This review was first published in International Affairs Volume 87, Issue 2,pages 467–520, March 2011

By David L. Levy

You cannot argue with rocks. This is the crux of Bryan Lovell’s argument in Challenged by Carbon, a book that combines a geological case for taking climate change seriously with an insider’s tale of the evolution of the oil industry’s stance on the issue. Lovell is a renowned geologist with degrees from Oxford and Harvard, and after a fifteen year career working with BP, is currently a senior research fellow at Cambridge and President of the Geological Society of London. The oil industry is, of course, responsible for emission of vast quantities of greenhouse gases and the major US-based companies have historically anchored corporate opposition to regulating carbon. After presenting the ominous evidence inscribed in the rocks about the severity of our climate problem, a more optimistic Lovell argues that the oil industry can also be part of the solution, by deploying its political prowess, financial resources, and technological expertise. He makes the case that sequestration, or Carbon Capture and Storage (CCS), is a feasible and cost effective solution for a significant portion of emissions.

Lovell explains how recent progress in geological science enables relatively high-definition dating of rock to within timescales of thousands, rather than millions, of years. Analysis of these long-buried rocks has revealed a dire warning for our industrial civilization. Around 55 million years ago, over 1000 gigatonnes of carbon (GTC) were released into the atmosphere during a short period, geologically speaking, of around 10,000 years. This coincided with an unprecedented warming of the planet, the Paleocene-Eocene Thermal Maximum. Ocean temperatures rose by 4-5 degrees Celsius, , mass extinctions of animal and plant life occurred, and it took nearly 200,000 years for the climate to settle down. We humans have already added about 300 GTC to the atmosphere in the last two centuries, and currently add about nine more every year.

You cannot argue with rocks, but you can argue with the interpretation of data encoded in them. For those like myself already convinced of the science of climate change, based atmospheric science and simulations, the geological evidence is further proof, if any was needed. Lovell sets out the scientific case in a reasonably accessible way, though I suspect there is much more intriguing story to be told about the evolution of the science, the debates amongst the geologists, and the realization of the dramatic import of the secrets in the ancient rocks. Lovell’s treatment of the evidence, however, is neither a compelling narrative nor particularly persuasive. Exploring the subject in the authoritative blog RealClimate.org, I found that there are still large areas of uncertainty in the data and their interpretation.[1] Ten thousand years is a long time in climate politics. The total carbon released might have been up to 3000 GT, and with the higher levels of atmospheric CO2 at the time, even this represents less than doubling of the level. We don’t know enough about other influences on climate at the time, especially the more complex feedback effects among clouds, forests and ice cover.

In the most original section of the book, Lovell traces the role of geologists in BP in shifting the direction of the company. In January 1997, David Jenkins, BP’s Director of Technology and former Chief Geologist, sent a memo to BP’s managing directors emphasizing both the scientific and business case for climate change. This process culminated with CEO John Browne’s historic speech at Stanford University in May 1997, in which Browne broke ranks with the industry by acknowledging the reality of climate change and pledging to take steps to address it. Lovell makes the case that BP was particularly open to the influence of geologists because of the centrality of the discipline in the oil business and the consequent respect for their expertise, especially from internal corporate scientists. This resonates with findings from my own research (together with Professor Sandra Rothenberg) on industry’s response to climate change, which points to the importance of the organizational channels that filter and legitimize particular perspectives. At Exxon, Brian Flannery, a respected atmospheric scientist and a climate skeptic, led a highly centralized strategy team that left little room for debate. European companies, by contrast, lacked internal expertise in atmospheric science, and so relied more on outside scientists who hewed to the mainstream consensus.

Geologists also feature as Lovell’s heroes in finding ways to bury carbon back underground. The same technological expertise that is used to locate and extract oil and gas can be applied toward long-term storage in underground reservoirs, giving companies an economic interest in developing the process. Lovell the geologist points out that storage in existing oil and gas reservoirs is relatively straightforward but limited in potential scale. Far greater capacity is available in saline aquifers, though he acknowledges that the permanence and side effects are uncertain. If Lovell’s strength is geology, he falters, however, in making a clear business case for the commercial viability of CCS. He cites one study showing that CCS might add 1 to 5 cents per kilowatt hour to the cost of coal-fired power, which might be viable at the low end but more than doubles the cost of electricity at the high end. Various cost estimates for CCS are given, from $6 to $10 per tonne, though he notes that a carbon price of $50 per tonne would be needed to make it viable. Aside from the confusion of numbers, Lovell doesn’t comment on the political challenge of securing a carbon price this high, at least in the US context.

