Climate Change is Driving More Extreme Weather Events

This has economic and political consequences, but it is still uncertain if they can be overcome.

There are many political and economic items on the agenda of business decision-makers and policymakers at the moment that are causing a lot of concern, ranging from the increasing trade tensions between the U.S. and China, the competitiveness of the European Union, the impact of the war in Ukraine and the Middle East, to the increase in geopolitical instability as the world order continues to become more multipolar. But a risk that has not gone away, but yet continues to impact everyday economic and political life, is climate change. This is particularly pronounced every time we are subject to extreme weather events, which now seem to occur more often.

Extreme weather events are typically understood as statistically rare events at a particular place and time of the year. Their occurrence is unexpected and unusual, compared to normally expected weather patterns based on historical weather records for any given area. They have caught communities off guard and caused significant loss, damage, and disruption. Extreme weather events include extreme heatwaves, unusual cold snaps, significant heavy downpours of rain, hurricanes, unexpected tornados, or tropical cyclones which can lead to extensive flooding, forest fires, long droughts, loss of life, and material damage.

Such events are becoming more common causing major disruptions for communities, many of whose infrastructures were not built for the twenty-first century. Recent examples of how they can wreak havoc around the world can be found in the recent floodings in Dubai, Brazil, and Texas, and the brutal heatwave experienced in Asia this month.

It is well established that the Earth’s climate has changed throughout history, but the current trend of global warming is unlike anything we've seen in thousands of years. It's happening fast, and it's clear that human activity since the 1800s is the cause. Human activities have produced the atmospheric gases that have trapped more of the Sun’s energy in the Earth system, which has created a greenhouse effect, warming the atmosphere and leading to rapid changes in climate. One of the key consequences of global warming is an increase in the frequency of extreme weather events.

It is the assessment of The United Nations International Panel on Climate Change (IPCC) that:

“Human-caused climate change is already affecting many weather and climate extremes in every region across the globe…. Human influence has likely increased the chance of compound extreme events since the 1950s, including increases in the frequency of concurrent heatwaves and droughts”

Why is this important?

As the climate continues to undergo significant change and weather patterns become more unpredictable, these extreme weather events are likely to have significant economic and political consequences which will likely grow in magnitude without sufficient and urgent economic and political solutions, that require international cooperation.

Disasters like floods and hurricanes can cause billions in damage to homes, businesses, and infrastructure, overwhelming local and national governments, and forcing them to divert funds at short notice from other programs towards recovery efforts. There is also the prospect of higher insurance costs for businesses and private homeowners. Droughts, floods, and heat waves can devastate crops and livestock, leading to food insecurity and price hikes, which can then have a knock-on effect on inflation, which influences interest rates.

Extreme weather events are also a cause of significant disruption to transportation networks and supply chains, leading to snarl-ups, and shortages of goods and services which in turn have consequences for the wider economy. Then there is also the uncertainty that more frequent extreme weather events could create when business decision-makers decide where (or not) to invest. Moreover, the prospect of more common extreme weather events will also impact the global tourist industry, where tourists may become discouraged from visiting certain regions and some operators may struggle to get affordable insurance.  

Maintaining our existing way of life will no doubt become more challenging. There will also be political consequences. If some areas of the world become uninhabitable people will need to move elsewhere bringing new immigration challenges to their destination countries and new political debates (and perhaps political polarisation) that often emerge with large arrivals of newcomers.

Adverse changes in our weather patterns may also impact security considerations, making some military equipment obsolete and some military installations redundant. Then, there is also the realistic possibility that climate change could nudge a significant shift in global power dynamics. In the future, countries may go to war over resources and world trade routes, with consequences for human life, business supply chains, and world order. There is a reason why some of the world's leading militaries are taking climate change seriously.

NATO has described climate change as an

'overarching challenge of our time' that will 'measurably' increase the risks to security and ‘worsen as the world warms further”.

What’s happening now?

The landmark multilateral Paris Agreement, adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France in 2015, is the framework that best provides for collective action in achieving the necessary greenhouse gas emissions reductions if the global community is going to manage to limit the worse consequences of climate change and avoid more extreme weather events in the future.

At Paris, the overarching goal agreed upon was to hold

“the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”

However, the UN has since noted that, in recent years, world leaders have stressed the need to limit global warming to 1.5°C by the end of this century, because the UN’s Intergovernmental Panel on Climate Change indicates that crossing that threshold risks unleashing far more extreme weather events, such as severe droughts, heatwaves, and rainfall. To limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030. That’s just a few years away from now.

Source: Our World in Data, Greenhouse gas emissions | CC BY

The Paris Agreement was a triumph for international multilateralism and a big vindication of those who believe big global-scale political cooperation is possible. It is less certain if such an agreement could get over the line in today’s international political environment where geopolitical considerations more often than not reign supreme.

Still, since Paris, there has been a lot of progress in transitioning to a green economy with major initiatives in leading economies such as the IRA in the U.S., the European Green Deal in the EU, and the massive investment in green technology in China. These initiatives which seek to invest in clean energy and replace emission-producing fossil fuels, are promising. Given the progress, there is still every reason to believe that confronting the impact of climate change can prove to be an economic boon.

However, it does not seem to be happening on a global scale, and at the speed that is needed. Nine years have passed since the agreement and despite the progress, it is still not at all certain if the goals agreed to in Paris will be met and if governments around the world continue to have the will or capacity to make it happen.

Investment in the green economy is critical, however, despite the growth in ESG investing in some regions such as Europe, new research this month shows that the world’s big banks have financed nearly $7tn in funding to the fossil fuel industry since the Paris Agreement. Moreover, the practice of ESG investing has also become entangled in Washington’s polarized politics.

Current trends suggest it's becoming more unlikely, even under optimistic scenarios, that the agreement will achieve its goal of limiting global warming at 1.5°C above pre-industrial levels.

The IPCC has said that

“global warming will continue to increase in the near term (2021-2040) mainly due to increased cumulative CO2 emissions”.

In their estimation, under a very low emissions scenario, they believe that global warming is “more likely than not” to reach an increase of 1.5°C and “likely or very likely to exceed 1.5°C under higher emissions scenarios”, making extreme weather events more likely.

Recent research from Climate Action Tracker, an independent scientific project that tracks government climate action and measures it against the globally agreed Paris Agreement, has found that current policies in place around the world could result in warming well above that target, as high as about 2.7°C warming above pre-industrial levels.

The current state of play seems to be one of a lot done but, still, much more to do in reducing human-induced climate change. If these figures prove true in the coming years then climate change is likely to continue to drive more extreme weather events, perhaps with more intensity, and bring with it all the consequences that it would entail.

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