• McKenzie Funk
  • May 4, 2021
    Read, recorded or researched
Windfall follows the business of those trying to profit from the slow burn of our global home. It's split into three sections: melt, drought, and deluge, and provides an engaging view of how countries, businesses, and entrepreneurs insulate themselves and profit from climate change. The sad fact is climate change is likely to make global inequality worse, and it's time we addressed that.

The Best Points


Exec Summary: We still talk more about polar bears than people

There is something crass about profiting off disaster, certainly, but there is nothing fundamentally wrong with it.

The hardest truth about climate change is that it is not equally bad for everyone. Some people; the rich, the north - will find ways to thrive while others cannot, and many people will wall themselves off from the worst effects of warming while others remain on the wrong side.

The problem with our profiting off this disaster is not that it is morally bankrupt to do so but that climate change, unlike some other disasters, is man-made. The people most responsible for historic greenhouse emissions are also the most likely to succeed in this new reality and the least likely to feel a mortal threat from continued warming.

The imbalance between rich and north and poor and south - inherited from history and geography, accelerated by warming - is becoming even more entrenched.

Environmental campaigners shy away from the fact that some people will see upsides to climate change - more minerals for miners, more famines for food sellers because any local gains muddy the otherwise catastrophic picture of a world without emissions cuts. I have not shied away, for the people described in these pages reveal something important: In an unfair world, rational self-interest is not always what we wish it would be.

In economic terms, global warming is not merely an externality that we have failed to price in. The free market can only get us so far. This makes it a truly wicked problem, but it also gives us a more perfect moral clarity. We are not simply borrowing against our own future. For the most part, we are not our own victims.

To rely on empathy to shape our response to climate change is often considered naïve because the victims of warming are distant in space, distant in time, and the bullets are invisible - but I believe it is more naive to hope that we in the north will significantly cut emissions or consumption or give needed adaptation funding to distant countries because we personally feel threatened.

In the world ahead, the politics of anger are not likely to work without the corresponding empathy. It is not enough to get mad at the oil companies - though it might help a little bit. There have been various post-mortems about why the U.S. Senate has not passed a climate bill, or why the UN cannot get a treaty, but the reason is fairly straightforward: In the wealthy north, where we still talk more about polar bears than about people, there is no true constituency. Hardly anyone cares that much. Not yet.

Climate change is often framed as a scientific or economic or environmental issue, not often enough as an issue of human justice. This, too, needs to change. From this moment on, many of us could get rich. Many of us could get high. Life will go on. Before it does, we should all make sure we understand the reality of what we're buying.

Part I: The Melt

The arctic upside

Up to a quarter of the world's remaining oil and gas is in the Arctic and there has been a major push to get it. Funk covers the tug-of-war between Canada, America, Russia, Norway and a few other countries to claim the Arctic as theirs, as well as Shell's business in the Alaskan Arctic and a bunch of oil block sales in Greenland:

One thing that's happened is we've kind of gotten all of the easy oil everywhere else in the world, and what's left is the Arctic. At the same time, there's no question that the ice pulling back helps for exploration and it helps for drilling. It allows for them to have a longer summer season. No one is going to be doing oil exploration when the Arctic is covered in thick ice, but if you look at Shell's case in Alaska, they had a longer season because the ice wasn't there.

Also explained as consequences of melting ice caps: Bad news for flood-stricken Bangladeshis, it turns out, is good news for Greenland's separatists, hoping to break free of Denmark and profit from an Arctic mineral boom. Russians are taking their lead from President Vladimir Putin, who has observed that the warming of his country means "we shall save on fur coats." Melting sea ice and permafrost would expand Russia's agricultural land, improve its fishing stocks and make it easier to extract minerals from Siberia. A Chinese company has signed a lease to farm 5% of Ukraine, some 7.5 million acres, to grow food for its home market.

Glacial retreat

Discussing shrinking glaciers around the world, the surprising snow making expertise in Israel and the costs of the solutions being implemented to keep the world stocked with drinking water:

In the Alps, no less than in the Himalaya or Rockies or Rwenzoris or Andes, disappearing ice is disappearing water storage. Glaciers are reservoirs. Snowfields are reservoirs. In winter, they grow with precipitation, trapping it uphill. In summer, just when it is most needed, their water is slowly released.

Shrinking glaciers imperil the water supplies of seventy-seven million people in the tropical Andes, along with the hydropower providing half the electricity in Bolivia, Ecuador, and Peru.

