Chapter Overview

Challenges of the Century

In this first section of the chapter, we provide a brief history and overview of developments in different environmental and social systems and how they are connected. In particular we look at:

• Socio-economic trends
• Earth system trends

In this background section we draw information from other sciences, such as earth system and environmental science. Before continuing, here are a few questions to think about:

Socio-economic Trends

Since the Industrial Revolution, humans have invented machinery to replace manual tasks, and discovered new chemical processes and power sources (e.g. coal). Whilst these inventions led to an increase in human and economic development, in the 1950s, development started to increase at an unprecedented rate. The figure below demonstrates these unprecedented and exponential increases in our social and economic (socio-economic) systems starting in the 1950s.

The Anthropocene website contains more information on the major changes that have occurred in key trends since 1950.

One of the most obvious challenges is related to the exponential increase of population. This is because people now live longer and on average have more than 2 children. The human population has more than tripled in the past 70 years, from 2.5 billion to over 8 billion, resulting in humans exerting even more dominance over other species. However, it is expected that increased education and opportunities for women will result in a stabilisation of the global population in the future.

Economic growth (GDP) has also reached unprecedented levels since the 1950s, leading to substantially more wealth and higher levels of welfare. However, these increases are mostly concentrated in OECD countries. Economic systems have become global, where a country’s wealth is linked to the wealth of other countries. We have collectively moved to cities, and many people have access to primary energy such as electricity and transport, allowing further economic development. We need to produce unprecedented levels of food, which has led to the increased use of fertilisers and water. We travel more and have more electronic devices than ever before (increasing amount of electronic storage. Only 20 years ago, Nokia phones had a limit of 20 messages – with 150 characters!).

The Anthropocene website has more information on socio-economic development.

Earth System Trends

Our explosive socio-economic developments have led to large changes in our natural environment. That humans impact the natural environment is nothing new and has been documented since humans have wandered the earth. However, it used to be that human activities only impacted a localised area, and with a lower population and less resourced population, the earth systems were usually able to recover. Now, however, human effects are happening at a much larger scale and are impacting some important life-supporting systems on regional, national and global scales.

The Great Acceleration figure above demonstrates the effect human activities have had on various key environmental indicators. Atmospheric concentrations of greenhouse gasses (carbon dioxide, nitrous oxide and methane) have exponentially increased, caused by, among other things, fossil fuel combustion for energy (carbon dioxide emission), increased deforestation (reducing the earth’s uptake of carbon dioxide), agricultural processes including livestock (carbon dioxide, nitrous oxide and methane emissions), and other industrial processes. Increased greenhouse gas emissions has led to several problems, including ocean acidification. Our human activities have also led to increased over-fishing, tropical forest loss, and loss of species. This has dire ramifications not only for us personally and other species living on this planet, but in the short term also for those companies and small businesses that rely on the environment for the running of their business, for example agriculture and tourism. Our society and economy, including its businesses, will increasingly be negatively impacted as our environment degrades, given we rely on a stable environment. For example, this New Scientist article^[2]describes how climate change is already affecting the tourism sector around the Great Barrier Reef.

The Great Acceleration

When Did Humans Begin to Affect the Earth’s Systems?

As we have seen, humans have moved from impacting the environment on a local scale to now becoming a geological force that is affecting the way the whole planet operates. Scientists are saying we have moved into a new geological epoch, the “Athropocene” – an epoch where humans are the driving force of changes in the environment. In other words, humans are the primary cause of permanent  planetary change. This epoch is characterised by the fact that planet is now outside of its natural limits. From being solely participants, humans became the dominant creatures on the earth, having an influence on the oceans, landscape, agriculture and animals. Human activities have caused fundamental changes in the way the earth is behaving, and it could be a full-scale catastrophic change.

You can watch a TED talk on the “Anthropocene” (YouTube, 18m15s) by renowned earth system scientist Professor Will Steffen for more information.

TEDxCanberra – Will Steffen – The Anthropocene (YouTube, 18m15s)

Some propose that this era started centuries ago, when we started smelting metals, traces of which we see in the Greenland ice core. Others argue that this started with the industrial revolution, as we dramatically increased our use of fossil fuels. Exponential growth in social and environmental changes has been evident since the industrial revolution. As we saw in the previous graphs, however, a massive expansion of the human enterprise has occurred since the 1950s, and this phenomenon is what scientists call the great acceleration. It refers to the era in which human activities are changing environmental systems at unprecedented scales and levels.

One of the main inventions that have allowed us to “unleash” the human enterprise was the invention of “fossilised energy”, also known as fossil fuels. These fossils that have been built up underneath the earth for millions of years, provide a cheap, powerful, reliable, and convenient energy when combusted. This energy source allowed humans to undertake economic activities more efficiently, such as:

• Converting and plowing land (globally, 85% of land has been impacted by humans in more than one way!)
• Manufacturing and transporting of products, many consuming energy themselves (e.g. cars, phones, laptops.)
• Construction
• Cutting down trees at a faster rate (for example, 50% of Australian forests have been cut down since European settlement)
• Building enormous fishing boats (also trawling the seas with huge nets and systems)
• Reforming the coastal zones
• Changing the delta systems of rivers
• Travelling large distances

Unfortunately, there is a side effect. During the process of fossil fuel combustion, carbon dioxide (CO₂) is produced. CO₂ is a greenhouse gas, which traps heat in the atmosphere. Why is this a problem? There is a natural level of greenhouse gas emissions in the atmosphere that keeps the earth warm, at exactly the right climate for humans to live and develop in. If humans are releasing CO₂ and other greenhouse gas emissions into the atmosphere every year, the concentration of greenhouse gases in the atmosphere increases, making the planet warmer. However, is a warmer planet bad for us?

