Well, Let's Add This to Our Growing List of Dire Warnings

Another day another warning that humanity is pushing its luck, overstressing this Earth, our one and only biosphere.

For those of you who can't handle stress, don't fret. It'll be down the Memory Hole by the end of the weekend at the outside.  We've already forgotten Tuesday's dire warning from the World Resource Institute about the dire freshwater crisis that has beset a quarter of humanity.  So many crises, so little time, how is a girl supposed to remember them all?

Dirt. Who gives a damn about dirt? Apparently the UN does.  The latest report from its Intergovernmental Panel on Climate Change, the IPCC, visits a recurring theme - soils degradation.

It's a topic that's been considered in depth before. Agronomists have been howling their warnings for years. We're exhausting our stocks of arable land, the soils we need to grow our food. It finally led the UN Food and Agriculture Organization (FAO) to issue a report in 2014 warning that we were heading toward a collapse in agricultural production within 60 years. Even the best remaining farmland, the agency claimed, were already somewhat degraded. We even got a map showing the then state of soils degradation. Then - whoosh - straight down the Memory Hole.

That 2014 report was followed up by another in 2018 that seemed to disappear into that hole of oblivion even faster. With it was a report warning that we would need a 50 per cent increase in agricultural production to feed the herd in 2050. Damn, if we were just a tiny fraction as good at responding to these warnings as we are at ignoring them, and we're so very good at ignoring them, we might just have some hope. Yeah but ignoring them until we've completely forgotten about them comes just so naturally to us. It's effortless and demands nothing of us and,  when it comes to change, our favourite flavour is nothing.

Today's report layers man-made climate change atop man-made soils degradation. I suppose you've guessed it's not good news.

The climate crisis is damaging the ability of the land to sustain humanity, with cascading risks becoming increasingly severe as global temperatures rise, according to a landmark UN report compiled by some of the world’s top scientists. 

Global heating is increasing droughts, soil erosion and wildfires while diminishing crop yields in the tropics and thawing permafrost near the poles, says the report by the Intergovernmental Panel on Climate Change. 

Further heating will lead to unprecedented climate conditions at lower latitudes, with potential growth in hunger, migration and conflict and increased damage to the great northern forests. 

The report, approved by the world’s governments, makes clear that humanity faces a stark choice between a vicious or virtuous circle. Continued destruction of forests and huge emissions from cattle and other intensive farming practices will intensify the climate crisis, making the impacts on land still worse.

What came through for me in reading those four paragraphs was how bland the message. It's almost as sterile as the soil itself and it's from The Guardian!  I know, ask George. Monbiot calls this report a miserable failure.

The problem is that it concentrates on just one of the two ways of counting the carbon costs of farming. The first way – the IPCC’s approach – could be described as farming’s current account. How much greenhouse gas does driving tractors, spreading fertiliser and raising livestock produce every year? According to the panel’s report, the answer is around 23% of the planet-heating gases we currently produce. But this fails miserably to capture the overall impact of food production.

The second accounting method is more important. This could be described as the capital account: how does farming compare to the natural ecosystems that would otherwise have occupied the land? A paper published in Nature last year, but not mentioned by the IPCC, sought to count this cost. Please read these figures carefully. They could change your life.

The official carbon footprint of people in the UK is 5.4 tonnes of carbon dioxide per person per year. But in addition to this, the Nature paper estimates that the total greenhouse gas cost – in terms of lost opportunities for storing carbon that the land would offer were it not being farmed – of an average northern European diet is 9 tonnes a year. In other words, if we counted the “carbon opportunity costs” of our diet, our total footprint would almost triple, to 14.4 tonnes.

Okay, well, I'm not sure we're ready to give up meat, poultry, even fish for a diet of swill and soya. I could be wrong but I just don't see it. Still, I like Monbiot's closer:

Are we prepared to act on what we know, or will we continue to gorge on the lives of our descendants?

