James Lawler: [00:00:00] Welcome to Climate News Weekly. Julio, good to see you again, from London, I believe.
Julio Friedmann: Yes, glad to be here. London Climate Week is next week, and I'm loaded for bear.
James Lawler: Amazing, amazing. You are indeed our world traveler. So, let's jump right into the first story, which is unfortunately a sad one, and we're highlighting this story because we covered it on our last show. The Hajj, which as we've, as we said before, was one of the largest mass gatherings in the world. It's a once in a lifetime duty for able-bodied Muslims who can afford it. I believe this, it ended this past week.
There were about 2 million pilgrims who are expected to take part in the Hajj this year, according to the Saudi General Authority for Statistics. And unfortunately, the death toll has topped 1,000 people from heat. So the, the temperatures that were reported there were 125°F, in the shade, and [00:01:00] this is a pilgrimage that requires significant physical exertion. So, this is, you know, quite devastating. Julio, what are your thoughts on this?
Julio Friedmann: Yeah, so, this is truly awful. We did talk about it last week. The Saudi government was trying to find ways to cool pilgrims. There were makeshift attempts along the way, but this was predicted, and we had an extreme heat wave during the Hajj and a thousand people died. We are going to have more extreme heat. Even though it hasn't received quite as much coverage, we have seen 40 days in a row now, I believe, or a whole month, in India above 40°C, which is extremely hot. It's very difficult for anybody living there.
James Lawler: Right.
Julio Friedmann: And one of the things that is true about the Hajj is that it brings, often, elderly, it brings disabled, it brings people in ill health, like part of the pilgrimage brings people who are literally on their last legs because it's an obligation [00:02:00] before you die. So, it is quite sad to receive this news
James Lawler: Yeah, and you know the theme I would say, if, if there is one, for the stories we're covering today is kind of the readjustment or shifting of our perspective on kind of the potential impacts, what the potential impacts can be, of the extreme weather that we are facing as a result of the changing climate.
And one of the ways in which this reframing is making its way into changes in policy is through a report that was published by the U.S. National Academy of Sciences that recommends a major reboot of the country's "probable maximum precipitation standards." So, this is a little wonky, but, but it connects to a number of other things. I just want to just want to mention what this is. So, for about 80 years, "high hazard structures in the United States," meaning dams, nuclear power plants, "have been engineered to withstand floods that result from the most unlikely but possible precipitation," which [00:03:00] is "termed probable maximum precipitation" or PMP. "Failure of any of the more than 16,000 high-hazard dams and 50 nuclear power plants would result in a huge loss of life and impose major economic losses."
And so, this is a recommendation for these standards to be updated in the face of just a very different world that we're now in, where these, you know, maximum possible events are, are happening, and they're happening with, with accelerating frequency. There's a great article in Bloomberg that highlights all of this. A study in Nature earlier this year, in April, that projected climate damages potentially costing the global economy $38 trillion per year, which the study notes dwarfs the estimated $6 trillion needed to cut planet warming emissions in line with the Paris Agreement.
So, the costs of, of not doing the things that that we need to do are, you know, we're talking about a sixfold, probably, I mean, it's a [00:04:00] multiple of the, the cost of actually of making the changes. And we're seeing society bear those costs. So, there's a story also on insurers who are one of many underestimating these extremes. What, what is that all about? What's, what are the specifics there?
Julio Friedmann: So, this is a fascinating story. And in this, actually, Swiss Re, who is one of the world's biggest reinsurers, basically said that the insurance and the reinsurance industry has grossly underestimated the risks, and they are pulling up stakes. They have actually pulled up stakes from Florida completely. So, if you're a homeowner in these places, and you just can't get insurance, like, it's becoming problematic.
And this is most people's largest personal investment. The thing that they have put their life savings into is their home. And then they can't get insurance. It's terrifying for homeowners. In other cases, they can get insurance, but rates have tripled, or something like that. Because as I've said before, [00:05:00] these are non-analog times. You cannot use conventional actuarial data to estimate the damages. There is no precedent for what we're doing right now. And so, the insurance industry thought that they were sort of ahead of the curve, they were using the best science, but they've learned that they had underestimated the damages. And, in some cases, they've raised the premiums, in some cases they've left.
