E3G

Environment and Business in the 21st Century

By Tom Burke

Each of these pressures would be significant in its own right, but it is the nexus of interactions between them that pose the more serious problem. These are poorly understood, pay no respect to geographical or bureaucratic boundaries and will be very difficult to manage.

Our food security is hugely dependent on cheap energy to make the chemicals and pump the water necessary to maintain agricultural productivity, the transport to get the food to ever more urbanised consumers and to run the machinery to produce and process food.

Without water for irrigation, far less land would be useful for food production, especially in the drylands where a great many of the world’s poorest people live.

Nearly a third of the world’s population live in areas suffering already from water stress. This creates an ever greater demand for energy to pump water from ever deeper aquifers. Maintaining energy security today means being able use fossil fuels for transport and electricity generation. But demand for those fossil fuels is driving the price upwards and the use of them is destabilising the climate. An unstable climate will exacerbate water and food stress because a warmer world makes dry areas drier and also lower crop yields.

These interactions mean that future political stability of China may depend on how well the U.S. manages its increasingly stressed water resources west of the Mississippi. Poor American water management leading to lower yields from the harvest in the U.S. can readily turn into large price rises for food in China.

In 2006, the global grain harvest was lower than demand, largely as a result of higher temperatures. Falling farm yields in China resulting from temperature rises and water shortages due to climate change will add more price pressure. As will the growing demand for grain to convert to ethanol in order to meet growing energy security anxieties. Any sustained conjunction of such factors could very quickly lead to political instability in China. But in our interdependent economy that is also our problem.

We share a dilemma with China and with the other rapidly emerging economies. We must all keep our economies growing in order to maintain social cohesion in Europe and basic political stability in China. But it is now increasingly clear that if our economies continue to grow as at present then we will degrade the pillars of prosperity, in some cases to the point of collapse. Were that to happen it will be impossible to keep our economies growing anyway. In either case, social cohesion and political stability is threatened unless we can find better ways to use resources and put much more effort into maintaining the integrity of the pillars.

No issue more clearly illustrates that shared dilemma than climate change. It is certainly timely to take a closer look at this pillar of prosperity in the wake of the recent publication of the stern report. But is also an issue that vividly illustrates the changing nature of the landscape of risk and opportunity in which business leaders will need to operate successfully in the 21st century.

There is now a high degree of confidence in the basic science of climate change. We know by observation that global average temperatures have risen by about 0.70c in the last century. We also know by observation that the concentration of greenhouse gases in the atmosphere is now about 425 parts per million carbon dioxide equivalent up from the pre-industrial 280 parts per million. (Carbon dioxide equivalent is the concentration of carbon dioxide itself (380PPM) plus the carbon dioxide equivalent of the concentration of the other anthropogenic greenhouse gases e.g. methane, nitrous oxide etc).

We know that this warming is already having an impact on ice sheets, glaciers, sea levels, and extreme weather events. We know enough about the mechanisms by which the long run translation of the carbon burden into temperature rises works to be able to predict with confidence that, even if we stopped any additional carbon entering the atmosphere today, we would still experience another 0.7°c rise in global average temperature.

So whatever we do, or do not do, we are committed to a rise in temperature of 1.40c. This is very close to the 2.0°c threshold that European environment ministers have said marks the boundary of dangerous climate change. Of course, we are not going to stop carbon emissions overnight so we would be prudent to plan for a world in which temperatures go above 2.0°c.