Lovell could be a very influential player in the climate debate as an oil industry expert and former inside. Despite his knowledge of the rocks, this book unfortunately suffers from uneven and inelegant style and structure, wandering from a fifteen page verbatim report on a public BP-Exxon debate to Edinburgh South election results and Hertfordshire Puddingstone, complete with pictures in case readers are unfamiliar with these rocks. Notably, Lovell recognizes that industry needs a push to take action.  Proclaiming that “Earth is not for negotiation”, Lovell advocates passionately for climate Keynesianism, stronger governmental policies and international institutions to create the incentives and regulations to steer corporate strategies. Climate policy is in disarray, however, and even a rock solid case does not seem to overcome the political obstacles to action.

by Charles Perrow

In 1984 I published a book, Normal Accidents (revised edition, 1999), that argued that we should abandon systems with catastrophic potential if they were interactively complex and tightly coupled, unless they could be redesigned to minimize these dangerous characteristics.  Complexity and coupling can be reduced through modular, rather than integrated designs, and catastrophic potential reduced through deconcentrating hazardous materials close to population centers or sensitive ecologies.  We might decide that some systems with catastrophic potential are so vital that the risk of a rare, but possible system failure is worth running.  Government officials felt that way about our nuclear defense system for many decades, steadily increasing the risks of a huge catastrophe.  I will argue that deepwater drilling, especially in ecologically sensitive areas, should be abandoned, because it combines complexity and coupling with catastrophic potential.

Interactive complexity is not simply many parts; it means that many of the parts can interact in ways no designer anticipated and no operator can understand.  Since everything is subject to failure, the more complex the system the more opportunities for unexpected interactions of failures.  Tight coupling means that failures can cascade through the system since the system cannot be stopped, fixed and restarted without damage; substitutions are not available, and failed subsystems cannot be isolated.

I do not think that the failure on April 20, 2010 of the rig built by Transocean and run by BP had a system accident (or “normal accident”).  While such rigs are very complex and very tightly coupled, it is more likely that faulty executive decisions resulted in knowingly running unnecessary and dangerous risks.  To be a system failure, in my definition, requires that even if everyone tries as hard as they can to operate safely, it is in the nature of complex, tightly coupled systems to inevitably (though rarely)  have the unforeseeable interaction of failures, usually small ones individually, that can cascade through the system.  This was not the case with the Transocean rig; BP management frequently overrode the objections and warnings of its own operators and engineers, and those of its subcontractor, Transocean, and independent consultants.  Nothing that transpired was unexpected.  

BP has had a history of ignoring warnings by its own staff in order to cut costs.  A refinery explosion in 2005 and a massive oil spill in Prudhoe Bay, Alaska in 2006, resulted in (small) criminal penalties for executive malfeasance; the pipeline had a smaller spill last year, and there are currently strident warnings about the dangers of a massive spill on the pipeline in Alaska.  The firm had a close call in 2005 with its deepwater drilling Thunder Horse rig.

With this record, perhaps deepwater drilling is safe if the other firms engaged in it do practice safety.  It is hard to tell.  Exxon-Mobil is reportedly very concerned with safety after the Valdez accident, and said to be the industry leader in safety.  But it is not encouraging that in July of this year Attorney General Eric Holden was asked if BP was doing anything different than others in the industry.  He noted “certain commonality of the way oil companies had been operating” in the Gulf, but since the investigation of drilling is ongoing, he would give no specifics.  BP may be an extreme case of putting profits over the safety of their workers, the environment, and the viability of the firm, but disasters in the chemical industry have been increasing in recent decades, so one should not be reassured that BP is the only bad apple.

The Materials Management Service (MMS) reports there are 33 rigs that have permits for exploratory drilling in deepwater in the Gulf; 29 were inspected after the spill and no serious violations were found. One may be skeptical of their finding.  For example, MMS only recommends, but does not require, a backup blowout preventer (the preventer failed in the April 20, 2010 Horizon accident).  MMS does not set specifications for all pipes, allowing BP to use less safe pipes in its rig, and so on.  Furthermore, the unsafe practices in the Horizon rig occurred when the rig ran into trouble; inspection would not catch such bad practices.  We cannot be reassured that BP is an outlier and other firms would operate safely, though a news story about Exxon’s last minute abandonment of a project, the deepest drilling at the time, is encouraging.  Less encouraging is that another drilling firm bought the lease to the abandoned exploratory drilling and has continued to drill, but for two years has recovered no oil from what is expected to be a vast pool.

