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TED Talks Daily

How climate shocks could break the economy | Edmond Rhys Jones

with Edmund Rhys-Jones

Published November 13, 2025
View Show Notes

About This Episode

Host Elise Hu introduces a TED talk by climate pathfinder Edmund Rhys-Jones, who explores the economic implications of climate change. Rhys-Jones argues that while climate science is detailed and alarming, traditional economic models understate real-world disruption because they ignore how climate shocks propagate through financial infrastructure. He calls for new, complexity-based simulations and financial innovations to better manage growing climate-related turbulence and safeguard a significant share of global GDP.

Topics Covered

Climate finance Risk and uncertainty Systems thinking Climate change projections Climate change and agriculture Hurricanes Renewable energy and decarbonization Complexity economics Natural disasters Insurance

Disclaimer: We provide independent summaries of podcasts and are not affiliated with or endorsed in any way by any podcast or creator. All podcast names and content are the property of their respective owners. The views and opinions expressed within the podcasts belong solely to the original hosts and guests and do not reflect the views or positions of Summapod.

Quick Takeaways

  • There is a large gap between what climate science projects and what traditional economic models capture about climate-related damages.
  • Natural disasters cause far more economic harm than insured direct damages suggest, because indirect and cascading effects are often ignored.
  • Climate shocks reverberate through financial infrastructure, affecting insurance markets, credit, and commodity prices in complex ways.
  • Rising frequency and intensity of extreme weather could push parts of the financial system past a tipping point where it can no longer manage climate risk.
  • Traditional models rooted in historical data and smooth trends lack the imagination needed to anticipate climate-driven turbulence.
  • Complexity economics and simulation-based "digital twins" can reveal non-intuitive systemic effects and help design better policies and products.
  • Parametric insurance is an example of a financial innovation that could help farmers and supply chains recover quickly from climate shocks.
  • Investing in climate action safeguards a substantial portion of global GDP, while parallel investment in resilience can reduce financial disruption along the way.

Podcast Notes

Show introduction and framing of the talk

TED Talks Daily and host introduction

Host describes the purpose of TED Talks Daily[1:56]
• The show brings listeners new ideas to spark curiosity every day.
Host identifies herself[2:04]
• The host states her name is Elise Hu.

Context for the climate economics question

2021 as a year of extreme climate events[2:36]
• Elise notes that in 2021 the world reeled from devastating floods and record-breaking droughts.
The uncomfortable investor question[2:12]
• An investor in 2021 asked, "Is solving climate change really worth it?"

Introduction of Edmund Rhys-Jones and core theme

Description of Edmund Rhys-Jones[2:18]
• Elise introduces Edmund Rhys-Jones as a climate pathfinder.
Main question of the talk[2:22]
• Rhys-Jones digs into whether solving climate change is economically worth it.
Gap between science and economics[2:24]
• The host says he reveals a massive gap between what science tells us about the climate crisis and how the economy measures its impact.
Focus on modeling and preparing for turbulence[2:34]
• Elise notes that Edmund will share why this is a moment to rethink how we model, predict, and prepare for the turbulence ahead.

Setting the stage: 2021 disasters and the investor's challenge

Examples of severe climate-related disasters in 2021

Pakistan floods and European drought[3:36]
• Edmund says 2021 was a bad year for natural disasters.
• He notes that floods in Pakistan killed 1,700 people.
• He adds that Europe began what would be the worst drought in 500 years.

Recounting the investor client's question

Client doubts about the value of solving climate change[2:58]
• Edmund recalls his client in 2021 asking, "is it really worth solving climate change?"
Client's motivation for the question[3:13]
• He clarifies that the client was an investor who wanted to understand the economic return on the trillions of dollars needed to get to net zero.
• Edmund characterizes this as a good question that has a good answer.

The gap between climate science and economic modeling

How climate science describes the future

Climate science is detailed and alarming[3:21]
• Edmund states there is a huge gap between the science and the economics.
• He describes the science as scary and really detailed.
Leaving 12,000 years of climate stability[3:33]
• The science tells us that we are leaving 12,000 years of climate stability behind.
• He notes that floods and droughts will become more frequent and more intense.
• He warns that crops may fail and fisheries may collapse.

How traditional economics portrays climate impacts

Smooth damage curves in economic models[3:55]
• Edmund explains that when you turn to economics, the turbulence and disruption seem to get lost in translation.
• He says you end up looking at graphs with suspiciously smooth curves showing rising temperatures and steadily declining growth.
What those economic graphs do capture[4:01]
• He concedes that the graphs show a real connection between global warming and our ability to build things, make things, and get things done.
• He emphasizes that the damages from this connection get really big, really quickly.

