The term “climate change” refers to changes in long-term trends in climate that have been caused by human activity. Since the Industrial Revolution, the extensive burning of coal and petroleum has resulted in large amounts of carbon dioxide being emitted to the atmosphere. Extensive land clearing has had similar results.
The Greenhouse effect is an analogy to a simple garden greenhouse. A greenhouse allows the rays of the sun to enter the greenhouse and then the glass traps the heat caused by the sunrays. The same effect occurs in the Earth’s atmosphere, except that instead of glass, water vapour and carbon dioxide (and other gases) trap the sun’s heat. As a result, the Earth is warming. These gases are called “greenhouse gases”.
The Earth’s atmosphere is very thin. Most of the atmosphere occupies only 11KM versus the Earth’s 12,600KM diameter (equivalent to a coat of varnish on a basketball).
The atmosphere has a limited capacity to absorb greenhouse gases. The oceans, trees and plants are able to absorb some of the gases generated, but the amount of greenhouse gases generated exceed the Earth’s natural capacity to absorb them. As a result, the levels of greenhouse gases have steadily increased since the Industrial Revolution
The impact of these greenhouse gases in the atmosphere has resulted in a measured increase in global average temperatures, an increase in sea level, a decrease in glaciers and snow cover in the poles and an increase in the frequency of severe weather events.
Climate change has the potential to present serious challenges to the viability of companies and at the same time it may present opportunities for new products and markets. Companies around the world are assessing their position in this new environment and seeking ways to gain a competitive edge, whilst mitigating the risks.
This article provides a high level summary of the phenomenon known as “climate change”.
The earth’s climate system is characterized by certain measures. These are temperature, atmospheric pressure, rainfall, moisture, wind and a number of others. Changes in these measures over a long period are referred to as climate change. Significant new changes have been observed since the industrial revolution of the 1800’s.
Since the industrial revolution, industries have been emitting waste gases directly into the atmosphere. The Intergovernmental Panel on Climate Change (IPCC) found that since 1750, global concentration of atmospheric carbon dioxide (CO2), methane (CH4) and nitrous oxides (NOX) have increased significantly due to human activities. Among these gases, CO2 is the main human induced greenhouse gas. The increment of CO2 from 1995 to 2005 was the largest change for any decade in at least last two centuries. The primary source of these greenhouse gases results from burning fossil fuels, agriculture and changes in land use patterns.
The IPCC climate projections have been recently updated in the “Copenhagen Diagnosis” report: http://www.copenhagendiagnosis.org/executive_summary.html
In order to get a perspective, the world’s total production of carbon dioxide is approximately 30,000 Million Tonnes/yr. China produces about 6,000 Million Tonnes/yr and the US about the same. Australia produces about 500 Million Tonnes/yr. However, when these volumes are divided by each country’s population, a different picture emerges. US and Australia produce about 20 Tonne/person/yr, Europe 8 and China 5.
Since pre-industrial time, humans have added over 800,000 Million Tonnes of waste gases into the atmosphere. From 1995 to 2006 ranked the warmest years since 1850. The average global temperature’s increment rate has doubled in last 50 years. Due to the warming effect, the water vapor content of the air has increased as well. The ocean has absorbed more than 80% of the extra heat added to the climate system. Warming of the seawater causes the oceans to expand, resulting in sea level rise. Melting of glaciers and ice caps also contribute to the global sea level rise. Changes in global climate patterns also affect the precipitation, evaporation and wind flow. As a result, heavy precipitation, strong winds and storms, more intense and longer droughts have been observed around the world.
The IPCC has projected alternative scenarios of future climate - based on current climate patterns. Climate models projected a warming of about 0.2°C per decade for next two decades. However, a further warming of about 0.1°C per decade would be expected even though if the concentrations of all greenhouse gases and aerosols had been kept constant at year 2000 levels.
Continuing emissions of greenhouse gases would cause as much as 4oC warming at the end of the 21st century. Even if countries ceased emitting completely, warming and sea level rise would continue for centuries due to the time scale associated with climate processes and feedbacks.
The recent summit in Copenhagen’s primary goal was to get global agreement for a system to reduce emissions. According to the current understanding of climate systems, keeping the level of greenhouse gas emissions below the current level is the main challenge.
According to Lord Stern, the cost of doing nothing is considerably more than the estimated mitigation cost. The IPCC has suggested short, medium term and long-term mitigation measures to reduce greenhouse gas emissions. In terms of short and medium term mitigation measures, mitigation opportunities with net negative costs have the potential to reduce emissions by around 20% in 2030. Energy supply, transport, building, industry, agriculture, forestry and waste management sectors have high potential to reduce greenhouse gas emissions through new economical and technological adaptation. Changes in lifestyle and behaviour can also contribute substantially to mitigate climate change. Improvement of air quality under health benefit initiatives can reduce the concentration of greenhouse gases and may offset a large amount of mitigation costs.
In terms of long-term mitigation measures, the goal is to achieve lower stabilization level of greenhouse gases. Choices about the scale and timing of GHG mitigation involve balancing the economic costs of more rapid emission reductions now against the corresponding medium-term and long-term climate risks of delay.
Business leaders will need increasingly operate in a carbon constrained world. The issue of climate change has already shifted the business strategies of companies in many countries. There are some systematic risks on global economy due climate change and related policies. Global markets have shifted towards products with smaller carbon footprints.
The science of climate change is well understood and has been studied for many years. More research needs to be done to analyze the potential impacts of these changes on businesses. The world’s governments are struggling to agree on a suitable global framework to tackle the challenge. In the interim, businesses could benefit from actively reviewing the opportunities and risks that result from climate change.