A Cat Bond Controversy, Democrats' Adaptation Platform, an AI-Powered Heat Wave Tool, and More

Today in Climate Proof:

Finance:

• Catastrophe Bonds Get Contentious

• A Wealth Tax For Climate?

Policy:

• What Are Democrats Promising on Adaptation?

Tech:

• Inside an AI-Powered Heat Wave Tool

• Hot for Climate-Friendly Cooling

Research:

• Another round-up of papers and journal articles on all things climate adaptation

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Catastrophe Bonds Get Contentious

A money-spinning financial product intended to bolster the climate resilience of the insurance industry is under fire for enabling Wall Street investors to dodge losses from extreme weather events. 

Catastrophe bonds (or ‘cat bonds’) are sold by insurers and governments to build capital against natural disasters like hurricanes and earthquakes. Investors receive high coupon payments in exchange for taking the risk that the bonds will be wiped out if a qualifying calamity occurs. The cat bond market had grown to US$47bn as of April, 24% larger than it was as of end-2022. Year-to-date, investors have made a 15% average return on their cat bond bets.

What’s causing controversy is that the bonds are not paying out to issuers in the wake of bruising climate shocks — including last month’s Hurricane Beryl, which has inflicted US$3.3bn of insured losses so far.

Following that storm, investors in Jamaica’s US$150mn cat bond avoided losses as the exact level of air pressure required to trigger a payout did not occur. This despite the fact the storm knocked out power to most of the country, destroyed or damaged many homes, and impacted 38% of public hospitals. 

Cat bond contracts carefully spell out exactly what kinds of storms will produce a payout, based on parameters including wind speed, air pressure, and rainfall. The triggers are calibrated to address tail risks: truly outsized weather disasters that occur outside the usual range of probabilities. 

Earlier this month, Caribbean heads of government called for an “examination” of disaster insurance innovations and urged discussion of “models and products suitable for the Region.” Meanwhile the Vulnerable Group of 20 (V20) countries — those on the frontlines of climate change — have called on the World Bank to review the triggers attached to cat bonds. The World Bank helped facilitate the Jamaican instrument.

However, demand for cat bonds could plummet if investors judge the triggers to be overly sensitive. Alternatively, they could become much more expensive to issuing companies and countries. 

A Wealth Tax For Climate?

The drumbeat in favor of increased climate finance is getting louder ahead of the upcoming COP29 Climate Change Conference.

In comments at a pre-conference event in Baku, Azerbaijan, last week, Alexander Saeir — head of communications at the United Nations Framework Convention on Climate Change (UNFCCC) — highlighted the growing financial burden of adaptation: “Previously, it was estimated that approximately US$100bn per year was needed to adapt to climate change. However, in recent years, we’ve realized that climate change and its impacts are accelerating, requiring increasingly larger investments," he stated.

Think tanks are cooking up plans to raise the climate finance needed for adaptation and mitigation. A new report out of the Tax Justice Network calls on countries to adopt a wealth tax on the 0.5% richest households. This would raise US$2.1trn a year globally, according to the group’s projections — more than double the amount needed to meet the “external climate finance” requirement set out by the Independent High-Level Expert Group on Climate Finance. External climate finance is defined as that coming from non-domestic sources, such as private capital providers.

Details of the Progressive Wealth Tax Following the Spanish Example

The calculation of how much climate finance such a tax could generate assumes the richest households are charged a progressive rate of 1.7% to 3.5% on a sliver of their overall wealth. This is modeled on Spain’s “Solidarity” wealth tax introduced in 2022, collected on the net wealth of those holding more than €3mn (US$3.4mn).

The Tax Justice Network assumes the tax would apply to only 0.003% of the global population, around one-quarter of a million people.

