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The risk of climate ruin

Author

Listed:
  • Oliver D. Bettis

    (Institute and Faculty of Actuaries)

  • Simon Dietz

    (London School of Economics and Political Science)

  • Nick G. Silver

    (Institute and Faculty of Actuaries)

Abstract

How large a risk is society prepared to run with the climate system? This is a question of the utmost difficulty and it admits a variety of perspectives. In this paper we draw an analogy with the management and regulation of insurance companies, which are required to hold capital against the risk of their own financial ruin. Accordingly, we suggest that discussions about how much to reduce global emissions of greenhouse gases could be framed in terms of managing the risk of ‘climate ruin’. This shifts the focus towards deciding upon an acceptable risk of the very worst-case scenario, and away from how “avoiding dangerous anthropogenic interference with the climate system” has come to be framed politically. Moreover it leads to the conclusion that, in terms of greenhouse gas emissions today and in the future, the world is running a higher risk with the climate system than insurance companies run with their own solvency.

Suggested Citation

  • Oliver D. Bettis & Simon Dietz & Nick G. Silver, 2017. "The risk of climate ruin," Climatic Change, Springer, vol. 140(2), pages 109-118, January.
    • Handle: RePEc:spr:climat:v:140:y:2017:i:2:d:10.1007_s10584-016-1846-3
    DOI: 10.1007/s10584-016-1846-3
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    References listed on IDEAS

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    Cited by:

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    2. Cardenas, J. C. & Jaramillo, F & León, D & López, M. & Rodríguez, M & Zuleta, H, 2021. "With a little help from my friends: Debt Renegotiation and Climate Change," Documentos de Trabajo 19732, Universidad del Rosario.
    3. Rick Van der Ploeg & Armon Rezai, 2018. "Climate Policy and Stranded Carbon Assets: A Financial Perspective," OxCarre Working Papers 206, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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