Thank you so much for your time. It is an honour to speak to you today.
My name is Gareth Gransaull. I'm a researcher at the Institute for Integrated Energy Systems at the University of Victoria. I am also presenting as the co-executive director of Re-generation, a non-partisan coalition of business and economic students at 23 campuses across the country.
I want to begin my remarks by observing that the people around the world most concerned about climate change are not actually environmentalists. They're military experts. The Pentagon calls climate change an “existential threat” and is preparing for a world of heightened national security risks due to conflict, displacement and natural disasters. However, when you look at the climate stress tests of major financial institutions in Canada, in the fine print you'll notice something strange. Many of them say that climate change is not a material risk to their asset values.
How is this possible? Nobel Prize-winning economist Joseph Stiglitz and Nicholas Stern have publicly said that the mainstream models we use to quantify climate risk, which central banks and prudential supervisors then use to create the guidelines they give to financial institutions, are deeply flawed. As a result, the data on which the so-called risk experts rely is often very wrong.
Let's give an example. We know that the world is warming faster than predicted, which means more days of extreme heat. At temperatures higher than 35°C, photosynthesis begins to shut down. Therefore, scientists predict that by 2030, the frequency of crop failures in the world's breadbaskets could increase by 450%. The most prominent model that purports to account for the impacts of climate change on the economy, the DICE model, as Mr. Coffin mentioned earlier, literally assumes that the systemic failure of global food production wouldn't matter that much, because agriculture is only 3% of GDP. Let that sink in for a second.
In other words, we're living in a reality gap. There's the real world, where 26 million people were displaced by natural disasters last year alone, and then there's the alternate reality that the banks and regulators are living in, where three or four degrees of warming apparently won't affect asset prices. That is actually what the CFA Institute is currently teaching their certificate students. Conversely, if you look at the recent report by the U.K. Institute and Faculty of Actuaries, you see that they predict a possible destruction of global GDP by as much as 50% by 2070.
The world is currently on track for 3°C of warming. At 1°C, the town of Jasper, Alberta, burnt to a crisp overnight. Because the climate system behaves in non-linear ways, 3°C is not three times worse than 1°C. It's exponentially worse.
There are nine globally significant tipping points that could all cascade simultaneously. The Institute for Economics & Peace predicts that at current rates, there could be 1.2 billion climate migrants by 2050. This is why the 1.5°C temperature threshold is so important. The good news is that the International Energy Agency has developed a net-zero pathway that would allow us to preserve a livable climate without relying on unrealistic levels of reverse combustion. This is coming from the world's top energy economists, but they're very clear about what this means—no new fossil fuel projects after 2021.
The largest five Canadian banks are not aligned with this science-based pathway. They have given over $1 trillion to the fossil fuel industry since the signing of the Paris Agreement, including $26 billion to fossil fuel expansion in 2022 alone. Climate change is a systemic risk to the financial system, but it's one that the financial system itself causes by funding fossil fuel expansion. This self-reinforcing cycle is not going to end without greater policy ambition. Canada's current approach is a “choose your own adventure” that allows financial institutions to disclose risks without actually requiring actions to limit those risks.
To address this, we need mandatory 1.5°C-aligned transition plans that align with international best practices, including the UN guidelines for net-zero commitments. One way would be to introduce the climate-aligned finance act put forward by Senator Galvez, which would substantially improve corporate governance on this issue. We also need to make sure that new fossil fuel projects are not given a green label under any voluntary or regulated system and that natural gas stays out of Canada's transition taxonomy.
Thank you so much for your time. I'd be happy to answer any questions.