Global Risk Report 2014–Global Governance Failure and Environmental Risks

1.  Introduction

1. Introduction

After the general discussion of global risks, including their ranking based on probability, potential impact, and a combination of these two factors, the Global Risk Report 2014 discussed how the most interconnected of all 31 global risks is that of Global Governance Failure.

It then went into a discussion of how this “central risk” of Global Governance Failure is related to the following three sets of risks:

  • Geopolitical and Societal Risks (Instability in a Multipolar World)
  • Economic Risks (The Digital Natives Are Restless)
  • Technological Risks (Digital Disintegration)

However, the one category of risks that were not discussed in relation to the central global risk of Global Governance Failure was the category of environmental risks, in particular the risks of failure of climate change mitigation and the greater incidence of extreme weather events.  

2.  Environmental and Economic Crises

One observation of the list of the top risks that were created by the analysis was that many of the lists were linked.    Look at the top six risks in the list of risks of greatest concern, which is found on page 16 of the Global Risk Report 2014.

# Global Risk Risk Category
1 Fiscal crises in key   economies Economic
2 Structurally high   unemployment/underemployment Economic
3 Water crises Environmental
4 Severe income disparity Economic
5 Failure of climate change   mitigation and adaptation Environmental
6 Greater incidence of   extreme weather events (e.g. floods, storms, fires) Environmental

Note that risks #1, #2, and #4 are linked, and the fact that risks #3, #5, and #6 are linked.    This shows that both economic and environmental risks are considered to be of the highest concern.   This is why I think more attention needs to be placed on the effect of global governance failure on environmental risks.   The problem is that economic risks are also paramount, and governments are trying to focus on what they perceive as the most urgent or pressing concerns, which are economic risks.   Because economic resources are constrained, environmental risks, albeit important, are considered to be longer-term risks and therefore are not receiving as high priority.

As example is the approval of the Keystone XL pipeline in the US, which would take crude oil from the tar sands in Canada and ship it through the pipeline to refineries along the Gulf of Mexico in the southern states from Texas through Louisiana.   The argument for the pipeline is that it would be a boost to the US economy, thereby lowering the economic risk of a fiscal crisis.  However, the argument against such a pipeline is that would heighten the risk, not just to the US, but to the world, of an environmental risk due to the heightened emission of greenhouse gases, leading to a heightened risk of extreme weather events. 

The problem about putting these risks against each other is that it is a false dichotomy.   ALL risks can be equated quantitatively through the quantitative analysis known as expected monetary value.    For example, what are the costs associated with extreme weather events?    Would reducing the frequency and severity of these events reduce their cost?   If so, would these cost savings exceed the opportunity cost of foregoing the additional revenue due to the construction of the Keystone XL pipeline?   Would the cost savings go to a greater number of people in the economy than the revenue due to the construction of the Keystone XL pipeline?   I don’t know the answer to these questions, but do I know that answering them would go a long way towards putting these risks at least on equal footing so that they can be compared.

3.  International Collaboration

If you look at the list of global risks of highest concern in section 2 above, the list goes to #6.   The global risk at #7 on that list would be global governance failure, and one of the reasons why is that any effective measure to reduce the emission of greenhouses gases would have to be done using international collaboration.   As it says on p. 20 of the report, “the year 2014 is likely to be crucial for addressing climate risks, a point made by United Nations (UN) climate chief Christiana Figueres at the Warsaw Climate Change Conference. Countries made only limited progress on issues such as emissions reduction, loss and damage compensation, and adaptation. Greater progress is urgently needed to create incentives and mechanisms to finance action against climate change while efforts are made to keep temperature rise below 2 degrees Celsius.”

Unfortunately, the so-called Kyoto Accord should be renamed the Kyoto Discord.   Perhaps the more frequent occurrence of the extreme weather events in 2014 will create enough pressure on national governments through their populace to overcome the recent deadlocked negotiations and create an accord in 2015.   It looks as if 2015 will be a year that coincides with an El Niño weather event, exacerbating any upward trend that already exists with regards to the average global temperature.   We’ll see if that translates into enough political heat for some international accord to be finally achieved.



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