Preface

Call it what you like, climate change or global warming, it’s here and it’s going to get worse, very likely far worse. Sixty years from now, people may wonder what happened in the past that allowed this nemesis to ruin the world. What were the decisions, or lack thereof, the missed opportunities, the political failures that caused a technologically advanced civilization to continue to alter earth’s climate even as its leaders knew better? These are the questions this book will attempt to answer.

More than four billion people have been born since climate change became a mainstream issue in 1988. More than five billion people have been born since the issue first appeared on President Jimmy Carter’s agenda. Billions of people, now well into adulthood, have lived their entire lives under the specter of global warming. During the past decade, average global temperatures crept up more than 1 degree Celsius over average levels before the Industrial Revolution. In fact, average temperatures are now regularly over the upper bound of what has prevailed since the dawn of the Holocene epoch—the period, starting 11,600 years ago, during which a human-friendly climate nurtured the dawn of civilization and allowed human numbers to grow from roughly five million to nearly eight billion. Noting this inflection point, renowned climate modeler Stefan Rahmstorf put up a sardonic post on Facebook congratulating humans because “we have now left the Holocene.” Several hundred million people have recently been born into a new climate epoch.

Roughly one-third of the world’s population is unaware that global warming is happening, and the majority of those who are aware that we are changing the climate are either insufficiently alarmed at the prospect or already too fatalistic.

So here we are, in the first innings of a rapid climate change event that is already getting very costly. Was this predicted? Yes, perhaps more than any disaster in history. Could this have been averted? This turns out to be a charged question. We have had more than thirty years of warnings, innumerable conferences and scientific gatherings, even ratified treaties on preventing a climate catastrophe. In recent years, however, the idea that we never had a chance has gathered strength. This argument holds that in the early 1990s, when the scientific consensus on the threat solidified, renewables were too expensive and inefficient to replace fossil fuels and, furthermore, that people did not consider global warming to be an imminent threat, which meant that there was no public alarm to propel political action (a mobilized populace being a necessary precondition to break the hold of fossil fuels on the global economy).

These are not trivial arguments, but they aren’t true, as I will explain. We could have taken action, and it’s important to understand why we didn’t, because the reason points directly to what is likely to happen next and what we can do about it.

Many factors, of course, explain society’s response to the discovery that our own actions are changing the climate. Looming over all of them has been the role of business and finance. Indeed, the business world has been the master puppeteer in terms of influencing public awareness, politicians, even the presentation of the science. Looking back at the history of the modern climate change era, we see that if the business community does not want something to happen, it usually doesn’t.

Obviously, there are many competing interests in the business community. That said, the record shows which voices were dominant at critical points during the climate change era. During most of that time, the dominant messaging came from the wide spectrum of interests related to fossil fuels with the support of the even broader community of business interests who shared an antiregulatory bias. As we will see, these voices outweighed the discoveries of scientists and the ever more alarming signals coming from the climate itself. From the beginning, business interests have proved adept at reframing the issue, dismissing the risks, demonizing the scientists, and defaming those seeking action as elitist dilettantes who want to tell you what to do and take away your job.

The posture of the business community also figured in the biggest missed opportunity of the climate change era, as the giant emerging economies were making decisions at the beginning of their push for industrial development and expansion of their energy infrastructures. Given a choice between renewables and fossil fuels, almost all chose coal. The greenhouse gas (GHG) emissions of the massive buildout that followed have much more than outweighed all the efforts (such as they’ve been) of the developed nations to reduce their dependence on carbon to power their economies. Indeed, in 2019, China alone emitted more greenhouse gases than all thirty-eight developed nations in the Organization for Economic Cooperation and Development (OECD) combined.

The one thing the business and finance community could not and cannot influence is reality itself, although it has proved adept at distorting the public perception of the impacts of changing climate that have been staring us in the face. As these impacts have become more frequent and intense, they have broken through the fog of disinformation disseminated by fossil fuel interests. In fact, the reality of climate change has reached a point where it has altered the posture of much of the business community toward the threat. The question of the day is whether those alterations will be sufficiently broad that this immensely powerful sector can become part of the solution and help reverse the momentum of climate change before it is too late.