Perhaps we should be reassured that the Horizon accident has alerted the industry to the dangers of deepwater drilling sufficiently to make accidents extremely rare, and furthermore has led them to have adequate emergency response facilities on hand if there is the rare accident.  After all, the nuclear power industry appears to have made significant safety improvements since the TMI accident; could not the deepwater drilling industry improve as well?  A rebuttal is that nuclear plants in the U.S. continue to have near misses despite improvements, and are not as much endangered by storms and hurricanes. BP, at least, does not appear to have changed its safety provisions in spite of the Thunder Horse near-disaster on July 11, 2005, because of a pump valve installed backwards and cracks in underwater pipes because of shoddy welding, and its Atlantis rig is being investigated because of whistleblower charges of unverified engineering documents.

An argument against a ban on deepwater drilling is that the expensive rigs able to do this would simply move to other locations that have no ban.  It is similar to intensive policing in one area; it simply drives the criminals to other areas, thus we should make no effort to increase policing in the high crime area – an argument for inaction. Were they to move to Norway or Brazil, where drilling takes place, they would have to have stronger safety standards – e.g. a backup blowout preventer – than those required in the Gulf.  But they might move their rigs to other nations where standards are presumably below those of the Gulf, and where there may be ecosystems as vulnerable as those of the Gulf.  The only response to this argument, unfortunately, is that one has to begin somewhere, and the U.S. ban just might encourage other nations to tighten regulations.

A further argument has been put forth by the oil industry and state governments bordering the Gulf: the economic impact upon the area would be severe in terms of jobs lost and business activity associated with pumping, transporting and selling the oil.  But the effect upon oil-related jobs is not likely to be as severe as the effect upon non-oil activities.  Oil is capital intensive, with few workers per unit of capital; non-oil activities such as fishing and tourism are labor intensive.  More jobs are at stake in non-oil operations.

A final argument is that we need the oil; shutting down deep-sea drilling would raise the price of oil in the U.S. and make us more dependent upon foreign sources.  Raising the price of oil is to be encouraged.  A higher price of oil would mean that investments in non-carbon sources of energy, such as solar, wind, and geothermal would increase, as would investments in efficiency and conservation.  The price of oil should be much higher to encourage these investments.  Since a carbon tax is out of the question in the U.S., and a pollution tax on gasoline unlikely because of public opposition, and especially oil industry opposition, curtailing production is the next best step.  Another step, a bit more likely than a carbon tax, would be a steep tax upon imported oil, reducing our dependency by tipping the market away from imports.  The market at present is not a “free” one, since the true costs of burning oil are not reflected in its price – the “externality” of pollution is treated as a free good when it actually imposes a heavy tax upon citizens and their environment.

The interactive complexity and tight coupling of deep-sea drilling rigs is apparent; even if BP had not skimped on safety and not overridden the objections of their own personnel and those of their subcontractors, the system could have the rare but possible unexpected interaction of failures. They are inevitable since nothing is perfect.  Profit motives and lax regulation only make such disasters more likely.

Roger Witherspoon writes about the “Myth of Technological Infallibility” underlying the arrogance and hubris that led President Obama on April 2, 2010 to give his tragically ill-timed assurance that opening up offshore oil exploration was safe: “It turns out, by the way, that oil rigs today generally don’t cause spills. They are technologically very advanced.” EPA Administrator Dr. Lisa Jackson explained in a May 24 press conference that there was no federal oversight of emergency plans because “we were told over and over by the industry that it could not happen. So we have few tools out there.”

Witherspoon, like many others, linked the oil spill to the unknown dangers of rushing headlong into a new era of nuclear energy, in an effort to deal with carbon emissions. Witherspoon argues that the U.S. Nuclear Regulatory Commission shares the mindset of underestimating risks and being too close to the industry it regulates. For example, the NRC has belatedly recognized terrorism as a threat, but decreed that commercial nuclear operators do not have to plan for such an event because risks cannot be assessed and terrorism prevention is a federal responsibility.

Oil rigs and nuclear power plants are highly complex technical systems, in which the failure of one component can potentially cascade into a larger scale disaster. As oil rigs penetrate ever deeper waters to tap high-pressure deposits, it is difficult to assess the risks and build in adequate margins of safety. But these are not just engineering challenges: the oil and nuclear industries are woven into organizational, economic, and political systems; their technologies and production practices are shaped by market forces, bureaucratic operating procedures, and regulatory agencies. They are complex dynamic systems with unpredictable behavior when certain thresholds are crossed, just like the climate and the economy (as I discussed in A Tale of Two Meltdowns).   