In Asia, two billion people in five major river basins - the Ganges, Indus, Brahmaputra, Yangtze, and Yellow depend on Himalayan meltwater. The range's glaciers, which irrigate millions of acres of rice and wheat in China, India, and Pakistan, lose an estimated four to twelve gigatons of ice a year.

In Spain, which is becoming so dry so quickly that some warn of "Africanization" - of the Sahara jumping across the Strait of Gibraltar - the Pyrenees have lost nearly 90 percent of their glacial cover. A century ago, the glaciers feeding such agriculturally important rivers as the Cinca and the Ebro stretched 8,150 acres across the range. They now cover 960 acres.

And even in the United States, millions of people depend on glaciers and winter snow fall: Southern California, kept green by mountain-fed rivers, especially the Colorado, is in danger of losing 40 percent of its water supply by the 2020s if melt in the Rockies and Sierra Nevada continues apace.

We’re all becoming Israelis now

In a sense, Israelis understood better than anyone what it was like to descend into drought. They knew what to do. Coming here from Europe as Avraham had explained, they had faced a changed environment hotter, drier, and less hospitable than what they had known before and they had faced it head-on.

Zionism had been guided by Enlightenment ideals: faith in reason, faith in capitalism, faith that any problem, even the treatment of Jews in Europe, had a rational solution if man was rational enough to find it. The first Israelis did not bow before nature. The Enlightenment answer to water scarcity, then as now, was to seek the silver bullet-an engineered solution, a supply-side solution.

"For those who make the desert bloom there is room for hundreds, thousands, and even millions," Ben-Gurion had written in 1954, when he himself moved to the Negev Desert.

Next, the prime minister underwrote Zarchin's test plant in the Negev. He began funding cloud-seeding operations, including 1960's Operation Rainfall, in which silver-iodide dispensers were attached to the wings of fighter jets. He built the National Water Carrier, eighty miles of pipes, canals, tunnels, and reservoirs, to move water from the Sea of Galilee, in the relatively wet north, to the Negev, in the bleak, underpopulated south.

Some of the fixes failed. Some had side effects. The water carrier would stoke war with Syria over the headwaters of the Jordan River, and it would soon feed a massive, export-focused agricultural industry. To export a gram of wheat was the equivalent of exporting a liter of water, so eventually Israel would export the equivalent of 100 billion liters a year. But at the time, few people questioned if any of this made sense.

We were all becoming Israelis now.

  • In Peru in 2009, a scientist won a World Bank award for his proposal to paint the Andes white and repel the sun's lethal heat.
  • In India's Ladakh region, a retired engineer built a $50,000 artificial glacier in the shadow of the Himalaya, collecting run off in rock-lined ponds that would freeze and attach to an existing glacier in winter.
  • In Spain, Barcelona became the first city in mainland Europe to resort to emergency water imports: five million gallons transported in 2008 in a converted oil tanker.
  • In China, the central government prepared to divert rivers at a scale the world had never seen: The $62 billion, three-canal, 1,812-combined-mile South-North Water Transfer Project will someday move 4.5 trillion gallons each year from the Tibetan Plateau, home to nearly forty thousand melting glaciers, to the cities in the country's arid, industrializing north. More than 300,000 citizens were being displaced to make room for canals and pipes.
  • While China waited for Tibet's water, its Weather Modification Office - thirty-two thousand on-call peasants manning thirty bases across the country at a cost of $60 million a year - was shelling its skies with rocket launchers and 37-millimeter anti-aircraft guns, delivering silver-iodide pellets of inducing rain.
  • And in China, India, Peru, Spain, and seemingly every country where rising heat and melt had induced drought, massive desalination plants were also on the rise. Between 2003 and 2008, 2,698 plants were built worldwide, and hundreds more were under construction.

Evian showers

By the time I visited Israel, IDE was responsible for nearly four hundred of the world's desalination plants, including what was then the biggest, most efficient, and most celebrated: the 86-million-gallon-per-day (mgd) plant in Ashkelon, Israel, next to the Gaza Strip at the edge of the Negev.

IDE's partner at the plant was Veolia, the world's biggest water company and one of Deutsche Bank's top stock picks. After Ashkelon, IDE had won contracts to construct the largest plant in China, a $119 million job; a 43-mgd plant in desiccating Australia, a $145 million job; and a giant, 109-mgd plant north of Tel Aviv in Hadera, a $495 million job.

