Today is Wednesday. Welcome to Equilibrium, a newsletter that tracks the growing global battle over the future of sustainability. Subscribe here: thehill.com/newsletter-signup.
Farming has never been much of a gold mine. But that could change for farmers on the Southeast Asian island of Borneo, according to Grist.
There, a local plant serves as a “hyperaccumulator” for metals in the soil. As it grows, the plant pulls “nickel, zinc, cobalt, and even gold” up into its stalk and leaves. Every six months or so, villagers shave off the top foot of growth, burn it and pull valuable metals from the ash.
This process is called phytomining or agromining. And at current commodity rates, Grist noted, it could let farmers “net a cool $3,800 per acre of nickel” — which is both a very respectable return for a cash crop and spares the landscape and water from the impacts of open pit mining.
Today we’ll look at how costs are rising for another sector: insurance companies, which critics say are now at risk from climate change that they have helped incentivize. Then we’ll check on how penguins are doing in Antarctica and whether U.S. endangered species protections can reach all the way at the poles.
For Equilibrium, we are Saul Elbein and Sharon Udasin. Please send tips or comments to Saul at firstname.lastname@example.org or Sharon at email@example.com. Follow us on Twitter: @saul_elbein and @sharonudasin.
Let’s get to it.
Insurance companies at risk from a climate crisis they are helping underwrite
Climate change is putting the financial stability of insurance companies at risk — potentially leaving their customers in fire- and flood-prone areas holding the bag.
And if the current state of play in California is any indication, once areas become uninsurable, they will simply withdraw, leaving economically devastated communities behind.
First, Insurance 101: As a quick refresher, homeowners pay insurance companies a monthly premium that’s pegged to their risk. Then the insurance companies invest that money. They make money off the “float” between the interest they earn and the amount they repay.
At least, that’s how it’s supposed to work — provided that companies correctly assess both the risks to the properties they are underwriting and the investments they have picked.
Here’s one way it goes sideways: A 2019 report commissioned by the California Department of Insurance found that insurers' investments in fossil fuel utilities were exposed to “physical risks” from fossil fuels — particularly wildfire and drought — as well as from “transition risk” that would come if the global investment community rapidly soured on coal-based utilities, leaving those investments worthless.
This is in addition to the critical role that insurance companies pay in underwriting the insurance policies that make all fossil fuels development possible, along with the accompanying climate instability.
“So you can imagine a situation where you’ve been paying large premiums to an insurer — and then when fire comes, they’re over-exposed and they can’t pay your claim,” Shrago said.
Flashback to the financial crisis: This is precisely what happened to insurance giant American International Group (AIG) during the 2008 financial crisis.
AIG insured the subprime mortgages — products aimed at homeowners with very low credit scores — whose failure was at the center of the 2008 collapse.
“AIG said, ‘Sure, we can insure subprime mortgages.’ ” Shrago said. “But it turned out they hadn’t properly calibrated the risk. And when all the risks hit, it blew up AIG.”
The mistake AIG made, Shrago said, was in trusting that they had diversified their business by offering insurance policies across a wide range of property types and geographic areas. But that missed something fundamental: the way that a feeding frenzy of new financial products and speculation had been built on the backs of millions of subprime mortgages.
When that failed, losses in Las Vegas couldn’t be balanced by gains in Tampa. Instead, Shrago said, “All that risk came due at once.”
A CORRELATION CONUNDRUM
Insurers call this phenomenon, when one event leads to many different cascading failures, a “correlated” risk.
The analogy to climate is not hard to see: A serious climate disaster — requiring massive insurance outlays to repay the damage — could correlate to mass loss of confidence in coal assets that wipes out the ability of insurers to pay that money back.
For insurers, this means that “incremental climate trends exacerbate extreme climate shocks,” according to a 2018 Moody’s report.
There’s not much regulators can do: “The insurance industry tends to invest in very conservative financial vehicles” such as fossil fuel powered utilities, said George Bradner, property and casualty director for Connecticut, a major insurance hub.
“I don’t see them moving quickly on that until they see what’s happening in the marketplace,” he added.
But risk is rising: Though fossil fuel utilities “are low risk from the standpoint of investments,” Bradner said, they “could become higher risk over time” as “investors get more concerned about the companies they are invested in.”
In the short term, as Saul reported Wednesday in The Hill, insurance companies have been withdrawing from the most wildfire-plagued regions for years, leaving thousands of homeowners uninsurable — a potential death knell for those communities’ long-term financial future.
Takeaway: Eventually, the federal and state governments will likely have to intervene in a more comprehensive way to bail out homeowners, as they once did with the National Flood Insurance Program.
The only questions are how much damage will be caused before that happens — and whether communities and insurers can collaborate to create proactive solutions before insurance markets hit a 2008-style tipping point.
Penguins test the reach of US environmental law
Emperor penguins may be one step closer to regaining their regal stature, after the U.S. Fish and Wildlife Service proposed listing the Antarctic bird as threatened under the Endangered Species Act, Bloomberg Law reported.
The flightless birds, known for their group huddles and the dance routines they conduct to keep warm, are native to Antarctica. But the Center for Biological Diversity sued the Trump administration in 2019 for failing to act on a petition to protect the penguins. The government settled, agreeing to make a decision about the penguins’ status by July 2021.