The "quadrillion dollar" slide and its limitations

Client reaction to large aggregate damage estimates[4:23]
• Edmund says that when he turned this analysis into his first quadrillion dollar slide for the client, it left the client cold.
Why traditional economics feels unsatisfying[4:29]
• He argues that economics is robust but does not do a good job of explaining how in practice climate change will impact businesses and households in the real economy.
• Because of this, the turbulence and disruption you would expect-and need to see to prepare-seem to disappear from the models.

Measuring climate impacts beyond direct disaster losses

Current estimates of natural disaster damages

Insurers' estimates for annual disaster losses[5:10]
• Edmund notes that big insurers estimate natural disasters cause about 200 to 300 billion dollars of direct damages every year.
Tangibility and incompleteness of these numbers[5:21]
• He says these numbers are more tangible because you can see collapsed bridges and flooded mines in the data.
• However, he argues that these estimates are incomplete.

Hidden indirect effects of disasters

Missing lost revenues and incomes[5:31]
• Edmund asks where the lost revenues are for factories that relied on a damaged mine.
• He also asks where the lost income is for workers who needed a destroyed bridge to get to work.
Comparing insured losses with macro damage estimates[5:20]
• He explains that when you compare insurance loss numbers with his quadrillion dollar slide, about 80% of the problem is missing.

Shifting focus from physical to financial infrastructure

Need to trace commercial and financial linkages

Looking beyond physical damage paths[6:09]
• Edmund argues that we need to step back and focus on commercial relationships and financial mechanisms that link companies and transmit climate impacts.
• Instead of chasing hurricanes through physical infrastructure, he proposes tracing them as they reverberate through financial infrastructure.
Why the financial perspective reveals turbulence[6:19]
• He admits that chasing hurricanes sounds more fun, but claims that following them through finance is where the turbulence and disruption become visible.

Example 1: Hurricanes and household finance in the American Southeast

Direct hurricane damage along the coast[6:28]
• Edmund notes that hurricanes regularly cause millions of dollars of damage along the American Southeast coast.
Rising insurance premiums and household strain[6:33]
• He explains that insurance premiums are rising across the region as a result.
• Many households, particularly low-income ones and many who live inland, cannot keep up with these rising premiums.
Spillovers to credit markets[6:46]
• As a consequence, Edmund says there are rising mortgage defaults and credit card delinquencies.
• These delinquencies, in turn, cause problems for another set of financial institutions.

Example 2: Brazilian coffee shock and global price spike

Climate shock to Brazilian coffee production[7:01]
• Edmund recalls that in 2021 a major frost and drought caused coffee production in Brazil to fall by 20%.
Global overreaction in coffee prices[7:15]
• He notes that global coffee prices rose 30% in just one week and then kept rising.
• He asks why there was such an overreaction in price.
Breakdown of forward contracts[7:23]
• Edmund explains it started when many farmers walked away from their forward contracts.
• He defines forward contracts as agreements meant to provide price stability between coffee farmers and coffee buyers.
Cascade into futures markets and further price rises[7:36]
• Some farmers saw higher profits available in the open market and left their buyers in the lurch.
• As a result, buyers could not meet their own onward commitments into the futures market.
• Buyers scrambled to find cash to keep futures positions open and to find new coffee suppliers, driving prices higher and higher.

Rising climate pressure on financial infrastructure

From isolated turbulence to systemic risk

Two examples of turbulence in finance[7:55]
• Edmund describes the hurricanes and coffee examples as two disparate cases of how climate change causes turbulence in financial infrastructure.
Concern about the financial system breaking[7:59]
• He says the real worry is that the financial infrastructure itself will break under rising pressure.
• He notes that we will see more extreme weather in the next 10 years than in the last 10 years.
Shrinking intervals between shocks[8:10]
• Edmund states that climate shocks are going to grow and the gaps between them are going to shrink.

Early warning signs: insurance markets and public finance

Florida's insurance withdrawals and state exposure[8:27]
• He points out that in Florida several insurers have gone bankrupt or pulled out.
• As a result, the state is now the single largest provider of home insurance in Florida, putting pressure on its budget.
California's rising borrowing costs[8:35]
• Edmund explains that in California climate risks are driving up the cost of borrowing for many local authorities.
• These local authorities are the ones that actually need to invest in preventing those climate risks.
Potential tipping point in financial risk management[9:30]
• He suggests we may be heading towards a tipping point where the financial infrastructure cannot manage climate risk anymore.

