Waters of Change: Rethinking Economic Resilience in a Warming World

The time to repair the roof is when the sun is shining – John F. Kennedy

For the past six months, I have been deeply involved in discussions with glaciologists, policymakers, economists, and experts from engineering firms. The consensus is clear: over the next 30 years, our climate will undergo significant changes, with an accelerated pace of sea level rise.

My conservative estimate is a rise of 30 to 50 centimeters by the 2050s. While this may not seem dramatic, the implications for the global economy and the capitalist system are profound.

Why is this seemingly gradual rise crucial? Real estate is a cornerstone of wealth worldwide, and the typical mortgage term is 30 years. A house purchased today may not only lose value but could become uninsurable as coastal areas face increasing risks.

Take Florida, where the average insurance premium has exceeded $5,000, and more than 1 million residents have turned to the state-backed insurer of last resort due to the inability to find or afford private market policies.

In December 2023, the only private island in Florida's prestigious Palm Beach was relisted at a staggering $187.5 million, reflecting a $30.5 million discount from its previous asking price. This decline is not a mere market fluctuation; it signals a more ominous trend. As sea levels rise and extreme weather events intensify, properties like these will become uninsurable and ultimately worthless.

This issue extends beyond the coastlines. Austin, Texas, where I spent my university years is not traditionally associated with flooding. However, recent data has revealed a higher risk than previously understood. Consequently, insurance premiums have skyrocketed—rising by up to 16% in the first half of 2023 alone, with some policies quadrupling.

Meanwhile, in California, the insurance company Allstate has ceased selling new home and condo insurance policies, highlighting the growing financial instability in the face of climate risks.

Sea level rise is a global systemic risk that threatens to destabilize mortgage markets and the financial system as a whole. The erosion of coastal property values and the uninsurability of these assets could trigger a cascade of economic failures.

Cities like Dhaka, Bangkok, Karachi, and Dubai face an existential threat from rising seas. However, this issue extends beyond the Global South; almost half of the populations in the EU and UK live within 50 kilometers of the coastline, making them equally vulnerable to coastal flooding and substantial economic disruption.

Despair is not the answer. I am an optimist at heart and believe that decarbonization and technological advancements can mitigate the worst effects of global warming. Yet, we must accept that a considerable degree of sea level rise is inevitable. In light of this, what can we do to address this challenge?

The Netherlands offers a beacon of hope. With eight centuries of experience in water management, the country has developed an incredibly sophisticated system to stay afloat. This expertise is especially crucial for a nation where approximately 26% of the land lies below mean sea level, facing significant flood risks. About two-thirds of its territory is vulnerable to flooding from the North Sea, rivers, or lakes, and this flood-prone area generates 60% of the country's GDP.

A couple of months ago, I met with the former Dutch Minister of Water and Infrastructure, Mark Harbers, and Meike van Ginneken, the Water Envoy of the Netherlands—one of only two such positions worldwide.

They shared their concerns about the increasing challenges posed by drought, flooding, and water quality degradation. The Netherlands anticipates a sea level rise of 70 centimeters to 1 meter by the end of the century. If we miss our decarbonization targets, the situation could worsen dramatically.

Yet, there is hope. Minister Harbers expressed confidence that the Netherlands could technically manage a rise of up to 3 meters. But do we want to face a world with such extremes?

Meike van Ginneken aptly described our reliance on technology and engineering as "dancing on the volcano." We must recognize that the stakes are not just about flood risks but also about the livelihoods of millions living in coastal areas.

The Netherlands, with its unparalleled expertise and scientific institutions, is positioned to lead the global effort against rising sea levels. Companies like Royal Haskoning are already at the forefront, working on projects like strengthening the Afsluitdijk, a major dam and causeway spanning 32 kilometers across the Wadden Sea and the IJsselmeer, an inland lake.

Dutch expertise is particularly relevant for nations like Singapore, where a bean-shaped plot of land on Pulau Tekong has been transformed into the city's first polder, utilizing techniques inspired by the Netherlands. Bloomberg estimates that with a 1.5°C increase in global temperatures, prime real estate in Singapore valued at $50 billion could face a high risk of flooding. To combat this, the Singaporean government has invested $3.75 billion since 2019 into a coastal and flood protection fund.

Yet, these solutions come at a high cost, and not all geoengineering projects will be viable. Proposals like building a giant curtain to slow warming in Antarctica may seem far-fetched, but they underscore the need for innovative thinking. We must prioritize our investments, balancing geoengineering projects, nature-based solutions, and innovations to decarbonize our economy.

Antarctica and Greenland, where massive icesheets hold the potential to redraw the world map, are on the brink of irreversible change under a ‘business as usual’ scenario. The scientific consensus is unequivocal: for the cryosphere, limiting global temperature increases to 1.5°C isn't just preferable; it's essential. The difference between 1.5°C and 2°C of warming is a matter of mitigating catastrophic sea level rise.

The climate skeptics often compare today to the past but let me tell you the next 50 years will not simply mirror the past; the accelerating rate of sea level rise demanding a fundamental rethinking of our economic strategies and investments.

We must confront difficult questions: Which lands do we protect? Which ones do we abandon? How do we resettle communities to safer, higher grounds? These are not hypothetical scenarios but pressing realities that require immediate and coordinated global action.

The rising tide is not just a metaphor for environmental change; it is a literal threat to our economic stability and way of life. We have the tools, knowledge, and resources to address this crisis. The question is, will we have the will?