But wait, there's more. We can avert the worst of the worst. All it will take is a little sacrifice.

However, action now to allow soils and forests to regenerate and store carbon, and to cut meat consumption by people and food waste, could play a big role in tackling the climate crisis, the report says.

Such moves would also improve human health, reduce poverty and tackle the huge losses of wildlife across the globe, the IPCC says.
Burning of fossil fuels should end as well to avoid “irreversible loss in land ecosystem services required for food, health and habitable settlements”, the report says. 

“This is a perfect storm,” said Dave Reay, a professor at the University of Edinburgh who was an expert reviewer for the IPCC report. 

“Limited land, an expanding human population, and all wrapped in a suffocating blanket of climate emergency. Earth has never felt smaller, its natural ecosystems never under such direct threat.”

Didn't you just know that our fossil-fuel economy would get in there somehow?  We know we've got to shut it down but even our Eco-warrior prime minister has other plans. He wants to take us in exactly the opposite direction. Burn baby, burn.

Prof Jim Skea, from the IPPC, said the land was already struggling and climate change was adding to its burdens. Almost three-quarters of ice-free land was now directly affected by human activity, the report says. 

Poor land use is also behind almost a quarter of the planet’s greenhouse gas emissions – the destruction of forests, huge cattle herds and overuse of chemical fertilisers being key factors.

Emissions relating to fertilisers have risen ninefold since the early 1960s. Rising temperatures are causing deserts to spread, particularly in Asia and Africa, and the Americas and Mediterranean are at risk, the report says. 

One of the most stark conclusions in the IPCC report is that soil, upon which humanity is entirely dependent, is being lost more than 100 times faster than it is being formed in ploughed areas; and lost 10 to 20 times faster even on fields that are not tilled. 

The report recommends strong action from governments and business, including ending deforestation and enabling new forests to grow, reforming farming subsidies, supporting small farmers and breeding more resilient crops. Many of those solutions, however, would take decades to have an impact, the IPCC says.

Decades. We haven't got decades to turn this around. Not unless we act now to buy more time.  That could begin by at least exploring new economic models to replace our current three-pack-a-day neoliberalism with its impossible growth-centric focus. And shutting down fossil fuels as fast as possible would be a great help. That could begin by putting an abrupt end to high-carbon fossil energy, thermal coal and bitumen.

The key to all of these crises is quite simple. Mankind has to accept the mortal need to live within the sustainable limitations of our very finite planet, Earth. We're way beyond that now and we just want to grow bigger, faster, all the time. If we can't find and adopt ways to again live in harmony with this, our one and only biosphere, it will surely eliminate us. And that is suicide.

Connecting the Dots on Climate Change

One of the biggest failures in climate change reporting is the tendency to focus on particular aspects without considering the bigger picture.  What does sea level rise have to do with droughts or floods?  What is the role of changing ocean circulation patterns?  How do these impacts all factor into our rapidly changing jet stream?

When we look at individual aspects we usually wind up with charts that reveal a linear pattern.  Sure, there may be dramatic increases on the curve, but nothing that appears wild or unpredictable.

Yet we're nearing the point where climate change impacts will be wild and unpredictable, totally non-linear.  A big part of this results from the "cascade effect" in which a number of seemingly unrelated impacts begin operating together, even harnessing man-made change with natural feedback mechanisms that will be much harder to control and nearly impossible to reverse.  We can expect to be overtaken by fast-developing events and very possibly without adaptation strategies or preparations.  In the scope of climate change, it's like we've all but given up.

An online course being presented by Germany's prestigious Potsdam Institute provides the missing link.  It begins to connect all the dots to reveal how changes already underway that will continue to accelerate and worsen even if we miraculously decarbonize today to make our world a far more difficult place for almost all forms of life.

One example is the Greenland ice sheet.  As it melts, the cold freshwater released to the sea has a direct impact on the thermohalene circulation (Gulf Stream) which, in turn, speeds up the decline in the Arctic sea ice and the thawing of high latitude permafrost and the loss of Alpine glaciers.