For those who don’t think climate change is a problem, this book is not for you. I’m not going to try to convince you the threat is real (and if you aren’t convinced by now, I’m not sure anything will convince you), but I’ll offer a suggestion as to how you might spend your time instead of reading this book: start an insurance company and sell flood and storm insurance policies in all those coastal communities where traditional insurers are pulling out. If you’re right about climate change, you’ll make a killing.

I come to this project having followed the climate change story since the 1970s and having written about it since the late 1980s. I’ve written essays, articles, and one prior book about climate change. Some of the essays and many of the articles were for Time magazine in the 1980s and 1990s. I’ve tried to get the word to the broader public through op-eds and articles in massive circulation vehicles such as Parade magazine (back in 2006 when people read the news on paper and Parade had a massive circulation); I’ve participated in a number of documentaries and dozens of conferences; and I’ve given talks at scores of institutions. I’ve covered global warming from a wide variety of approaches, exploring its impact on the spread of disease and its potential financial consequences. In my reporting on the issue, I’ve traveled to the Arctic and Antarctica and many places in between. All of this is to say that climate change has been my companion for more than three decades. I’ve witnessed firsthand how the climate change story unfolded since it became a mainstream issue more than thirty years ago.

I will draw on all this history in an attempt to understand how we got to this point where a problem that seemed so far in the future when I first wrote about it has become a clear and present danger for all humanity, not to mention countless other life forms with whom we share our fragile planet. And I will draw on other experiences and investigations into the nature of markets and the consumer society to show a narrow path that might yet get us out of the mess we have created.

Introduction

There have been several false dawns in our efforts to tackle the threat of global warming. President Jimmy Carter convened a blue-ribbon panel to study the problem of carbon dioxide emissions in the late 1970s. The group, which included pioneering climate scientists Roger Revelle and George Woodwell, presented Carter’s Council on Environmental Quality with a paper in 1979, entitled The Carbon Dioxide Problem, which warned that if we didn’t take action to curb greenhouse gas emissions, we would see changes in climate by the end of the twentieth century.

Another false dawn broke nine years later during the sweltering summer of 1988, prompted by James Hansen’s dramatic testimony to a U.S. Senate committee in which he argued that global warming had already begun. Out of that wave of alarm came a toothless agreement called the Kyoto Protocol of 1997, which went into effect in 2005. Most countries ratified it (although not the United States), but it did little to halt the rise in emissions of greenhouse gases. There have been several pulses of public interest since, the most recent false dawn being the Paris Agreement on climate change of 2015, which was signed by every nation on the planet (until the United States pulled out), but none of them has stopped greenhouse gas emissions from inexorably rising, now more than 60 percent above the levels of 1990, when the global community first began to talk about taking steps to halt their growth.

Now, a real dawn of climate action finally seems at hand. Just six years after the Paris Agreement became a treaty, things are changing fast. Not as fast, alas, as the climate itself. Many of the climate-related changes we’re living through—rising seas, more intense heat waves, floods, droughts, massive brush and forest fires around the world, plagues of locusts and outbreaks of pathogens, record warm years, melting permafrost, and changes in the ice sheets—first became noticeable in the 1990s. What’s different today is that they are coming so thick and fast, and are producing such outsized costs, that they cannot be ignored. Before the 1990s, Australia, for instance, experienced severe drought roughly every eighteen years. Since then, both the severity and length have been increasing. Australia was plagued by recurring droughts from 2001 until 2009. Drought, heat, and wind caused devastating bushfires in 2009 that destroyed two thousand homes, displaced seventy-five hundred people, and killed an estimated one million animals. Drought resumed in 2017 and has continued since, culminating in 2019 with some of the worst wildfires in the country’s history, during the country’s hottest and driest year on record. This time around, the fires killed an estimated 1.25 billion animals, more a than a thousand times the estimated wildlife casualties of the 2009 Black Saturday fires. More than a billion more animals were killed as the fires continued in 2021.

