The probability of global bankruptcy

At the last Climate Action Brisbane meeting at Friends of the Earth (FOE) headquarters, the following was handed out. Sources haven't been checked and authenticity hasn't been confirmed but sounds very plausible and likely given what we can see happening around us.

Extract from book "The Little Green Handbook", by Ron Nielsen, 2005, published by Scribe Publications. Reproduced without authorization under the 'fair use' doctrine of international copyright law, without profit.

Perhaps the best and most convincing short-cut to the problems associated with studying the slow process of climate change and extreme weather, lies in weather-related economic losses. The relevant records are not only well documented and scrutinized, but are also expressed in terms of a single quantity we can easily understand and appreciate - the money we have to pay for weather-induced damage. These records are maintained by insurance companies, and it is in their interest to make them reliable.

One such company is the Munich Re group, which has clients in more than 150 countries. Before being made available to clients, records of weather-related losses are checked and verified several times. They involve large sums of money, and many companies rely on their accuracy. According to Munich Re, local weather-related economic losses increased from $3 billion per year in 1980 to $80 billion per year at the end of the 20th century. Losses per decade increased from $86 billion for 1980-89 to $474 billion for 1990-99.

Only a small percentage of the losses are covered by insurance, but someone has to pay for them. Only 34 per cent of Australia's weatherh-related loses in 1998 were covered. In that year only 29 per cent were insured on the continent of America, 27 per cent in Europe, 7 per cent in Africa and 4 per cent in Asia.

Global weather-related losses covered by insurance increased from $26.2 billion for the 1980-89 decade to $123.5 billion for 1990-99. These data show that, on average, only 26 per cent of weather-related losses were insured. Accurate records of uninsured losses are also important for insurance companies, because they contribute to an understanding of what is insurable.

How long can we cope with weather-related economic losses? If global income is substantially greater than the losses, and if it increases at least as fast as the losses, we have nothing to worry about. There will always be enough money to repair the damage. If global income increases more slowly than the losses, it is worthwhile to calculate how long the money will last. To estimate this period I have analysed the data for weather-related economic losses and for global world product (GWP) both expressed in 2001 US dollars.

Preliminary examination of the data shows that the prospects are not encouraging, because the losses are increasing much faster than income. As we have seen, global weather-related losses per decade have increased ... 450 per cent, in the last two decades of the 20th century. However, GWP increased from $29 trillion per decade to $386 trillion, or 33 percent, during the same period. GWP is still greater than the weather-related losses, but the losses are increasing much faster, and in time they might match global income. That would mean global bankruptcy.

Weather-related economic losses can be fitted by using exponential function. The best fit corresponds to a doubling time of 4.42 years. GWP can be fitted using a polynomial function, which increases slowly and has no doubling time. The two calculated curves cross in 2045. If about that time we decide to repair the damage, there will be no money left for anything else.

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The world seems to finally be accepting what the Environmentalists have been warning everyone about for ages. The most recent issue of Time magazine has the cover story Global Warming: Be Worried. Be Very Worried.

My take on this is that the world will have to change the way it "does business" fast and voluntarily - we can't afford to wait until we are made to do it since then we will certainly have gone beyond the tipping point.