Detailed case studies of various disasters by organizational sociologists reveal a common pattern of how complex technologies interact with organizational processes and routines, hierarchical power structures, pressures to cut costs, and lax oversight. Together, these can lead to inertia, distorted cognition, the neglect of warning signals, and poor decisions. In engineering-intense organizations, there is often a hyper-masculine culture in which expressions of concern about risk are treated with scorn. Normal Accidents, Perrow’s classic study of the nuclear accident at Three Mile Island, concluded that catastrophic accidents were “normal” in the context of highly complex socio-technical systems. Even the most carefully designed safety systems could not always prevent the interaction of human and technological failures from cascading into major calamities. Perrow describes in vivid detail the managerial pressures to ignore risks, to stay on schedule and keep costs under control. Perrow found that information available to decision makers was inadequate, delayed, and sometimes inaccurate, and often subject to misinterpretation under crisis conditions. When people do intervene, there are frequently unanticipated effects that exacerbate matters. Diane Vaughan’s analysis of The Challenger Launch Decision demonstrated very similar characteristics.

Perrow concluded that the unpredictability of complex systems make the risks of nuclear power fundamentally unmanageable, and there are voices expressing the same attitude toward deep sea drilling. But do we have to embrace the deep ecology position that nature “cannot be so confined”? Nature is reliably confined and controlled in the combustion chambers powering cars, planes, and electric power generation. The economy cannot be precisely controlled, but it can be steered. Of course, using historical experience to guide for future decisions in relation to low-probability but high impact events can underestimate risks, especially when technologies are pushing new frontiers.

But there are no absolutes here: the question is always how reliable are the systems, and what are the consequences of catastrophic failure, in time and geographic reach?  Failures cannot be eliminated from complex systems, but they can be managed to tolerable levels. Lean production systems employ statistical process control and input from workers to improve quality and reliability, from the component level to the whole production process. In my doctoral thesis work, I studied how this approach could stabilize international supply chains which had been subject to chaotic disruptions. The Federal Aviation Authority examines airplane safety records and mandates technical as well as procedural changes.

In general, there has been too little attention to the non-technical aspects of risk management, the economic and organizational pressures and wider governance systems. Yet the overall safety record for risky technologies is not bad. More than 4000 offshore oil platforms operate routinely in the Gulf of Mexico alone, and it has been over 30 years since the last major offshore blow out. France has operated 59 nuclear power stations for decades without major catastrophe. About 50,000 commercial flights are operated each day around the world.

If BP succeeds in installing the new cap and staunching the oil flow in the next week or two, this will count as a major regional disaster, but not necessarily one that should prevent all offshore drilling in the future. Within a couple of years, bacteria will have digested most of the oil, and life will return to the coastal regions. There are technological, political, and economic lessons to be learned, and with a bit of luck, we could go another 50 years till the next big blowout.

The risks associated with oil are modest compared with nuclear power and weapons production. Even if power plants can be operated safely, the waste disposal problem remains stubborn. The New York Times recently reported that “the amount of plutonium buried Hanford Nuclear Reservation in Washington State is nearly three times what the federal government previously reported.” Production of plutonium stopped at the 560 square mile site in the 1980s, and clean up has barely begun because nobody seems to know exactly what was dumped where, or how to deal with contaminated soil. Plutonium is highly toxic and can slowly seep into groundwater and the Columbia river. With a half-life of 24,000 years, it needs to be contained for eons of time during which civilizations, languages, and the climate will all undergo profound shifts.

There are some rumors circulating on the web that the BP blowout could trigger a massive release of methane, unleashing tsunamis and toxic gas clouds that would cause massive devastation to the region. A frightening scenario indeed, but the most credible report I can find does not see this as a serious threat. The real risk is that we get back to the business of safely pumping and burning oil and gas as usual, pushing the climate through critical thresholds and triggering global, irreversible changes.

The deep ecology position itself carries some hidden dangers. It reflects the same kind of deep populist distrust of scientific expertise that has animated climate deniers (and which this week’s report clearing the U. of East Anglia scientists of major wrongdoing will do little to allay). And the claim that the existing order is “natural and sacred” has traditionally been used by elites to justify the status quo. Progressive politics demands that we “denaturalize” our systems of production and governance, our assumptions about hierarchy, and our faith – and fears – of science and technology. Progressive politics requires that we be alert to the ways in which science and technology are embedded in social, economic, and political systems, and that we actively manage these systems to transition to a more socially, economically and environmentally sustainable system.

