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Climate change risks are soaring with every day of inaction

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Bob Litterman

Renewables generated by wind, hydro and solar now make up 25 percent of the power consumed by Minnesotans. Every year brings another step toward moving away from the fossil fuels that are driving climate change.

Congratulations, but it is not enough. Not even close.

The Dickensian technology of burning coal still accounted for 39 percent of Minnesota’s electrical production in 2017, with generators powered by natural gas providing 12 percent of the state’s electrical capacity. Nuclear power accounted for the rest of the state’s electrical output.

In other words, despite Minnesota’s considerable progress in adopting alternative energy sources in recent years, more than half of the state’s electricity remains the product of burning fossil fuel – a practice with a long history that threatens to shorten humanity’s future.

The time for slowly reducing fossil fuel consumption is past. The moment has arrived to slam on the brakes – hard and fast. Full stop, as soon as possible. Not just in Minnesota, but around the nation and across the world.

In the words of a recent call to action by the United Nations’ Intergovernmental Panel on Climate Change, averting the dangerous overheating of the planet will “require rapid, far-reaching and unprecedented changes in all aspects of society.”

Assessing risk

I spent the better part of my career assessing risk for major financial institutions and often used mathematical modeling to understand potential outcomes. More recently I have applied the same risk assessment methodology to ask how serious climate change is. The reason it is time to slam on the brakes now is that the risk created by not doing so is exploding.

What it means to slam on the brakes in the context of climate change is that it is time to create appropriate, which is to say very strong, incentives to reduce greenhouse gas emissions and to suck carbon dioxide out of the atmosphere. The solution to this problem is incredibly straightforward.

Today the incentives to reduce emissions embedded in tax codes are backward. Globally governments heavily subsidize the production and consumption of fossil fuels, which create emissions of carbon dioxide that pollute the atmosphere. Those subsidies dwarf the meager incentives that support the production of sustainable sources of energy such as wind, solar, hydro, geothermal, and nuclear.

The fossil fuel emissions create risk that the planet crosses a tipping point at which some unforeseen chain of events leads to a positive feedback that gets out of control. Imagine a worst-case scenario, and how the risk of such an event increases over time if we don’t slam on the brakes.

Consider: By the end of this century, the earth’s hothouse gas concentrations – excess carbon dioxide – will be more than five times higher if we start pricing to reduce fossil fuel use in 2020 than if we had taken the same steps in 1980.

The ultimate impact on temperature is complex because of inherent lags in how the earth ecosystem responds, but it takes around a decade after emissions hit net zero before the planet reaches a new equilibrium and the temperature stabilizes.

Short-term tab is small compared to long-term cost

Yes, the cost of energy may be destined to rise as governments prod electricity producers away from fossil fuels. But the short-term tab surely will be far less than the long-term cost of a world plagued by drought, famine, lives cut short, forced migrations of millions of people and other disruptions that are real and loom larger with each passing year.

No one knows the exact probability of a disaster driven by climate change. What we can say with some confidence is that the risk of a disaster will grow rapidly between now and 2030 if we don’t slam on the brakes. We can also say with confidence that had we done so as recently as 2001, when Sens. John McCain and Joe Lieberman introduced climate legislation that went nowhere, the problem would be only a small fraction of what is today.

Delay is a reckless option. It is not too late, but coasting away from fossil fuel won’t do. We need to slam the brakes.

Bob Litterman is a founding partner of Kepos Capital and chairman of the Risk Committee. He previously headed risk management for Goldman, Sachs & Co. and is the co-developer of the Black-Litterman Global Asset Allocation Model. He is an advisory board member for the Heller-Hurwicz Economics Institute at the University of Minnesota.


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Comments (12)

  1. Submitted by joe smith on 11/19/2018 - 12:27 pm.

    Minnesota going totally “green” (not close to being possible due to infrastructure/delivery issues not to mention none of the green sources are economically viable) would make no difference on the globe. It would just cost Minnesotans millions of dollars.

    • Submitted by Bob Barnes on 11/19/2018 - 04:21 pm.

      That’s pretty much it in a nutshell. But if you disagree with the “consensus” you get silenced.

    • Submitted by Pat Terry on 11/20/2018 - 10:32 am.


      • Submitted by Bob Barnes on 11/20/2018 - 11:08 am.

        Without subsidies no one would build wind farms. Also, you have to build a coal/nat gas/nuclear plant to backup the wind farms which makes the costs nearly double. Remember, wind blows less than 25% of the time meaning the other 75+% of the time those turbines aren’t turning and aren’t generating power.

