Climate and Insurance.org | 2008 Predictions from the Experts

Editor’s Note: For many individuals, the end of the calendar year and start of a new one traditionally is a time to take stock of where they have been and what they plan to accomplish in the new year. With that in mind, we asked four climate change experts who we interviewed in 2007 to answer the following question for us: “What legislative, regulatory or scientific initiatives do you see happening in 2008 that could potentially impact the current debate over climate change in the United States and the rest of the world?” Below, are their answers?

Evan Mills, Ph.D., Staff Scientist, Energy Analysis Department, Lawrence Berkeley National Laboratory, Berkeley, California

Over the coming year, the discussion will continue to evolve from one of sensationalized “debate” to one of consensus and constructive action.

As recognition grows that minimizing climate change will be far more cost-effective than a business-as-usual path, we will see private industry (including insurers) and governments pushing more strenuously for cuts well beyond Kyoto-specified emissions targets. Witness United Kingdom Prime Minister Gordon Brown’s recent comments that the European Union should aim to reduce its GHG emissions 30 percent below 1990 levels by 2020 and at least 60 percent by 2050, as well as statements by dozens of companies, including GM, AIG and ConocoPhillips endorsing calls (through USCAP) for the United States to reduce its carbon emissions by 60 to 80 percent in the next few decades. In response to these aspirations, a carbon cap-and-trade policy and associated trading market already exists in Europe, and one will likely appear in the United States soon. Insurers will trade in these markets and provide risk management products and services to others who do so.

After years in the doldrums, policy shifts at the U.S. federal level are now under way – as evidenced by the freshly signed energy bill – and will no doubt accelerate after the coming presidential election. Meanwhile, continued climate change litigation will trigger liability insurance claims – the latest form of insurer vulnerability to climate change – and further fuel the private sector’s push for legislation and other means for establishing a “standard of care.”

On the insurance regulatory front, the NAIC has released a draft of its long-anticipated white paper on climate change. They do not debate the arrival of global warming or its relevance for insurers, and focus instead on risks and opportunities for both the property/casualty and life/health lines. Regulators will begin to engage in direct assessments of climate risks, encourage insurers to disclose these risks to customers and shareholders, and to examine the implications for pricing.

Meanwhile, insurers are rapidly developing “green” products and services, and their regulators will have a part to play in evaluating and hopefully enabling best practices and discouraging green-washing. Financial regulators beyond the NAIC may also call for disclosure of climate-related risks on the part of firms; individual and institutional investors certainly will continue to do so.

The process of shifting our attention from debate to acceptance will continue, and for many it will conclude once and for all. If 2008 is anything like 2007, the scientific community will unearth more startling evidence of the progression – and acceleration – of climate change and its impacts. Progress will no doubt be made in establishing useful linkages between insurers’ historically based CAT models and forward-looking climate models from the scientific community. This will help reduce uncertainties around how climate change will impact insurers and their customers, and help to better target efforts to encourage better disaster preparedness through building codes, land-use planning, etc. Desperate climate contrarians will regroup and redouble their efforts to cherry pick and otherwise spin the facts, but fewer people will heed their shifting and unconstructive claims.

The question is difficult to answer because, of course, hands down, the most important thing happening in 2008 is the U.S. presidential election. The candidates on both sides have already been forced to discuss global warming, and if I can generalize, I would put it this way: The Democrats pretty much uniformly want to do something strong to address the problem, and if anything, some of their proposals - 80 percent reductions in greenhouse gas emissions by 2050 - may be promising more than is politically feasible at the moment. As for the Republicans, some are stronger than others, but most of the serious contenders in this bunch also take climate change more seriously, in my opinion, than George W. Bush has throughout the course of his administration.

So the most important influence on the climate debate in 2008 will be statements made during the presidential campaign. That's one reason I helped organize a group, ScienceDebate2008, that wants to get all the candidates (or those remaining) to participate in a debate or series of debates solely focused on science and technology policy. Without a doubt, global warming would feature in a major way in such a debate.