The New York times ran a story on this. We're seeing Bloomberg, FT, The Guardian. There's statements like the "uninsurable world." So we, we are off the map on this stuff. And politicians have not squared in their head. What happens if a huge number of voters can't insure their house anymore? And then there's a fire, what do you do?
James Lawler: Yeah. And the problem of these, you know, increasingly high insurance rates is not just the fact that, oh, you have to pay the higher insurance. It actually, if you think about the home, the value of, of homes and houses as a function of, you know, the potential cash [00:06:00] flows and costs of such things, you know, over time, a fairly modest increase in your insurance premium actually represents a fairly significant effective reduction in your home equity values. So, so that it's, if you tally all that up, you get to a very, very large number in terms of the, the impact on that value.
Spencer Glendon is someone who has, has written a lot about this, former Head of Risk for Wellington. And we, we've done a, a big podcast with him on this question of insurance and, and home values, et cetera, which, which listeners can find on the Climate Now site. You know, this article in the Financial Times, Julio, also mentions that these insurers are pulling out because oftentimes rates need to be approved by regulators. And the regulators don't want to see rates get too high, so the result is companies pull out and that's what's happening. So, interesting, interesting stuff.
Julio Friedmann: Right. Final thought about this: if you can't get flood [00:07:00] insurance, if you can't get fire insurance, it's hard to sell your house.
James Lawler: Right.
Julio Friedmann: So, if you're making all this investment in your house with the expectation you'll sell it someday and then you can't sell it, what does that mean? Nobody knows. Again, we're off the map.
James Lawler: So, shifting gears a little bit, the Supreme Court in the UK, the highest court in the land, said that a local council in England should have considered the emissions from burning the oil and not just the narrower effects of extracting it from a proposed drilling project in Horse Hill. This is, has been seen as an unprecedented ruling. Sarah Finch, who was a local resident who led the effort against the project, said that "Oil and gas companies may act like business as usual is still an option, but it will be very hard for planning authorities to permit new fossil fuel developments---in the Weald, the North Sea or anywhere else---when their true climate impact is clear for all to see."
Julio Friedmann: So, hard to [00:08:00] make a lot of this. Drilling in Surrey is not exactly a global undertaking, right? It does set a legal precedent for British courts for legal permitting in the North Sea, for example, which is something that is done by the British government. Then, if they are required to do that as part of their work, it will add to the time and the burden. It may make it more difficult to get these projects permitted.
I think that is reasonable. And it may, in fact, in the North Sea, diminish a certain amount of enthusiasm for drilling. I would remind people, though, Russia exists. Saudi Arabia exists. 50 percent of the oil in the world is produced by state oil companies, not by BP or Exxon Mobil. So even if this became law everywhere, it's not clear what the change would be in terms of global oil production. I think it is good to make sure that we ingest the full costs of fossil fuel production [00:09:00] and use. That is good economic theory. That is good governance. But this law is probably not going to be transformational. It is probably going to be one of many things that contributes to change over time.
James Lawler: I think it's it is perhaps a good indication of trend- of a trend, though. I mean, we're seeing more of this kind of thing, more efforts to kind of account for all of the externalities or all of the costs associated with burning the stuff that we burn, factored in to decision making.
Julio Friedmann: Right. But I would add that extraction is not the problem. Demand is the problem.
James Lawler: Right.
Julio Friedmann: It is the fact that we continue to require and ask oil companies to do this for us, that is the big challenge. That's why things like building renewable power charging stations, like building out the charging infrastructure and clean power infrastructure, is actually so important.
James Lawler: Right.
Julio Friedmann: But I would agree with you also in terms of trendology. We saw the Montana decision not that long ago. A number of young plaintiffs [00:10:00] said that the Montana Constitution required a high quality of living and filed for climate protection through that. And the Montana state Supreme Court said yes.