Extreme weather events are coming with increasing frequency and greater intensity. In 2017, Hurricane Irma knocked out power for one million people in Puerto Rico; two weeks later, Hurricane Maria hit, cutting power for the rest of the island. The storms killed nearly three thousand people, and the island has yet to recover. Five of the ten most damaging wildfires in California history took place in 2020 alone. Then, in 2021, California had its largest fire in the state’s history. For a period in July and August of that year, it seemed like the whole world was on fire, with scores of wildfires burning in Greece and Turkey, and some of the largest fires ever seen incinerating millions of acres of Taiga forest in the Russian Far East. Smoke from these fires cast a pall that extended thousands of miles from the fires themselves.

None of this is news to anyone with a passing interest in current events. While the pace of this tide of extreme weather events has accelerated, the flood of data points has been flowing for three decades. During most of that period, the connection between extreme weather and climate change didn’t seem to matter to the public or the business community. Now it does.

That’s because things are getting expensive. According to a study undertaken by the giant insurance broker Aon, weather-related disasters around the world led to $1.8 trillion in losses between 2000 and 2010. The figure for 2010 to 2019 is $3 trillion. Monsoon floods in China wreaked $15 billion in damage in 2019; on the other side of the globe, the Mississippi floods inflicted $10 billion in losses.

In the United States, the belated awakening to the threat is just the latest iteration of a deeply ingrained response to threats that has become typical in America. Warnings, whether they be of a financial crash, a pandemic, a threat of pollution or climate change, go unheeded until a crisis hits, and then politicians and the public react. The cycle is so predictable that social and economic commentators even have a phrase for it, “barn door closing,” meaning that we tend to take action only after the cows have fled. Thus, only after the financial crisis of 2008 did Congress enact the Volcker Rule to prevent banks from taking the risks that almost brought down the global financial system (and then as memories faded in the ensuing years, Congress quietly rolled back those protections, setting the stage for the next crisis). This pattern of barn door closing is not an accident. The reason we usually don’t act until a crisis has occurred is that business as usual has enormously powerful momentum in our society, and until a crisis happens, the danger can be dismissed as speculative.

A threat to the atmosphere discovered in the 1970s provides a case study of how the business community reacted to a newly discovered hazard, foreshadowing the response of moneyed interests to the later discovery of global warming.

This threat was the discovery that certain chemicals were damaging the ozone layer. The global response has been cited as a great environmental success story, but the truth is more mixed. Sherwood Rowland and Mario Molina first warned of the danger that the unchecked release of chlorofluorocarbons (CFCs) posed to the ozone layer in 1974 (in 1995, along with Paul Crutzen, they were awarded the Nobel Prize in Chemistry for their groundbreaking work), but the global community did not act for another fifteen years. Even after it was discovered that CFCs were responsible for knocking a giant hole in the ozone layer, it took another four years for the global community to take action.

The Montreal treaty was a great environmental victory only if we ignore one small issue: once CFCs get into the upper atmosphere, they stay there for decades. Thus, if there is no backsliding on the moratorium on producing CFCs—not at all a certainty—the ozone layer will not heal until the 2030s, roughly six decades after the problem was first identified.

Climate change poses a far more difficult challenge than CFCs. The threat to the ozone layer came from one class of chemicals used in specialized activities. With climate change it sometimes seems as though almost all economic activity contributes to the problem—agriculture, transportation, power generation, concrete and steel production, construction, you name it. And greenhouse gases have an even longer life in the atmosphere than some CFCs.