By David L. Levy

Progress toward building a coalition supportive of aggressive action on climate change seems to have become mired in spring mud. In an earlier posting, I discussed the sudden change in climate in the wake of “climategate”, the cold winter in Europe and the US, the defection of BP and other companies from the US Climate Action Partnership, Scott Brown’s upset senate victory in Massachusetts senate, and rise in climate skepticism. Recently the mass media have begun to look at the reasons for the rise in skepticism. Ever aware of their own importance, they have turned the spotlight on the gulf between weather forecasters, who are mostly meteorologists, and climatologists. Even the Colbert Report joined the fun with a “weather forecaster vs. climatologist” confrontation.

A Columbia Journalism Review article on this topic cites an Emory University survey of  TV meteorologists in which 29% of respondents said that global warming was a scam, and only 24% percent believed that humans were responsible for most of the change in climate over the past half century. A more recent piece in the New York Times pointed to a study in the January 2009 newsletter of the American Geophysical Union, which found that while nearly 90% of some 3,000 climatologists who responded agreed that there was evidence of human-driven climate change, only 64% of meteorologists agreed with the statement.

In trying to explain this gap, most of the blame has been placed on the lack of expertise and scientific training of weather forecasters, few of whom have a graduate degree. Joe Romm commented that: “Asking a meteorologist to opine on the climate is like asking your family doctor what the chances are for an avian flu pandemic in the next few years or asking a mid-West sheriff the prospects for nuclear terrorism.” My business school background, however, leads me to ponder explanations that are rooted in some of the more subtle mechanisms of organizations and institutions.   

This divide matters because weather forecasters have far greater media access and influence over the public than climatologists, due to the nature of their professions. Joe Bastardi is an influential meteorologist with AccuWeather who frequently editorializes against climate change on the television channel. Anthony Watts, a retired California weather forecaster, runs the popular climate-skeptic blog Watts up with That?, though he also claims to drive an electric car and have solar panels on his roof. Climatologists, by contrast, are mostly based in universities and research centers, and their highly technical publications in academic journals are difficult for non-specialists to comprehend and receive little press coverage. Anthony Leiserowitz, director of the Yale Project on Climate Change and an author of a June 2008 on public opinion, argued that “Most people are not interested in digging through the scientific literature, and in that situation trust becomes an enormous factor.” And the study showed 66% of people trusted television weather reporters on climate change, but very few knew any climate scientists personally.

My research on the oil and auto industries’ responses to climate change in Europe and the U.S. sparked my interest in the role of scientists in shaping corporate attitudes and strategies (see my academic papers on the oil industry with Prof. Ans Kolk  and the auto industry with Prof. Sandra Rothenberg). We found that American companies, who had been subject to stringent clean air regulation for years, tended to rely on their internal corporate scientists as their primary source of information on climate change. Indeed, they sometimes served as corporate filters for external information, selectively disseminating and commenting on climate science reports. These corporate scientists were frequently experts in atmospheric pollution and smog formation, not climate change, but were seen as the most accessible and reliable sources of information. In Europe, by contrast, the oil and auto companies didn’t have strong internal expertise, so the companies would rely on independent university-affiliated scientists, who usually hewed closely to the mainstream IPCC view.

Almost all the atmospheric scientists with major American companies were climate skeptics, with the notable exception of Ruth Reck at General Motors, who worked tirelessly in the mid-1980s, and against considerable internal resistance, to put climate on the agenda. The tendency for corporate scientists to be climate skeptics is a complex phenomenon. As with the TV weather forecasters, they have expertise in a closely related fields, but not specifically in climatology, perhaps lending them more trust and credence than warranted.  Unlike TV forecasters, many corporate scientists do have doctorates. After many conversations, my impression is that the key issue is not competence but the subtle socialization processes that affect a scientist’s views and very identity. As air quality scientists, part of their job is to interpret the evidence in a way that minimizes impacts on the environment and human health. They are colleagues with business managers who have traditionally seen environmental regulation as a threat to profits, even to the American way of life.