IDE was also part of the consortium building two contentious 50-mgd plants in Carlsbad and Huntington Beach, California. An engineer at the company leading the construction, Poseidon Resources, told me they would be able to create water with the exact mineral content and taste of Pellegrino. "People will drink Pellegrino out of the tap," he said, "and they'll take showers in Pellegrino."

Ashkelon met almost 6 percent of Israel's total water demand, a first step in the country's plan to get a quarter of its water from the sea by 2020. After subsidies, its price per cubic meter was just sixty cents - on par with tap-water costs in the United States, far cheaper than in parts of Europe.

Once bought by the government, nationalized, and dumped into the National Water Carrier, its water was the indistinguishable from the rest. But, as the Shell scenarios team highlighted in its exploration of the water-energy-food nexus, there was a problem: Desalination plants, even Ashkelon, use vast amounts of power.

Power plants - whether nuclear, coal, gas, or hydroelectric-use vast amounts of water for cooling. If they are fuelled by coal, or, to a lesser degree, natural gas, they also emit vast amounts of carbon. Carbon furthers warming, warming furthers drought, and desalination begins to resemble a snake eating its own tail.

If the average Israeli were to take all his or her water from Ashkelon, it would cause 0.6 metric tons of annual emissions - about half of what each person on the planet can emit if we're to someday halt warming. (Israelis currently emit about 10 metric tons, Americans 20 metric tons-both already well over that limit.)

In California, the numbers are much worse. The Carlsbad desalination plant, the largest in the United States, may get most of its energy from coal. It will then be responsible for more carbon emissions - 97,000 metric tons a year more than a dozen island nations. But no one claims desalination can save the world. They can only save the rich parts from the fate befalling the rest.

Part II: The Drought

Fire burning

Across the globe, the first decade of the new millennium was a decade of fire: Fire in Alaska and Spain and Siberia and Corsica and Bolivia and Indonesia and British Columbia. In New Mexico and Oregon and Colorado and Texas and Arizona. In the Black Hills of South Dakota and the swamplands of North Carolina.

In Greece, the worst fires in half a century during the worst drought in millennia. In Australia, the worst fire in recorded history during the worst drought in recorded history. In Russia, fires so destructive that the president-Medvedev, not Putin said out loud that climate change was real.

The largest fires in Georgia's recorded history, in Florida's recorded history, and in Utah's recorded history. Across the United States, an average of seven million acres have burned each year of the new millennium - twice the 1990s average. Between 1986 and 2006, the number of major wildfires grew by 400 per cent, the area burned by 600 percent.

The effects of climate change on wildfire were not limited to the lack of water or the heat of the hottest days. Early spring snowmelt meant longer growing seasons, eventually more fuel. Higher average temperatures meant summers were effectively longer, and fuels had more time to dry.

Warmer winters meant parasitic larvae - pine beetles, spruce beetles, bark beetles, tent caterpillars - could flourish and expand their range, killing vast forests, creating more dead, desiccated fuel. If there is sustained drought, trees can't generate the chemicals to fend off the pests.

In the western United States, spring-summer temperatures had risen just 0.87 degree Celsius since the mid-1970s, but the fire season was now seventy-eight days longer.

Rise of Private Firefighting

If firefighting can be thought of as a rough metaphor for fighting climate change, then public firefighting would be closer to mitigation cutting emissions for the good of all, while private firefighting would be more akin to adaptation, with individual cities or countries endeavouring to protect their own patches.

It is worth remembering that in the case of firefighting we have tried this before.

The man who gave Britain its first firefighters and the world its first fire insurance was a Puritan preacher's son who went by the name Nicholas.

In 1666, when he was in his late twenties, the The Great Fire of London was lit. It started in a baker's oven on Pudding Lane - someone overcooked some bacon - and because the baker's house was made of wood and his neighbors' houses were made of wood and London had no firemen, it spread easily.

People ran in every direction, carting away valuables in horse carriages. "The noise and cracking and thunder of impetuous flames," wrote one observer, "the shrieking of women and children, the hurry of people, the fall of towers, houses and churches, was like a hideous storm."

Two prisons, eighty-seven churches, and more than thirteen thousand homes, housing seventy thousand of the city's eighty thousand citizens, were destroyed.