Consequences if financial risk management fails

Impact on mortgages and housing markets[9:16]
• Edmund says that if we cannot manage climate risk, we cannot do a lot of things.
• He asks listeners to imagine trying to get a mortgage on a house that they cannot insure, and answers that they cannot.
• He adds you also cannot sell a house that has become uninsurable.
From normal cycles to persistent breakdown[9:09]
• At scale, he calls this major disruption.
• He contrasts it with normal boom and bust cycles, saying this is "just bust, bust, broken."

Debate over systemic tipping points and the need for better foresight

Acknowledging differing views on financial system resilience

Perception that this may sound extreme[9:24]
• Edmund recognizes that his description may sound melodramatic or extreme to some.
Two camps in current debate[9:26]
• He describes a growing set of voices that worry about tipping points like the ones he has outlined.
• He contrasts them with those who say the financial system as a whole will be able to manage climate risk for many decades to come.

Why improved anticipation matters regardless of who is right

Value of anticipating turbulence[9:48]
• For his purposes, Edmund argues it does not really matter which side of the debate is correct.
• He claims there is huge benefit in better anticipating the turbulence ahead either way.
Limitations of traditional tools and techniques[10:28]
• He says the first step is recognizing that many tools and techniques we have relied on do not have the imagination to anticipate future turbulence.
• These tools are rooted in the status quo, historical data, and past trends.

Introducing complexity economics and simulation-based tools

Looking to other complex dynamic systems

Fields that study complexity and change[10:37]
• Edmund suggests looking to other complex dynamic systems and how they are studied.
• He lists evolutionary biology, thermodynamics, environmental science, and energy networks as examples.
Role of complexity economics[10:26]
• He explains that the field of complexity economics borrows tools and techniques from those other areas.
• Complexity economics uses these tools to better anticipate how shocks and trends reshape economies.

Climate change as both shock and trend

Dual nature of climate impacts on the economy[10:37]
• Edmund notes that climate change is both a set of shocks and a trend.
• He describes it as falling productivity and rising risk, punctuated by natural disasters.

Simulations as "digital twins" of the economy

Structure of simulation models[11:16]
• He says a key tool many of these fields use is simulations, which in this context should be thought of as digital twins of the system being studied.
• These simulations are populated with thousands of virtual actors, each with their own rules of behavior and the connections between them.
How simulations are used and tested[11:24]
• Edmund says you set the simulations up and let them run.
• You can test them against reality and calibrate them, and then run experiments on different setups and possible futures.

Unexpected insights from simulations in other fields

Urban planning example[11:16]
• Urban planners use simulations to prove that demolishing a major road can actually ease traffic congestion.
Ecology and fish stock example[11:27]
• Ecologists use simulations to show why fish stocks can collapse even after fish quotas are put in place.
Importance of non-intuitive results[11:37]
• Edmund emphasizes that both of these results are unexpected and not intuitive.
• He argues that this kind of surprising insight is what is needed where global warming meets the global economy.

Call to action for modelers and data scientists

Who needs to build these models[11:49]
• He calls on systems thinkers, risk modelers, and data scientists.
Desired property of new models[11:49]
• Edmund says we need models that surprise us before the future does.

Using simulations to design resilient financial products

Parametric insurance for farmers

Concept of immediate payout insurance[12:03]
• Edmund offers an example of insurance that pays out to farmers as soon as they are hit by a natural disaster.
• This rapid payout would get farmers back on their feet with minimal impact on their customers.
Existing product: parametric insurance[12:13]
• He notes that this product already exists and is called parametric insurance.
Challenge of scaling parametric insurance[12:15]
• The challenge is scaling it up, because providers must find terms that work for thousands or tens of thousands of farmers year after year, shock after shock.

Applying simulations to the coffee industry

Testing insurance terms with industry simulations[12:28]
• Edmund asks listeners to imagine having a simulation of the coffee industry.
• In such a simulation, one could test parametric insurance terms against past shocks and potential futures.
Building resilience in coffee finance[12:38]
• He says parametric insurance is just one of several innovations that could make the coffee industry's financial infrastructure more resilient.

Extending innovation across the real economy

Need for widespread financial innovation[12:40]
• Edmund argues that we need exactly that kind of innovation across the real economy.
Turning uncertainty into opportunity[12:51]
• With the right tools, he says what felt like an impenetrable fog of uncertainty starts to feel like a landscape ripe for opportunity.

Economic case for climate action and resilience

Safeguarding global GDP through climate action

Revised answer to the client's original question[12:55]
• Edmund reflects on what he would say to his client today.
• First, he says the economic case for climate action is clear.
Magnitude of GDP at stake[13:08]
• He states that we are talking about safeguarding maybe 25% of global GDP between now and 2100.

