The Science of Climate Risk – An Investment Manager’s View
The dangers facing our planet from increasing CO2 emissions and the resulting changes in our climate, are well documented and much debated, however, the origins of the discussion are often overlooked.
As far back as the late 19th century scientists predicted the amount of CO2 in our atmosphere would double by 2100 and that this would lead to an increase in temperature of 7o C. This calculation was made using the principles of thermodynamics.
Thermodynamics was the science of the industrial revolution. The search for ways to extract the maximum amount of energy possible from fossil fuels led to the science of thermodynamics and scientists of the era were quick to apply it to the world around them.
However, celebrated French mathematician, Fourier, in 1822 discovered that the Earth was much hotter than he expected it to be. His explanation was that perhaps the Earth’s atmosphere acted like an insulating blanket preventing heat from escaping into space. This was the first recorded mention of what we now know as the ‘Greenhouse Effect’.
But it is a Nobel prize-winning physical chemist, Svante Arrhenius, who is credited with first estimating the extent of the link between a rise in Co2 emissions and a rise in global temperature. He warned that a doubling in CO2 emissions from a pre-industrial era would lead to a rise in global temperature of between 6C and 8C.
These predictions are what we now call ‘Global Warming’. What wasn’t so well understood at the time is what, in the modern era, we are becoming increasingly familiar with; ‘Climate Change’.
Climate Change is the Earth’s response to Global Warming. As increasing levels of Co2 in our atmosphere cause the Earth to become warmer, the response of our oceans and atmosphere dampens that rise in global temperature, which is why we are now looking at a rise in temperature of 1.5-4C rather than the 6-8C predicted 120 years ago.
The challenge for today’s scientists is to understand the innumerable ways in which our planet is responding to the increasing levels of CO2 in our atmosphere.
The ability to identify the sources of CO2 and other Greenhouse Gas (GHG) emissions is one of the problems of developing accurate climate predictions for the future. What we do know is that prior to the industrial revolution the process of emitting and absorbing carbon on Earth was in balance. Now the planet’s ecological and geological systems are required to absorb 20 billion more tonnes of CO2 than they emit. This is what is causing the changes to our land and sea habitats and is the reason why scientists are so focussed on us achieving ‘Net Zero’ by 2050.
This article is an extract from a white paper written by Guy Cameron, Chief Investment Officer at leading independent fixed income investment manager, Cameron Hume Ltd. To read the full paper, click here.http://www.cameronhume.com/thought/the-science-of-climate-risk/