Equilibrium & Sustainability

Equilibrium/Sustainability — Bread prices soar as inflation cripples Europe

A European sidewalk staple could soon become a luxury, as the iconic French baguette contends with soaring electricity and flour prices.  

“Consumers can afford to pay more for now, but prices will keep rising,” Julien Bourgeois, whose family runs a central France flour mill, told The New York Times.  

Since Russian invaded Ukraine, Bourgeois said the price of wheat purchased by his family has risen more than 30 percent while their electricity bill has tripled, according to the Times.

To offset higher costs in the future, Bourgeois has urged the 1,000 bakeries that buy his company’s flour to mark up their baguettes by 10 cents, the newspaper reported.  

While 10 cents might not seem like a huge jump, that’s an 8 to 10 percent chunk of current baguette prices.

And in France, the cost of baguettes has already risen more than 8 percent in comparison to prices last year, according to the Times.

“We remember that the revolution started over the price of bread,” Bourgeois told the Times, referring to the French Revolution of 1789.

Consumers are enduring supermarket sticker shock not only across Europe, but also in the U.S., where inflation remains elevated and where the price of bread has soared 15 percent from a year ago.

Such jumps are by no means limited to bread — they’re hitting other food producers too. Swiss-based Nestlé announced Wednesday it had increased prices 9.5 percent in the third quarter compared to the same period last year.

And although Nestlé also cited its highest quarterly growth in 14 years, the company may face what The Wall Street Journal described as “a balancing act.” 

Pushing up prices further could cause customers to turn to cheaper brands, especially as Europeans — who make up 20 percent of Nestlé’s sales — feel the impacts of high energy bills this winter, the Journal noted.

Welcome to Equilibrium, a newsletter that tracks the growing global battle over the future of sustainability. We’re Saul Elbein and Sharon Udasin.

Today we’ll start with President Biden’s decision to release more oil from the country’s Strategic Petroleum Reserve. And we’ll also look at a collaborative call for climate justice in Africa from the world’s biggest health journals.

Plus: Why big insurance companies are turning away from fossil fuels. 


Biden touts petroleum reserve release

President Biden announced on Wednesday that the U.S. will release 15 million barrels of oil from its Strategic Petroleum Reserve, our colleague Brett Samuels reported for The Hill.  

The move is the latest step the administration is taking to lower the price of gas, which has hampered the economy this year.   

Biden dismisses criticism: Biden rejected criticism that his latest oil release was politically motivated, with just a few weeks left until the midterm elections, Samuels reported. 

  • The motivation, Biden maintained, was to ensure that “there’s enough oil that’s being pumped by the companies.”  
  • This boost in supply will help the country produce enough fuel at home while “at the same time keep moving in a direction of providing for alternative energy,” he said.  

What is the Strategic Petroleum Reserve? It’s the world’s biggest supply of emergency crude oil, created to decrease the impact of supply disruptions, according the Department of Energy. 

  • The reserve was established in the 1970s, after Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the U.S.  
  • Located in the salt caverns on the Gulf Coast, the reserve can hold up to
    727 million barrels of oil. 

How much of it is being used? About 165 million barrels of crude oil has been delivered or has been put under contract since the spring, when the president said that he would tap up to 180 million barrels.

The 15 million barrels allocated Wednesday constitute the remaining portion of that total disbursement.

When can a president release oil? A president can withdraw all the oil when a “severe energy supply interruption” poses a threat to the economy, Bloomberg reported, citing the 1975 Energy Policy and Conservation Act

By contrast, a limited withdrawal — up to 30 million barrels — can occur during “a domestic or international energy supply shortage of significant scope or duration,” according to Bloomberg. 

Some noted historic releases: 

  • President Obama released 30 million barrels in 2011 to counter supply disruptions from Libya. 
  • President George W. Bush released 11 million barrels in 2005 following Hurricane Katrina. 
  • President George H.W. Bush released 17 million barrels in 1991 during the first Gulf War. 

Insurance companies react to rising climate risk 

More powerful climate-induced storms like Hurricane Ian are slashing insurance company profits. 

That’s causing a growing number to take a more cautious view of the role that climate risk should play in underwriting policies for vulnerable homes. But it’s also causing a re-evaluation of the fossil fuel projects that are primarily responsible for climate change. 

Big damage: Property insurer Travelers Co posted a nearly one-third drop in incomes for its third quarter — declines for which Ian was partly responsible, The Wall Street Journal reported. 

  • Preliminary projections put Ian’s damage at between $30 billion and $70 billion, according to the Journal. 
  • That means the storm will likely surpass the $36 billion damage caused by last year’s Hurricane Ida — which pummeled the eastern U.S. interior in an arc from New Orleans to New York. 

Global context: The World Bank estimated that the devastating summer floods in Pakistan — a country with real estate far less expensive than South Florida — cost the country roughly $40 billion in damages, according to The Associated Press.  

Treasury worries: As damage from Hurricane Ian was tallied up across the Southeast, insurance regulators from the Department of the Treasury took steps to lessen future risk, as our colleague Rachel Frazin reported on Tuesday.

  • “The Federal Insurance Office called on Tuesday for insurers to collect and disclose their payouts for every ZIP code across the country over the past five years, The New York Times reported. 
  • Their goal: Identify where climate change is making effective insurance is unaffordable, leaving homeowners exposed to catastrophic losses, per the Times. 

Big picture: A region where insurance becomes unaffordable faces a potential economic death spiral, as we reported. 