Moreover, at least at first, the impacts of climate change seemed to unfold so intermittently and so incrementally that each anomalously strong storm, drought, flood, or heat wave could be written off as just that: an anomaly and not a warning that the world was changing. Sure, the United States sweltered in the summer of 1988, but then Mount Pinatubo erupted in June 1991, throwing up a globe-circling volcanic haze, and the following year the Northeast had the second-coldest summer on record, with snow in June in New York. In later chapters, we’ll look more closely at how the episodic and incremental aspects of a changing climate make it easy to ignore various climate impacts right up until the point they become catastrophic. As Sherwood Rowland remarked when he accepted the Nobel Prize, “What is the use of having developed a science well enough to make predictions if, in the end, all we’re willing to do is stand around and wait for them to come true?”

Warnings go unheeded because it is deeply ingrained in capitalism to disregard any action that might interrupt the existing flow of money, until a crisis can no longer be ignored. This inherent vice of capitalism, especially the American way of business, sets up a tragic collision of geophysics and economics: climate change demands proactive measures from a system that is geared to be reactive. The result is that the world has loaded more greenhouse gases into the atmosphere in the thirty-four years since climate change became an international issue than it did in the entire industrial age up to that point. As noted, a good portion of that increase has come from China, which in 2017 put ten times more carbon into the atmosphere than it did in 1972.

Despite the mismatch between the timetables of capitalism and the timetables of climate change, there were and are levers in the economy that could have permitted proactive measures in the 1990s to reduce our dependency on fossil fuels. One of the great trends of the past century has been the shift in almost all countries from rural to urban. Given the proper infrastructure, a major city might transition from coal to hydro or renewables with the flick of a switch. And while greenhouse gas emitters number in the millions, just a few score companies account for the majority of fossil fuel production and use.

The most reasonable argument for why little action was taken in earlier decades is that renewable technologies were too expensive to provide a realistic alternative for power generation and transportation. But to say that also begs a question: Why were alternative energy sources so underdeveloped in the 1990s?

Viewed in a historical context, the question is damning. Inventors have been looking at how to capture solar, tidal, and other forms of natural energy since our ancestors first began to speculate on ways to enhance human power. Humans are no more intelligent now than they were 10,000 years ago (or 150,000 years ago for that matter), and long before the discovery of cheap oil in the Arabian desert, inventors saw the power of the sun, the wind, the tides, and the heat trapped in the earth and have tried to imagine ways to capture or divert that energy to human use. And long before James Hansen spoke to Congress about global warming in 1988, some thinkers wondered whether we might be forced to turn to alternative sources of energy because of fossil fuels’ potential impact on the climate.

Writing for the Smithsonian Institution, Robert Thurston argued that even before fossil fuels are exhausted, emissions from smokestacks may alter climate, and that ultimately humans may be forced to harness the energy of the sun. That article was published in 1901. Back then it would have been natural to expect that renewables would be the major source of power a hundred years in the future. Indeed, in 1900, the Boston Globe, in an article on what life would be like in the year 2000, offered the following prediction of a time “when the tides in the harbor will be made to furnish heat, light and power, when every person will own his own automobile, or whatever it may be called in that day.” They were right about the automobile. They could not have been more wrong about what would be powering Boston.

Thurston wrote at the end of the Victorian era, a period of great invention and technological hubris, but before oil gained its stranglehold on the economy. It was a period boiling with ideas about powering industry. Many of the innovations being investigated today amount to dusted-off ideas of a century earlier. Or even earlier still.

For instance, some solar projects in the American Southwest convert heat generated by concentrated solar energy into electricity in part through a Stirling engine, a device invented by the Reverend Robert Stirling in 1816. A 400-megawatt power plant in the Mojave Desert uses the same basic principles as a solar power system built in Egypt in 1913 by an engineer named Frank Shuman to drive pumps on an irrigation system. Both rely on an array of mirrors to concentrate the sunlight into usable heat.

