Climate Case Studies – The 2010 Russian Heat Wave: Risks (2)

Climate Case Studies – The 2010 Russian Heat Wave: Risks (2)

In the last article I wrote about the March 11, 2011 earthquake in Tohoku, Japan. There are two points I want to bring forward from that entry. The first is to reiterate that our world exists in many systems with fragile balance. The second is that all of these systems are connected. In the last entry I followed one thread of global consequences and risks, including climate risks, following from an earthquake that is localized on the coast of a single island in Japan.

In the past couple of years nature has provided us many examples of case studies to appreciate the risks associated with climate and weather. In this entry, I want to revisit the 2010 Russian heat wave. The heat wave was at its peak in early August 2010. The direct impact of this historic heat wave and drought was many thousands of deaths and massive fires.

Even as early as July 16, 2010 many millions of acres of crops in Russia had been destroyed. By August 16, 2010 the cost of the drought and heat was estimated at 15,000 lives and 15 billion dollars. By August 3, 2010 wheat prices had increased dramatically and were on their way to doubling. In August 2010 Russia imposed a ban on wheat exports.

There has been significant analysis of this series of events. In June 2011 Oxfam produced a report (author George Welton) that looked directly at the consequences of Russia’s grain export ban. Intuition is that the export ban would be to protect the grain supply and cost within Russia. In an absolute sense, this was not realized, and prices of both grain and bread increased in Russia. Because of disproportionate impact on the poor, the rate of poverty increased. Internationally, wheat prices were pushed up. Two of the countries that buy much grain from Russia are Egypt and Pakistan. Within Egypt there was great stress on government, and the government committed to subsidies to try to maintain the low cost of bread. In Pakistan the cost of bread increased on the order of 15%.

The conclusion of the Oxfam report is that the cost of wheat and the damage of the drought and the heat wave both in Russia and outside of Russia would have been less if there had been no ban on exports. At least as early as August 19, 2010 an article in the Financial Times was stating that the markets responded more strongly to historical market behavior than it responded to the reality of the grain supplies. In the Financial Times article it is maintained, for example, that Egypt started buying up wheat early in August, driving up prices, in anticipation of a Russian export ban – consistent with previous behavior. (From the point of view of wheat farmers in, say, Colorado in 2010, impact of the Russian drought and embargo … June Low to August High)

What strikes me is that in the short term, a large impact of weather extremes is on markets. This impact is not directly related to the actual amount of grain deficiency caused by the weather extreme. Rather it is related to humans trying to find advantage or avoid perceived risk in the market. People are anticipating changes in not only wheat supply, but also changes in behavior. They are betting. This stands in contrast to the idea that because a quantity such as wheat operates in a global market that wheat would be relatively immune to such climate extremes. That is deficiencies in one place would be offset by surpluses in other places with the cost minimized by market forces. Perhaps this is true in the longer term, but damage has already occurred to those who are vulnerable.

Let’s continue: The winter of 2010 and the spring of 2011 were characterized by very high food prices. An essay by Sarah Johnstone and Jeffrey Mazo entitled, Global Warming and Arab Spring, draws a convincing line that the pressure on food prices was a contributor to the start of the revolutions of the Arab Spring – the tumultuous uprising against many Arab governments. (also here) To diffuse the arguments that are sure to follow – this was a contributor, along with many other factors that came together to fuel a movement. This is the idea of climate extremes as a threat multiplier.

When we talk about climate change and global warming, we often talk of it in the future. We talk about droughts and floods. But the consequence of droughts and floods include damage to crops and damage to cities. The impacts are local and direct, for some, but beyond the immediate, local impacts are the impacts through markets, budgets, and political systems. As these impacts tumble across the world, the results are unpredictable.

The reality of global warming is that events such as the Russian heat wave occur more frequently. The markets connect events globally. They connect parts of the world with agricultural excesses and deficiencies – but, if droughts and floods are more frequent and more extreme, then markets connect deficiencies with deficiencies. The impact of climate change is more disruption, more instability – a threat multiplier.

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Figure 1: A woman sits surrounded by the remains of her home in the Russian village of Mokhovoye on July 31, 2010. (From Radio Free Europe / Radio Liberty)


Some other interesting references.

Food Security and Russia’s 2010 Drought

Internal Political Ramifications of 2010 Drought and Heat Wave

Changes in Russian Views on Global Warming?