940 millibars sounds like a pretty small number, were it not for the gravity of its context in the wake of Hurricane Sandy last month. 940 millibars is the minimum central pressure that Sandy decreased to as it approached the East Coast of North America, as the air inside her rose upwards in the same fashion as a category 4 hurricane.
Whether politicians, financiers, or the wider public will take note of such a miniscule number is still to be determined. However we know that a series of far larger numbers, set in much more action-orientated units will be ringing against the walls of the White House and Wall Street for decades. $60 billion dollars is the estimated cost to the debt ridden USA in property damage and lost business, and 105 is number of lives lost to this catastrophe.
I have no interest in perpetuating calls that Hurricane Sandy should be a wake-up call to the U.S to act on climate change. I do however think the question of a climate change contribution to Sandy needs venturing, not as a financial issue, an environmental issue, or even a human issue, but as an issue of whether the answer even truly matters.
Global warming perpetuates atmospheric moisture build-up, and more moisture means the potential for more rain, whether in a hurricane or otherwise. Excessive rainfall and consequential flooding is one of the top 3 causes of hurricane damage, and another, storm surge, is also linked to climate change. Increases in sea level (something often touted as climate change induced), mean that by definition hurricane surfs can travel further inland and do further harm. Worst of all, warming oceans, the engine fuel for hurricanes can be directly attributed to climate change. The link isn’t the superlative, but an overall trend for hotter oceans means storms like Sandy have the potential to be stronger, for longer, than they otherwise might have been.
Then there are the caveats. At its peak, Sandy reached over 1000 miles in diameter, and although only one other storm in the Atlantic has ever had a larger recorded wind-field, Massachusetts Institute of Technology hurricane experts’ research implies global warming forces only minor increases in storm size. Sandy’s sheer breadth may simply be a one-off, natural fluctuation. Secondly, a lot was made of the fact that Sandy was considered a ‘hybrid storm’, receiving energy from warm oceans like a tropical cyclone, while also getting some energy from atmospheric temperature contrasts as with traditional winter cyclones. The problem is that no comprehensive climatology research exists on ‘hybrids’, and they do occur with some regularity around the world.
A New Perspective
From the climate scientist’s point of view, this disaster is another file in the evidence cabinet, and the narrative emphasising the countless things we don’t know about global warming from how hot it’s going to get to who caused which storm, is a distraction from the reality. New York Governor Andrew Cuomo put it succinctly “extreme weather is a reality. It is a reality that we are vulnerable.”
Of course, the millions of oil, coal and gas related dollars coaxing the US Congress play no small part in ensuring climate change stays low on governmental agenda. Although the newly reinstated President Obama is more sympathetic to the issue than his former opponent, wider political opinion remains fraught. We know increased levels of carbon dioxide cause atmospheric warming. We know that fossil fuel energy production causes carbon emissions. That final causal relationship between the two is aggressively pushed apart by those so inclined.
Many think Obama will take a stronger stance on climate change this time around, as he was widely applauded in his handling of the disaster relief. The endorsement came as New York Mayor Michael Bloomberg threw his support behind Obama explaining that “our climate is changing, and while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be – given this week’s devastation – should compel all elected leaders to take immediate action”.
Stepping back from the blame game temporarily paints a broader picture. The estimated $60 billion recovery cost could subtract approximately 0.6% from US GDP in the October to December quarter, a very large proportion of an economy growing at just 2%.
The biggest issues on economist’s predictive minds before last month were Europe, the fiscal cliff, and an earnings slowdown. Sandy is an example of what a great risk looks like, and understandably no analyst could have predicted this coming – however they could have better hedged for it. This isn’t a knock at economist’s ability to predict weather events, it is instead a criticism of the value they place on predictions in a world that’s so risky and unknowable.
However, not all investments streams are set to be overtly effected. “As an insurance event, Sandy is going to be a blip on the balance sheet,” said Duncan Ellis, U.S. property practice leader at Marsh, the insurance broker. “2012 has been a relatively catastrophe-free year.”
The established changes to our climate, whatever their origin, may raise the odds that any storm could prove more devastating. When you employ the precautionary principle to how we alleviate this threat you realise that we are vastly underprepared in terms of both mitigation and adaptation.
The fact of the matter is that whatever percentage of a particular storm you pertain to anthropogenic climate change is academic, the baseline has increased and when you are already stretching the limits, no matter by how much, things can really break. Investment and relief programs are not fully accounting for these risks, and the pathways to hedge them do exist. In investment talk, the stark reality is that low-correlated markets which remain so during good times have a tendency to becoming strongly correlated during troubled times – exactly what the old diversification systems relied on them not doing.
In the aftermath of (possibly) the most significant US event, and (certainly) the most significant economic US event of the year, it might be time to revise these old methods of risk management.