When “Adapting” Becomes Impossible

Climate deniers tell us we will simply “adapt” to changes in climate. But when our built infrastructure, as well as the financial infrastructure that props it up, is predicated on predictable climate of the 20th century, which no longer exists, well, that’s a problem.
So we need to adapt, but climate is changing so fast that we are not even sure what the worst case scenario would be like at any given moment, because the background conditions have shifted so quickly.
Bloomberg has a good new piece on this. The part that popped out to me was one expert’s observation, that when “Every part of our financial and legal system at this point is devoted, singularly devoted, to keeping the status quo in place, ..It will be difficult for us to adapt.”
Also below, 3 UK experts explain the rapidly changing baseline.

Bloomberg:

Years ahead of the financial crisis, David Burt saw trouble brewing in subprime mortgages and started betting on a crisis, winning himself a cameo in The Big Short by Michael Lewis in addition to lots of money. Now Burt runs DeltaTerra Capital, a research firm he founded to warn investors about the next housing crisis. This one will be caused by climate change.

In a webinar with journalists last month, Burt argued that US homeowners’ wildfire and flood risks are underinsured by $28.7 billion a year. As a result, more than 17 million homes, representing nearly 19% of total US home value, are at risk of suffering what could total $1.2 trillion in value destruction.

“This is not a ‘global financial crisis’ kind of event,” Burt said, noting the total housing market is worth about $45 trillion. “But in the communities where the impacts are happening, it will feel like the Great Recession.”

Burt’s estimate may actually be on the conservative side. The climate-risk research firm First Street Foundation last year estimated that 39 million US homes — nearly half of all single-family homes in the country — are underinsured against natural disasters, including 6.8 million relying on state-backed insurers of last resort. 

The issue is that in many parts of the US, insurance premiums don’t reflect the risk of climate-fueled catastrophes, which is growing as the planet warms. A record 28 weather disasters in the US last year did $1 billion or more in damage, according to the National Oceanic and Atmospheric Administration. This year is on pace to at least match that record, with 15 such events so far — a tally that doesn’t yet include Hurricane Beryl, which might have caused $30 billion in damage.

Globally, the toll from natural disasters has topped $120 billion so far this year, the reinsurer Munich Re estimated this week. Only $62 billion of that was covered by insurance, a figure 70% higher than the long-term average. Most of this damage happened in the US, and much of it was borne by homeowners. 

Insurers have been raising premiums in response to these catastrophes and to cover the rising costs of rebuilding and buying their own insurance through companies like Munich Re. Homeowners insurance premiums rose 11% on average in the US in 2023, according to S&P Global Market Intelligence. They’ve risen by more than a third in just the past five years. In states on the front lines of climate change, including California, Florida and Texas, increases have been even higher.

But premiums still aren’t high enough, mainly because almost nobody wants them to be. Homeowners aren’t fans of paying exorbitant insurance rates, and they tend to punish politicians who let them rise too much. Higher premiums also hurt property values, threatening tax revenue. The result is market manipulation like California’s Proposition 103, which sharply limits how much insurers can raise premiums. And even if insurers could increase rates willy-nilly, they might think twice about chasing off customers — especially when laws and regulations are designed to discourage homeowners from suing insurers for uncovered damage.

“Every part of our financial and legal system at this point is devoted, singularly devoted, to keeping the status quo in place,” Harvard Law School professor Susan Crawford said in the webinar. “It will be difficult for us to adapt.”

First Street used a hypothetical California home to illustrate just how wildly divorced from reality insurance costs can get in some places. Say our imaginary Californians started out in 2010 paying an annual $2,000 home-insurance premium. If that increased by 7% a year — the absolute most the state will allow, and highly unlikely in any case — that premium would have hit $4,820 in 2023. Yikes! And yet that would still be $2,900 short of what the price should be to truly reflect how much Hypothetical Insurance Inc. has at risk, First Street estimated, considering climate change, inflation, reinsurance and other costs.

Simon Lee, Hayley Fowler, and Paul Davies in The Conversation:

Typically, meteorologists and climate scientists use a 30-year period to represent the climate, which is updated every ten years. The most recent climate period is 1991-2020. The difference between each successive 30-year climate period serves as a very literal record of climate change.

This way of thinking about the climate falls short when the climate itself is rapidly changing. Global average temperatures have increased at around 0.2°C per decade over the past 30 years, meaning that the global climate of 1991 was around 0.6°C cooler than that in 2020 (when accounting for other year-to-year fluctuations), and even more so than the present day.

If the climate is a range of possible weather events, then this rapid change has two implications. First, it means that part of the distribution of weather events comprising a 30-year climate period occurred in a very different background global climate: for example, northerly winds in the 1990s were much colder than those in the 2020s in north-west Europe, thanks to the Arctic warming nearly four times faster than the global average. Statistics from three decades ago no longer represent what is possible in the present day.

Second, the rapidly changing climate means we have not necessarily experienced the extremes that modern-day atmospheric and oceanic warmth can produce. In a stable climate, scientists would have multiple decades for the atmosphere to get into its various configurations and drive extreme events, such as heatwaves, floods or droughts. We could then use these observations to build up an understanding of what the climate is capable of. But in our rapidly changing climate, we effectively have only a few years – not enough to experience everything the climate has to offer.