Last September, Lehman Brothers announced in a report that “Society may want to pay an insurance premium to reduce the risk of an unforeseeable…catastrophe.”
That report, oddly enough, had nothing to do with Lehman itself, or with the bank’s sudden collapse yesterday, which sent global stocks into a collective tailspin and prompted presidential candidate Barack Obama to call it “the most serious financial crisis since the Great Depression.”
It wasn’t that sort of crisis Lehman was predicting, back in the halcyon days of 2007, but rather an environmental one. The report, called The Business of Climate Change II, assessed the “social cost” of carbon emissions at $50 per metric ton, and claimed that the public might be willing to pay even more to cushion itself from the potentially ruinous effects of carbon emissions on climate and the environment:
…catastrophic risks, and society’s wish to avoid them, explains why society may prefer to pay a bit ‘over the odds’ to reduce further the risk of an irreversible climate-change-related event.
What amount of “risk premium,” as Lehman called it then, would keep us out of the environmental red? And if Lehman’s own practices couldn’t save it from the credit meltdown, are investments really going to save us from the climate-related equivalent? Granted, I'm no finance whiz kid, and maybe the parallels I’m attempting to draw between the stock market and the global climate are tenuous at best. But with this year looking like the worst on record for polar bears because of melting sea ice, it’s hard not to look at the two crises—one already erupted, the other building—in tandem. It’s hard to ignore that inattention to sustainability (i.e. buying up bad mortgages) in one arena won’t have similar effects in the other.
How do we avoid that? Perhaps the answer is to invest not in protection against catastrophe, but rather in sustainability. If how we’re living now is going to produce a catastrophe…then it’s time to change that. Isn’t it? One small way: building green. Even though it involves some overhaul, greening our homes can provide massive energy savings. Instead of having to build more dams or erect new wind farms (which will probably happen anyway), starting at the source could help reduce demand.
But enough doom and gloom and badgering for today. The one perk to the Lehman collapse, as reported in Connecticut’s The Day, is that a modest 1,000-acre tract of old-growth forest called The Preserve, previously owned by a Lehman subsidiary, may now come under the jurisdiction of the state of Connecticut, possibly blocking a contentious real estate development project. (And, sorry, but who thinks it’s a good idea to develop real estate right now?) Nothing’s for sure yet. Maybe local residents could buy risk premiums in case they need to stave off the catastrophic effects of the development.