Water is 850 times as dense as air, and it has occurred to many inventors that the immense power of moving water, whether it is moving as a current, a tide, or in waves, might power turbines to generate electricity. In the late nineteenth century, Thomas Edison came up with the idea of mounting impellers on the ocean floor off the coast of Florida to capture the tremendous energy of the Gulf Stream, which moves 8 billion gallons a minute as it approaches within 15 miles of the East Coast. Today, Verdant Energy applies the same concept to produce electricity from the fast-moving, tide-driven East River in New York City, and projects producing energy from rivers and tides are generating power in bodies of water around the world.

Wind has been harnessed by sailors and millers for thousands of years, and wind-powered electrical generation dates back to the nineteenth century. In 1938, some of the scientists who worked on the first atomic bomb built a 1-megawatt wind turbine in Vermont. Human capture of geothermal power for heat dates back ten thousand years, and its use for electrical generation dates to 1904 when Prince Piero Ginori Conti of Trevignano built a 10-kilowatt plant in Larderello, Italy. (Descendants of that plant now generate 800 megawatts of electricity.)

What derailed renewables in 1900? Something better came along. That was oil. In the decades following 1859, when oil was first found in Pennsylvania, a series of vast new discoveries made the fuel ever cheaper, and improvements in refining made it ever more useful. It turned out that oil or its by-products could do almost anything one could do with coal, and more. Compact, packed with energy, and easy to move around, oil and gas derivatives came to dominate transportation fuels and utterly perfused the economy. The more the world came to depend on it, the more its strategic importance pushed alternatives to the sidelines. Starting around 1908, when vast reserves were discovered in what is now Iran, and accelerating in 1938, when what seemed to be unlimited supplies of oil were discovered in Saudi Arabia, renewables fell into a coma, where they remained for decades.

The U.S. space program gave something of a boost to solar power research, and then in 1973, renewables caught a big break, thanks to the hubris of the OPEC nations, which, in response to U.S. support of Israel during the Yom Kippur War, imposed an embargo on exports to America and other countries. The embargo produced huge lines of cars waiting at gas pumps, sent oil prices skyrocketing in the United States, and exposed our dependence on Middle East suppliers. But that effort fizzled when Ronald Reagan came into office.

Consequently, solar, tidal, and, to some degree, wind power were behind the curve when the first real false dawn arrived, the clamor to limit greenhouse gases that arose in the years before and after 1990. At that time, it was fossil fuels, not renewables, that received the lion’s share of government subsidies (and still do, to the tune of $400 billion annually around the globe). Those who argued in 1990 that there were no viable alternatives to fossil fuels except hydropower and nuclear power had half a point, but it was analogous to a football coach who shoots a sub in the leg and then benches him because he’s not ready to play.

In the years since 1990, investments in solar, wind, tidal, geothermal, and other renewables have ramped up. Today, wind, solar, geothermal, and even tide power are cost competitive with fossil fuels in many markets around the world. Wind power now accounts for roughly 20 percent of the electricity generated in Texas and is so plentiful and cheap that the giant utility TXU has a program that gives electricity away for free after nine p.m. to some of its customers. This has happened despite the best efforts of the George W. Bush and Donald Trump administrations to support fossil fuels, particularly coal, and to derail efforts to promote renewables.

When economists argue that fossil fuels are essential to our prosperity, they are also saying, implicitly, that luck, not ingenuity, fueled the growth of the Industrial Revolution. We’d better hope that’s not true, and there is every reason to believe that it isn’t. The same ingenuity that found multiple ways to expand and optimize the utility of fossil fuel combustion since the nineteenth century might have gone into improving wind turbines and tidal impellers. Material sciences might have focused on the best materials for converting sunlight much earlier than they did.

Industry might have found less carbon-intensive ways to produce basic materials. A perfect case in point comes from the steel industry, where the smelting of 2 billion tons of global production accounts for 8 percent of CO₂ emissions. As documented by Maria Gallucci of Grist, MIT scientists invented a way to make steel with zero GHG emissions by passing an electrical current through iron oxide and other metals, and the heat ultimately produces steel with an exhaust residue of oxygen. The scientists formed a company called Boston Metal to produce steel, and they argue that they can do so at costs competitive with coal-fired plants.

