Climate Change Could Lead to Financial Crisis

asking for it. But you know, when it comes to climate change and all the different parties involved, it's complicated. It's really complicated. Fortunately for us we have Eugene Linden, journalists and author, author of the new book Fire and Flood of people's history of climate change from ninety nine to the present. Eugene joins us on the phone from Irvington, New York. Eugene, it's really good to have you with us. We've got quite a bit of time with you this afternoon,

so we're looking forward to our conversation. I just want to start though with big picture and and really in your interpretation, how you think we're getting the conversation around climate change wrong in this day and well, we're not doing anything. Uh, we're a hell of a lot of talk about it. Twenty six congressive partner parties, and you know, we're on the sixth assessment from the u N and emissions are six higher than they were in nineteen ninety

when they were already a problem. And between nine and now two point three billion people have been added to the population. The average emissions per person is about more than four tons, So that's another ten billion tons that we have to take out um. And we were already forcing the climate into a warmer state way back in nine So we have just a much bigger rock to roll up a much steeper hill with a much shorter timeline. Why have we been so bad about this? I think

there's a number of reasons. One fundamental to the way we do business is that the momentum of business as usual is just enormous, and we have a kind of blind spot in our economy in that um we have a very hard time representing the long term threats in in in in a business that is focused very much on the short term and essentially makes us leaves us

blind to these long term threats like climate change. And my best example of that, I think is the insurance industry, which recognized the threat at the reinsurance level, really part of the industry that insurance catastrophic risk very early on. But at the retail level, the momentum of business as usual is to keep writing policies even for people moving into harm's way. You did not have to say when we were talking about this on our early morning call

this this morning about you coming on. I remember early on that that's what started to get everybody's attention about the cost of climate change and from an insurance industry aspect, and I feel like that was what initially made us all kind of sit up and take notice, and then it kind of just went away. Oh yeah, way back, I wrote an article for Time expecting that the insurance industry would be a white night um in the climate story because they live and die by pricing risk appropriately.

And what I I there were a couple of things I didn't realize. They turned out to be a very timid, white night, by the way. But what I didn't realize then was the incredible momentum again to keep writing policies, and then secondly their genius at offloading and spreading risk, and and then also most insurers can UH have policies on an annual renewal basis, so if something goes wrong, they can get out unless regulators stop them. Is which was the case temporarily in California. But the net effect

of this was, well, they did get out. Actually in Florida after Hurricane Andrew a bunch of mature stuff writing wind policies, UM and the state stepped in and basically socialize the risk. And that happened in California as well. And so where I expected to see a signal in the market, in the economy that would cause people to make an orderly move away from the zones that are really in jeopardy from climate change, that didn't happen. In fact,

the reverse happened. The underpricing of risk led millions to move into areas that are most at risk of climate change, not just the fire zones in the West, but the flood zones on the coast. Yeah, and it's well, we've seen, you know, business We has done some reporting about areas where people are very vulnerable. It tends to be often lower income areas people that are really susceptible to flooding. And how municipalities certain across the country have started buying

up those properties just to kind of stop it. We're speaking to Eugene Linden, journalist and author of the new book Fire and Flood of People's History of Climate Change from nineteen seventy nine to the present. Eugene, stick with us, because we're gonna get some serious time with you, uh in just a few minutes after we do some news. Well, there's a new book out. It's entitled Fire and Flood of People's History of Climate Change from nineteen nine to

the present. It sounds the alarm about the looming climate caused financial crisis. We are talking with the author, Eugene Lindon. He's an award winning journalist and writer covering science, nature in the environment. He's still with us on the phone from Irvington, New York. Um, Eugene, I'm gonna let Tim ask this question because we both were thinking about this U during the break. Eugene, I had this professor in college.

He taught science, technology, and society, and he was he was big into climate and he said that people just shouldn't live in California. I'm a California I'm from California. My parents are there. Is he right? I mean should should people not live in the West? Should should people not live in these areas that each year get consumed by fire. What's going to happen in California is that climate change is basically put it in a rain shadow.