As the Arctic warms the temperature differential between the Arctic and temperate latitudes narrows,  weakening the jet stream and giving rise to Rossby waves, blocking events that can stall weather fronts in a particular location for upwards of four weeks.  These Rossby waves are responsible for Atlanta, Georgia falling into a February deep freeze while a village in Alaska hits temps. in the 60s.  These Rossby waves created the conditions for the Calgary flood and triggered the recent drought in Russia that ruined the wheat harvest there.

The Amazon rainforest governs precipitation patterns in much of South America. A warming beyond 2C carries the risk of transforming the Amazon into savannah grasslands, upending essential rainfall needed for many millions of Brazilians and their neighbours.

The hydrologic cycle is the climate change cycle.  Our civilization is utterly dependent on the steady and predictable supply of precipitation for human needs (drinking, cooking, sanitation), for agricultural production and for industry. When precipitation falters and becomes unreliable or sporadic, there goes your economy and, with it, your civilization.   This is nothing new.  We have a rich history of this sort of societal collapse.

Already billions lack adequate access to safe water.  Billions do not have access to basic sanitation.  Even as we experience growing water scarcity many of the most vulnerable countries also heavily contaminate their freshwater resources. This is compounded by deteriorating ecosystems and by failing infrastructure and lack of investment.  Water is something we're all too ready to fight over when scarcity sets in and there are few coherent international policies to deal with conflict.

Two areas expected to be among the hardest hit are Africa and Asia.  They're also experiencing explosive population growth.  They're going to be especially vulnerable to droughts, floods and sea level rise.  It's estimated the world will need to up food production by 50-70% by 2050 to keep up with the growing population yet these climate change impacts, taken cumulatively, will cause a sharp decline in food production in the most needy areas.  Draw your own conclusions as to how that will play out especially in the Hindu Kush.

Our ecosystems are in a migratory transition.  Plants and animals alike are responding to climate change by steadily moving away from the equator. Although you may think otherwise in central and eastern Canada, Spring is now arriving two weeks earlier globally.  Pests and disease are also migrating.  West Nile virus is one example.  Above 2C be prepared for a spread of malaria and a sharp increase in infections.  As it warms the incubation period for malaria plummets and mosquitoes bite a lot more.  Water-related diseases from cholera to typhus to dysentery also increase.

It's critical to consider the effect this warming already underway will have on biodiversity.  Many species are incapable of evolving to survive the current, early onset, rate of change.  If we fail to arrest global warming at 2C (now considered highly unlikely) and instead allow it to reach 4C, the number of species lost will skyrocket. 2C simply gives many species a window to survive through adaptation, evolution migration.

This week it was announced that, in March, we set another record when every part of the planet experienced GHG concentrations about 400 ppm. Everywhere. To put that in perspective, our coral reefs cannot survive long beyond 350 ppm. of atmospheric CO2.  It's calculated that 1.5C of warming will kill off all but 10% of the world's corals.  Here's the thing.  It was recently reported that our existing emissions, what we've already put into the atmosphere, will "lock in" 1.5C of warming by 2100.  We've already pulled the Celsius trigger.  Now we've pulled the acidification trigger.  Sea level rise stresses corals.  So do severe storm events such as the cyclones savaging the central western Pacific.

As I went through the lectures from these top world scientists, leaders in their own disciplines, in looking to what awaits in a 4C world each said the same thing - "all bets are off."  Each of them described their field in the context of a climate change impacts "cascade" but noted that these combined impacts and they synergies are beyond anything in the experience of human and other life forms. Most also pointed out that, by the time we get to understand the cascade fallout, it'll be too late to do anything about it.

To sum up, we've got two choices - just the two.  Either decarbonize now, just as quickly as humanly possible, or "don't worry, be happy."  

Your Global Warming Surcharge Coming Soon

Reservoir, What Reservoir?