Planetary Boundaries

For humans it is important to know three elements: 1) which of earth’s processes are humans are impacting/affecting by their activities – which do we control, and 2) which natural systems are important for providing living the conditions we need – what scientists call a “safe operating space for humanity”; and 3) by how much we can change the systems before the earth becomes an unsafe place for humans to live and develop in. The planetary boundaries framework aims to answer these questions based on the most sophisticated scientific knowledge and evidence to date (for example work that has been published in prestigious journals such as Nature and Science). 

The framework identifies nine interlinked, but different, systems: climate change, novel entities, stratospheric ozone depletion, atmospheric aerosol loading, ocean acidification, biochemical flows, freshwater change, land-system change and biogeochemical flows (see above figure). Humans are dependent on these systems and humans impact these systems at the same time.

The framework concerns itself with the level of anthropogenic (human caused) changes that can occur so that the risk of destabilisation of the earth is likely to remain low. Generally, it is an indication of what a safe operating space is for global societal development. This is shown by the green “zones” in the diagram. The framework identifies the scientific limits to important planetary systems, which if transgressed, would pose a high risk of irreversible change in the earth’s stability, tipping it out of the safe Holocene state. The system limit is shown by the white border in the diagram. As an example, the planetary boundary for CO₂concentration in the atmosphere should not exceed 350 parts per million by volume. In 2022 we reached 418.56 parts per million.

Crossing the identified limits is considered high risk because:

Whilst all planetary boundaries are important, the two core planetary boundaries are climate change and biosphere integrity. The reason for this is that these two systems could tip the earth into a new (unsafe) state and also have a significant impact on the other boundaries.

Case Study: Biosphere integrity

Biosphere integrity refers to the quantity and quality of biodiversity. It is very similar to the concept of diversification that you have come across in your prior finance studies. The more plant and animal species that inhabit the planet, and the better the quality (“function”) of these species, the more resilient and better the health of our ecosystems is. Currently we are facing extinction rates that are 100-1000 higher than usual. We have thus exceeded the planetary boundary of limiting extinction rates to 10 extinctions per million species per years (=10 times the usual rate). However, when making difficult choices about which species are most important to concentrate our efforts on conserving, we need to look at the function of species in our ecosystems.

For example, bees should definitely be on our priority list! Bees pollinate about 70 percent of the world’s food. Although very small in size, bees are doing very important services for us (for free!), and are highly functional. This means that if bees go extinct, unprecedented problems would occur. The functional diversity of species are different. This means that some species provide greater “function” to the ecosystem than others. Perhaps losing some types of mosquitoes might not be that bad?

The World Economic Forum

So far we have focused on socio-economic and environmental developments. This has provided you with an introduction of how systems are vastly interrelated. To understand and help solve challenges it is important to take a systems perspective that acknowledges complexity and interrelatedness, so as not to “shift” challenges by solving one problem but creating a new one by doing so.

A useful demonstration of how challenges are related across different systems, and how to prioritise these challenges, can be found in the yearly Global Risks Reports by The World Economic Forum. These reports show the interrelatedness of risks, referring to economic, environmental, geopolitical, societal and technological risks. The reports detail the number and strength of connections of risks as well as the trends. Environmental risks dominate global risks in terms of both impact and likelihood.

The figure below demonstrates the linkages between the different types of risks, and how one problem is connected to other problems. Consistent with the planetary boundaries framework, climate change is identified as a strong driver of increased environmental and social risks.

While climate change has had an impact on several other environmental issues, such as biodiversity loss and natural disasters (extreme weather events), it will increasingly lead to social issues such as food or water crises, and large-scale migration. It will also dramatically alter our economies and businesses, regardless of whether we rise to meet the challenge or not. Thus, ultimately climate change is a long-term socio-economic issue that, if is not tackled, will have catastrophic implications for socio-economic systems. 

Challenges of the Century – Summary

In this section, we have covered how recent rapid developments in socio-economic systems have led to unprecedented changes in important life-supporting earth processes. This presents us with unique challenges for humanity in this century. One challenge is to decouple our socio-economic activities from negatively impacting planetary systems on which long-term human development depends. At the same time, there are social challenges such as poverty and income equality that are important to be considered. In the next section we focus in on the challenge of climate change in more detail.