It's now in the midst of a drought that is the worst in a thousand years, and it isn't going away anytime soon. Basically, the the the rainstorms have been shifted pullward further north and uh leaving UM California and actually parts of Oregon dry. And that's not going to change, and so the fire regime is going to continue. An event truly that is going to get priced by the

insurance industry UM. Even now UM A lot of insurance AIG pulled out of California, for instance, and a lot of homeowners can only get the bare bones backstop from the FAIR program, which is the California Insurance Backstop insurance program. What that means is, if you think about it, UM, is that most people have a mortgage. You can't get

a mortgage without fire insurance UM and UM. If you can't get fire insurance, if you can't afford the premiums UM, you're not gonna be buying a home, some people aren't gonna be able to sell it. And already, Um, there's been stories about how climate migrants are leaving the fire zones, moving to perceived safer places like New England. Well, how do you how do you explain though the rising housing prices in California and continuing to be out of reach

for so many people and people still staying there. I mean, it's not being priced in yet. No, it isn't being priced in, and it's not being priced in Florida. The hottest city in the country is Miami. And uh. The Rhodium Group with pro Publica in The Times did a study of every county in the United States for like five different risks from climate change, including sea level rise

and windstorms and fires and everything else. And they aggregated those risks and they said, these counties might They named a bunch of counties that might be unlivable in twenty to forty years. Um. One of those counties was Miami Dade and that's one of the hottest real estate markets in the country. So um, people I hear anecdotal stories of people where they're a lot of condo and their prices doubled in the last year. Palm Beach County is

another of those counties. The county that is home to Hilton Head is another, and there are also counties in Texas and Arizona and in California. So um I that will change at some point. And the problem is is that because of the underpricing of these risks for so long, there are a lot of people there and it it.

I argue that it sets the stage for a replay of two thousand and eight, where you have home buyers who either can't sell our home or can't get a mortgage to buy it, and the values drop, and then of course you get a banking crisis, is what we had in two thousand and eight. I had a front row seat for that because I was chief investment strategist for a hedge fund back when as it was unfolding,

and I can see something similar unfolding. The difference being is that two thousand and eight was a one off, and you know, basically, once we cleared up the bad debts and everything else, we could restart the economy and a climate reated related financial crisis it's going to get worse year after year after year, because the climate crisis will get worse and that's what we face. And you know, I think, um, but it's it's not just a financial

crisis that's down the road. You mentioned a predicted temperature rise for if even if we abide by the Paris Agreement. I heard a figure of two point seven to three point seven degrees celsius, like eight to eleven degrees fahrenheit. That's those kinds of temperatures for haven't been seen on the planet since before the ice ages, some three million years ago. It was plenty of life back then, but

no humans. So for those of who argue, God, we can't deal with climate change because of the lower our standard of living, I disagree with that. By the way, I would argue, um, there's a much more serious lowering of standard of living coming if we don't deal with

climate change. I had a line in the lead to you initially, and I think I dropped it, but I would say how everybody is arguing, you know, when it comes to thinking much more about the environments, that the existence of our world depends on it, And you know, that's where we're going. And I don't think people understand

the severity of it. I joke about the metaverse that that's where we're all going to have to live because we're not gonna be able to go outside because it's gonna either be so darn hot and it's funny, but it's not funny. Um. So we've only got a couple of minutes. We can't solve climate change right here in now.

But what would you say to our audience, a smart audience who are plowing money into E s G assets and so on and so forth, thinking they're doing the right thing, making their contributions, companies who are playing out and you know, talking with him and me constantly about

sustainability initiatives and how they're taking the right steps. What would you say, Well, I do think that the business and finance community has had a c change in the last couple of years, recognizing not the regulation for climate change is a threat to profits, but the climate change itself is a threat to business. That's heartening, and the money flowing into these things is heartening as well. And there are solutions out there, you know, to take carbon

out of the atmosphere. You can make concrete um by making synthetic limestone, by combining carbon dioxide with calcium. You can make steel without coal um. That's eight percent of emissions two billion tons a year UM by running electrical current through iron oxide and other metals. And so there are of these solutions that can be the look deployed, and the money flowing in will help deploy them. We

have to do that. Um. The thing that has to happen, I think, is that we need a universal agreement the lower emissions of universal being meaning every nation on Earth, because we can't have exceptions like China and India and other developing nations and put the entire burden on the develop the Western nations because they cannot do it alone. So the it is possible we are in for some degree of climate change, already experiencing it, and we're already

it's already costing the economy trillions. All Right, we're gonna leave it there. Listen, Thank you so much. Really, some thoughtful things from Eugene Lyndon, journalist right or his new book Fire and Flood at People's history of climate change from nine to the present.