        • Submitted by Paul John Martin on 11/20/2018 - 01:00 pm.

          Part of the answer to Bob Barnes’ out-of-date argument is in the CBS News piece that Pat Terry linked. The rest is in adopting different renewables where and when each works: wind, solar, biomass, hydro, tidal. Along the way, we generate thousands of good, family-wage jobs. And we raise our chances of passing on a habitable planet to our grandchildren. Bob Litterman is right: a big shift in tax incentives is a vital step.

          • Submitted by Bob Barnes on 11/20/2018 - 03:17 pm.

            The problem is most renewables don’t work very often and aren’t reliable 24/7. Having solar and wind farms means we spend big money to put them up, big money to maintain them AND big money to maintain backups for them. Neither can produce on demand or 24/7. So we must have nuclear, coal, nat gas etc plants running and maintained on top of all those renewable costs. You can’t just spin up an electrical generator plant on a whim. We need reliable, cheap energy. The future will be Thorium reactors. Wind and Solar are simply expensive, inefficient fads that will never be worthwhile in any of our lifetimes. They only make sense on a very small scale…like your house or a small business where you can get by on a battery at night or when the wind isn’t blowing.

  2. Submitted by John Evans on 11/19/2018 - 05:04 pm.

    Come on! Yes, Minnesota is too small to effect global climate much, but we don’t need to keep electing Congressional Representatives who don’t want the US to do anything at all. That means Tom Emmer, Jim Hagedorn and Pete Stauber. It means every Republican.

    Moving away from fossil fuels also requires action at the state level. We can provide incentives and subsidies for better insulation of buildings. We can take action to reap the considerable savings available through conservation. We can continue providing the incentives the tip the scales enough so the solar power proliferate throughout the state. and we can provide better infrastructure for electric vehicles. We can do all that without spending a great deal of money. And we know by now that we really should do what we can.

    But we won’t be able to do any of it unless we quit electing so many Republicans to the state House and Senate.

    The Republican Party has made its position clear. Minnesota has no choice but the leave them behind.

  3. Submitted by Janette Dean on 11/19/2018 - 10:03 pm.

    Important and timely column. As Bob Litterman implores, we must “slam the brakes” on fossil fuels production and use. Fossil fuels are the largest source of greenhouse gas emissions as they are still so heavily used for electricity, heating and cooling, and transportation. GHGs are trapping far too much heat from the sun in our atmosphere and have led to other crises including ocean warming and acidification when carbon dioxide and seawater combine to form carbonic acid. We can also do much more to cut methane emissions from livestock with new types of seaweed supplements, for instance, and simply by limiting our meat consumption by eating other foods which could include quite tasty meat alternatives like Tofurkey, various Beyond Meat choices and The Impossible Burger, for example. We also need to focus on new carbon capture and methane removal technologies. This will help us to remove decades-long and also local emissions. There truly is no more time to waste and we mustn’t spare any cost at this point. The costs and lives lost due to far too many disasters already have proven that.

  4. Submitted by Hiram Foster on 11/20/2018 - 05:32 am.

    Well, next time work harder to get Democrats elected.

  5. Submitted by Jeffrey Swainhart on 11/20/2018 - 07:49 am.

    It’s the tragedy of the commons. If each person/entity does only what’s best for itself in the short term, our long term viability is threatened. Humans are well adapted to dealing with short term, concrete risks, but evolution has not provided most of us with the tools to deal with long term, abstract risks. Add to that the organized disinformation orchestrated by the fossil fuel industry to delay meaningful action and you have a recipe for disaster.

    Creating a “Green New Deal” may seem a fools errand to some, but in truth it is our only path to long term viability.

    • Submitted by joe smith on 11/22/2018 - 09:30 am.

      Jeffrey, I totally disagree. The power of the commons is our innate ability not to be thrown into groups. We love our individualism. Spend an afternoon looking at the professors and scientists that don’t agree with global warming (start with Professor Lindzen from MIT). There are too many individuals that are not buying what the “green energy” folks are selling….. That is the power of us common folks…. Same reason I innately don’t trust politicians!

  6. Submitted by Richard Helle on 11/26/2018 - 04:55 pm.

    For me, it’s less important whether or not Climate Change is caused by burning carbon fuels and human activity or it’s just the way things are. If the vast majority of Climate scientists are wrong and CO2 emissions are entirely blameless, it doesn’t really matter. We still need to quit fouling our nest. If we transition to a sustainable green economy our air will be cleaner and our water will be cleaner. On the other hand, if we do nothing, we will surely render the planet uninhabitable for our species in short order.

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