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Addressing climate change in a post-pandemic world

Source(s):  McKinsey & Company

By Dickon Pinner and Matt Rogers, senior partners in McKinsey’s San Francisco office; and Hamid Samandari, senior partner in the New York office


Given the scope and magnitude of this sudden crisis, and the long shadow it will cast, can the world afford to pay attention to climate change and the broader sustainability agenda at this time? Our firm belief is that we simply cannot afford to do otherwise. Not only does climate action remain critical over the next decade, but investments in climate-resilient infrastructure and the transition to a lower-carbon future can drive significant near-term job creation while increasing economic and environmental resiliency. And with near-zero interest rates for the foreseeable future, there is no better time than the present for such investments.


Pandemics and climate risk also share many of the same attributes. Both are systemic, in that their direct manifestations and their knock-on effects propagate fast across an interconnected world. Thus, the oil-demand reduction in the wake of the initial coronavirus outbreak became a contributing factor to a price war, which further exacerbated the stock market decline as the pandemic grew. They are both nonstationary, in that past probabilities and distributions of occurrences are rapidly shifting and proving to be inadequate or insufficient for future projections. Both are nonlinear, in that their socioeconomic impact grows disproportionally and even catastrophically once certain thresholds are breached (such as hospital capacity to treat pandemic patients). They are both risk multipliers, in that they highlight and exacerbate hitherto untested vulnerabilities inherent in the financial and healthcare systems and the real economy. Both are regressive, in that they affect disproportionally the most vulnerable populations and subpopulations of the world. Finally, neither can be considered as a “black swan,” insofar as experts have consistently warned against both over the years (even though one may argue that the debate about climate risk has been more widespread). And the coronavirus outbreak seems to indicate that the world at large is equally ill prepared to prevent or confront either.


Key differences


A global public-health crisis presents imminent, discrete, and directly discernable dangers, which we have been conditioned to respond to for our survival. The risks from climate change, by contrast, are gradual, cumulative, and often distributed dangers that manifest themselves in degrees and over time. They also require a present action for a future reward that has in the past appeared too uncertain and too small given the implicit “discount rate.” This is what former Bank of England Governor Mark Carney has called the “tragedy of the horizon.”


By all accounts, the steps we take in the decade ahead will be crucial in determining whether we avoid runaway climate change. An average global temperature rise above 1.5 or 2°C would create risks that the global economy is not prepared to weather. At an emission rate of 40 to 50 gigatons of CO2 per year, the global economy has ten to 25 years of carbon capacity left. Moving toward a lower-carbon economy presents a daunting challenge, and, if we choose to ignore the issue for a year or two, the math becomes even more daunting. In short, while all hands must be on deck to defeat the coronavirus and to restart the economy, to save lives and livelihoods, it is also critical that we begin now to integrate the thinking and planning required to build a much greater economic and environmental resiliency as part of the recovery ahead.

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  • Publication date 15 Apr 2020

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