Other Stuff

OPEC charity gives millions to protect nations from climate damage (E&E News)

Inside Rwanda's Rwf154bn (US$117mn) budget for climate change adaptation (The New Times)

Washington State Department of Health (DOH) awards more than US$14mn of Climate Commitment Act funds to 41 community organizations and Tribes (Washington Department of Health)

Sanford, North Carolina, raises US$21.9mn via bond to upgrade water infrastructure (ImpactAlpha)

US Department of Commerce Invests US$13.5mn for water infrastructure improvements to support businesses growth in Lake City, South Carolina (US Economic Development Administration)

US Environmental Protection Agency awards US$25.5mn in new grants to combat impact of climate change on drinking water infrastructure (EPA)

New York Governor Hochul announces US$42mn to protect the Eastern Finger Lakes Watershed (governor.ny)

California selects and funds 94 wildfire projects to build community and climate resilience (gov.ca.gov)

What Are Democrats Promising on Adaptation?

Last week’s Democratic National Convention (DNC) had plenty to enthuse party stalwarts and anti-Trump tribalists. But there was little to excite climate activists. Climate change was given a single, fleeting reference in Vice President Kamala Harris’ keynote address, and other speakers barely touched on the topic.

The sidelining of climate extended to the Democratic platform, the document that sets out the party’s governing priorities. The platform contains multiple references to a second term for President Biden, a sign perhaps of how this year’s election tumult has caught the policy process unprepared.

“Adaptation” is cited just twice in the 92-page document. In the climate section, Democrats reiterate the Biden administration’s “investments in climate infrastructure” that support adaptation and mitigation. In the foreign policy section, the platform highlights Biden’s efforts to “support adaptation efforts in developing nations.”

“Climate resilience” gets more of an airing, however. A section on “Building Climate Resilient Communities” recalls the efforts made to climate-proof the US via the Inflation Reduction Act and Bipartisan Infrastructure Law, together with promises to continue investing in cooling centers and refuges for vulnerable populations facing extreme weather events.

There’s also a specific pledge to pass a Disaster Resilience Tax Credit “to help low- and middle-income families and small businesses invest in preparing for and easing the impact of storms, heat, floods, and other natural disasters.” On conservation, the platform promises to bolster protections for Arctic regions, designate new marine sanctuaries, and protect rivers and wetlands — all crucial to building climate resilience.

On the innovation front, Democrats commit to launching an Advanced Research Projects Agency for Climate (ARPA-C) to “help find new ways of generating and storing energy, reducing emissions, and boosting climate resilience.” This would be modeled on the Defense Advanced Research Projects Agency (DARPA), an organization lauded for creating innovations including the internet and GPS. 

Hardening the US against climate risks also features. Democrats say they will “enforce and advance labor and environmental rules” to protect workers from extreme heat and combat heat stress in urban environments by planting millions of trees.  Climate-proofing infrastructure also gets a mention, with a reference to how the current administration is building “new roads, bridges, and ports that are less vulnerable to flooding” and upgrading electricity transmission lines “so winds can’t bring them down where they catch fire.”

But ultimately there’s little here that goes beyond the language used in the 2020 platform, before President Biden’s election. The previous edition also included promises on ecosystem restoration, heat resilience, and disaster relief. What’s different is because of Biden’s legislative success, lots of these promises have been kept — or are in the process of being honored.

And of course, the Democratic platform has much more to say on climate resilience than the Republican’s —which doesn’t mention climate change once.

How Vice President Harris will build on the climate promises in the platform remains to be seen. Last week, Bloomberg quoted an adviser who said she was committed to “bold action” on climate issues, with an emphasis on environmental justice and bolstering protections for public lands.

Other Stuff

Put people at the centre of urban policies, says new UN-Habitat chief (UN)

US Supreme Court decision pleases real estate developers, but threatens land use climate adaptation (Daily Kos)

Rockefeller Foundation invests in Uganda’s climate change health National Adaptation Plan (The Rockefeller Foundation)

Mozambique announces roadmap to ensure early warning weather coverage for all by 2027 (Down To Earth)

A hostile climate: confronting the challenges of humanitarian aid delivery in the context of climate change (Doctors Without Borders)

Climate disasters challenge right to safe and adequate housing (Climate Home News)

Inside an AI-Powered Heat Wave Tool

Looking for a fast, cheap, effective way to attribute heat waves to climate change? The hunt is over.