The process requires no new high-tech breakthroughs. Indeed, Grist quotes Donald Sadoway, the MIT material chemistry professor, as saying that he got the idea decades ago as an alternative way of making aluminum. The basic materials of this process—non-fossil-fuel electricity, iron oxide, and other metals—have been available for more than a century, and the only reason this process was not invented sooner might be described as lack of motivation. With coal as a dirt-cheap energy source, steel makers had little incentive to look for alternative ways to make it.

Had not cheap oil driven renewables to the fringes for several decades there is no question that solar, wind, geothermal, and tidal would have become economically viable much sooner. That this did not happen was not destiny, just another example of the self-perpetuating momentum of a technology once it has become the standard. No technological paradigm has perfused the modern economy more thoroughly than those related to the combustion of fossil fuels (though information technology will likely become more pervasive in the coming decades).

Unfortunately, climate change has its own timetable governed by geophysics, not business and politics, and it has ramped up even faster. Greenhouse gases have their own momentum. Once carbon dioxide is created through combustion, it remains in the atmosphere for many decades. Even if the world cut emissions to zero tomorrow, which it can’t, further climate change is locked in, and the problem is likely to become ever more disruptive for decades to come. Increased volatility will arise from the second-order impacts set in motion by the warming we’ve had so far. These include the melting of the permafrost, which is releasing increasing amounts of CO₂ as well as methane, an extraordinarily potent greenhouse gas, and the immensely important but still uncertain response of the oceans to the heat they have absorbed thus far.

The story of how we got here requires the unpacking of four different realms and how they have interacted over the past three decades. The first realm is reality itself: what has actually happened. The second is the state of science. The third is public awareness. The fourth is the world of finance and industry. I don’t include politics as a fifth realm because politicians have largely been reactive, and their actions have been derivative, driven by the mood of the public and, to a much greater degree, by the realm of money, where the real power lies.

The actions of this fourth realm, the world of business, finance, and industry, explain why the United States and the rest of the world have been so unprepared for a warming globe. For most of the climate change era (which I date from 1988, when it became a mainstream issue), the aggregate impact of the financial/business community was to delay action on the problem, even if many investors and executives acknowledged that the danger was real. The implicit cost-benefit analysis was that regulation and other preventive measures posed an immediate threat to profits, while the costs of climate change lay far in the future. Acting on that analysis, the business/investing community devoted enormous resources to sowing confusion about the issue in the public and throwing sand in the gears of any nascent steps toward action.

This is not news. The scope and details of these efforts have been exhaustively documented in articles, books, and documentaries. The business/financial community, however, is not a monolith. That broad umbrella includes a variety of sectors. For industries like coal, regulation of climate change posed an existential threat, but for others, notably insurance, it was climate change that posed the direct threat. In other words, some businesses should have had a different cost-benefit analysis than, say, a fossil fuel company.

In fact, the insurance sector did have a very different posture toward climate change than the fossil fuel sector. But when it came down to acting on that very different analysis, it was, with a few exceptions, mostly business as usual for much of the era. Warren Buffett once remarked that before the attacks of 9/11, the insurance industry assumed the risk of terrorism for free. The same could be said about climate change. Moreover, unlike prior risk mitigations such as seat belts and lighting standards, where the insurance industry was quite aggressive in lobbying Congress for action, in the case of climate change, the lobbyists were largely AWOL. It was a case of a dog that barked but didn’t bite.

It’s the actions of the insurance companies, a sector that was threatened by climate change itself, that provide the most telling clue to why the world dithered for decades about the problem. Throughout the climate change era, at the level of daily business, almost all of American finance and industry acted as though climate change was not an issue. This applied even to those businesses that found their profits most at risk from climate change and recognized that threat early on.

