
Risk Management Action – Support
policies promoting: Wind energy

February 2019
Risk Management Action – Support
policies promoting: Electric Vehicles

February 2019
Risk Management Action – Support
policies promoting: Fusion (ITER)

February 2019
Risk Management Action – Support
policies promoting: Energy Efficiency

February 2019
Action – Support policies reducing:
Energy use (developed countries)

February 2019
Risk Management Action – Oppose:
Climate Science/Risk Deniers

February 2019
One-liner rebuttals to Fallacies

November, 2017 Copyright Jan W. Dash
Contrarian/Denier Pseudoscience
Disinformation - Example:

2/13/13 83
Climate Fallacy: “It’s the Sun”

November, 2017 Copyright Jan W. Dash
Risk Management Action – Oppose:
Climate denier logical errors …

February 2019
Risk Management Action - Oppose:
Climate Action Obstruction

February 2019
Action – Oppose: Network of $
promoting climate disinformation

February 2019
CLIMATE RISK MANAGEMENT ACTION

!  YOU’VE SEEN WHAT WE CAN DO !
!  OPTIMISM – no other choice
!  COURAGE – difficult with obstruction
!  PERSISTENCE – not a sprint
!  WE ALL CAN HELP – PICK A CLIMATE
ACTION AND JOIN IN !
!  IF YOU ARE ALREADY ACTIVE IN
CLIMATE CHANGE WORK, THEN

February 2019
Thank You

February 2019