So, you see, you've got this conjunction of forces.  There are more of us by the day, about 220,000 every 24-hours and that's a net increase.  And then our ever larger population is also movin' on up.  We're making progress on reducing poverty and those mega-populated, emerging economies are spawning their own middle, or consumer classes that want pretty much everything that you or I take for granted - nice houses, cars, holidays abroad, consumer goods of every description and better food.  There's the first part of your problem - demand.  It's way up.

The second part of your problem is supply.  Unlike demand, supply may be heading in the other direction.  You see, we've changed the climate.  We've changed the channel.  We're into a new climate now and when it comes to meeting our growing demand, it's less than ideal.  Climate change is making wet regions wetter and dry regions dryer.  In the case of dry regions that often means drought.
Unfortunately these warm, dry regions have also been where we get a lot of what we eat.  Think of California, North America's supplier of fruits, nuts and, of course, wine.  The Golden State is still getting plenty of sunshine but precious little rainfall and farmers are struggling with drought.  Even orchards are being lost.

Now word is out that the world's main olive producer, Spain, is also in the throes of terrible drought.  Spain produces half the world's olives and most of our olive oil.  Expect to pay more soon for olive oil.  European prices have already jumped 30% this year.  Unfortunately this is a problem we're going to be facing ever more in years to come.

Here's the thing.  We can grow olives elsewhere in our warming world.  The problem is it takes nearly 35-years from planting until an olive grove comes into production.  So there's bound to be a period of disruption and, while that lasts, expect to pay for it at the check out.

And, by the way, look for domestic food prices to nudge higher this year.  China is in the midst of its worst drought in 63-years in its northern agricultural belt.  The crop shortfall could send China to the world markets, driving up prices for wheat and other grains.

Don't fret, we still have enough wealth disparity that we can continue to buy our way out of these shortages, for now.  People at the bottom end of the wealth scale, let's just call them the poor, don't have as many options.  They do without or find substitutes like dirt and grass.

We Stand on the Brink of Global Instability and There's No Running from It

Maybe we should rethink our rush to extract and export as much of Canada's fossil fuel reserves as possible.  Maybe we should give some thought to the domestic needs of our future generations.

A fascinating article from The Guardian today by Dr. Nafeez Ahmed, executive director of the Institute for Policy Research and Development, explores the connection between the end of cheap energy and unrest spreading across the globe.  His warning is stark.  We either hasten our transition to a post-carbon world  and adapt to it quickly or we face a global epidemic of rioting and instability.

If anyone had hoped that the Arab Spring and Occupy protests a few years back were one-off episodes that would soon give way to more stability, they have another thing coming. The hope was that ongoing economic recovery would return to pre-crash levels of growth, alleviating the grievances fueling the fires of civil unrest, stoked by years of recession.

But this hasn't happened. And it won't.

Instead the post-2008 crash era, including 2013 and early 2014, has seen a persistence and proliferation of civil unrest on a scale that has never been seen before in human history. This month alone has seen riots kick-off in Venezuela, Bosnia, Ukraine, Iceland, and Thailand.

This is not a coincidence. The riots are of course rooted in common, regressive economic forces playing out across every continent of the planet - but those forces themselves are symptomatic of a deeper, protracted process of global system failure as we transition from the old industrial era of dirty fossil fuels, towards something else.

Food insecurity, a major factor in the Arab Spring uprisings, and the demise of cheap energy point to a looming epidemic of rioting and instability.

In Ukraine, previous food price shocks have impacted negatively on the country's grain exports, contributing to intensifying urban poverty in particular. Accelerating levels of domestic inflation are underestimated in official statistics - Ukrainians spend on average as much as 75% on household bills, and more than half their incomes on necessities such as food and non-alcoholic drinks, and as75% on household bills. Similarly, for most of last year, Venezuela suffered from ongoing food shortages driven by policy mismanagement along with 17 year record-high inflation due mostly to rising food prices.

