In 2015, Mark Carney, Governor of the Bank of England, the United Kingdom’s central bank (like our “Fed”), addressed the fabled Lloyd’s of London membership. Mr. Carney spoke to this consortium of insurers about the future of the financial markets. Namely, the new threat: Climate Change. He knew that insurers, much more than other group would understand the risks, and want to be out ahead of what lies beyond the horizon!
As insurers, Lloyd’s members should be aware of the many hidden costs to our society which, either directly or indirectly, they might have to insure. Economists use the term “Tragedy in the Commons”, which is where any entity uses the communal resources—the air, water, fishing, etc—for their own benefit, while leaving any negative aspects of their actions to society, at large.
Although there are many situations where the Tragedy in Commons may occur, perhaps the best example might be the local electric power utility. The negative aspects of using fossil fuels—coal, oil and gas—to generate power, are not paid for by the utility that reaps the profits. Increased health issues, replacing obsolete plant and equipment, and environmental clean-up, are left to the local residents. And as the air and water flow by, one city’s contagion can spread to other cities—and even continents.
Yesterday, I added a most compelling book to the “Books That I Recommend” tab, on this blog: “Climate of Hope”, by Michael Bloomberg and Carl Pope. Over the past several decades, the ebb and flow of politics, has caused the commitment of many nations to dissipate, with regard to the various global climate change accords. Fortunately, many, many cities have stepped-up to fill-in the void!
Michael Bloomberg discusses the fact that much of a city’s needs fall-on the local government. As the former Mayor of New York City states, when the incidence of asthma spikes, people call City Hall, and not their Congressman. Besides public health issues, cities assume responsibility for: safe streets; police and fire; functional mass transit; basic utilities; schools; parks and recreation; etc. And each of these must by budgeted, and paid-for by the taxpayers.
As Bloomberg and Pope point-out, many of these problems are inter-related. Consider the following: clean air improves health, which provides better attendance at school or work; better-planned cities reduce flooding and expedites the flow of traffic; mass transit improves air quality, and it is cheaper to operate when it is powered by bio- or electric power; updated technology and energy-efficient operations can reduce the business expenses, etc. And in the end, cities must be vibrant to attract residents and businesses!
In addition to considering many of the concerns we’ve heard for several decades—the air we breathe; over-fishing; auto emissions, etc,—Climate of Hope also describes a number of environmental aspects that we might not even be aware of. For instance, a chicken dinner has one-sixth the carbon impact as a (similar-sized) beef dinner; there are a number of other toxic gases, besides CO2, that we emit into the atmosphere; and depending on what we import, and from where, we might be encouraging additional climate change.
Working with some 7,000 cities, Bloomberg and Pope have encouraged businesses to join them, rather than as adversaries. Corporate leaders can better-understand the cause and effect relationship, between up-front investment in plant and equipment, and the long-term stream of lower maintenance costs. And, once the true costs are included in the analysis, corporate partners want their families, and those of their employees, to live in cleaner, healthier, safer cities, as well.
NOTE: Welcome to my readers from Panama and Qatar!