Second investment case: resilience to financial turbulence

Building resilience alongside mitigation[13:13]
• He identifies a second investment case in building resilience to the financial turbulence experienced along the way.
Climate inevitability vs. disruption scale[13:24]
• Edmund says climate change is now inevitable for at least the next 75 years.
• However, he stresses that the scale of the economic disruption is not inevitable.

Role of models, products, and collaborations

Determining cleanup vs. solution investment[13:08]
• He concludes that what we build together-the models, the new products, the collaborations-will determine how much we spend clearing up the mess as we go.
• Those same choices will also determine how much we can invest in actually solving the problem.
Closing thanks[14:26]
• Edmund thanks the audience for their time.

Outro and production credits

Identification of event and location

Where and when the talk was given[14:02]
• The host notes that the talk was by Edmund Rhys-Jones at TED at BCG in Dubai in 2025.

TED curation and collective

Reference to TED curation guidelines[14:00]
• Listeners are told they can find out more about TED's curation at TED.com/curation guidelines.
Mention of TED Audio Collective[14:04]
• Elise says TED Talks Daily is part of the TED Audio Collective.

Production, fact-checking, and support credits

Fact-checking acknowledgment[14:06]
• The host notes that the talk was fact-checked by the TED research team.
Production and editing team[14:10]
• She lists producers and editors: Martha Estefanos, Oliver Friedman, Brian Green, Lucy Little, and Tansika Sangmarnivong.
Mixing and additional support[14:18]
• The episode was mixed by Christopher Faisy-Bogan.
• Additional support came from Emma Taubner and Danielle Balarezo.

Host sign-off

Promise of future ideas[14:22]
• Elise Hu says she will be back tomorrow with a fresh idea for the listener's feed.
Closing thanks[14:26]
• She thanks listeners for listening.

Lessons Learned

Actionable insights and wisdom you can apply to your business, career, and personal life.

1

Relying solely on historical data and smooth economic models can blind decision-makers to the real, turbulent ways climate shocks propagate through economies and financial systems.

Reflection Questions:

  • • Where in your own work or life are you depending on past data or trends that might fail under future shocks or disruptions?
  • • How could you incorporate scenario thinking or stress tests to reveal vulnerabilities that your current models or assumptions are hiding?
  • • What is one decision you're facing now where you could deliberately seek out "non-intuitive" possibilities before committing to a course of action?
2

Indirect and second-order effects-like broken contracts, rising insurance premiums, or higher borrowing costs-can be more systemically important than the initial physical damage from climate events.

Reflection Questions:

  • • When you consider a major risk you face, what are the second- and third-order consequences that you have not yet mapped out?
  • • How might a disruption to one supplier, client, or financial partner cascade into other parts of your business or personal finances?
  • • What specific relationships or dependencies could you analyze this week to better understand how shocks might spread through your own network?
3

Using tools from complexity science, such as simulations and "digital twins," can reveal unexpected behaviors in complex systems and support more robust strategies for navigating uncertainty.

Reflection Questions:

  • • In what areas of your work could simple simulations or scenario models help you test "what if" cases before you act?
  • • How might adopting a complexity mindset-expecting feedback loops, delays, and surprises-change the way you design plans or policies?
  • • What is one process, project, or system you are involved in that you could map out and experiment with virtually before making real-world changes?
4

Building resilience through innovative financial and organizational tools-such as parametric insurance and new risk-sharing structures-can reduce cleanup costs and protect value while long-term climate solutions are pursued.

Reflection Questions:

  • • Where are you currently exposed to shocks without any clear mechanism for fast recovery or risk-sharing?
  • • How could you redesign contracts, insurance, or partnerships in your context to ensure quicker, more automatic support when things go wrong?
  • • What is one resilience-building tool or arrangement you could explore or pilot in the next few months to reduce the impact of potential disruptions?
5

Climate change over the coming decades is unavoidable, but the scale of economic and social disruption it causes will depend heavily on the models, products, and collaborations we choose to build now.

Reflection Questions:

  • • What role-however small-could you or your organization play in shaping more resilient systems rather than simply reacting to crises?
  • • How might your priorities shift if you treated climate-related disruption as inevitable but its severity as something you can still influence?
  • • What is one collaborative effort you could initiate or join this year that would meaningfully contribute to managing or reducing climate-related risks in your sphere?

Episode Summary - Notes by Alex

How climate shocks could break the economy | Edmond Rhys Jones
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