While dependence on increasingly expensive food imports plays a role here, at the heart of both countries is a deepening energy crisis. Ukraine is a net energy importer, having peaked in oil and gas production way back in 1976. Despite excitement about domestic shale potential, Ukraine's oil production has declined by over 60% over the last twenty years driven by both geological challenges and dearth of investment.
 
Currently, about 80% of Ukraine's oil, and 80% of its gas, is imported from Russia. But over half of Ukraine's energy consumption is sustained by gas. Russian natural gas prices have nearly quadrupled since 2004. The rocketing energy prices underpin the inflation that is driving excruciating poverty rates for average Ukranians, exacerbating social, ethnic, political and class divisions.
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These local conditions are being exacerbated by global structural realities. Record high global food prices impinge on these local conditions and push them over the edge. But the food price hikes, in turn, are symptomatic of a range of overlapping problems. Global agriculture's excessive dependence on fossil fuel inputs means food prices are invariably linked to oil price spikes.
Naturally, biofuels and food commodity speculation pushes prices up even further - elite financiers alone benefit from this while working people from middle to lower classes bear the brunt.

Of course, the elephant in the room is climate change. According to Japanese media, a leaked draft of the UN Intergovernmental Panel on Climate Change's (IPCC) second major report warned that while demand for food will rise by 14%, global crop production will drop by 2% per decade due to current levels of global warming, and wreak $1.45 trillion of economic damage by the end of the century. The scenario is based on a projected rise of 2.5 degrees Celsius.

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The epidemic of global riots is symptomatic of global system failure - a civilisational form that has outlasted its usefulness. We need a new paradigm.

Unfortunately, simply taking to the streets isn't the answer. What is needed is a meaningful vision for civilisational transition - backed up with people power and ethical consistence.

It's time that governments, corporations and the public alike woke up to the fact that we are fast entering a new post-carbon era, and that the quicker we adapt to it, the far better our chances of successfully redefining a new form of civilisation - a new form of prosperity - that is capable of living in harmony with the Earth system.

But if we continue to make like ostriches, we'll only have ourselves to blame when the epidemic becomes a pandemic at our doorsteps.

 

The Every-Country-For-Itself Face of the Global Food Insecurity Crisis

Consider these two realities.   (1) The United Nations World Food Programme toils to keep millions of people alive (2) in the same African nations where affluent grain-importing countries like Saudi Arabia, China and South Korea are busy buying or negotiating long-term leasing rights on key agricultural lands.

As of mid-2012, hundreds of land acquisition deals had been negotiated or were under negotiation, some of them exceeding a million acres. A World Bank analysis of these “land grabs” reported that at least 140 million acres were involved - an area that exceeds the cropland devoted to corn and wheat combined in the United States. This onslaught of land acquisitions has become a land rush as governments, agribusiness firms and private investors seek control of land wherever they can find it.

There was a time when if we got into trouble on the food front, ministries of agriculture would offer farmers more financial incentives, like higher price supports, and things would soon return to normal. But responding to the tightening of food supplies today is a far more complex undertaking. It involves the ministries of energy, water resources and health and family planning, among others. Because of the looming spectre of climate change that is threatening to disrupt agriculture, we may find that energy policies will have an even greater effect on future food security than agricultural policies do. In short, avoiding a breakdown in the food system requires the mobilisation of our entire society.

Can we solve this burgeoning food crisis?  Yes we can but not without the collective will to solve it and the willingness to accept the discipline, cooperation and sacrifices that mandates.  Wake me when we get there.

When Pigs Float

Shanghai has a water problem.   Somehow more than 2,800 dead pigs wound up floating in one of the main rivers that supplies drinking water to the mega-metropolis of 23-million.

Local authorities claim the river water is still safe to drink but they are local authorities and this is China.

Nobody has figured out where the pigs came from yet.   How some farmer can conceal the absence of nearly three thousand pigs is a bit tough to understand.   Yet the animals show no sign of disease or any other obvious cause of death.