Consequently, the collective voice of the business community that the public was hearing in the early decades of this era was that climate change was not a problem, or that it was a problem that lay far off in the future, or that efforts to deal with it would cost you your job, or that climate change would make the world a more pleasant place. This voice was amplified through ad campaigns, through astroturf (fake grassroots) organizations and through paid “experts.” Separately, this message was delivered to politicians by lobbying groups and political action groups. The campaign provided a case study in how to muddy public opinion and divert political action.

Nor were Americans the only people listening. Because fossil fuel interests recruited three American presidents (Bush I and II and Trump) and many other prominent politicians to their cause, China and other emerging economies heard wildly seesawing messages from the West when they were choosing their paths to development. They were being told to ignore their domestic supplies of coal and other fossil fuels and, instead, to power their development with renewables, while at the same time powerful politicians in the West were belittling global warming and championing the use of coal in their own countries.

Throughout my career, I’ve been drawn to explore revealing anomalies, curiosities that provide a gateway to understanding fundamental dynamics underlying an event. In the case of climate change, the revealing anomaly is that insurers aggressively pursued writing policies for projects that would contribute to global warming, and for homeowners and businesses in areas at risk because of climate change, for thirty years after they first identified the problem.

One would expect that a sector whose business is understanding risk would factor this new risk into its pricing. That insurance did not do so at the retail level speaks to a fragility at the very heart of our consumer society. In particular, this peculiar anomaly offers a window into the perverse incentives that delayed or emasculated action on climate change for more than three decades and that still pose the biggest impediment to action going forward.

The property and casualty insurance business, for instance, has long recognized that it stands right in the crosshairs of virtually every threat posed by climate change, ranging from more intense windstorms and hurricanes, to the increased risk of wildfires, to floods and droughts, to sea level rise. The industry recognized the risk almost from the get-go. If, in a changing climate, past data can no longer be relied upon to price future risks, the industry might ruinously underprice property insurance. With this in mind, many of the big reinsurance companies (those giant firms that underwrite the risk of catastrophic events) have put together conferences, reports, and studies of various risks from the beginning of the climate change era.

I’ve been a consumer of these studies and reports and helped edit and write one in 2004. Moreover, the industry is huge. With $640 billion in premiums each year in the United States and more than $1.6 trillion worldwide, the property and casualty insurance industry rivals the oil industry in terms of financial heft. It could have lobbied for Congress to take action on fossil fuels just as it successfully lobbied for electrical standards in wiring and seat belt laws. Indeed, when I first wrote about the insurance industry and climate change for Time in 1994, that was the hope—that insurers would turn out to be the white knights of the business community.

Instead, the industry has turned out to be a very timid knight. Why that is so helps us understand the nature of the inherent vice that has left society blind to the threat of climate change even as we can see climate changing before our eyes.

While the big reinsurers have done admirable work trying to model the risks, at the other end of the business—where the policies are sold—the actions of insurers have more enabled climate change than adapted to or reduced the threat. Finally, belatedly, change is happening: in July 2018, Swiss Re, the second-largest reinsurer, made headlines when it announced that it would no longer insure businesses that derived more than 30 percent of their power from coal, joining a host of other insurers that had recently made such commitments (another giant, Lloyd’s, made a similar announcement in 2020). These actions make it all but impossible to finance new coal-fired plants in the West.

Coal is by far the worst contributor of greenhouse gases, producing 2.86 tons of carbon dioxide for each ton of the fuel burned (per the U.S. Energy Information Administration), so reducing the use of coal is essential. Reinsurers began denying coverage to coal-fired utilities only in the past few years. That means they’ve been enabling the financing of coal plants for the prior decades of the climate change era. Which part of the reinsurance industry has had more impact on the world: the modelers and strategists who produced the many great reports that have come out of the industry? Or the executives who green-lighted reinsurance coverage for thirty years for the planet’s worst climate actors?