Researchers at Stanford and Colorado State University have developed an AI-powered method to figure out how and when heat waves occur amid changing climate conditions. The hope is that with improvements, it could be used to inform climate adaptation strategies and even provide evidence for those taking polluters to court over climate damages.

The eggheads behind the method used AI models to predict maximum daily temperatures based on regional weather conditions and the global mean temperature (GMT). The models were trained on climate simulations generated over the 1850 to 2100 period, and then tested against real-world heat waves to predict how hot they would have been under different GMT levels. This way, they are able to deduce how much human-caused warming has exacerbated extreme heat events.

Applying the method, the researchers concluded that the 2023 Texas heat wave was 1.18°C to 1.42°C hotter because of climate change. Moreover, similar events are projected to happen 0.14 to 0.6 times each year at 2°C of warming. This makes plain how climate change is making heat waves more common — and more dangerous. The 2023 Texas heat wave contributed to a record number of heat-related fatalities in the state that year.

What makes the approach innovative is that the AI can be trained using existing climate simulations, rather than expensive new climate model runs. The use of actual weather event data, meanwhile, assists with the accuracy of the findings.

“Machine learning creates a powerful new bridge between the actual meteorological conditions that cause a specific extreme weather event and the climate models that enable us to run more generalized virtual experiments on the Earth system,” said study senior author Noah Diffenbaugh at the Stanford Doerr School of Sustainability. “AI hasn’t solved all the scientific challenges, but this new method is a really exciting advance that I think will get adopted for a lot of different applications.”

Hot for Climate-Friendly Cooling

Talking of heat waves, one of the most promising areas of climate adaptation tech is next-gen cooling. Finding smart ways to cool homes, businesses, and people is essential as sweltering temperatures become the norm. A recent report out of Climate Central found that “cooling degree days” — a measure of cooling demand — for the late July to early September “back-to-school” period have surged in 95% of US locations since 1970.

However, the planet could do without cooling tech that adds to global emissions. That would be “maladaptation” in action — a would-be solution that actually exacerbates the problem it purports to solve.

Six US universities are teaming up to find ways to produce cooling tech without the nasty climate pollution with the help of a US$26mn grant from the National Science Foundation (NSF). The Environmentally Applied Refrigerant Technology (EARTH) Hub has been set up to create tech that boosts the energy efficiency of heating, ventilation, and cooling and reduces their contribution to global warming. The Hub will be based in the University of Kansas, with teams drawn from Lehigh University, University of Hawaii, University of Maryland, University of Notre Dame, and University of South Dakota. 

It’s one of four NSF Engineering Research Centers founded last week. The others are tackling carbon dioxide in manufacturing processes, the development of robots to help human workers, and the production of rubber alternatives.

The EARTH Hub could spin out innovations and technologies that contribute to climate adaptation and bolster the US economy. The University of Kansas says the phase-out of high-polluting refrigerants could create 150,000 new jobs and add US$39bn to US manufacturing. Climate-friendly refrigerants could also support US exports.

Other Stuff

Sensors can read your sweat and predict overheating. Here’s why privacy advocates care (AP News)

Hyundai and Kia introduce advanced temperature control tech for future vehicles (Manufacturing Today)

Life sciences investor BEVC raising $25mn climate tech fund (TechCrunch)

Advanced forecasting of drought zones in Canada using Deep Learning and CMIP6 projections (MDPI)

Drought prediction using artificial intelligence models based on climate data and soil moisture (Scientific Reports)

Combined ocean-atmosphere data improves complex ocean forecasts (NOAA Climate Program Office)

RESEARCH

Can Behavioural Science Help Scale Climate Change Adaptation Solutions? (International Institute for Sustainable Development)

Anticipating responses to climate change and planning for resilience in California’s freshwater ecosystems (PNAS)

Politicization of water use exacerbates farmers' distrust, researchers find (phys.org)

The elements of climate resilient buildings (World Architecture Community)

Warming summer temperatures are rapidly restructuring North American bumble bee communities (Ecology Letters)

Widespread habitat loss and redistribution of marine top predators in a changing ocean (Science Advances)

Thanks for reading!

Louie Woodall
Editor