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Is a ‘Green Cold War’ coming?

25th January 2022 - Author: Pete Carvill

The world should expect to enter a ‘Green Cold War’ in coming years, where states around the world form ‘climate blocs’ that will compete for dominance, according to a new report from Lloyd’s.

The report, Shifting Powers: Climate Cooperation, Competition, or Chaos?, was released recently, and is aimed at helping the industry understand the overlaps between geopolitical risk and climate change.

The report outlined three scenarios—‘Green Globalisation’, ‘Climate Anarchy’, and the ‘Green Cold War’—and designated them respectively as ‘cooperation’, ‘chaos’, and ‘competition’. The last, the ‘Green Cold War’ was defined by the report’s authors as ‘competition’.

Lloyd’s said that this was the most-likely scenario, given the ‘current levels of cooperation’. However, it added that the reality is ‘likely to mirror two or more scenarios, and to fluctuate as states and societies shift throughout the 21st century’.

However, the report says that the insurance industry has the potential to take the lead on this.

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It concluded: “Not only in helping multinationals manage their increased exposure to political risk through the largest energy transition in history, but also in providing suitably available capital to underpin confidence in transition projects and ease construction woes which could strain geopolitical relations and interdependencies.”

It added: “The implications for insurers are therefore magnified: they must respond to the physical and transition risks surrounding climate change, the scale of which will be determined by the level of political cooperation or competition; while also considering how their actions in themselves can influence those geopolitical movements and the severity of climate change.”

The report was put together by six authors, three from Lloyd’s and three from the Cambridge Centre for Risk Studies.

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