This doesn’t mean that the scientists deliberately distort the science – atmospheric and climate science does have areas of uncertainty and conflicting opinion. People working in fossil-fuel dependent sectors (and not just the scientists) shape their interpretations to fit organizational interests and norms, and to gain acceptance from colleagues. Psychologists have long observed that people are averse to “cognitive dissonance”, holding conflicting ideas simultaneously. Similarly, conflict between our behavior and ideas is uncomfortable. So people who work for a car or oil company can reduce their internal conflict, or dissonance, by embracing climate skepticism. In fact, in our research on the auto industry we found that the scientists and engineers working on advanced energy efficient or all electric vehicles were quick to embrace climate science – they could believe that climate change was a problem because they were working on a solution, and they were part of team who shared these views.

Weather forecasters and climate scientists cannot escape the institutional and social pressures we all face as workers in organizations and participants in wider professions. One doesn’t have to be a climate skeptic to appreciate that there are subtle pressures for conformity, as well as some financial carrots, within the global climate science community. Climategate has not undone the consensus on climate change, but it has cast some interesting light on the politics of science. While climate scientists are mostly employed in universities and research institutes, weather forecasters work in private media corporations, many of which are part of larger news and entertainment conglomerates.

Media companies don’t share the same interests as oil and coal companies, of course, but writers such as Robert McChesney and Ben Bagdikian have argued persuasively that the major media corporations tend to see their interests aligned with business in general, due to their dependency on advertising, ownership links, or directors’ ties, and we know where the US Chamber of Commerce and National Association of Manufacturers stand on climate change, despite a few high profile defections from the former last year. This perception of interests in media firms tends to percolate down to the editorial level. Indeed, weather forecasters are more akin to journalists in their professional orientation than climate scientists, and Max Boykoff has written extensively about journalistic bias and media portrayals of climate change.

Weather forecasters are also predisposed to mistrust climate science because their understanding is rooted in meteorology rather than climatology. As the New York Times article notes, meteorologists know that weather is a chaotic system subject to the proverbial butterfly effect: its evolution is highly dependent on initial conditions. Weather forecasts rely on computer simulations that inherently have limitations on spatial resolution and starting conditions, so that their accuracy rapidly diminishes after five or six days. Meteorologists frequently express skepticism that climate models, which are based on very similar principles, can provide accurate information for the coming century. Yet meteorologists, with their short term orientation, also tend to assume that longer-term climate patterns are stable. These are not just individual biases, however – as meteorology has evolved as an organized profession, these views have become more institutionalized as a shared perspective.

Climatologists are working with phenomena that operate on a different scale, and are more concerned with the prediction of long-term patterns and mean temperatures than whether it will rain in Boston on a particular date in 2090. Climate scientists are quick to acknowledge that the climate system itself is chaotic over millennia, as greenhouse gases interact with longer term shifts in ocean circulation, precipitation, ice and forest cover. But the next few decades for climate scientists are like the next few days for weather forecasters – the short term for which models are useful, if not always accurate.

Managing crises in complex systems

Just when the world was beginning to wake up to the climate change crisis, with a flood of new evidence on the accelerating meltdown of glaciers and polar ice caps, the financial crisis struck. Paul Gilding has termed this convergence of twin crises “The Great Disruption.” At first glance, the twin meltdowns, financial and climatic, appear to be very different problems requiring very different responses. The financial crisis presents as a relatively short-term crisis that resulted from a combination of housing and financial asset bubbles, poor regulation, excessive leverage, and distorted incentives. The climate crisis, by contrast, is driven by the seemingly inexorable rise in human emissions of greenhouse gases, a longer-term problem with a more defined physical structure. The financial crisis calls for fiscal and monetary policy responses combined with new financial regulation. The climate crisis is spawning a wave of regulatory and market responses, from caps on emissions to subsidies for low-carbon energy.

Despite their apparent differences, however, the climate and financial crises are both manifestations of a common problem – the difficulty in predicting and controlling complex dynamic systems riddled with feedback loops, time lags, and non-linear relationships. Though it’s tempting to point the finger of blame (and there is plenty of blame to go around), both systems are susceptible to fundamental, structural problems of governance. Most notably, we rarely recognize that we are careening over a cliff until we are well past the precipice. Moreover, once we recognize that we are spiraling down in a vicious circle, recovery is far from easy.