Apparently this is nothing new.

"You can see dead pigs here every year, but there are more now than in the past few years," a local man told the [state broadcaster CCTV].

The Jiaxing Daily newspaper in northern Zhejiang province quoted a villager as saying that over the past two months almost 20,000 pigs in his village have died of unknown causes. While Shanghai compensates its farmers for properly disposing of dead swine, the newspaper said, Zhejiang and Jiangsu provinces lack a comparable incentive system, so farmers there often dump their pig carcasses directly into local rivers.

"The local authorities are conducting co-ordinated efforts to stop the dumping of dead pigs from the source," said China's official newswire Xinhua.

Experts say the groundwater in half of all Chinese cities is contaminated, most of it severely, and that soil pollution could be widespread in 15 of the country's 33 provinces.

A study released last year found that upwards of 40% of Chinese farmland is now contaminated by arsenic and heavy metals carried from factory smokestacks.   China is in a race to salvage its agricultural production, a race that might already be lost.

When The Rich Eat the Poor

You might think that Ethiopia is a country that would take its food supply very, very seriously.  We're regularly greeted by appeals for donations to help relieve starvation in the Horn of Africa - Ethiopia, Djibouti, Somalia, Eritrea.

It's a bit disconcerting to learn that Indian investors are now snapping up Ethiopia's prime farmlands, forcing the people off their land.

Ethiopia's leasing of 600,000 hectares (1.5m acres) of prime farmland to Indian companies has led to intimidation, repression, detentions, rapes, beatings, environmental destruction, and the imprisonment of journalists and political objectors, according to a new report.

Research by the US-based Oakland Institute suggests many thousands of Ethiopians are in the process of being relocated or have fled to neighbouring countries after their traditional land has been handed to foreign investors without their consent. The situation is likely to deteriorate further as companies start to gear up their operations and the government pursues plans to lease as much as 15% of the land in some regions, says Oakland.

This is no more than a small part of a pattern of economic colonization underway around the world whereby countries with wealth ease their own food deficiencies by sourcing food production from other countries.

We have some experience of this.   How much Mexican or Central American produce is in our grocery stores?  The history of the United Fruit Company is rich and sullied.   The difference is that
what's happening today is creating more hardship.   Middle Eastern oil countries are land grabbing in Africa.   China is going after good farmland in southeast Asia, Africa and even South America.  India is likewise getting into the game.

Both China and India are poised for genuine and severe environmental calamity and both will be under pressure to use their wealth to seek food security abroad.   This is only just beginning.

Can You See Where This is Headed?

Apparently the world is on the cusp of the "Consumption Revolution."

The developing economies are surging, opening up what could be a $30-trillion a year demand for, well, stuff - stuff that affluent consumers sometimes buy.

A report by McKinsey’s business and economics research arm, McKinsey Global Institute, calls it “the biggest growth opportunity in the history of capitalism.”

“We think it’s bigger than when the plow was introduced,” report co-author and MGI director Richard Dobbs said. “And this is a thousand times the size of what happened with the British Industrial Revolution.”

Allow me to, politely, call "bullshit" on this story at this point.   For starters, to feed this sort of demand for products, will require a lot more resources than the Earth can provide and vastly more energy than our civilization can burn if we're to have a snowball's chance in hell of seeing this century out without a major war.

Consumer goods production inevitably demands two things - cheap fossil fuel energy and vast amounts of virtually free water - in addition to labour, plant and materials.   And, of course, all those consumers and the lesser folk who make the stuff they consume need food, shelter and the other necessaries of life, a lot of those things also in limited supply.

When it comes to food and water, emerging economies are staring at a massive wall.   Global warming has already broken the hydrological cycle that used to bring predictable, measured and sustained precipitation essential for agriculture, replacing that with regional droughts, floods or, in some cases, cyclical drought and floods.   It's gotten to the point that leading water science types are warning that, within the next forty years, mankind is going to have to go vegetarian if we're to feed the population predicted for 2050.