In the legislative arena, we will have to watch the progress of legislation to cap greenhouse gas emissions - particularly the bipartisan Lieberman-Warner bill. Nobody I'm talking to thinks this bill can actually become law during an election year. But if it moves, it could draw considerable attention and force responses from the presidential contenders - indeed; it could become a focal point in the campaign.

The same goes for cutting-edge scientific research published about global warming in 2008 or - and this is an even bigger wild card - some type of weather event, like a Katrina or the four 2004 Florida hurricanes, that ends up being linked to global warming in the public mind in some way. I see the possibility that some such event, combined with breaking scientific research or ongoing movement of legislation like Lieberman-Warner, could create a type of synergy causing the presidential candidates to suddenly stop and have to focus exclusively on climate for a week or longer.

And to reiterate - anything that forces the U.S. campaigns to focus on global warming, especially during the general election, will have dramatic resonance not just in this country but globally. For as we just saw in Bali, everyone is waiting to see who the next U.S. president is and how that president will address - or fail to address - the climate problem.

The prospects for federal climate legislation in 2008 are chancy. Climate policy is energy policy, which is difficult to legislate because of the numerous partisan and geographic crosscurrents. Those in the political world who refuse to accept the findings of climate scientists are dwindling, but they still wield influence. The Bush administration remains hostile to mandatory carbon caps. And the crescendo of election-year politics will boost the partisan polarization that afflicts Congress.

Nevertheless, like Grant's siege of Petersburg in 1864-65, an accumulation of pressures will begin breaking down resistance to climate legislation over the coming year. Leading pressure sources will be states and businesses.

States: Frustrated with the slow-moving federal government, more states are taking climate policy matters into their own hands. In the Northeast, 10 states are moving forward with a cap-and-trade plan to cut power-plant carbon dioxide emissions 10 percent by 2019. In the West, six states and two Canadian provinces have set a joint goal to cut emissions. Six Midwestern states have followed suit, signing up to an agreement to set greenhouse gas emissions reduction targets and timetables. The regulatory prospects for coal-fired power plants have become chancier. Proposed plants have been turned down in Florida, Kansas, and Washington State.

Business: The more states go their own way, the more that businesses will push for a national policy to provide some regulatory certainty. Leading companies, including General Electric and DuPont, have banded together to lobby for a national climate policy that uses market-oriented mechanisms, such as cap-and-trade, to send a price signal that drives markets toward greater energy efficiency and low-carbon technologies.

By the beginning of 2009, with a new president and Congress taking office, pressure to act will be palpable and odds of federal legislation passing will be significantly higher.

Roger Pielke, Jr., Director, Center for Science and Technology Policy Research - Boulder, Colorado

In 2008, many people will look to the outcome of the U.S. presidential election as marking a dramatic change in U.S. participation in international climate negotiations.

I think this is probably right, but the new administration will be more important in terms of its tone rather than substance. On this we can look to the recent change of governments in Australia, where Labor's Kevin Rudd announced that he would immediately sign on to the Kyoto Protocol, which required very little (or nothing) in terms of policy change, but then backed off more aggressive actions at the recent Bali meeting.

I expect the next U.S. presidential administration - whether Republican or Democrat - will find it quite easy to change the rhetoric, but far more difficult to change policies.

Internationally, I expect to see some real handwringing. Domestically, these struggles will be reflected in policymakers' willingness to impose costs (e.g., by making energy and various forms of consumption cost more) and forgo opportunities (e.g., by deciding not to build highways, power plants, airports, etc.).

My sense is that policymakers have extremely weak stomachs for any of these actions. Hence, one possibility is that the climate debate will become increasingly connected to debates over international trade, as policymakers seek to capitalize both on concern about climate as a way to gain national advantage and to keep their fingerprints off actions that many of their constituents ultimately won't like (e.g., by placing tariffs on desirable, cheap imported goods).

And I am sure that weather events will throw in a few surprises; researchers/advocates will squabble about this and that; and the rhetoric will be every bit as inflamed as we see at the close of 2007. So in many ways, 2008 will probably look a lot like 2007.