Complex systems, such as the climate and the economy, have many interconnected parts that interact in intricate and sometimes poorly understood ways (for a primer on complexity, download my book chapter here). They tend to be unstable and unpredictable, though they also exhibit patterned, cyclical behavior. The current recession, while more severe than most since the 1930s, is following an oft repeated trajectory of boom and bust, of overshoot and collapse in asset prices. In a similar way, but on a much longer time scale, the earth’s climate has cycled from ice ages to relatively warm inter-glacials about every one-hundred thousand years. The search for historical parallels can be useful due to this regularity. As Mark Twain famously said, history does not repeat itself, but it rhymes. Systems move in familiar patterns, but never exactly retrace the same path. A host of complex non-linear interactions mean that small differences in starting conditions can lead to very different outcomes. Though hurricanes take familiar tracks in the North Atlantic, we can never be quite sure how strong one might grow or what city it might hit. The current recession could turn out to be a brief dip or herald the onset of second major depression. Occasionally, complex systems can exhibit dramatic collapse, a result of self-reinforcing feedback loops that transform a minor event into a systemic crisis. We are used to the “normal” business cycle where output, investment, employment, asset prices, and confidence interact to create growth or recession dynamics. In the current recession, however, the sudden recognition that vast pools of complex derivatives based on risky mortgage and credit card debt might be worthless led to panic, frozen credit markets, and bank insolvencies. In a similar way, many scientists fear that human emissions of greenhouse gases could lead to a runaway warming effect due to several mechanisms. For example, polar regions tend to warm more rapidly, leading to loss of polar ice and more absorption of solar radiation. Moreover, warming is likely to lead to faster release of carbon dioxide from forests and vegetation. The vast Russian and Canadian tundra regions are thawing, while recent studies demonstrate that the Amazon will become significantly drier, accelerating the shrinking of the rain forest.

In the June McKinsey Quarterly, Michele Zanini reminds us that the severity of these unpredictable disasters, from earthquakes to stock market crashes, actually follows a predictable power law; there is a clear statistical relationship between the frequency and magnitude of the collapse. The so-called butterfly effect is not always at work; sometimes small events may cascade into a major storm, but more typically self-balancing feedback loops help to restabilize the system. Hurricanes dissipate thermal energy, the fuel for storms. Recessions lower interest rates and prices, stimulating investment and consumption. Occasionally, however, the changes that cascade through a system can push it past a tipping point and lock it into a new “phase state”, with a markedly different set of patterns of cycles. As Keynes famously argued, the economy was stuck in a deflationary cycle in the Great Depression and would not naturally bounce back as wages and prices fell. In a similar way, the climate can transition into ice ages lasting tens of thousands of years, in which ice sheets miles thick covered the British Isles and large portions of North America, or hot periods such as the Jurassic era, which lasted millions of years.

It is, then, not surprising that complex dynamic systems are inherently difficult to manage. Controlling the economy has been likened to attempting to steer a car by looking in the rear-view mirror. We can only see where we have been, not where we are heading. And the mirror is often foggy. Data are available after a time lag and may be distorted or offer conflicting interpretations. While the warning signs might seem obvious with hindsight, distinguishing the signal of a financial crisis from the noise of usual variability is difficult in the early stages. Moreover, the recognition of crisis conditions necessitating extraordinary policy measures is a time-consuming social and political process. Nick Kristoff has argued that evolution has predisposed us to worry about immediate tangible threats from tigers and snakes rather than longer term concerns based on analysis and calculation. As a result, prescient prophets of doom are destined to be ignored and we prefer, instead, to assume that what worked (or appeared to work) yesterday will continue to work tomorrow. There are also social and competitive pressures for this. We exhibit herd behavior in markets and crowds, relaxed and optimistic if others are, but vulnerable to panic contagion. As Citigroup chief executive Chuck Prince famously said in mid-2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Facing up to the climate crisis is much harder than recognizing the financial crisis. It is unfolding on a time scale of decades rather than months. Unlike the economy, where unemployment, bankruptcies and foreclosures provide more tangible and immediate evidence, the human imprint on the climate is hard to discern for the casual observer. Changes in carbon dioxide levels are invisible, the melting polar ice sheets and tundra are far away, and the oceans are, for now, soaking up much of the excess heat (though we may have reached nature’s overdraft limit).

Even for climate scientists, sophisticated statistical analysis is needed to demonstrate the human impact of greenhouse gases on global temperatures, and we are only just beginning to discern evidence of a link between hurricane intensity and climate change. Moreover, this is our first climate crisis as a sentient civilization. We have experience and institutions to help measure and deal with hurricanes and financial crises, but these are sorely lacking on the climate front.