Humans derive about 20% of their protein from animal-based products now, but this may need to drop to just 5% to feed the extra 2 billion people expected to be alive by 2050, according to research by some of the world's leading water scientists.

"There will not be enough water available on current croplands to produce food for the expected 9 billion population in 2050 if we follow current trends and changes towards diets common in western nations," the report by Malik Falkenmark and colleagues at the Stockholm International Water Institute (SIWI) said.

"There will be just enough water if the proportion of animal-based foods is limited to 5% of total calories and considerable regional water deficits can be met by a … reliable system of food trade."

As the Global Footprint Network announced recently, Earth Overshoot Day, the date each year on which mankind exhausts a full year's supply of renewable resources, arrived on August 22nd.   Just six years ago that didn't arrive until October 9th.   The Consumption Revolution being forecast by the McKinsey business consultancy will propel Overshoot into overdrive.

Here's something else McKinsey has overlooked.   Of the BRIC countries, Brazil alone has the instruments of governance to wrestle with this transition.   China doesn't, India doesn't, even Russia doesn't.   How will they cope with the social and political dimensions of evolving into First World consumer societies?    Good luck with that and pass the poi.

Drought - America Isn't Alone

Russian wheatfield ravaged by locusts and drought

Another giant grain exporter, Russia, is also being hammered by drought leaving Brits fearful of major food price increases.

Farmers in Russia are being crippled by severe drought, which has caused a potentially devastating drop in the country's grain production.
Fears are mounting that the country, which exports the cheapest wheat, will impose an export ban, pushing up the price of food globally.
Russia is forecast to produce 75million tons of grain this year – a 30 per cent drop in the country’s usual yield.

Jack Watts, senior analyst at HGCA the Home-Grown Cereals Authority, said: ‘If there is a longer term period of higher prices then this may well end up with higher food prices.’ 

Speaking to Radio 4’s Farming Today programme today, he said: ‘Two years ago Russia had a blanket export ban in place very quickly.
‘In 2012 the market is very fearful of this happening, there is no confirmation or real denial an export ban is going to happen, but the market is nervous based on a repeat of what we saw in 2010.’
The former Soviet Union is one of the world's biggest producers of wheat, barley  and rye.

Putting a Price on Environmental Vulnerabilities

If a nation's economy is heavily dependent on imported resources that are in increasingly short supply, should this be factored into that country's credit rating?   It seems to follow that the more dependent an economy on limited resources the more vulnerable that economy would be to disruptions or reductions in supply or price instability.

Could an abundance of natural wealth be a factor in positively influencing a country's credit rating and the quality of its bonds? Could a resource-guzzling economy be cause for a downgrade?


The UN Environment Programme Finance Initiative (UNEP FI) in collaboration with Global Footprint Network and leading financial institutions will endeavor to shine a light on these questions with a groundbreaking project to explore the role of natural resource accounting in strengthening risk models for government bonds. The project seeks to incorporate how much natural wealth countries have and how much they spend into assessments of long-term credit risk.

 "The global financial crisis has taught us more than anything that some of the core risks that affect the value of debt securities and derivatives can simply run ahead of our ability to understand them," said Paul Clements-Hunt, Head of UNEP FI. This is why we must deepen our understanding of the risks posed by climate change, water scarcity and the overuse of natural resources for securities. We should not be caught off-guard again. This project is one of the first that tries to quantitatively and systematically consider the linkages between the use of natural resources and its impact on a country's core economic indicators that in turn influence the quality of its bonds.

The study raises important and overlooked questions that go to the environmental stability of many leading countries including the United States and the emerging economic superpowers of China, India, Russia and Brazil.  We're only beginning to grasp the havoc their economies will face from already unpreventable climate change, from their precarious and unsustainable water resources and from the rising global demand for other scarce resources, including food.