Then there is the extreme other end of the insurance business, the agents who sell the policies to homeowners. Companies like Allstate and State Farm were writing policies for homeowners in fire-prone areas of California right up until the 2018 Camp Fire cost $12.5 billion in insured losses. Then they started canceling policies in at-risk areas and stopped writing new ones. One of the state’s insurance lobbyists was quoted as saying that insurers were “scrambling” to understand the new liability.

In fact, the increased risk of wildfires has been in virtually every insurance industry report on climate change I’ve read over the past decades. That insurers have been surprised by a risk that they’ve worried about for thirty years points to something else entirely. That insurers would continue to write fire coverage right up to the point where losses overwhelm premiums points to perverse incentives deeply embedded in the way we (the United States and many other developed countries) practice capitalism.

Later chapters in the book will explore exactly how these incentives played out in the case of property insurance (depressingly, all players were doing what they could have been predicted to do given the competing pressures on them at any given point), but the fact that a business predicated on accurate risk assessment should profess to be blindsided by events its own risk assessors predicted underscores the power of these incentives.

Some of the perverse incentives come from well-intentioned government programs. Had the insurers operated in a vacuum, they might have forced action on climate change. Most policies are renewable every year, and once the risk hit, the insurers could simply pull out of an area if they weren’t allowed to price in the newly discovered risk. But insurers don’t operate in a vacuum; they are a regulated industry. In California, regulators imposed a moratorium on cancellations after recent wildfires. And in cases where insurers still pulled out, such as Florida, where the state would not allow insurers to price for the rising risk of hurricanes, the state has provided a backstop. Across the country, various state and federal programs provide similar backstops for natural disasters such as floods, wind, and fires, all of which subsidize risks of climate change that would otherwise be expressed in increased insurance costs, falling home prices, and other economic signals.

The combination of complacency and perverse incentives is a recipe for unhappy endings. For a case study of how perverse incentives can create a financial crash, we can turn to the relatively recent near-death experience of the financial sector during the Great Recession. In 2008, a large number of people, in and out of the financial sphere, saw a crash coming but were ignored because business as usual was just too profitable for too many people and financial institutions. To set the context, recall that one of the triggers of the 2008 meltdown was the earlier parabolic rise of home prices as the explosive growth of a new type of bond incentivized lenders to write mortgages regardless of whether a household had the wherewithal to keep up payments. The bankers got fees for writing mortgages but didn’t worry about repayment, because they quickly sold the mortgages to other bankers who would use the mortgages as the collateral for billion-dollar securities. When the mortgage defaults inevitably arrived, many of these securities became worthless, and with investors pulling back, easy money disappeared from the housing market. Plummeting housing prices fueled a banking crisis that morphed into a financial crisis and severe recession, devastating the markets and throwing millions of people out of work and into bankruptcy.

One of the accelerants of the downturn involved panic selling of homes in overpriced markets such as Las Vegas, Phoenix, and parts of Florida as sellers found themselves competing with banks dumping foreclosed properties as well as forced selling by neighbors even as the pool of buyers dried up. Later chapters will explore how climate change might well bring about a similar cascade of financial repercussions.

There are many other examples of well-predicted disasters happening because those in a position to make decisions found it more profitable to ignore a certain threat with an unpredictable timeline than to sacrifice some gains for long-term security. The matrix of competitive pressures on today’s businesses, both industrial and financial, incentivizes executives to drive off cliffs. Those careering toward the cliff keep the pedal to the metal because it’s almost never clear how far away the cliff lies.

This tendency seems to be in the very DNA of modern American capitalism. If immutable, this does not bode well given that climate is changing around us, and those changes will continue to accelerate. On the other hand, systems mutate just as organisms do. Chinese communism is not the communism of Mao. The regulated/deregulated tendencies of American capitalism have been more of a sine wave than a straight line over the decades as politicians and the public reacted to crashes, booms, and depressions. And today, more and more businesses see climate change as a bigger threat to their future than regulation. In this lies hope.

What we don’t have is time. The global community has squandered decades and even now struggles to address the issue. The following chapters show how we lost our way.