What's noteworthy here for me is actually that is the UK Supreme Court. A lot of these things have been appealed. The appeals have changed the verdicts. These things take a very long time to go through the appeal process and so forth. What's, in part, noteworthy here is the UK Supreme Court status. If in fact this were to take place in a nation that produces a substantial amount of oil, let's say the United States or Canada, then again, the effects would, I think, be broader.
James Lawler: So, in another story, EU ministers, this is also from the Financial Times, a story published on June 17th, "EU approves nature law in the face of Austrian legal threat." So the, so the law here is the Nature Restoration Law. And this, this law was passed by the [00:11:00] EU's environment ministers on Monday. And it "sets a legally binding target for [European countries] to preserve [20%] one fifth of EU's land and seas" for environmental restoration, for rewilding, you know, not surprisingly, this is not an easy pill for all of the countries in the EU to swallow. What do you make of it?
Julio Friedmann: It's fascinating because this actually, it's not directly climate related, it's related to the UN's biodiversity treaty signed in 2022. And this approval by the EU ministers is to reflect that law and it requires you to set lands aside to preserve biodiversity. And that's important in this world, like that we know that biodiversity has value and we need to do more along that front.
One of the challenges though, is in a place like Europe, you have a lot of little countries. They don't necessarily have a lot of land. Some of those countries have a higher level of industrial economy than [00:12:00] others. And in that regard, it's not that much of a surprise that Austria was the one who claimed this because they don't have that much land to set aside in addition to lands that are already protected. They have very active steel and concrete and other kinds of production. And so, if you're one of these kinds of countries, Romania would be another example, it might be harder for you to do this, and so the question is like, hold on folks, why, why are we bearing this outsized burden to our economy when a place like France does not, or, or it's much easier for them to do it? It's a fair complaint. It is also, though, the UN's biodiversity treaty. And I think this is a good test case. We are going to have to do things like put much more land into preservation and there will be friction that looks like this.
James Lawler: Continuing on that theme of who's responsible for what, there's another story on G7 leaders that are calling on [00:13:00] richer developing countries like China and Saudi Arabia to pay up for climate change. Where were these negotiations happening and what were the results?
Julio Friedmann: Right. So, the G7 had its meeting last week, and to be clear, this is easy to misunderstand, so I ask your listeners to pay attention. The G7 nations themselves, for the most part, said it is the responsibility of rich nations to do more. So, this is not an attempt to dodge their responsibilities. Quite the opposite. They've all said, “We're putting more money to work, we're upping our ambition, we realize we have an obligation to the past, and so we all want to do a lot”. But then in the same breath, they said, “Hey, there's a whole bunch of pretty wealthy nations that are not in this club that could be doing more”.
And the two nations you mentioned, China and Saudi Arabia, are exemplars. In the case of Saudi Arabia, not exactly a poor nation. Not one of the G7s, but plenty of wealth. Hey, Saudi Arabia, shouldn't you be doing more to help [00:14:00] developing countries and expand climate response? In the case of China, it's a little more complicated. You know, China would correctly claim, “Hey, we still got 300 million peasants, we are trying to grow our economy at a ferocious rate. 20 years ago, we were nowhere, you know, this is not our obligation, West. You guys made this problem. At which point the G7 nations said, “Not so fast. Aren't you the world's second largest economy? Aren't you the world's largest emitter? Isn't the burden in the atmosphere now 20 percent yours? At what point is it appropriate for a country like China to make a higher degree of commitment and obligation?”.
James Lawler: Yeah.
Julio Friedmann: And this is going to be one of the future points of friction. There's geopolitics at work here for sure, but independent of the geopolitics, it's a fair question. At what point is a nation wealthy enough? And in what terms is a nation wealthy enough to demand that they do more to manage the globe's development to an energy transition and a carbon free world?
James Lawler: [00:15:00] And that's all we have time for today. Thanks so much for joining us, Julio, as always, and thanks to our listeners for tuning in. Hope you can join us next time.