Climate Change

Introduction

In this section we focus on the challenge of climate change. Climate change has increasingly been pushed up the agenda internationally given the urgency of the issue. As we learned in the previous section, climate change is one of the key earth systems that can, on its own, push the earth into an undesirable state for humans. If climate change is not tackled, it could even lead to humans becoming extinct. Tackling the challenge will require many changes in the way we see and do business and finance. Mark Carney, prior governor of the Bank of England, said at the 26th Conference of Parties (2020, p. 2)^[3] meeting on climate change:

“The objective for the private finance work for Cop26 is simple: to make sure that every private finance decision takes climate change into account. [..] Achieving net zero emissions will require a whole economy transition – every company, every bank, every insurer and investor will have to adjust their business models”.

If we act now, Mark Carney says it “could turn an existential risk into the greatest commercial opportunity of our time”.^[4] Note that what Mark Carney stated can be applied to any challenge: challenges can also be considered as opportunities, it depends on one’s perspective as to how we approach them. What he is suggesting here is that if companies increase their investment in research and development that helps us transfer to a low carbon economy, they will most likely be rewarded with healthy bottom lines in the not-too-distant future.

Climate Change: Science

In this TEDxNASA (YouTube, 17m 21s) video,  Bruce Wielicki gives an overview of some of the key facts and impacts of climate change. If you are really keen to learn more, you may like to look at the IPCC reports – they contain all the scientific knowledge we have to date on climate change.

TEDxNASA – Bruce Wielicki – Climate Change: Fact And Fiction (YouTube, 17m 21s)

How Does the Climate System Work?

The way the climate system works can be associated with simple budgeting. There is income and expenses, and the balance of the two.

In the climate system, there is sunlight, which is the incoming resource or energy that keeps heating up the planet. This energy leaves the system through infrared radiation – this is something that you do not see with your eyes, but it feels similar to fire, if you are close to it. At the same time, there are greenhouse gases (often expressed as a CO₂-equivalent) blocking the heat from escaping, giving us a nicely habitable earth.

Thus, there is energy coming in, and energy leaving the system, which has a balance, and this is the energy budget of the planet. This determines the climate on the planet. Before the industrial revolution, the concentration of CO₂ in the atmosphere was 280 parts per million (ppm), but through our anthropogenic activities we kept adding greenhouse gases every year, increasing the amount of heat retained, and resulting in a concentration of  419ppm in October 2023.

The more carbon dioxide there is in the atmosphere, the more heat is trapped and the warmer the planet gets. The main sources of anthropogenic CO₂ emissions are fossil fuel combustion, cement production and flaring.

What is a Cloud Feedback?

Scientists have been interested in the way climate change impacted the earth systems for decades – the earliest climate models were built in the 1970s.

One of the many variables impacting the climate are clouds. There are models that have analysed cloud feedback for decades, to see the impact of change in temperature. For example, if the global cloud cover is changed by 1 percent, it triggers dramatic changes in the sensitivity of the climate system (Note: Bruce Wielicki has been studying cloud feedback for the last 30 years!).

For a more accurate representation of this change, and comparison of data, satellite data was analysed, in different wavelengths (or colour of light). This allowed scientists to compare the amount of green vegetation, the brown deserts, the snow, the ice and the clouds, and the thermal emission that is infrared up to space. This method contributed to a better understanding of the climate system and facilitated the prediction of future trends. There are many examples like this for the studying of oceans and other planetary systems.

Some of the reliable sources for reliable information about climate change are:

Note: in academia, peer-reviewed articles are considered legitimate sources. Peer-reviewed articles have undergone significant criticism and questioning by other academics in the field, and are only published when all criticisms and concerns have been addressed to the highest standard.

Climate Change: Impacts

What are the Impacts of Climate Change?

Human activities are estimated to have caused 1.2C of global warming since pre-industrial levels. The impacts of climate change are already being felt around the world, we are already experiencing species extinction (flora and fauna slowly disappearing) and more extreme weather events (more frequent and more intense), just to name a few.

What Can be Done to Stop the Temperature Increase?

The Paris Agreement

Based on the overwhelming scientific evidence on climate change, most nations around the world have signed the “Paris Agreement”, which is a commitment to keep temperatures well-below 2°C warming compared to pre-industrial levels. Crossing 1.5°C-2°C will substantially increase the risk of setting off feedbacks that will lead to irreversible and catastrophic changes to our planet. For example, crossing 2°C would substantially increase the risk of melting the icecaps in Greenland, which would release huge amounts of methane (a strong greenhouse gas). The suddenly increased level of greenhouses gases would then accelerate climate change. There are many such feedbacks, as the earth is one big complex interconnected system.

Even though the Paris Agreement has been signed by most nations, current commitments to reduce greenhouse gas emissions are not sufficient to stay below the 2°C threshold. In fact, current commitments will lead to warming of at least 2.6-3.1°C (Rogelj et al., 2016).^[5] Find out how on track your country.

Reducing Emissions

To have a more than 50% chance of staying below 1.5°C, cumulative emissions need to be kept within 480 GtCO₂ from 2018, which is also referred to as the “remaining carbon budget”. Currently, we emit around 41 GtCO₂ globally every year. This means that if we keep emissions at 2018 levels, we would exceed the budget before 2030. To ensure that we stay within the carbon budget and meet the temperature limits set out in the Paris Agreement, all stakeholders in society have a role to play, which we discuss in more detail in the next chapter.