“The recent impacts in Florida from Hurricane Ian demonstrate the critical nature of this work and the need for an increased understanding of insurance market vulnerabilities in the United States,” Treasury Secretary Janet Yellen said in a statement.  

Passing on risk: The losses that hit the insurance conglomerate Travelers are unusually high for a large insurer in Florida, because most such companies have been careful to avoid writing policies for the state’s most-exposed homeowners, according to the Journal.  

  • Such strategic withdrawals are a key means by which insurance companies are responding to climate risk. 
  • This leaves homeowners dependent on small-scale insurers, who charge high premiums in addition to hurricane deductibles of at least two percent of total damages — and often more. 

Passing on risk: These smaller outfits seek coverage from large reinsurers — insurers for insurers — like Swiss Re, as Reuters reported. 

  • The Zurich-based reinsurer has assessed preliminary damages from Ian at $1.3 billion. 
  • That’s enough to leave it with $500 million in additional losses for the quarter — about as much as Travelers. 

REINSURERS TURN FROM FOSSIL FUELS

A growing number of global reinsurance companies are moving away from covering fossil fuels, according to a report published on Tuesday by advocacy group Insure Our Future. 

The move is fueled by accumulating climate change-driven losses by the insurance companies they underwrite, the group found. 

  • Sixty-two percent of reinsurance market share is controlled by companies that exclude coverage of insurers active in the coal industry. 
  • Remaining coal insurers “lack the expertise or capacity to underwrite large new coal power plants outside China,” according to the report. 

Reducing risk: The move makes financial sense because the production and burning of coal, oil and gas are the primary drivers of damage — and insurance payouts — from climate change, insurance experts told the AP. 

  • Reducing fossil fuel use is “the same idea as an insurance company raising your property insurance rates because you engage in risky behavior, like drunk driving,” said Jason Thistlethwaite, who studies the financial impacts of extreme weather at the University of Waterloo. 
  • “But in this case, it’s the fossil fuel sector that’s engaging in risky behavior by contributing to climate change,” Thistlewaite added. 

Score card: Insure Our Future rated Axis Capital, Allianz and AXA best for their coal exit strategy, and Aviva, Munich Re and Hannover Re best for their plan to move off petroleum.

  • American insurers Berkshire Hathaway and Starr were at the bottom of their rankings. 
  • U.S. insurers and reinsurers generally lagged behind their European competitors.

“Fossil fuel projects that don’t get insured, don’t get built,” Risalat Khan of Insure Our Future said in a statement.  

Global health journals want climate justice for Africa

More than 250 health journals have joined forces in publishing an editorial aimed at convincing world leaders to deliver climate justice for Africa.  

The editorial — which was authored by 16 editors of Africa’s leading biomedical journals — argues that the continent has suffered disproportionately from a climate crisis it has done little to cause. 

Coming together: Ahead of next month’s United Nations Climate Change Conference (COP-27) in Egypt, the writers urged wealthy nations to strengthen their support for vulnerable nations in addressing the effects of climate change. 

  • “The climate crisis has had an impact on the environmental and social determinants of health across Africa, leading to devastating health effects,” the authors wrote in the editorial, released on Tuesday night.  
  • Climate-related risks across Africa include flooding, drought, heatwaves, decreased food production and reduced labor productivity, according to the writers.  

Death, migration, disease: In both west and central Africa, flooding has resulted in increased deaths and forced people to migrate due to loss of housing and cultivated land, the authors stressed.  

Meanwhile, changing environmental conditions have led to surges in diseases — like malaria, dengue fever, Lyme disease, Ebola virus and West Nile virus — across sub-Saharan Africa, according to the editorial.  

Economic impacts: The authors estimated that the climate crisis has destroyed about a fifth of the gross domestic product of those countries most vulnerable to climate shock.  

  • “The damage to Africa should be of supreme concern to all nations,” the authors wrote, noting that this fight needs to be “all hands on deck.” 
  • Knock-on effects can impact all nations, they explained, noting the coronavirus pandemic should serve “as a wake-up call to these global dynamics.” 

Call for action: The authors urged wealthy nations to fulfill a previous commitment they made — but have thus far failed to carry out — to invest $100 billion annually in poorer countries.  

  • This investment, they argued, must occur now if the planet is “to forestall the systemic risks of leaving societies in crisis.”  
  • The resources should come as grants, rather than as loans, and prioritize health-system resilience, according to the editorial.  

To read more about their recommendations, please click here for the full story.  

Waste Wednesday

New York City won’t cave to the rats, legacy pollution haunts U.S. waterways and waste from nuclear weapons is found beneath a Missouri elementary school. 

NYC asks residents to take out the trash later 

  • New York City officials are asking residents to take out their trash later at night — to 8 p.m. from the original 4 p.m. — noting the streets have become an “all-night, all-you-can-eat rat buffet,” CNN reported. “The rats don’t run this city,” Sanitation Commissioner Jessica Tisch said at a news conference this week, per CNN. “We do.”

Much work remains on Clean Water Act anniversary: report 

Cold War nuclear contamination closes Missouri school 

  • A St. Louis elementary school switched to remote classes for the remainder of the semester after the discovery throughout the school of radiation samples “far in excess of the natural background”, according to the St. Louis Post-Dispatch. The school sits in an area downstream of several areas contaminated by the production and disposal of atomic weapons, the Post-Dispatch found. 

Please visit The Hill’s Sustainability section online for the web version of this newsletter and more stories. We’ll see you tomorrow.

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