We do, of course, attempt to peer into the future for both climate and the economy using modeling techniques, but the picture is generally even foggier than that in the rear view mirror. Models are, by definition, simple representations of a far more complex reality. They attempt to capture the major elements of a system and can perform quite well for short-term forecasting under relatively stable conditions. Economic forecasts hold up in reasonable fashion over several months or quarters, as long as there are no sudden shifts in consumer or investor sentiment. Weather forecasts, which rely on very well defined physical relationships between humidity, temperature, air pressure, and other factors, can be quite accurate for three or four days into the future, a bit better than a guess for up to ten days, but have little utility beyond that.

Weather forecasting illustrates an interesting paradox of complex systems; in principle, the weather is a deterministic system based on the well-known physics of atmospheric interactions, so that from a given set of starting conditions, the system ought to unfold in a predictable way. Yet even the most sophisticated weather models that use powerful supercomputers cannot capture the precise initial conditions at every point on earth; they usually work with a spatial resolution of several kilometers and don’t even have accurate data for all these “grid boxes”. Small errors in initial conditions are amplified across the millions of calculations that simulate the dynamic interaction of these atmospheric boxes every few minutes. For climate forecasting, the problems are similar, though different in scale. We are more interested in the average temperature and rainfall in fifty years time at a regional level than whether it will be cold and raining in Boston next Tuesday. But over a timescale of decades, the climate will exhibit more structural shifts with uncertain feedback effects; we don’t know how rapidly polar ice will melt, how fast rainforests will shrink, what might happen to cloud cover, or whether giant ocean currents like the Gulf Stream might slow or even shut down.

Even once the existence of a crisis is widely recognized, the steps required to address it are far from clear and simple. The economy and the climate have huge inertia and respond slowly and somewhat unpredictably to intervention, with the potential for unwelcome side effects. Action on the financial crisis was delayed while debates played out over fiscal versus monetary intervention, and bank nationalization versus recapitalization. Paul Krugman and Niall Ferguson have been recently feuding over the potential impact of large governmental deficits on inflation and interest rates; while Krugman supports aggressive intervention, for Ferguson and the deficit hawks, large scale government deficits will spook the bond markets, raise interest rates, and choke off any recovery. In any event, available policy options are only partial, limited tools; the government does not directly control business investment or consumer confidence. Large parts of the “gray” financial markets, such as hedge funds, non-bank finance, and credit default swaps issued by insurance companies lie beyond the reach of existing regulatory structures.

In a similar way, action on climate has been delayed while various parties argue over the best course of action – cap-and-trade versus carbon taxes versus direct traditional command and control regulation; nuclear power versus renewable energy. Mitigation policies can have unwanted side effects; raising vehicle fuel efficiency lowers the cost of fuel per mile, and so might encourage more driving. Electric vehicles might be charged on coal-intensive power in the US mid-West. Valuable carbon credits help to make air conditioning plants in China appear more profitable, accelerating production of these power hungry appliances. Policy tools tend to use indirect levers, such as the carbon price, which is likely to so low in the US as to have little effect on corporate or consumer behavior (see: Carbon Markets to Serve the Planet). Large sources of emissions lie mostly beyond the reach of current policy; emissions from developing countries, deforestation, international air travel and sea shipping have been out of bounds, till now at least. Moreover, carbon is only one piece of the climate system; we lack the technical tools to directly address other elements, such as melting ice caps, thawing tundra, or ocean currents.

Arguments about how to tackle crises are partly technical, reflecting different understandings of the workings of complex systems. But these differences are also deeply political, reflecting how we think the crisis, and proposals for intervention and change, will affect us in our particular geographic and economic location. It’s easy to claim that “we are all in the same boat”, but the truth is that some of us are in luxury yachts and some are in leaky dinghies. Bankers holding bad loans and homeowners facing foreclosure might want very different forms of government assistance; meanwhile, the majority of the tax-paying and still-employed public are wary of large scale public bail-outs. On climate change, the fiercest proponents of action on climate change are the low-lying countries likely to be swamped by rising sea levels, while the countries who strongly oppose action possess substantial coal and oil reserves. Rich industrialized countries might consider it reasonable to pay 1-2% of GDP to cut their emissions, but developing countries want access to cheap fossil fuels to drive their own industrial transformations.

Managing through a crisis in a complex dynamic system is clearly no easy task. To adapt the steering metaphor, the apt image might be steering a car with fogged up windows, using a greasy steering wheel that’s only loosely coupled to just one of the wheels. Oh, and there are four people in the car arguing about how we got here, where we are heading, and which way to turn the wheel.