In 2023, rising climate costs could become a challenge for countries, companies

As the new year approaches, public concern is expected to increase as rising climate costs could prove to be a major challenge for countries and companies.

A view shows the fatal collapse of parts of a mountain glacier in the Italian Alps amid record temperatures on the Marmolada Ridge, Italy (Reuters)

by Reuters,

In a year marked by yet more climate-linked floods, storms and droughts, governments and companies were forced to look more closely at financial risks and liability exposure.

This was nowhere more evident than at the UN climate conference in Egypt, where countries reached a landmark agreement to set up a fund to help poor countries cope with climate-fuelled disaster costs.

However, Egypt’s COP27 negotiations did little to address the cause of those disasters – the ever-increasing levels of greenhouse gases in the atmosphere.

Such slow progress in tackling climate change has left vulnerable countries determined to sanction so-called loss and damage funds – extreme weather from the United States to China including record heat waves, the collapse of glaciers in India and Europe After another year of disasters, a never-ending drought is pushing millions of people into famine in East Africa.

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Insurers were feeling the pain, as that year saw three of the costliest disasters of the decade – “dystopian” floods that caused $40 billion in damage to Pakistan, a series of deadly heat waves that collectively cost Europe more than $10 billion, Damage caused, and according to risk modeling firm RMS, Hurricane Ian is toppling Florida and South Carolina at a cost of $100 billion.

The Loss and Damage Fund also marked a diplomatic coup by poor countries, fearing decades of US and European resistance could open them to legal liability for their historic emissions. But the countries agreed that the funds would be drawn from existing financial institutions, not richer countries, allaying those liability concerns — for now.

why it matters?

As watchdog groups call out companies for failing to disclose how climate change could threaten them financially, investors face mounting pressure to factor in climate risks and not go too far .

“It’s the Wild West in terms of what companies should be doing. And there are some that are doing greenwashing, yes,” said Kathryn Hayhoe, climatologist and chief scientist at The Nature Conservancy of Canada. But some are making a sincere effort. “There’s a pushback from the purity culture, with people saying nothing but perfection is worth it.”

Even Hayhoe and others who have warned about the dangers of climate change have not escaped condemnation, with some activists berating them for going to conferences or eating meat.

At some point, people started throwing soup and paint around and sticking things to themselves.

“I understand,” said Hayho. “It’s a psychological response to the genuine fear that people feel when they begin to understand the magnitude of the problem.”

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Others sought to take their grievances to court. To date, there are 2,176 ongoing climate lawsuits worldwide, 654 of which have been filed in US courts, according to the Sabin Center for Climate Change Law at Columbia University.

And scientists and economists are moving to calculate how much a country’s activity may contribute to climate change – and to specific disasters. This line of reasoning, called “climate attribution science,” made its way into more courtrooms.

“So far it’s been a battle of the experts on paper,” said Michael Berger, executive director of the Sabin Center. “What we haven’t seen yet is a real test” of presenting evidence to attribute a certain percentage of liability to a climate-polluting company or country.

But it’s just a matter of time, experts say.

What does this mean for 2023?

With the new year approaching, expect more public concern as climate change continues to escalate – and more concern among companies and governments over liability and risk.

Companies and investors will face increasing pressure to climate-certify their supply chains and operations.

He said the courts would file more climate cases – focused on challenging national governments to raise their climate policy ambitions and holding corporations accountable for their emissions or deceptive practices.

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At the end of the year, the countries will meet again at the next UN climate summit, COP28, in Dubai. And they will be under extra pressure to see emissions halved by 2030 and net zero by 2050 – the only way to keep global warming within 1.5°C.

“An increasing number of powerful actors are coming to terms with the fact that we can’t stick our heads in the sand,” Burger said.