Fish and Wildlife’s announcement Tuesday determined that “the emperor penguin is in danger of extinction within the foreseeable future within a significant portion of its range.”
Since these penguins don’t exist naturally in the U.S., the proposal will put the Biden administration’s global influence on climate change to the test, according to Bloomberg.
What’s going on with the penguins? The extinction rate of the species is speeding up due to a surge in extreme climate events, such as glacial calving — when ice chunks break off from the edges of a glacier — scientists at the Woods Hole Oceanographic Institution revealed in a Science Daily news release.
If sea ice declines according to current energy models, virtually all colonies could be wiped out by 2100, the researchers wrote in Global Change Biology.
As of 2020, there were about 280,000 breeding pairs of emperor penguins worldwide, most of which were in Antarctica, The Washington Post reported.
Does the Endangered Species Act have sway outside the U.S.? It’s a big question.
Although some of its provisions don’t apply to species outside of U.S. jurisdiction, an Endangered Species Act listing does enable certain research and conservation initiatives.
It would also require U.S. federal agencies to ensure that their actions do not harm the penguins or their habitat, as well as restrict emissions in these regions, the scientists wrote.
So what is the climate situation in Antarctica? Right now, not good. But cutting emissions would make a big difference. A May 2021 study in Nature indicated that limiting warming to 1.5 degrees Celsius could cut in half sea level rise from thawing glaciers — minimizing melting in both the Antarctic and Greenland ice sheets, The New York Times reported.
‘Bold climate action’ or ‘business as usual’?
What about the rest of the Arctic? Geologists found that a 2020 Siberian heat wave resulted in an influx of methane emissions from melting rock formations in the Arctic permafrost, The Washington Post reported, citing a new study in the Proceedings of the National Academy of Sciences. The intense heat killed surface vegetation, allowing limestone to emerge — releasing methane in the process.
Meanwhile, the Biden administration is reviewing the Trump administration’s decision to open Alaska’s Arctic National Wildlife Refuge to drilling — with particular focus on the impact of drilling on waters, wildlife and emissions, The Hill reported.
But at the same time: The Fish and Wildlife Service on Wednesday also authorized oil and gas companies to nonlethally harass polar bears and Pacific walruses during their year-round operations in Alaska’s Beaufort Sea.
Stressing that only about 900 bears remain in the region, the Center for Biological Diversity lambasted this move, noting that the president “promised bold climate action, but this is business as usual.”
Takeaway: Even an administration bent on combating climate change makes decisions that counterbalance the financial and political ramifications of conserving wildlife versus the impacts on wildlife of supporting industry. Such precise considerations — like whether a penguin or polar bear population is worth prioritizing — will shape how governments define a sustainable future.
In which we go where the wind takes us.
Offshore wind brings steel industry back to Baltimore
- U.S. Wind, a Maryland offshore energy developer, announced it was building a new steel plant at Sparrows Point, southeast of Baltimore, according to E&E News.
- The site is “hallowed ground” for steelworkers, one union leader said. It was once the home of Bethlehem Steel, which smelted steel for the Golden Gate Bridge and Liberty-class cargo ships during World War II.
- The Biden administration wants to lay the groundwork for 30 gigawatts of offshore wind energy by 2030, by which point Maryland plans to meet 50 percent of its energy demand from renewable sources.
Winds drive biggest fire to hit Hawaii’s Big Island
- Strong winds fueled the largest wildfire ever documented on Hawaii’s Big Island, USA Today reported.
- State fire protection forester Mike Walker described the fire as resulting from a “perfect storm of drought conditions” — adding that sustained winds of 30 mph and gusts of up to 50 mph had triggered a fire that traveled about 100 acres per hour over the weekend, according to The Guardian.
- In more positive Hawaii wind news: The island of Maui is expected to become the first power grid of its size to run entirely on wind and solar by around 2024, with the help of the National Renewable Energy Laboratory, Renewables Now reported.
- Today, Maui has almost 200 megawatts of wind and solar and is supposed to add another 175 of solar-storage hybrid plants by 2024, the report said.
Denmark's largest energy company completes major onshore wind project
- Danish multinational firm Ørsted has completed construction on its 367-megawatt Western Trail Wind Farm, located in Wilbarger and Baylor counties in northern Texas, bringing the company’s total onshore capacity to more than 2.8 gigawatts of wind, solar and battery storage, Renewable Energy Magazine reported.
- The wind farm, the magazine reported, has already secured power purchase agreements with PepsiCo, Hormel Foods and Nucor for most of the power produced from the project, which it says “will provide low-cost, reliable power to the Texas grid," said Philip Moore of Ørsted Onshore, according to the magazine.
The project includes 130 of General Electric’s 2.82-127 turbines — three-blade turbines with a rotor diameter of 127 meters — and is located on the property of billionaire Stan Kroenke, who owns the Arsenal Football Club, the Los Angeles Rams and other sports teams, Wind Power Monthly reported.
Please visit The Hill’s sustainability section online for the web version of this newsletter and more stories. We’ll see you on Thursday.