In response, Nicholas built a firefighting company, the Fire Office. One contemporary described it as "servants in livery with badges, who are watermen and other lusty persons." They were always ready "when any sudden fire happens, which they are very laborious and dexterous at quelling, not sticking in cases of necessity to expose themselves to great hazards."

The Fire Office offered insurance policies for seven, eleven, twenty-one, or thirty-one years - two shillings, six pence per pound of rent for a brick house, twice that for a wooden one, with the services of the lusty watermen included. Nicholas signed up more than four thousand clients.

But the company soon attracted competition: the Friendly Society, the General Insurance Company, the Hand-in-Hand Company. Each brigade had its own uniform-blue coats with red linings, or blue shirts with silver buttons, or yellow pants and silver-buckled shoes-and its own fire marks, metal plaques posted on homes so that everyone would know exactly who should save whom.

Whenever part of London burned, the brigades fought so fiercely against one another for water and staging areas that authorities had to impose fines: five shillings for hitting rival fireman; two shillings, six pence for pouring water on him. It was chaotic and, in fact, inefficient.

By the early nineteenth century, disarray was such that private firefighters were the replaced by public firefighters, for whom the only adversary was fire.

Fast forward to today:

Seen up close, Chief Sam (Head of AIG's private firefighting operation in California) and his men also seemed less efficient than the public crews. Like the exotic financial instruments that had sunk AIG, like so many responses to the effects of carbon emissions, like so many Band-Aids when the cure was to never have gotten hurt in the first place, the Wildfire Protection Unit was a solution so complicated that the root problem had become an abstraction. Public firefighters fought fires. They discovered where they were burning, went there, and tried to put them out. But Chief Sam and his men did something more complex.

In real time, using the best communications systems they could afford without cutting into profits, they got clients' addresses from dispatchers in another state, who had to get them from AIG and Farmers reps in yet another state.

They had to figure out where the fire was going. They had to figure out which client addresses were in the way. They had to get to them, even if it meant sneaking across police lines. When they reached an address, and if the house was in fact in danger - a rarity, I was learning - they had to jump out of their trucks, unroll their hoses, spray their Phos-Chek, retrieve their hoses, jump back into their trucks, and race to the next threatened address on their list.

Unless, that is, the fire had changed course and the list needed to change, too. When that happened, they had to start all over again. The libertarian dream was a logistical nightmare.

Good hurricane seasons improve margins

Terry Coles of the F&C Global Climate Opportunities Fund, explained how a good hurricane season helped insurance companies hike rates. "People often expect it to be a big negative for insurers," he said. "You get a big sell-off of stock. But unless a really serious one comes through, they'll put the premiums up and actually get the benefit of improved margins."

In 1992, when category 5 Hurricane Andrew struck Florida and Louisiana, insurers paid out more than $23 billion in claims - $1.27 for every dollar of premium collected that year.

They turned to catastrophe modelling companies such as Eqecat and Risk Management Solutions (RMS) - the quants of the insurance industry - which used a century of weather data to predict future losses, and then they raised premiums accordingly.

In 2005, after Hurricane Katrina, the first category 5 storm of the new climate era, they paid out more than $40 billion but, thanks to an expanded market and better models, only 71.5 cents per dollar collected. That year, the industry still made $49 billion in profits.

It has profited, sometimes more, sometimes less, every year since.

Market equilibrium

Growth was everywhere for the innovative.

AIG had Firebreak, but where rich policyholders were clustered on risky coastlines, its Private Client Group was offering the Hurricane Protection Unit: men with GPS units and satellite phones who were on the scene after a storm blew through, boarding up broken doors and windows, patching holes in roofs, covering skylights with tarps, evacuating valuable artwork.

In the corporate world, Munich Re's Kyoto Multi Risk Policy protected investors from carbon-credit defaults, and its weather derivatives helped solar projects hedge against cloudy days and wind projects against calm ones.

The Wall Street guy and the warlord

In the flurry of news accounts and think-tank reports about what activists had begun calling the global farmland grab, Heilberg and Matip were recurring characters: the Wall Street guy and the warlord, the former AIG trader and the most feared man in South Sudan, twin symbols of what would happen the more populations boomed, temperatures rose, rivers ran dry, and food prices - and thus the value of farmland shot through the roof.

In the previous decade, especially after the 2008 "food crisis" that preceded the financial crisis, rich countries and corporations had acquired an estimated 200 million acres in poorer countries - the equivalent of the combined cropland of Britain, France, Germany, and Italy, or almost 40 percent of arable Africa, or every inch of Texas.

It was a territorial shift unseen since the colonial days, and it was happening quietly and bloodlessly, behind closed doors. I'd come here because Sudan, along with Ethiopia, Ukraine, Brazil, and Madagascar, was one of the major target countries and because Heilberg, convinced he was doing the right thing, was unafraid of the attention.

Heilberg's own patch, leased in a late-2008 deal approved by Matip, was nearly the size of Delaware: a million acres. Irrigated by an offshoot of the Nile, it was level and fertile, safe from drought, and largely free from land mines. The deal, if it was valid, had turned him into one of the largest private landholders in Africa, and crammed in his briefcase was a map showing where he now hoped to double his holdings: six blocks to the east and north of his first million acres, close to the border with Ethiopia, outlined in orange marker.

His business model, Heilberg explained, was to find those countries about to break into pieces - to identify the future winners of Africa's internecine conflicts and to be standing with them when it was over.

South Sudan was his biggest project, but he was also busy befriending Darfuri rebels in London, oil-bunkering militants in Nigeria, and ethnic separatists in Somalia and Ethiopia, looking to cash in on any commodity-petroleum, uranium, whatever-that might come his way in the wake of independence.

The strategy had come to him early in his career, when he was a trader at AIG. "I saw the Soviet Union split," he said. "Saw it up close. I realized there was a lot of money to be made in breakups, and I vowed that the next time I'd be on the inside."

Farmland Grab

As climate change pushed farming to higher latitudes, the money followed. Two of the most visible farmland investors - the British-run Landkom and the Swedish-run Black Earth Farming - had invested hundreds of millions of dollars in agricultural operations in Ukraine and Russia.

BlackRock, the world's largest asset manager, invested $250 million in British farmland, France's Pergam Finance sunk $70 million into former ranches in Uruguay and Argentina, and Calgary-based Agcapita put $18 million into Canada's future corn belt.

After Saskatchewan land prices jumped 15 percent in 2008 - the largest increase on record - Agcapita began raising its next $20 million. But it was One Earth Farms, a sprawling grain and cattle venture on tribal lands in the Prairie Provinces, that would soon be Canada's biggest farm. With funding approaching $100 million and investors ranging from the former prime minister Paul Martin to the agribusiness giant Viterra, one of Deutsche Bank's climate-fund picks, it was forming partnerships with more than forty First Nations tribes who controlled more than two million acres across Alberta, Manitoba, and Saskatchewan.

In Brazil, the British-run Agrifirma, partly owned by Lord Jacob Rothschild and headed by Jim Slater-who came to fame writing an investment column for the Sunday Telegraph that he signed "The Capitalist" - had spent $20 million to buy or option 170,000 acres and survey another 6 million.

The seed money for Agrifirma had come from the Brits' previous venture, Galahad Gold, which had made 66 percent annual profits by flipping a uranium and molybdenum venture in melting Greenland. Brazilian agriculture would be relatively protected from the ravages of climate, Slater wrote, because the country has "about 15 per cent of the world's recoverable water supply - 90 per cent more than its nearest rival."

Part III: The Deluge

Rising seas = Rising border walls

Many people these days approach social problems with the mentality of an engineer. The question is not what we can do but what we can build, and India's razor-wire-and-steel response to migration - much blunter than Europe's varied responses to its African migrants - seemed to me even more representative of what was beginning to happen in this third stage of climate distortion, as the world faced up to rising seas in addition to melt and drought. Walls.

From here on, in one sense or another, this is what those of us who could afford them were engineering against climate change. Those who could not afford them would be stuck on the other side.

India was a poor country, but Bangladesh was poorer. India emitted more carbon than Bangladesh, and perversely this signalled that it had more resources to deal with the effects.

Despite the specter of climate change, Bangladesh received less foreign aid now than it did at the end of the 1990s - about $1.5 billion a year, a quarter of what its exported laborers sent back in remittances.

The question Bangladeshis asked was not whether India would complete its fence-it surely would-but whether the high emitters of the West would make good on pledges of climate aid.

"The nightmare scenario on climate change," he said, "is that there will be money floating everywhere. Floating around. A lot of money floating around, and a lot of zero-carbon technology being transferred to places that already produce virtually zero carbon. And nothing happens for the poor, absolutely nothing happens."